Examination of Witnesses (Questions 2260
- 2279)
WEDNESDAY 19 MARCH 2008
Mr Luke Johnson and Mr Andy Duncan
Q2260 Lord Maxton:
I would have thought that if you say it is high quality news,
different from anybody else's, does it not attract what I would
call a high income audience?
Mr Johnson: I would say that if we programmed
a ruthlessly commercial strand in that hour we could at minimum
double the audience we get.
Q2261 Lord Maxton:
Would that be true in the future where increasingly people can
either watch their recorded programmes or recorded programmes
on PVRs or they can watch it on catch up television in a variety
of different ways?
Mr Johnson: I think the ratio would still hold.
Q2262 Lord Maxton:
If I am watching one of your recorded programmes on my PVR, when
it comes to the adverts I just do that and I fast forward and
would not even watch the advert.
Mr Duncan: I think that is a separate issue.
Typically if you take our eight o'clock slot, for example, we
get between two to three million as an audience; Channel 4
News gets around a million. I think Luke's point about going
forward, even if the news audience dropped away as switchover
happens, you would still get more than double in that slot if
you did not run the news. If we were a for profit organisation,
a commercial organisation trying to maximise profit, one of the
first decisions we would do would be to change the news to half
an hour.
Q2263 Lord Maxton:
Is that why are you so opposed to privatisation?
Mr Duncan: We are there to deliver public purpose.
Mr Johnson: If you privatised Channel 4 you
would attempt to abandon all such strands of the news, Dispatches,
Cutting Edge, Unreported World et cetera; they would all
disappear completely as quickly as you could possibly get out
of them.
Q2264 Chairman:
That is your board position, is it?
Mr Johnson: No, that is not our board position.
If commercial shareholders who were interested in profit alone
owned the corporation rather than the tax payer, that is unquestionably
what they would do.
Q2265 Chairman:
As a company, as a board, you are opposed to privatisation.
Mr Johnson: Yes, because I think if you strip
away those sorts of crucial elements from Channel 4, what are
you left with?
Q2266 Baroness Howe of Idlicote:
As one of those who was there when the presentation was made,
I think possibly one of the things we are missing is the background
to the specific issues that we are discussing today which really
gave more of a reason for why the extra money is needed. Just
looking at what happened to the spectrum and what is likely to
happen to the digital switchover dividend, let us face it, the
Treasury wanted most of that. Is there any reason to think that
they are less likely to want to claw the whole of that amount
back?
Mr Johnson: As I put it at the presentation
the other day, it is ultimately about how much our political leaders
and regulators, our stakeholders, the public at large, our viewers
value Channel 4. I think if they value it as it is in terms of
what it providesthe alternative voicethen there
is a cost to that. If the old economic model is breaking downwhich
it unquestionably isthen there comes a point at which it
is no longer sustainable. The Treasury and the Government as a
whole will have to take some tough decisions and either there
will have to be subsidy of some form or other to us or we will
start diminishing what we offer.
Mr Duncan: I think it is fair to say that from
the conversations we have had with Treasury officials and indeed
other government departments there is a general acceptance that
for the relatively modest opportunity cost historically Channel
4 delivers incredibly good value for money. People think that
the direct impact we have is a very strong one and the evidence
for that is in the document published last week. Secondly I think
they do believe that there are several billion pounds a year that
goes into the BBC and the licence fee and free spectrum and they
do think we are a pretty good value for money mechanism to make
sure some of their money is spent efficiently. The other area
that the Treasury are very interested in is the impact that we
have more widely in the economy. The other key thing about Channel
4 is that we do not have an in-house production department; we
spend all our money externally. Fewer than a thousand people work
at Channel 4. PWC did a big report about a year ago which estimated
that some £2 billion a year was generated for the British
economy and some 22,000 jobs. The other powerful argument that
we were trying to develop more with the Treasury was to say that
any money invested in Channel 4 effectively gets spent outside
the organisation. There is not just a creative and cultural benefit
to that, but there are also some hard economic benefits to that.
One of the other big things we put in the document last week was
our ambition to spend more of that money outside London, in particular
we could be spending more in Scotland, Wales and Ireland where
we are lower than we would like to be and we have a good track
record across the regions.
