What's the point of Channel 4?

LONDON - As the broadcaster celebrates its 25th birthday, the balance it has struck between its remit and delivering audiences is under threat.

It is a provocative question, and one with a seemingly obvious answer. As it celebrates its 25th birthday, Channel 4 can claim to have brought to our screens some of the most memorable television of the past two-and-half decades. From The Tube to Big Brother and Friends to Jamie's School Dinners, the broadcaster has plenty to be proud of.

Yet, for all this success, the past year has arguably seen more soul-searching than at any time in its history. Both its remit and funding are topics of media industry debate. Its future finances are in doubt as the multichannel age erodes its audiences. It is caught between those who want to see a strong commercial operator and those who want a bold public-service focus. Put simply, Channel 4 is under pressure to define its purpose and juggle its responsibility to viewers with the needs of advertisers.

The roots of this dilemma lie in its origins. Channel 4 was launched on 2 November 1982 (its Welsh counterpart, S4C, launched the previous night) and came with a strong public service remit. Publicly owned yet ad-funded, it had a duty to serve minority audiences to complement the mass-market ITV. From the start, it has had to balance this remit with delivering audiences for advertisers.

Early content targeting minority groups, notably the black community, homosexuals and feminists, fulfilled its remit and often drew critical attention, with campaigner Mary Whitehouse regularly claiming the channel had overstepped the mark. But over the years, growing commercial pressures have meant it has had to seek bigger audiences and higher revenues to fund the more innovative programmes that are core to its ethos. In doing so, many believe that it has become too mass-market and lost its distinctive character.

An Ofcom report published earlier this year concluded that Channel 4 has changed the way it delivers its remit over time, and noted 'a shift from serious factual programming to more accessible and commercial educational output'. Its first chief executive, Sir Jeremy Isaacs, said that the channel should be 'for all of the people some of the time'; now, says Starcom head of trading Chris Locke, it is 'for all of the people more of the time'.

According to Sir Jeremy, who remained chief executive until 1987, the balance between remit and revenue was relatively easy in the early days when ITV handled its ad sales. 'ITV was hugely prosperous and had a monopoly in most places, so as a condition of keeping that monopoly, it had to support Channel 4. We got a fixed percentage of ITV's previous year's revenue, and ITV sold enough ads on Channel 4 to recoup the money it gave us. But we got to the point where we believed we could sell our own ads better than ITV, even though we knew that would place greater pressure on the public service remit.'

Under Michael Grade, who became chief executive in 1988, the channel's focus shifted from niche to edgy mainstream. It was under his tenure that Channel 4 took control of its own ad sales in 1993. The broadcaster responded with a more overtly ratings-driven programming strategy; out went many of the highbrow shows and in came the sort of content that earned Grade the moniker 'Britain's pornographer-in-chief'. Racier fare aside, it was Grade who brought popular US TV shows such as Friends, Frasier and ER to the channel and aired them in peak viewing slots - a tactic it still uses.

Despite the shift in strategy, many feel that Grade struck an effective balance between commercialism and a distinct identity, using ratings winners to fund edgier fare. However, Sue Stoessl, the launch marketing director of Channel 4, believes that it lost some of its daring when it began to sell its own ads. 'Once the sales team had a say in content, some of the diversity went,' she says. Much of the educational content disappeared, too. 'Originally, cookery, DIY and gardening shows were central and were backed up by written material, such as factsheets and books, unlike today's formulaic property shows.

These views are echoed by Isaacs. 'There is room on the channel for revenue-earning programmes, but the balance has shifted too far now, and the long runs of Big Brother, on which Channel 4 has been too dependent, illustrate that.'

If Channel 4 seems safer these days, it is partly a victim of its own success. Bill Griffin, strategy partner at agency Rapier and the channel's head of marketing until 2005, says: 'Channel 4 was established to give a voice to minorities, but it has played such a key role in assimilating them into the mainstream that, 25 years later, its remit needs to be redefined.'

The media landscape has also changed and poses huge challenges. When Channel 4 launched, a letter to Marketing questioned its niche positioning. 'Who will [the viewers] be? Underwater ludo players?' asked the writer. But where once there were just four national channels, there are now nearly 900 across an array of platforms, with every niche (even, perhaps, underwater ludo players) catered for.

When current chief executive Andy Duncan took charge in 2004, he predicted a £100m revenue shortfall by 2012, as digital switchover hits Channel 4 audiences and commercial revenues. The review by Ofcom came to a similar conclusion, arguing that 'new forms of public support' may be needed in the long term and that public cash may be required for 'transitional support'.

Part of Channel 4's response has been to push furiously into additional platforms to shore up its audiences. Duncan, who as director of marketing, communications and audience at the BBC oversaw the launch of its digital services, has made E4 and Film4 free-to-air, launched More4 and video-on--demand service 4oD, and will spearhead the launch of three radio stations in 2008 and 2009.

But there is no guarantee any of that will bring in the required cash. The gap is projected to be about 10% of total revenues - not enough to threaten survival, but enough to upset the balance Channel 4 has established between commercialism and public service. It raises questions about the future form of the channel. Should it be privatised and become another commercial broadcaster, free of public service obligations, or should it receive a slice of the licence fee or get a state handout, thereby reinforcing its public remit?

