Memorandum submitted by S4C
1.1 S4C has over the past two years set
about on a radical programme of reform with an eye on digital
switchover and changes to the wider creative industry. We set
out below our vision for the future of Welsh language audio visual,
public service content, funded in the main by grant in aid coupled
with a contribution from the licence fee and commercial revenue.
1.2 Our Welsh language service and those
of the other indigenous language broadcasters, CCG and TG4, are
a vital element in delivering plurality and diversity to enrich
and reflect the cultural life of the UK for the benefit of the
whole of the UK. Both Professor Laughton's Independent Review
of S4C for DCMS in 2004 and Ofcom Review of Public Service Television
Broadcasting in 2005 remained committed to the provision of Welsh
language television services post switchover.
1.3 S4C suffered a steep decline in viewing
figures at the beginning of the millennium and questions were
raised about the sustainability of the S4C services post switchover.
Our 2004 Creative Excellence Strategy and the ongoing programme
of reform is our answer to the challenges of the new multiplatform,
multimedia environment. Whilst we are the only Welsh language
broadcaster we operate in a competitive environment against the
best of the UK's creative industry. The Creative Excellence Strategy
has necessitated wiping away institutionalism whilst retaining
core values. The strategy appears to be reaping rewards, most
importantly, on screen, with improved viewing figures. In addition
our relationship with key stakeholders, including Ofcom, the BBC
and the independent sector have been transformed, all of which
are vital to the sustainability of our unique services.
1.4 We have not sought to answer each of
the specific questions posed by the Committee. We have attempted
to address those most relevant to S4C whilst setting out a vision
of S4C's future path to provide a picture of our role within the
UK public broadcasting landscape.
2. S4C SERVICES
2.1 The public service remit for S4C on
analogue is: a broad range of high quality and diverse programming,
in which a substantial proportion of the programmes consist of
programmes in Welsh; and, programmes broadcast for viewing between
18.30 and 22:00 every day of the week consist mainly of programmes
in Welsh; and, the programmes that are not in Welsh are normally
programmes which are being, have been or are to be broadcast on
Channel 4 [CA03 sch12 p2].
2.2 The public service remit for S4C digidol
is: a broad range of high quality and diverse programming in a
service in which a substantial proportion of programmes consist
of programmes in Welsh.[CA03 sch 12 p 2].
2.3 Post switchover we understand that the
remit for S4C digidol will be our main public service remit. This
means that the main public service channel will, like S4C digidol,
remain a mainly Welsh language Channel.
2.4 Services currently provided by S4C:
|Name of service||Nature of Service
||Platform||Access and Footprint
|S4C||At least 37 hours of Welsh-language programming, per week. Welsh only during peak hours and best of Channel 4 at other times.
||Analogue||4 in Wales
|S4C digidol||Up to 80 hours of Welsh language programming per week. At least 12 hours of broadcasting per day.
Digital Satellite (including red button and interactive services)
|104 in Wales|
104 in Wales and 135 throughout UK
194 in Wales
4 in Wales
|www.s4c.co.uk/e.watch||Welsh language programming has been available to watch since January 2006.|
Live streaming of major Welsh events.
During 2007 we will increase the number of hours of live streaming of S4C digidol.
|Broadband||UK (apart from where restricted by rights).|
Worldwide (apart from where restricted by rights).
UK (where rights allow worldwide).
|www.learnons4c.co.uk||Dedicated service for Welsh learners using S4C programmes as a learning tool
|Freewire||In the very near future streaming of S4C digidol through Partnership with INUK
||IPTV||Available on the Freewire portfolio for university campuses.
Additional coverage of national events.
NB This service is funded from S4C Commercial revenues and a partnership with the BBC
|507 throughout UK|
86 in Wales
195 in Wales
3. CREATIVE EXCELLENCE
3.1 It is by now well documented that with high digital
penetration in Wales viewing figures and key relationships suffered
with the onset of digital in the late '90s and early '00s. It
is fair to say that S4C was caught out by the new environment
and a new approach was required for Welsh language audiences.
The programme of reform was supplemented by the Laughton Independent
Review of 2004 and Ofcom Review of Public Service Television Broadcasting
3.2 There is inevitably a dichotomy between the delivery
of a service which is of a broad range, but must also be high
quality within a finite budget. The key to S4C's success will
always lie in getting the balance right. We set out to address
the challenge with the publication of our 2004 Creative Excellence
Strategy, geared to positioning our services as leading providers
of high quality contentincluding live events, children's,
drama, culture, news, entertainment, rural and lifestyle programmes.
The other key commitment made in 2005 was to improve our relationship
with our key suppliers, the independent production sector and
the BBC for the benefit of our audiences.
