Examination of Witnesses (Questions 80-94)|
TUESDAY 22 JANUARY 2002
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.
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 worldand I am the loath
to say any specific programmeprogrammes 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
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
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 statisticthat
is in multi-channel householdsis 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.
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
93. If it is not a trade secret, I gather that
ITV's revenue fell by about 12 per cent. Was that your experience,
(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.
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.