Select Committee on Culture, Media and Sport Minutes of Evidence

Examination of Witnesses (Questions 80-94)



  80. I am sure you are right in saying that the single thing, that the licence payer or the general public is interested in, is programmes that reflect their own lives and interests and passions and that is the uniqueness of the licence fee, that it ends up pumping £2.5 billion into that directly in a pretty cost-effective way. Can I make one plea which is when are you going stop playing around with West Wing? There are many members of the House who would dearly love to be able to watch it and you seem to repeatedly decide to put it on when we cannot possibly get to it.
  (Mr Gardam) We have decided to put West Wing on at a time which I hope is most convenient to all Members of Parliament which is intended to be at 9 o'clock on a Sunday, which I do not think our rivals know.

  Mr Bryant: Hurrah! So we have won something out of this.

Miss Kirkbride

  81. I was interested in your description there because it seems to me that really the biggest incentive that you have to provide different and interesting programmes is, of course, that it does create a path for your advertisers who, after all, chase the A/Bs just as much as the C/Ds and it is harder to get at them than the C and Ds. Is the principal motivator you have behind your public service remit that it helps in that regard?
  (Mr Gardam) It is true that it is a virtuous circle but it is a virtuous circle only by virtue of the remit of public service ambitions which you have to meet. It is true that Channel 4's aim is to promote difference and diversity. I would describe it as trying to connect the most interesting and creative minds in British television to an audience which is perpetually hungry for new ideas. In order to do that you are trying to identify and select attitudes that are held by a wide range of people. The point about Channel 4 is that is appeals to people with a set of attitudes and values which then translate down the line into demographics appealing to advertisers. The truth is that if you try to make a programme by "painting by numbers" you do not get a particularly good programme. So the fences that have been placed around Channel 4 and its licence in previous Acts are ones that free us from having to maximise ratings in every slot, because that is the danger of the future of broadcasting: that in a fragmented world everyone will seek to maximise the value of every slot. The strange thing about the broadcasting market is that the diversity of outlets we see now, with the exception of sport and film distribution, so far is not leading to a diversity of content, in fact it is leading to a commodification of content, and therefore the role of regulation is to put those mechanisms in place that encourage that diversity of content, because otherwise we will see more and more of the same being produced and because there is not yet the technology whereby the programme is directly sold to the viewer, and (therefore programmes are sold in bundles of viewers to advertisers, there is an increasing incentive against risk and, therefore, the point of regulation is to put that incentive back to encourage risk.

  82. That is rather a depressing picture. If we allowed a completely unregulated world—and I am the loath to say any specific programme—programmes would have no public service remit whatsoever because there was no value in providing —
  (Mr Gardam) I am not sure that is quite the case. I think the range of accessibility and the range of funding to the sort of programme we see in the British market comes from the interventions in the market, which are not solely based on the delivery of maximum ratings to individual slots.

  83. If you look at the American market, you would have to agree with that. You said that you would like to see the BBC come fully under the remit of OFCOM. Is that the only difference in view you would have presently with the arrangements that have been put in place for OFCOM?
  (Mr Gardam) The difference between us and the BBC you mean?

  84. And what the Government is proposing under the present arrangements?
  (Mr Scott) We welcome the establishment of the single regulator. They have got a large task ahead of them to bring together the various strands and we do think that the regulator should regulate all parts of broadcasting.

  85. Were you surprised by the view expressed by the BBC that it would be far too much for them to regulate the BBC as well?
  (Mr Scott) I can conceive of an argument to get OFCOM up and running in 2003/2004 and leave the BBC to one side until its Charter renewal.

  86. Then the axe should come down? Can you tell us a little bit more about the present state of the advertising market and your own financial position. You said earlier that ITV should not really be complaining because it made 300 million quid this year and it has given money to the Inland Revenue. How much money do you give to the Exchequer in a year?
  (Mr Scott) We pay Corporation Tax on our profits when we have them.

  87. If you have them. Would like to expand a little more on that?
  (Mr Scott) In recent years we have been paying £10 million a year in Corporation Tax. For 2001 Channel 4 will not have made a profit so we will not pay Corporation Tax.

