One of the first tasks that Mark Thompson embarked upon when he took over as the chief executive of Channel 4 was a total review of 4Ventures, its commercial arm. 4Ventures' results, which were announced last week, show the first fruits of his labours.
Michael Jackson, Thompson's predecessor, founded the division, which includes all of Channel 4's digital and interactive channels, in January 2001. But, according to Thompson, it had grown out of control and, instead of providing additional revenue that could be ploughed back into the main channel, it was a drain on resources. Thompson made the decision to carry out dramatic surgery - the FilmFour production business was closed and a third of the division's total staff lost their jobs. There are few who dispute that, while the closure of the FilmFour production business was a cultural blow, it made business sense.
A new management team was installed under the stewardship of Rob Woodward, who took on the position of commercial director from Andy Barnes, now Channel 4's sales director.
4Ventures' results show the cost cutting appears to have paid off. Turnover was up 20 per cent to £125.6 million while losses had fallen by 53 per cent to £27.6 million. "It was a year of progress in a tough market," Thompson says.
Growth was driven by E4, which doubled its share of 16- to 34-year-old viewing in multichannel homes. Successful licensing of Channel 4's products and Channel 4's educational arm, 4Learning, also helped improve fortunes.
Now that the major surgery has taken place, Thompson has announced his plans for reconstruction of the division. "We may have achieved our short-term goals but we've still got a long way to go," Woodward confirms.
Thompson remains confident that 4Ventures can return value into the core channel. It currently contributes only 15 per cent of Channel 4's turnover, but he wants this to double to put the commercial division in line with the other broadcasters - 30 per cent of the BBC's turnover comes from commercial activities, while both Granada and Carlton manage to exceed this figure.
As part of Thompson's strategy, Channel 4 is planning to transmit a time-shifted version of E4, E4 +1, which will be a mirrored version of E4 but broadcast one hour later.
After a slow start, Channel 4 seems to have found a place for E4. "E4 hasn't been the success that everyone hoped but it's a good secondary channel," Nick Theakstone, the investment director at MindShare, says.
While the E4+1 launch is hardly revolutionary, it does show that E4 wants to make the most of its space on the digital spectrum. Non-stop coverage of Big Brother and The Salon may not be to everyone's taste but losses have been cut by 57 per cent and the channel is predicted to break even next year.
Ostensibly, the reason for the time-shifted E4 +1 is that E4 viewers may not be able to start watching the channel when it first comes on air at 3pm. However, there is the possibility that an alternative premium service could replace it when the economy is in a better position. It will also reinforce the core terrestrial channel and create a deeper relationship with its audience. "I wanted to strengthen the creative links between E4 and Channel 4," Thompson says.
Much more startling was the news that 4Ventures is planning to launch a fourth digital channel, provisionally dubbed G4, to supplement the existing suite consisting of attheraces, the FilmFour channels and E4.
With digital penetration creeping up to the half-way mark (46 per cent of UK homes have multichannel TV), Channel 4 has realised that, to retain audience share, it will have to continue to embrace the digital arena.
The collapse of ITV Digital has meant its pay channels - E4 and FilmFour - lost a sizeable audience, although Thompson claims that additional subscribers have been enticed to sample the FilmFour channels following a marketing campaign with Sky Digital.
With the launch of Freeview, Channel 4 no longer had a terrestrial route to market for its premium channel offerings, so the launch of G4 as a free-to-air digital channel seems a sensible decision.
Because of the extra capacity afforded to Channel 4 as part of the terms of the reissued digital terrestrial licence, the broadcaster is in a more advantageous position than its rivals, five, for example. "At least Channel 4 is looking for more options," Theakstone argues.
G4 has been billed as "a channel for Frasier fans", but Thompson is, at the moment, unwilling to give away many more details. Whatever the eventual schedule, the news has been well received. "The new channels increase their opportunities to broadcast, which is a good thing," Theakstone says.
Attherraces, a joint venture between Channel 4, Sky and Arena Leisure, continues to be a drain on resources not helped by the lapse between the channel launching and the technology for interactive betting finally being installed. While it contributed a loss of £10 million to Channel 4's bottom line, there remain those who think that it is a smart business move.
Ben Christie, the director of interactive solutions at PHDiQ, thinks that the extensions work well as feeders into Channel 4. He compares Thompson's approach to that of Sir Richard Branson. "Its further extension of the brand is similar to the policy that Virgin uses," he says.
It's been a dramatic year for 4Ventures but Thompson is optimistic for its future and that of Channel 4. "While we continue to look hard at the performance of all our businesses, we've got real prospects," he says.