THE FOURTH MAN: Channel 4's Mark Thompson reveals his programme plans and how he thinks the channel will fare as an independent sales house

The life-size cardboard cut-out of Richard and Judy on Mark Thompson's wall injects a shot of colour into the donnish Channel 4 chief executive's otherwise pretty spartan office. It also, perhaps, represents a two-fingered salute to those critics who mocked Channel 4's decision (subsequently vindicated by its audience figures) to poach the king and queen of daytime television from ITV.

Dominated by a massive wall-mounted TV screen and a long table, Thompson won't have his goldfish bowl office for much longer - he has decided to impose an open plan policy across the building, surely one of the easier decisions he's had to make during his time at the station.

Serious, earnest, bearded, fearsomely intelligent and a devout Roman Catholic, Thompson joined Channel 4 as it celebrated its 20th birthday by posting its first ever loss. Subsequently, he has made many changes both structurally and on-air to put Channel 4 back into the black.

Reflecting on his 20 months as the head of Channel 4, he says: "I think there's plenty to do on the creative front and the business front but do think we've achieved a fair amount already."

His route to the top is seemingly a typical Establishment one. Educated at the Jesuit Stonyhurst College in Lancashire and at Merton College, Oxford, where he edited Isis, Thompson joined the BBC in 1979 as a graduate trainee. Identified as a rising star at an early age, he was fast-tracked through the Corporation, starting his career as a researcher on Watchdog before becoming a producer on Nationwide, Everyman and Newsnight.

His ascent of the BBC's corporate ladder really accelerated when he was made the executive producer of the Nine O' Clock News in 1988. He was then made the editor of Panorama, the head of features, the head of factual programmes, the controller of BBC2 and the head of nations and regions before finally landing the director of television job in 2000 under the patronage of Greg Dyke.

Tipped as a possible successor to Dyke as the BBC's next director-general, Thompson left the Corporation in 2001 on an enforced period of gardening leave before replacing Michael Jackson as Channel 4's fourth chief executive on a salary of £400,000.

When he arrived, Channel 4 was under pressure both financially and on-screen and after drastic surgery to improve the company's balance sheet (more on that later), he started a process of on-air creative renewal.

"One of the things I felt when I arrived was that the channel had slightly lost its knack of being talked about," he says. "We're trying to get that back and I think we've had some real success."

The theme of "talked-about TV" is one that Thompson refers to regularly.

He used his MacTaggart Lecture at the Edinburgh Television Festival in 2002 to complain that British TV in general had become inherently risk averse, mechanical and samey. This was something that he wanted to change.

By investing in new programming formats Thompson thinks that on Channel 4, this goal is at least some way to being achieved.

"If you looked at the half-dozen most talked-about programmes of the year all the way from Wife Swap to The Deal to Derren Brown, we've had a lot on this channel," he claims.

Of course, there have also been some notable failures including Boys and Girls and RI:SE, which is being replaced by repeats of Friends - but such is the price of risk. To assist in this process there has been widespread change on the commissioning floor - Channel 4's director of television Tim Gardam made way for his counterpart at five Kevin Lygo, who was largely responsible for ridding five of its seedy, downmarket image. "His (Lygo's) job is to find the next big thing," Thompson says.

As well as creating programmes that are talked-about (mostly for the right reason), Thompson says that he has dedicated a lot of resource to the drama genre - one of particular interest to advertisers - since Brookside was dropped.

"What we've tried to do so far is begin the next chapter creatively at Channel 4. That's about trying to get life into some key genres - one of the things I wanted to try to do when I came was to tell a more consistent story about drama on the channel than we've told before," he says.

"The channel had never, before Teachers, ever had a drama series that was renewed. Teachers is a real success-it's a franchise for us, it stands for something and has a loyal audience that come back to it in a very good demographic," he continues.

A glance at Channel 4's forthcoming schedule reveals several new commissions that Thompson hopes will become renewed series. These include Shameless, a seven-parter written by Paul Abbott, No Angels, a drama series based on young nurses in Leeds, written by Tony Garnett, and Green Wing from the Smack the Pony team. All, according to Thompson, are highlights of the forthcoming schedule.

"The idea is to begin developing a set of drama titles. You've got one in the schedule most weeks of the year and they are eye-catching, strong, have something to say and are redolent to the Channel 4 brand," Thompson says.