  88. Nothing. How much does your £10 million compare to ITV's contribution?
  (Mr Scott) Through the licence payments it pays about £300 million, I think.

  89. Every year? That is quite a gap.
  (Mr Scott) Yes, but they are using the public spectrum for making business for private shareholder gain, and that is the system of bids which they went into to allocate the spectrum to them in the first place. In Channel 4's case, we use the spectrum to generate revenues from advertising which we put back into services which we are providing so there is no shareholder gain element, which is what ITV effectively bought through their licence bids.
  (Mr Gardam) As the person responsible for programmes, I do not think that any of those decisions we made which ended in our most ambitious and defining programmes would have been made if one's objective was to satisfy shareholder interests. We would not have invested, for instance, in the Samuel Beckett plays last year nor would we have invested in Shackleton. One could have invented an entirely new soap once a week for the money we put into Shackleton. Were a different fundamental set of decisions to be made and if our remit was one that took us into the private sector, we would no doubt be able to make some great programmes, as indeed ITV does, but we would be a different creature.


  90. I was surprised that your submission did not refer to E4 because it strikes me as the most successful of the digital channels in that not only is it entertaining in itself but in the cross-fertilisation with Channel 4 they work very well together. I suppose the most remarkable example in the past year has been the coverage of Big Brother and also we explored areas of inter-activity on that. What further plans do you have for digital channels and have you got any statistics about the kind of audience that E4 is getting?
  (Mr Woodward) Over the course of last year E4 generated an audience of just below one per cent and the important statistic—that is in multi-channel households—is the combined share of Channel 4 plus E4 was up about 30 per cent over the course of the year. The secret for us, as you point out, is to find more formulae like Big Brother where we can explore the cross-platform benefits of inter-activity and terrestrial and digital channels all working in tandem. Over the course of last year, in addition to the film channel and E4, we launched an additional three multiplex channels in film-making, so a total of four channels. Right now we have no immediate plans to launch any further channels over the course of this year. The focus is on improving the performance of the channels we currently have.

  91. What strikes me both from your submission and your programming is that you know what you are doing and that seems to me quite rare in any broadcasting organisation. Do you think that this comes from the security of being a public corporation with a statutory remit which you have to abide by?
  (Mr Scott) Yes I do, and I think that the stability of our structure enables us to make decisions for the medium term, not for the short term, and I think it is because we can invest with a clarity of purpose that is as much part of our success, and our structure is very important to that stability.

Michael Fabricant

  92. Following from the Chairman's remarks, what would happen if, God forbid, you made continuing losses? How would you then continue to operate?
  (Mr Scott) I think, as for any company financed by its own revenue generation abilities, we have to cut our expenditure cloth to match the revenues which we have available to us. Sometimes it is more efficient not to swerve too quickly. I think that one needs to take a proper look forward a year or two years ahead. We can sustain an element of loss-making for a short period of time and certainly, as the extent of the downturn in advertising revenue last year became apparent, we took steps to reduce our cost base.

  93. If it is not a trade secret, I gather that ITV's revenue fell by about 12 per cent. Was that your experience, too?
  (Mr Scott) We had a decline of five per cent in advertising revenue last year and in the first quarter of this year the trend of decline of revenue has continued. We hope that later this year we will begin to see renewed growth from the advertising market, but that is not yet apparent.

Mr Bryant

  94. One of the things that we have been asking about is copyright and the balance between the rights holders and fair use practices. For most people in this country that means the ability to record a programme on television and watch it at a time of their choosing. With the arrival of TiVo and hard disk capacity in television sets and so on, this is going to change to some degree. Do you foresee that there are going to be any problems for ordinary people being able to record their programmes and not falling foul of your rights?
  (Mr Scott) I was not aware of any question that the rule on recording of copyright for personal consumption in the home will change. I am not aware of any change there.

  Chairman: Thank you very much. It is obvious that you are doing something right and long may it continue.

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Prepared 27 February 2002