3.3 Our Creative Excellence Strategy (published mid-2004)
appears to be bearing fruit. In contrast to the trend for most
other terrestrial broadcasters we are showing increases in our
viewing during the all important Peak Hours (ie the hours in which
the substantial proportion of programmes are in Welsh). During
2006 S4C succeeded in increasing viewers watching during Peak,
with an increase of 3% year on year. This is the second successive
year that we have seen an increase in the crucial Peak Hours.
Over a two year period there is an increase of 15% in the '00's
3.3 Our share of all viewing for Peak Hours was 3.4%
during 2006. Another increase of 10% on the year-on-year share.
Again this was the second successive year that we showed an increase,
and since 2004 we have seen an increase of 21% in our share of
all viewing during the Peak Hours. (Please see graph 3.4 (i) and
3.4 (ii) below.)
Graph 3.4 (i)
3.5 Welsh language programming across the schedule increased
reach during 2006. This is the first increase in reach since 2002.
3.6 Additionally, our qualitative measures shows that
our audience appreciate our content. The Appreciation Index for
2006 measured 22 genres, out of which appreciation for our service
was higher than the average for all channels in 18 genres, equal
in two and lower in two. (Please see Appendix 1).
4. THE FUTURE
4.1 Children and young people
4.1.1 We are committed to providing content for children
and young people. We have doubled our financial commitment to
our provision for pre-school children over the past two years.
Over 1,100 hours of children's programming were broadcast on S4C
in 2006. One of the main aims of our Creative Excellence Strategy
was to make our services more attractive and relevant to people
of all ages. The need for us to engage with young people becomes
even more apparent when looking at the changing pattern of Welsh
Speakers. Today, 21% of the Welsh population speak the language
and the number of young Welsh speakers continues to rise. According
to the 2001 Census, there was a 50% increase in the number of
five to 24-year-olds who can speak Welsh. To reflect this trend
we have a policy of providing English language subtitles on content
for the benefit of English speaking parents of pre-school children.
4.1.2 Following a target that was set in 2006 to decrease
the age of our audience, 2006 saw the proportion of our audience
under 45 at 31%an increase of 24%.
We wish to increase this proportion and the number of younger
viewers even further in 2007.
4.1.3 A challenge that we are currently seeking to address
is to deliver content with which young people and children wish
to engage and this in a converged world which is lacking in Welsh
language content. To this end it is not only the content but the
means of delivery which are key. With the publication of a tender
to produce our presentation of interstitial broadcast material
for children across television and the web (expected January 2007)
we have set another challenge for the independent sector in Wales.
We look forward to seeing creative and innovative ideas from the
4.1.4 If we want to reach children and in particular
young people we have identified the need for dedicated cross platform
services. Dependant on the outcome of the tender, our current
intention (which we have begun discussing with DCMS), is the launch
of cross platform Welsh language services for children and young
people (including a television channel) in time for our 25th anniversary
in November 2007.
4.1.5 We will not be seeking additional funds for the
launch of these services.
4.2.1 News provision is of particular importance to our
services. We are the only outlet for Welsh Language television
news. Our news services are provided by the BBC. Plurality in
news provision will always be difficult if not impossible when
there is only one Welsh language broadcaster.
4.2.2 Under the terms of the new strategic partnership
with the BBC (for more details see below) there will be a review
of the presentational and editorial news direction and interactivity
via red button will be introduced. During 2007 we will carry an
interactive service for the Welsh Assembly elections. Our nightly
news programme is currently scheduled at 19:30 with a bulletin
during peak and we envisage a prime slot will continue in the
future. We are extending our news provision for young people during
4.2.3 Our current affairs programmes are in line with
Ofcom quotas and are commissioned from several different sources.
This enables us to provide a degree of plurality for the viewer.
We are committed to continuing to commission our current affairs
programmes from more than one source and to schedule a significant
proportion of the same in peak.
5. THE DELIVERY
5.1 Due prominence
5.1.1 There is a must carry obligation in Wales in respect
of our public services. The continuation and extension of a must
carry obligation coupled with a requirement for due prominence
for our services are crucial to the future success of S4C. The
imposition of a requirement for S4C's public services to be placed
in a bouquet with the other public service channels with due prominence
is crucial if public services are to retain their value. With
a 25 year history as the fourth channel in Wales it is vital that
we retain that position post switchover.
5.1.2 We have recently announced a new identity and brand
for S4C. The adoption of this multimedia branding strategy is
aimed to place S4C in a strong position in the deregulated converged
market when users are looking for high quality Welsh language
content. Whilst we support deregulation a voluntary commitment
by the main engines/gatekeepers to provide due prominence to public
service providers would undoubtedly assist in ensuring that our
content is as widely accessible as possible.
5.2 Extending reach and providing an opportunity to view
throughout the UK
5.2.1 It is essential that we achieve maximum impact
for our public money. Our multimedia strategy is designed to address
both delivery of current content and the provision of new content.