Mr Johnson: And investing more in small independent
production companies which again there is an argument for saying
they have more of an alternative voice which otherwise would not
necessarily find broadcast time.
Q2267 Lord Hastings of Scarisbrick:
In your document, which I have to say is a very good read, you
call for new legislation to redefine public service broadcasting
in the light of the additional developments and new media that
you are involved in. Could you say what it is that you want?
Mr Duncan: To be very specific, from the way
that the Communications Act is currently written up Channel 4
is legislated in a way where we only deliver public purpose through
one core linear channel and everything else we do is there so
make money commercially to then re-invest back in that core linear
channel. I think that a few years on it already looks very out
of date. First of all it has not taken account properly of the
internet and the most obvious example is 4 On Demand which
is our online broadband service. The idea that a public service
programme that appears on the On Demand internet version
is suddenly not public purpose because it happens to be delivered
on the internet and not on a linear channel is a bit of a nonsense.
What we said last week very clearly is that we want to deliver
our purposes in the way that an increasing audience wants to get
programmes and content which is cross-channel, cross-platform.
At the appropriate moment the legislation should be updated to
reflect the fact that we already effectively deliver public purpose
in many more ways than the linear channel. That is not to say
that we do not also want to earn money commercially with the mixed
model we have always had. Quite clearly we are alreadyand
will continue toincreasingly offer news, current affairs,
drama, other documentary programmes and so on beyond just the
one channel.
Q2268 Lord Hastings of Scarisbrick:
Your list of programmes then are the list of what you do to give
teeth to your purposes; what are your purposes?
Mr Duncan: I think the same four purposes we
put in the document. I think the nurturing talent and creative
ideas, helping people to see the world differently, the idea of
actually inspiring people to make a change in their lives, those
very same purposes would be the same purposes we believe we already
deliver against on some of the multi-channel activity and also
online and in other platforms. It is essentially saying that to
deliver those purposes going forward in the modern world we have
to recognise now it is a multi-media world and we can and should
be delivering those purposes in a way that the audience wants
to get programme and content.
Q2269 Lord Hastings of Scarisbrick:
In the closing remarks of the document you probably give what
is quite a tidy definition of what those purposes might be. There
is a bullet point which defines your role as "an alternative
voice, entertaining, questioning, challenging, sometimes infuriating"
(which is certainly true) "but always with the potential
to have `a positive impact on the lives of our viewers and on
society as a whole'." "Positive impact" implies
that there is something you wish to create about society and endorse
about society. Could you just explain how you line that up with
some of your current content and most notably one of the programmes
in the document you say has boosted your audience and therefore
your revenue is Shameless which you describe in the document
as being "dysfunctional". How can you have a positive
impact on society from a programme which is about a dysfunctional
society?
Mr Duncan: On the broad point I think throughout
the schedule and throughout the whole range of genres of programming
that we show, I think we always aspire over time to have a positive
impact through the programming we show.
Q2270 Lord Hastings of Scarisbrick:
Does Shameless have a positive impact?
Mr Johnson: Do you watch Shameless?
Q2271 Lord Hastings of Scarisbrick:
I have watched it many times in fact.
Mr Johnson: Do you enjoy it?
Q2272 Lord Hastings of Scarisbrick:
I did not say I enjoyed; I said I watched it.
Mr Johnson: I think there is an argument, which
is obviously subjective, that Shameless can often be an
uplifting view and also there is a touch of realism about it.
There is a touch of farce as well. It is a creative programme.
I think that not through every hour and every programme genre
are you going to have a uniformly positive view; that would be
bland and dull.
Q2273 Lord Hastings of Scarisbrick:
The real point I am making here is that in order for you to increase
your revenueswhich is the point of this conversationfor
you to fund public service broadcasting, the examples you have
given of programmes which drive your audience are all the examples
which have questionable impact on the positive lives of people
in society.
Mr Duncan: Very specifically Shameless
was an award-winning programme and it was a highly innovative
drama. When it first came through I think it was a break-though
drama in tackling, albeit in a humorous and quite unusual way,
real social issues and throwing a light on parts of modern Britain
and I think it has actually had some sort of wider role to play
there as well. More generally, there are a lot of programmes for
example The Food Season where I would say that the campaign
we did in January with Jamie Oliver and with Gordon and with Hugh
had a very positive social impact in raising issues around diet
and food. That one actually did quite well in terms of ratings
as well. So there are occasions where you can have both a clearly
public purpose, social purpose programme that also rates well.