The process of on-air creative renewal could only happen after he tackled Channel 4's £28 million debt. "I arrived at Channel 4 when it made its first loss," he remembers. "We've done a lot of work getting 4Ventures (Channel 4's commercial arm) on track. It will go cash positive next year and will start contributing money to the centre."

The work carried out was undoubtedly painful, not least for the 200-odd staff that were made redundant as the result of the cutbacks and closure of FilmFour. But few would doubt that it was the right thing to do - Channel 4 had ballooned to enormous proportions and there had been almost uncontrolled growth.

"We've taken a third of our cost out - more than £35 million. As a result of that, as a business we are in a leaner, healthier state than we were 18 months ago," he points out.

This has allowed him to increase the programming budget from £400 million when he arrived in early 2002 to £430 million in 2003 and, he hopes, to £450 million for 2004. Compared with ITV, this may seem relatively small beer - ITV's director of programmes, Nigel Pickard, is given a £849 million budget to play with, but Thompson says he has been able to grow the amount that he can invest in programming faster than his rivals.

"I believe, in terms of the main channel programme budget, we can compete effectively with everyone - as a proportion our budget will have increased faster than ITV and five," Thompson points out.

He also thinks that Channel 4's status as a state-owned and commercially funded TV station that ploughs profit back on-screen gives him greater flexibility than that of its commercial rivals.

"Channel 4 is not at any stage trying to make a return to shareholders. The incentive for me is to keep as much money in the programmes and that's kind of unique because everywhere else there are shareholders who are very keen to make sure that the most important line in the budget is the profit line."

But there are other pressures on Channel 4 - as well as the start of the BBC's Charter Renewal, the Communications Act has led to a shake-up of British broadcasting.

Following the Government's decision to approve a merger of Carlton and Granada, which may or may not produce cost savings of £100 million, Ofcom ruled that restrictions precluding the merger of the other TV sales houses would be lifted. This could potentially reduce overheads and put ITV's rivals in a stronger position when competing for advertising revenue.

But despite informal talks with other channels, including five, Thompson isn't committing himself just yet.

"We're going to follow events closely. Our view would be that firstly we did not think that to allow the merger to go ahead with relatively light behavioural remedies was in the public interest because we thought it would not be good for advertisers. In common with others, we've been mystified at the inability of the competition authorities to see that.

Saying that, we think Channel 4 has a very distinctive product to offer in terms of audience delivery, young audiences and light viewers. We think that therefore we have an absolutely strong future as an independent sales house," he says.

Thompson claims to have regular dialogue with advertisers and agencies and begins a small sales pitch.

"Advertisers like access to Channel 4 because of what it stands for. If you want early adopters, if you want your ads going out in an environment that feels fresh and contemporary, there really isn't anywhere better than Channel 4," he says

"Any option of consolidation (of the sales function) has got to beat the stay-it- alone option and we think this is a pretty high bar," he concludes.

Assuming that Channel 4's sales strategy remains untouched, the number of channels that it has to sell is increasing. This is vital as multichannel penetration increases and as we head towards the planned analogue switch-off date of 2010.

On top of the entertainment channel E4, which after a rocky start, is due to make a profit in 2005 at the latest, Channel 4 is launching a new digital channel called More4. This will be available in 12 million homes.

Thompson hints that further launches could be on the cards.

"What we're doing is creating a portfolio of TV channels. It's tougher for us than the BBC because we can't just pull it out of the licence fee. Each one has to be a business that we can get to work," Thompson says.

More4 is intended to be more upmarket, contain drama, comedy and entertainment and, despite having spent so much time in the public-funded, public service world of the BBC, Thompson is refreshingly aware of the realities of running a commercial TV station.

"We'll absolutely launch it as a channel that has a credible business plan. It won't have some of the cultural baggage that BBC4's got," he says. Incidentally, during his time at the BBC, Thompson was largely responsible for getting its controversial digital channels off the ground.

As for the more immediate future, Thompson seems pleased with the work he has done so far and promises much for the future.

"Over the coming months viewers are going to see a lot of experimental, energetic different programming in the schedule," he concludes. Perhaps some new cardboard cut-outs will soon replace Richard and Judy on the wall.