It is by now expected that users be provided with several opportunities
to view across all the most popular platforms. The commissioning
process takes into account the multi delivery options most suitable
for the different genres and we are already providing public service
material on new media through our broadband services and the upcoming
IPTV and further in the future, other relevant new media. We are
committed to ensuring that our content is available free-to-air
to our viewers and users.
5.2.2 The 2001 census indicated that there are 158,000
Welsh speakers living outside Wales in the UK. Our contribution
should not be limited to sustaining the Welsh language and culture
exclusively in Wales. It should be available to the Welsh Diaspora
and those with an interest in our content (our sports and music
coverage is already enjoyed by non Welsh speaking music and sports
lovers throughout Wales and we carry English subtitling on all
of our content).
5.2.3 TG4's obligation to reach the Irish Diaspora highlights
the need to promote the diversity of culture which is provided
by indigenous language broadcasters, throughout the UK and beyond.
We are currently available on Sky and broadband throughout the
UK and we will be setting up research projects during the year
to more accurately measure our audiences on Sky outside Wales.
We believe that we should be available to the public across all
the major platforms throughout the UK and have requested the BBC
and DCMS to consider post switchover, carriage of our public services
throughout the UK.
5.2.4 Our ambition is global. We are aware that there
is a market for S4C content abroad and for promoting and reflecting
a modern Wales throughout the world, (for example S4C programmes
were sold to over 31 different countries during 2006). Subject
to rights clearances and the requirements of our content providers,
convergence allows this to become a reality by opening up new
opportunities. Last year, our website, featuring coverage of the
Llangollen International Eisteddfod, received 707,000 hits from
people from around the world. Our recent call to arms for the
Jones' of the world to collate and break a world record saw us
reaching through press coverage over 27 million North Americans.
It also saw participants from the US, Australia and beyond visiting
Wales for the first time to enjoy our unique cultural heritage.
6. CREATION OF
6.1 The Independent Sector in Wales
6.1.1 We are a commissioner/broadcaster. Our relationship
with the independent sector in Wales is the cornerstone of our
Creative Excellence Strategy. Unlike the BBC we do not produce
our own programmes. Like
Channel 4 our content is commissioned from the independent sector
but unlike Channel 4 it is more difficult for us to acquire foreign
programming. We are committed during 2007 to commissioning 95%
of hours from the independent sector, equating to a spend of at
least £70 million. The majority of our content is commissioned
in accordance with the Code of Practice and Terms of Trade (and
annually reviewed). Independent producers retain the copyright
in content commissioned by S4C and provide a licence to S4C.
6.1.2 We consider that the development of a strong creative
industry is one of the functions of a public service broadcaster
such as S4C. Within Wales we have an important role to play in
supporting this key agenda.
6.1.3 We have a policy of tendering all major contracts
to ensure transparency and contestability and to support consolidation
within the industry. We acknowledge that there is no one model
to ensure creative success but we believe that: facilitating exploitation
of rights by independent producers; increasing contestability;
investing in development; providing advance notice of longer term
technical requirements, and, investing in training will go some
way to empowering the sector, both creatively and commercially.
6.1.4 For example, our 2005 development tender changed
the way we fund development. Rather than support piecemeal projects,
a substantial tender was won by five companies enabling external
producers to put in place sustainable frameworks. Such a framework
further allows for leveraging, talent development and a greater
degree of long-term planning than may have been previously possible.
A tender in 2006 for animation projects in Wales saw the establishment
of a £500,000 development and production fund. The fund was
awarded to three companies to develop a range of creative animation
projects across different genres and for multiplatform use. The
participants saw this as a "stepping stone to more ambitious
and far reaching work".
6.1.5 Additionally, we are the only broadcaster to have
embarked on a systematic reassignment of the rights to our back
catalogue to the original producers (subject to certain criteria
being met). There may be more to do and we are funding an independent
review of our Supply Chain during 2007.
6.1.6 During the year we hope to draw up fair trading
guidelines to ensure that any activity undertaken in new areas
does not cut across the emergence of secondary markets or market
based initiatives in the Welsh language. We have indicated above
that it is our duty to provide our content across new media and
to reach as wide an audience as possible. However, we are also
aware that we must be careful not to fund initiatives that could
stifle potential commercial projects. Our role as a public service
provider is to deliver content on a multiplatform basis that would
not be provided by the market. Our approach to date has been to
partner with companies in Wales but we do not have a strategy
of commercially exploiting broadband content (other than through
advertising and sponsorship).
