Media: All About ... FilmFour's move on to Freeview

Channel 4 couldn't resist the chance to boost revenues.

According to many observers in the advertising industry, the Channel 4 announcement last week - that it was switching FilmFour to a free-to-air business model - was as close to a no-brainer as you'll get these days in the TV business.

Since its launch in 1998, FilmFour has been available on a subscription-only basis to digital cable and Sky Digital homes. Some 300,000 have chosen to pay up to £7 a month to receive it. It became the flagship for Channel 4's growing multichannel ambitions - but these were scaled back in 2003 following a funding crisis.

In July, it will relaunch as the UK's only major free-to-air film channel, available at no extra cost to every digital home in the UK - 66 per cent of the country's 24 million homes in the third quarter of 2005 but now assumed to be closer to 75 per cent.

In the past, you could have been forgiven for assuming that FilmFour's philosophy was unapologetically niche. Channel 4 now has the exciting prospect of increasing revenues substantially by adding FilmFour to the free-to-air mix that already contains E4 and More4.

A free-to-air launch would have been unimaginable eight years ago when FilmFour launched - and, of course, the phenomenon that has changed the game completely in recent years is the incredible growth of Freeview.

The free-to-air digital terrestrial TV platform is now available in around ten million homes.

FilmFour will be Freeview's only dedicated film channel when it makes the switch in the summer, so it will be a pretty big fish in an already substantial pond - and it will also migrate on to the basic starter tiers on cable and satellite. So more than two-thirds of UK homes will be able to receive it.

In short, its audiences will be large enough to command serious ad revenues - and it will maximise income by running mid-film breaks (something Sky doesn't do on its own movie channels).

FilmFour has good grounds for optimism. Since E4 joined Freeview in May last year, its audience share has almost doubled to 2.3 per cent in multichannel homes - and it has been reaping the rewards in ad-revenue terms.

Andy Benningfield, the head of TV at BJK&E, reckons FilmFour can triple its revenues. He explains: "It will offer an attractive audience in terms of profile - it offers a good proportion of upmarket young men. Advertising is not restricted to end breaks and the sponsorship potential is greater too."

So, clearly, this is a commercial opportunity to be grasped with both hands - and, arguably, it dovetails neatly with the Channel 4 chief executive Andy Duncan's born-again evangelism for public-service values. Public service, in his book, means making programming available to the widest possible audience at the lowest possible cost. That's why he's embracing every platform going, not just Freeview but also mobile and programming on demand via the internet.

Interestingly, though, there were those prepared to read an even weightier significance into this. They argue it could signal a shift in the balance of power between pay-TV and more conventional TV funding models.

"Freeview is certainly the platform that offers most hope for the advertiser-funded model," the TV industry consultant David Cuff says. "Sky won't be happy about this. It will seem like another question mark hanging over pay-TV."

Sky will be even less amused if FilmFour finds itself well placed to evolve into a more mainstream film channel. Come July and its Freeview launch, it will probably be the UK's most-watched film channel. If it can use that fact to enter a virtuous revenue cycle, it will find itself bidding for some serious Hollywood films.

Worryingly for Sky, this could have a mutually stimulating impact on Freeview. The FilmFour brand has bags of cachet and could become one of its lead selling points. It confirms the platform's positioning - a low price point yet premium brand values. That could become the stuff of compelling advertising campaigns.

Perhaps understandably, Sky sources contest this view. They point out that, despite Freeview's recent growth, Sky has also been turning in record performances. In the last quarter of 2005, it had its highest number of new subscription sales for five years.

The future still belongs to Sky, they add. Freeview, they insist, will soon be seen widely for what it really is - a low-tech interim solution that will be unable to offer interactivity or cope with the medium's next great leap forward, high-definition TV.

WHAT IT MEANS FOR ...

ADVERTISERS

- Whatever they may say publicly in support of BSkyB's strategic vision, many advertisers privately fear for the future of advertiser-funded television.

- They will be pleased at this latest development - and will also be keen to see what it does to redress the balance of power between Sky and the established commercial broadcasting sector.

FREEVIEW

- This will be seen by the platform's management as a huge coup and they will undoubtedly make much of it in their promotional activities over the coming months.

BSKYB

- Sky sources argue convincingly that this is a very small earthquake in the wider scheme of things. Yet the existence of a free film channel as a strong selling point on a rival platform might be seen as a setback.

- Sky will continue to point out that it secures first-run rights on 90 per cent of Hollywood's top blockbusters each year. In contrast, it argues, FilmFour's product is not all that different from that available on terrestrial channels.

CHANNEL 4

- More money. And it needs all it can get. After all, its chief executive, Andy Duncan, told the Government last year that it might need future hand-outs if it was to meet its continuing public-service broadcasting commitments.