Andy Duncan's plan to scrap subscriptions to FilmFour and make the channel free-to-air shows that he is still capable of generating the sort of surprise that greeted his appointment as Channel 4 chief executive nearly 18 months ago.
Although the move is still in the planning process and has yet to be approved by the Channel 4 board, seven years after it launched as a premium subscription service FilmFour is likely to be made available on all digital TV platforms, including Freeview, at some point next year. With its digital youth channel E4 free-to-air since May, Channel 4 will have soon completely exited the pay-TV market, which was once seen as key to securing Channel 4's future.
If the E4 experience is anything to go by, taking FilmFour free-to-air makes financial sense, but this is just one reason why Duncan is intent on making it available in all digital TV homes, as he seeks to ensure Channel 4's long-term growth.
FilmFour, which comprises the core channel, a time-shifted 'plus-one' channel and the FilmFour Weekly channel, attracts an average of 400,000 subscribers on Sky, NTL and Telewest, each paying £7 a month to access its film content. Since its launch, hundreds of thousands more subscribers will have sampled the channel but subsequently churned out.
There is an argument that the service has become less appealing due to the growth of rival dedicated channels and following the closure of Channel 4's FilmFour production business, which was responsible for a raft of successful films in the early-90s, such as Four Weddings and a Funeral and Trainspotting.
Duncan's predecessor Mark Thompson decided to shut the FilmFour production division in 2002, following a series of expensive box-office flops, including The Parole Officer and Birthday Girl. This left the FilmFour library looking thin and the channel found itself competing against the might of Sky in acquiring the rights to films. Inevitably, with this competition, the quality of its output has suffered, with recent fare on the channel including older films such as Ghost Dog and A Life Less Ordinary.
Film Four's limited appeal is reflected by its minuscule 0.0053% share of viewing in Sky homes and the fact that, according to Channel 4's 2004 annual report, it only managed to produce a small operating profit of £500,000 against an operating loss of £1m in 2003. In comparison, the Sky basic-package movie channel TCM attracts a 0.48% share, while the combined audience share of the Sky Movies channel portfolio is 4% in satellite homes.
Duncan is gambling on the loss of subscription revenue from its 400,000 customers being outweighed by an increase in FilmFour's audience share as a free channel, leading to a rise in advertising revenue, and this looks to be a probable scenario.
Since Duncan took E4 free-to-air, timed to coincide with the launch of Big Brother's sixth series, the channel has doubled its share of viewing for youth audiences and agency estimates reveal that it has made more in ad revenue than it would have taken in subscriptions.
Steve McDonnell, a TV director at MediaCom, believes that as a free-to-air channel FilmFour could attract up to £30m in advertising money, although this is dependent on the length and structure of the ad breaks that it introduces, which are subject to regulatory control by Ofcom.
While the financial argument seems an obvious one, the move, when complete, fulfils other criteria that are important to Duncan, not least his commitment to free-to-air television and support for Freeview, the digital terrestrial platform that he played a crucial role in creating in his previous role as director of marketing at the BBC.
In September, Duncan launched More4, an entertainment channel, as a further free-to-air offering. These initiatives, allied to the inclusion of FilmFour, will bolster the Freeview platform and make it a significantly more appealing alternative to pay-TV.
With the entire Channel 4 portfolio free on all TV platforms as well as steps being made to ensure it can be viewed on broadband and mobile TV, Duncan will have shown his commitment to public-service broadcasting.
This will no doubt help his case when pleading with the government for additional funding to plug Channel 4's expected £100m revenue gap by the end of the decade.
From a strategic perspective, it also secures Channel 4's presence on Freeview ahead of the digital switchover process, which is due to be completed by 2012, and should be seen in the context of the current land grab by terrestrial broadcasters to ensure that they have as many slots as possible on the platform. By getting in early and moving FilmFour onto the platform, Channel 4 is ensuring that it will build up as strong a brand as possible six years ahead of switchover.
However, there are several, potentially thorny, issues that Channel 4 will need to resolve before FilmFour becomes a free-to-air, channel, not least the renegotiation of its existing access deal with BSkyB and the renegotiation of the rights issues with the studios that made the films.
But as Duncan has already proven with E4, these problems are not insurmountable, and once resolved, FilmFour should become an extremely attractive option for advertisers.