There are many other occasions, for example, Battle for Haditha
on Monday night, that only had about a million in terms of the
audience. That sort of film will never get much more than that
but I think it is a really valuable programme to have. We have
to have a balance across the schedule of programmes that hopefully
have a public purpose that can rate sometimes but on other occasions
they do not. We do other things, in a sense, that plainly play
more of a commercial role. For us acquisitions definitely play
a commercial role.
Chairman: Can we move on from Shameless
to the future of ITN?
Q2274 Lord Grocott:
When ITV has its contracts renewed or otherwise with ITN in 2012
I think you say in your evidence to us that "ITN would in
all likelihood cease to be a viable news supplier to Channel 4
because ITN would not be able to provide sufficient newsgathering
base ... " et cetera. I know you might simply respond by
saying that this is speculative, but you presumably have to give
some thought to this. What would happen to your news output if,
as you say, ITN ceased to be viable news provider?
Mr Duncan: It would obviously be a very significant
concern for us. The situation at the moment is that ITN do a very
good job for us, as we talked about earlier on. One of the reasons
is actually the fact that we are getting the benefits of a wider
infrastructure, a good example of which would be regional coverage.
Because ITV also source their news from ITN in share newsgathering
and access to some of the regional news stories, for example,
Channel 4 News is strengthened from being part of that
wider infrastructure. To the extent that that is reduced or diminished
over time, that clearly is a worry for us. We went through this
in the last contract of what happens if we cannot agree sensible
commercial terms with ITN? What are our alternatives? At the moment
we have Sky as an alternative; there is always the possibility
of going to a new third party to try to source the news.
Q2275 Chairman:
Like?
Mr Duncan: For example some of the suppliers
that have a strong tradition in current affairs.
Mr Johnson: We would essentially create a new
provider from scratch, but I think it would be a tremendous wrench
and extremely difficult to pull off.
Mr Duncan: To keep the quality as high would
be almost impossible, I would say.
Lord Maxton: Would you go to somewhere
like the Guardian?
Lord Hastings of Scarisbrick: Or the
Telegraph?
Q2276 Lord Maxton:
You are closer to the Guardian.
Mr Johnson: One can see immediate issues over
the point you have just made. We are very happy with ITN; we think
they do an outstanding job and clearly we will do all we can to
try to encourage them to continue to provide the overall package
that we need for both national and regional news.
Q2277 Lord Grocott:
This does trespass into ITV I know, but you said that the cost
of the seven o'clock news as opposed to the income was £10
to £20 million (£20 million cost, £10 million income),
is that in any way comparable to the gap in income and expenditure
that ITV would have with its flagship now normally at ten? Are
the economics quite similar or how do they contrast?
Mr Duncan: Clearly in ITV's case they have the
early evening bulletin, they have a late evening bulletin, they
then have the regional news with different infrastructure costs
around the country, but we do not have access to their information
on that. I think our model is really quite a different model to
their model.
Q2278 Lord Grocott:
They are obviously putting it out when it is a less expensive
time to put it out.
Mr Duncan: The opportunity cost of them putting
it out later on in the evening would be less than if they did
it, for example, at seven o'clock, certainly for them because
of course they have very highly rating soap programmes; Emmerdale
and Coronation Street in particular tend to dominate the
early evening schedule. I think it is a worry if there is a reduction
in investment over time in ITN generally; there would be a knock-on
effect.
Q2279 Chairman:
In your written evidence you say that "Consideration might
also be given to how future legislation might safeguard the editorial
independence of Channel 4 News and ensure that there remains
plurality of news supply". I am not quite sure where the
need for that was and what kind of legislation you mean.
Mr Johnson: Currently there is no need because
we believe Channel 4 is very much independent; we think ITN is
broadly independent; we think there is plurality of providers
in that there is Sky out there as well. If there were not both
ITN and Sky, for example, that would be a concern and we might
well have to consider the possibility of creating our own newly
formed news provider because the alternatives might not work.
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