Grade, now executive chairman at ITV, is against Channel 4 receiving state help, arguing that it would lead to the long-term erosion of the brand. 'I don't think the people who run Channel 4 fully understand the strings attached to taking public money, and I think they would have more chance of holding on to their brand values if it were privatised,' he says.

Duncan disagrees: 'If Channel 4 were privatised, it would be destroyed overnight because all people would be interested in would be making a profit.' He favours retaining public service obligations and acknowledges the tension they cause with commercial imperatives, but insists it is a healthy tension. 'We want to make shows that people want to watch,' he says.

In terms of its responsibilities, Duncan is keen to stress the channel's record on innovation and creativity, a key pillar of its remit under the 2003 Communications Act, above more traditional concerns such as serving niche audiences. He points to the channel's investment in comedy, which can be expensive because many new shows do not take off. 'Our own research, based on audience feedback and supplier sourcing, shows that we are at least twice as innovative as our nearest contender, BBC2,' he says. 'Last year we ran at least twice as many new shows as ITV and Five put together, and worked with 300 independent producers, twice as many as any other individual channel, and 50 of whom were first-time suppliers to us.'

Despite Duncan's optimism, many feel the channel has work to do to boost its public service credentials if it is to convince ministers it deserves a handout. They argue that the channel's output has become too polarised between the big audience-pullers - Big Brother, Hollyoaks and some of the US imports - on the one hand, and the more innovative and educational programmes, such as the acclaimed foreign affairs series Unreported World, which attracted about 800,000 viewers at its peak, on the other. 'The trick,' says Griffin, 'would be to produce shows that nails both those objectives simultaneously; Jamie's School Dinners, for example, pulled in audiences of about 5m and resulted in a change in government policy.'

In a tacit recognition that the channel has strayed off course, Kevin Lygo, director of TV and content, outlined a 'creative overhaul' at the MediaGuardian Edinburgh International Television Festival in August. Celebrity Big Brother will be dropped next year after the racism controversy over this year's series, and shows such as Brat Camp and You Are What You Eat will make way for new programme ideas in the popular 9pm slot. Lygo added that the channel would also reduce the amount it spends on acquiring US TV shows. The result, he admitted, could be lower ratings and lower revenues from advertisers. The strategy, then, appears to be to sacrifice short-term commercial considerations (and, therefore, deliver lower audiences for advertisers) to secure long-term financial support.

Current marketing director Polly Cochrane argues that advertisers will win in the long term. One of Channel 4's big draws for media buyers is that it attracts young, upmarket and light viewers - demographics that advertisers are most keen to target. But, she says, 'unless we review the funding model, we may have to play safer in terms of our creative output, and the first thing to go would be the new and the risky. It is expensive to get an audience for new things.'

Bernard Balderston, associate director of UK media at Procter & Gamble, warns that Channel 4 must tread carefully. He praises the broadcaster for delivering upmarket and youth audiences, but points out that many of the programmes that deliver those audiences are outside of its public service remit. 'For advertisers, the public service remit of Channel 4 is secondary, and it is in danger of muddling the separate issues of public service TV and what it delivers commercially,' he says.

However, Balderston warns that going too far down the commercial road would be just as bad. 'Advertisers want the channel to retain the strength it has, and if that needs to be reinforced by something a bit more commercial and less public service oriented, that would not really worry us, provided it did not go too far. Another Channel 5 would be disastrous.'

This opinion is shared by Michael Jackson, Channel 4's chief executive in the late 90s and now president of programming at US firm InterActiveCorp. His tenure saw ratings hits such as Queer as Folk and The 1900 House, which arguably met the remit. He believes Channel 4 needs to be able to invest in shows that aren't ratings winners. 'My hope is that it still has the space to nurture the sideways and the oddball, because that way the future lies,' he says.

For Cochrane, the decision to drop several safe audience-winners puts greater strain on her department. 'Our marketing is going to have to work even harder to entice viewers,' she says. Channel 4 trails about eight shows a week on air, and puts its off-air marketing effort behind about eight programmes a year. 'These shows tend to distil our brand values and how we want to be judged,' says Cochrane. In time, on- and off-air work will be augmented by online marketing, she says. 'We will be putting more emphasis on the long front trail in advance of a programme's premiere on the main channel and try to keep the dialogue going post-launch. As the number of ways of seeing something on our network of channels, along with online and video-on-demand, increases, I am convinced that audience, advertisers and programme brands will be winners.'

Channel 4's remit is the subject of an Ofcom review, due to be completed by 2009, after which the government has said it will do its own review of public sector broadcasting as a whole. Channel 4 is currently trying to define the role it should play from 2012, and will publish the findings, which will inform both the Ofcom and government reviews, early next year.

So, amid the celebrations of a highly successful 25 years, Channel 4 has its work cut out. There are very real fears that the compromise it has achieved between commercialism and innovation is starting to unravel. As Duncan points out, there are no answers yet. Everyone seems to know what they want, but nobody is quite sure how to get there. 'The consensus is that we want a public service broadcasting system in the UK after 2012 and that we want plurality of supply. The government and Ofcom agree that Channel 4 should play a key role in providing that competition,' he says. 'So the question remains, how do we keep Channel 4 strong?'

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