Media: All about ... The restructure at Channel 4

The shake-up goes on under Andy Duncan. Alasdair Reid reports.

The Duncan revolution continues. Not that last week's pronouncement was revolutionary. Or much of a surprise, come to that. Channel 4's retreat from high-risk businesses outside its core broadcasting competence began under its previous chief executive, Mark Thompson - and when Andy Duncan succeeded him last summer, he gave every indication that a more radical restructure was on the cards.

It has now arrived. 4Ventures will remain in existence, but will focus on the sales of Channel 4 content in international programme markets plus DVD and book spin-offs. Meanwhile, the rest of its activities will be reintegrated into the centralised Channel 4 structure.

Thus, the programming heads of E4 and More 4 will now report to Channel 4's director of TV, Kevin Lygo, who will manage editorial policy and programme budgets. Dan Brook, who was the managing director of the digital channels run by 4Ventures Channels, has been given "a new strategic role" as the controller of digital channels. He will report to Duncan.

1. Previously, 4Ventures housed all of Channel 4's commercial activities outside of its flagship terrestrial television channel. These activities included the usual activities such as books, videos and international programme sales - but, more importantly, it was set up as a vehicle for ambitious plans to expand into digital TV, online activities and film production.

2. This expansion strategy was largely the vision of Michael Jackson, who succeeded Michael Grade as chief executive in 1998. Channel Four Films was part of the commissioning structure going right back to launch in 1982 and although it had some hits (such as Four Weddings and a Funeral) it had relatively modest ambitions before Jackson's arrival.

3. Channel Four Films was renamed FilmFour in 1998 and a companion subscription channel, FilmFour TV, was also launched at this point. FilmFour, according to some critics, started to think of itself as a "British Miramax" rather than focusing on its previous strength - low-budget, cutting-edge films with eventual TV distribution in mind.

4. Jackson also accelerated Channel 4's multichannel strategy. A dedicated horse-racing channel, attheraces, was launched in 2000 and E4 was launched in 2001.

5. 4Ventures Ltd launched in February 2001, in response to critics who claimed Channel 4 was financing its loss-making new businesses with revenues earned on its core terrestrial TV airtime. Jackson announced a separation of the two sides of the business. Chris Smith, the then culture secretary, warned that the broadcaster was playing a dangerous game. "Channel 4's argument is that FilmFour and E4 will become self-financing. We have to hold them to that," he said. Later that year, Jackson said he was investing £200 million in new digital and online services.

6. By November 2001, with Jackson pursuing a career in US TV, the strategy was unravelling. Costs were slashed at 4Ventures in an effort to halve projected losses of £70 million a year. Its interactive division was eventually closed.

7. With a new chief executive, Mark Thompson, now at the helm, rising losses at 4 Ventures dragged the whole Channel 4 organisation into the red. Thompson pledged more cuts but a double whammy was on its way: ad revenues were looking bleak for 2002, while FilmFour prepared to unveil its costliest flop yet: Charlotte Gray. The FilmFour production arm closed at the end of the year.

8. Thompson stuck to the view that 4Ventures would remain an integral part of Channel 4's strategic vision and there was still talk of adding new channels to the digital portfolio. But the vision seemed clouded when it was revealed Thompson had been in merger talks with five.

9. By summer 2004, 4Ventures had recovered and was on track to turn in a profit of £10 million. Although Duncan pledged to maintain non-core revenues, the focus had changed and, following the departure of the 4Ventures director, Rob Woodward, Duncan decided to reintegrate its operations.

He also announced that commercial activities will not be sufficient to make up Channel 4's projected revenue shortfall. Ofcom says that there is "no immediate case" for direct public funding.

WHAT DOES IT MEAN FOR ...

ADVERTISERS

- Many advertisers love the young, upmarket, attentive nature of the audience that tunes into the flagship Channel 4 - and anything that strengthens its ability to deliver that audience will be welcomed.

- They now expect Kevin Lygo to impose a more coherent approach across all of his portfolio of brands - and to reap audience rewards from better scheduling and defter cross-promotion.

- A focus on mainstream activities, ie ad revenue, could mean E4 will be offered on a free-to-air basis on Freeview. Advertisers are keen for this to happen as it would instantly boost commercial supply.

ITV

- The network looked like a dinosaur when it came to digital TV, while Channel 4 was a sexy challenger brand. Now Channel 4 will be looking to ITV's three-channel model for inspiration.

THE BBC

- The corporation is well-versed in combating ITV's attempts to put it back in its public service box - but Channel 4, under Andy Duncan, has started questioning the whole nature of the box itself.

- Duncan wants public money for making public-service programmes - and if successful that, almost by definition, will mean less in the pot for the BBC. However, Ofcom said this week that there was no case for direct public funding of Channel 4.