6.2 Licence fee funded content
6.2.1 The BBC is required by statute to provide us with
up to 10 hours of programming per week. 2007 marks the start of
our new strategic partnership with the BBC. The BBC contribution
is vital to the sustainability of our services and the BBC is
committed to spending £72 million on our services over the
next three years. For the first time we will have control over
the commissioning of content from the BBC and control over how
the proportion of the licence fee set aside for S4C will be spent
in accordance with the White Paper on the future of the BBC. We
will obtain the same rights in BBC produced content as is obtained
from the independent sector. This means that for the first time
we will make our entire offering available on our broadband and
6.2.2 It appears to us that the strategic partnership
is a blueprint for how public service broadcasters other than
the BBC can utilise the licence fee for the benefit of their users.
It sustains public service broadcasting outside of the BBC without
compromising the BBC's independence or its duty towards licence
7. THE VIABILITY
7.1 Grant in aid
We are uniquely funded and in 2007 will have turnover of
over £100 million. The bulk of activity is funded through
grant in aid from DCMS. 2007 will see S4C receiving £94.395
million to fund our public service activities, we will receive
a further £22.9 million of content from BBC Wales and a further
£7.9 million from other sources. Our grant in aid increases
by RPI in each calendar year. As the bulk of funding is derived
from grant in aid and the licence fee, any future threats are
likely to arise from Government Policy (be that in respect of
treasury policy or primary legislation).
7.2 Commercial revenue
7.2.1 Revenue from advertising on S4C analogue has been
in decline for the past seven years. We believe that we have weathered
the steepest decline in terms of profit. In Wales, 80% of households
are already digital, compared with 73% in the rest of the UK.
This well advanced multi platform environment and the success
of our Creative Strategy has, during 2006, seen our share of all
broadcast stabilising. 
7.2.2 Current predictions show that as the Channel 4
schedule becomes less important and our main channel becomes S4C
digidol the decline in the national advertising market will to
some extent be balanced by growth in the regional market. Projections
to 2010 do show our advertising revenue halved but potential cost
savings post 2008 should see a similar income line from advertising
sales in 2010 to that of 2007. By switchover programme sales will
not be a significant element of our turnover.
7.2.3 In 2005 we sold our share in the multiplex operator
SDN to ITV. We have invested the funds to produce a dividend line
to assist in funding our public service and ancillary activities
(which include the technical cost of the non-public service channel
S4C2 or any new channel to be carried on that capacity).
7.3 Internal re-organisation
We are undertaking a reform of internal structures which
is designed to position S4C as a viable public service provider.
The changes have permeated throughout the company to create a
more dynamic, streamlined but flexible company equipped to face
the challenges of the future. This has included outsourcing commercial
activities and internal production activity. The commissioning
department has been restructured to help us to take forward a
more collaborative relationship with external producers. The decreased
administration on S4C which arises from our Creative Strategy
and the changes to the industry will enable us to make further
cost reductions coupled with a fall in staffing levels over the
next few years. Our overheads are forecast at, 4.3% for 2007.
Significantly lower than any other public broadcaster.
7.4 Funding going forward
7.4.1 We are confident that current funding levels (plus
RPI) will enable us to deliver our proposed strategy, including
the new children's channel and extended platform policy. We believe
that this will be achieved in the main through our Creative Excellence
Strategy, efficiency savings, the internal reorganisation and,
the increased value of the BBC contribution.
7.4.2 However, the costs of digital remain unknown. Our
services will be carried on one of the BBC's public services multiplexes
and we are discussing the likely proportion of cost which we might
be expected to carry based on the cost of building the terrestrial
network. In order to properly plan for the future and to make
policy decisions we need these costs to be quantified. Once quantified
we believe a policy decision must be taken by the government and
the BBC as to whether or not the costs will be funded by the BBC
or through other means.
About S4C: Like the BBC, S4C is a public broadcasting
authority, unlike the BBC it does not have a charter but was set-up
as a statutory corporation and is regulated by the Broadcasting
Act 1990 and the Communications Act 2003. It is regulated by Ofcom
and the S4C Authority. The S4C Authority is appointed by the Secretary
of State for Culture, Media and Sport and has up to nine members
(including a Chair).
The Authority has recently adopted a new modus operandi
which reflects the principles of good governance and best practice
in light of the Government's White Paper on the future of the
BBC. The new structure is designed to increase governance, accountability
and transparency by adopting greater separation with a clearer
division of responsibility between the Authority and the executive.
There will be a new board of Executive Directors with at least
one non-executive member. The Authority reports annually to parliament
on its use of public funds and delivery of the public service
Re Data: In considering this data it should be noted
that between 1 November 2005 and 22 January 2006 an incorrect
channel identity was provided to S4C by BARB. This led to an underestimation
of S4C data of approximately 6% during peak and 3% across all
The number of young viewers also increased during 2006 by 30%. Back
With the present exception of our weather bulletin. Back
2006 saw a year-on-year decrease of 0.1% for all hours. Back