Media Forum: Did Ofcom let down Channel 4?

Will Ofcom's ruling on public funding affect Channel 4's future?

When the Channel 4 chief executive, Andy Duncan, made a big play for public funding last month, he was clearly confident about the outcome.

How else to explain the provocative manner in which he tempted fate? Anyone who dared to contradict him on this matter would, he stated definitively from the dais at the Oxford Media Convention, be guilty of "lazy thinking".

It was no surprise, then, that the Ofcom chief executive, Stephen Carter, felt himself equal to the challenge. Ofcom's latest report on the matter, published last week, agrees that the structure of public service broadcasting - and its funding - will change over the next few years as we head towards analogue switch-off; but there is, it stated, no "immediate case for the direct public funding of Channel 4".

Duncan will doubtless focus on the word "immediate" as he ponders just how lazy Carter has proved himself in this instance - and indeed, the report promises to monitor Channel 4's performance and finances and will revisit the question of funding by 2007.

In the interim, however, Channel 4 has been invited to "develop further its proposals for self-help, including cost savings, commercial ventures and alliances". Self-help? It almost sounds like the sort of rebuke you'd hand down to a feckless scrounger.

Duncan's plea for public money was based on projections showing that, in a fragmented digital TV market, Channel 4 could face a decline in its share of audience - and, as a consequence, revenue. It may currently be in profit: but by 2015 it faces an annual shortfall of £100 million a year. And the notion of self-help is arguably no help at all - Channel 4 has only recently recovered from financial problems brought about by its expansion programme.

In short, Channel 4 has now been left stranded in strategic limbo, hasn't it? Iain Jacob, the chief executive of Starcom Mediavest, doesn't think so. He states: "The truth is that Channel 4 has been dealing brilliantly with the challenges of a fragmenting market - and actually it has prospered.

It has done that by focusing on the right things - first, content, and second, its brand. I think it has a very good understanding of the realities of the market and its place in it. There is an understanding that it has to get content right rather than getting involved in platform and technology issues. Its mixture of big ratings winners and more specialist programming is pretty well managed."

Tom George, the managing director of Mediaedge:cia, seconds that. And, he reckons, Channel 4 has achieved exactly what it set out to - put the issue firmly on Ofcom's agenda. He adds: "I assume it adopted a lobbying position and will regard this outcome as slightly better than a score draw because it now knows it has the right of appeal if its business performance is affected by factors outside of their control."

Steve Huddleston, the head of media operations and trading at BT, agrees.

He comments: "I think there might have been an element of Duncan chancing his arm - and Ofcom has hardly slammed the door on him, has it? I think that, rather than being bad for Channel 4, this has to be seen as good for the BBC - which must have been worried about the implications of Channel 4 getting some of its money.

"It's true that Channel 4's performance in Freeview homes has to be a worry - and it is absolutely right to alert people to its concerns as early as it can. But Ofcom's response is understandable. It is saying: 'Keep doing what you've been doing, because you've been doing it well.'"

Last week, presumably with self-help very much in mind, Channel 4 announced that it was raising the E4 programming budget from £40 million a year to £60 million. Is this wise, given its track record in non-core activities?

Chris Boothby, the director of operations at Vizeum, points out that the recent overhaul - which saw 4Ventures re-incorporated into the main Channel 4 management structure - means E4 has become a core activity.

And programme commissioning is what the company does best.

He concludes: "I think there's also every indication that it is now in a position to manage the stable of channels - E4, More4 and Channel 4 - in a stronger fashion and there will be increasing opportunities both above and below the line to encourage advertisers to use the whole portfolio. So I don't think doom-mongering is called for. We're talking about a healthy and unique business."

NO Jacob: Fragmentation can affect share - but eventually consumers begin to gravitate back to the suppliers who represent good value. We're already seeing that in television. Success in multi-channel television is not just about having lots of channels offering more of the same. So, in the long run, I don't think Channel 4 will need to burn reserves.

NO George. Ofcom is well aware that Channel 4's share of national advertising revenue has remained remarkably stable. I don't think any other commercial broadcaster can say the same. Channel 4 will argue that the pace of change has quickened but the inescapable fact is that, commercially, it has proved itself incredibly adept over the years.

NO Huddleston: As for self help, there are options it can explore. In the past, for understandable reasons, Channel 4 has had something of a purist attitude when it comes to the sorts of proposals that advertisers might make. Maybe there could be a bit of a mindset change there rather than it becoming more overtly commercial in its programming.

NO Boothby: I can't believe that the Channel 4 audience will be as badly affected in the future as some people seem to be saying. Of course it will be under pressure in the multichannel environment but it has been under that pressure for many years now and it has performed as well as - or better than - other commercial broadcasters.

NO - Iain Jacob, chief executive, Starcom Mediavest

"Fragmentation can affect share but consumers return to the suppliers who represent good value. Success isn't about having lots of channels offering more of the same. In the long run, I don't think Channel 4 will need to burn reserves."

NO - Tom George, managing director, Mediaedge:cia

"Ofcom is aware that Channel 4's share of national ad revenue has remained stable. Channel 4 will argue that the pace of change has quickened but the fact is that, commercially, it has proved itself incredibly adept over the years."

NO - Steve Huddleston, head of media operations and trading, BT

"In the past, for understandable reasons, Channel 4 has had a purist attitude when it comes to the sorts of proposals that advertisers might make. Maybe there could be a bit of a mindset change there."

NO - Chris Boothby, director of operations, Vizeum

"I can't believe the Channel 4 audience will be as badly affected in the future as some are saying. Of course it will be under pressure in the multichannel environment but it has been under that pressure for many years now."

Got a view? E-mail us at campaign@haynet.com.