MEDIA FORUM: Is Channel 4 over-egging its position in digital TV? - Last week Channel 4 announced a structure to drive its digital proposition. Does the plan have implications for advertisers?

This is definitely the spring cleaning season in the television

business. Days after ITV tidied up its various properties into a neat

new structure, Channel 4 goes and launches 4 Ventures, a neat and tidy

new structure to accommodate all its non-core activities - FilmFour, E4,

the FilmFour Channel, plus its online activities, international

programme sales division, its Go Racing joint venture and various other

commercial activities such as publishing. The rationale is to bring an

increased focus to the management of these business activities, and that

new focus will go hand-in-hand with a more aggressive investment

strategy. Non-core business (in other words, everything outside of the

main Channel 4 terrestrial television operation) accounted for 4 per

cent of expenditure last year. That will rise to 10 per cent of the

budget - roughly pounds 200 million.

Its horizons, in other words, will continue to broaden. Is this


Shouldn't Channel 4, which has historically been far more comfortable

swimming with the dolphins, think twice about climbing into the shark

tank? And are there any implications here for advertisers?

Actually, the best parallel here perhaps isn't so much what's been

happening at ITV but the situation at another broadcasting institution

It's strangely reminiscent of the approach taken by the BBC, which has

imposed a nominal Chinese wall between its public service,

state-supported media properties and its commercial ventures stretching

from the web through digital TV to magazine publishing.

The analogy isn't perfect - paradoxically, the BBC is far more

aggressively commercial in its ambitions and Channel 4 is far more

public service in its instincts - but few doubt that the BBC has been

spreading its talents too thinly or, indeed, that it is not finding its

internal contradictions extremely painful. And perhaps we are already

seeing signs that Channel 4's golden era (which began with its economic

independence from ITV in 1993) is coming to an end. No longer can we

assume that its stature will grow steadily with its audience. At least,

that seems to be the implication behind a comment by Channel 4's chief

executive to the effect that recent audience successes might be hard to


Does the launch of 4 Ventures signal the end of an era? Don't jump to

conclusions, Andy Barnes, the commercial director of Channel 4,

counters. He can give reassurances that Channel 4 won't neglect its core

business. 'Our programme budgets are up in line with ad revenue

increases,' he points out. 'To say that Channel 4 should just be a

terrestrial broadcaster would mean we were being asked to preside over

decline.' The organisation as a whole has no intention of doing


He adds: 'We have to be valid in all the environments we can. We have to

exploit our secondary rights. We don't really have an option. In five or

ten years we want to be able to hand down a legacy of a channel that is

still up-to-the-minute and has a licence to do things in an innovative

way. If the main channel isn't successful then everything else would

have to fall by the wayside but in buoyant times we can invest more in

reaching people in different environments.

'I think all the evidence is that people are happy with the fact that

we've launched E4. If we'd launched a gameshow channel, people would

have said 'what on earth are you playing at'. And they'd have been right

to. But something like E4 cross-fertilises what we do on Channel 4.'

But isn't the warning on future audiences exactly the sort of thing

guaranteed to set alarm bells ringing at ISBA? It has, after all, been

vociferous in urging that the BBC sticks to its public service knitting.

Doesn't it believe that Channel 4's remit is incompatible with wider


Not necessarily, Bob Wootton, ISBA's director of media and advertising

affairs, says: 'Channel 4 is similar to the BBC in that it is a

statutory corporation. But the difference is that it is a commercial

venture - it doesn't get any mandatory tax revenues. It's also the case

that, while Channel 4 might be investing aggressively, it isn't doing so

to the same degree or with the same degree of flagrancy as the BBC.

If Channel 4's main broadcast channel was falling over we might be down

there to say 'Oi! Stop frittering it away'. But the core product isn't

falling over.'

And, in general, advertisers tend to recognise that mainstream

broadcasters are in a philosophically awkward spot these days.

Fragmentation, after all, is a very real phenomenon and broadcasters

have to make some provision for its impact. But that said, it's also

true that the broadcasting establishment responds well to pressure.

Wootton adds: 'The BBC, ITV and Channel 4 haven't declined as much in

audience terms as some might have expected. So setting targets, even

what may be considered unreasonable targets, does seem to yield


Chris Hayward, the head of broadcast at Zenith Media, agrees that there

is an inescapable logic at play here: 'This type of venture is

inevitable given the way that the TV market is developing. If you want

to be a major player in the future this is the sort of avenue you have

to explore.

Almost all of the major players have sought to develop in this way.' But

isn't he worried that it always seems to come hand in hand with attempts

to get in early excuses about the difficulty in maintaining audience


Especially, in Channel 4's case, the young and upmarket audiences on

which it has based its revenue success. Its core constituency, in other


It's difficult, Hayward agrees. 'The whole business is difficult. The

truth is that unless you can do something to stimulate overall viewing,

even the more successful parts of the audience will be eroded.'

But Paul Parashar, the broadcast director of New PHD, says that it's

wrong to focus on the potential downsides. He states: 'These days we are

always looking to extend value beyond traditional advertising spots and

that may involve doing deals across the various aspects of what a media

company such as Channel 4 is about. We might want to do a deal that will

bring together things like online, books, broadcast and pay per


Channel 4 as a whole may appeal to a certain set of consumers that

advertisers are keen to get closer to and we will welcome anything that

enhances the ability to do that. Of course, they need to set it up

carefully given the Channel 4 remit. In many respects they need a brand

champion at Channel 4 - someone to ensure that compromises aren't made.

If you're asking me if Channel 4 has a strong enough culture to achieve

that, then I'd have to say yes.'

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