UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE
To be published as HC 50 9-i

house of commons

oral evidence

taken before the

CULTURE, MEDIA AND SPORT Committee

CHANNEL 4 ANNUAL REPORT

Tuesday 16 JULY 2013

LORD BURNS GCB and DAVID ABRAHAM

Evidence heard in Public Questions 1 - 84

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Oral Evidence

Taken before the Culture, Media and Sport Committee

on Tuesday 16 July 2013

Members present:

Mr John Whittingdale (Chair)

Angie Bray

Philip Davies

Paul Farrelly

Steve Rotheram

Jim Sheridan

________________

Examination of Witnesses

Witnesses: Lord Burns GCB, Chair, Channel 4, and David Abraham, Chief Executive, Channel 4, gave evidence.

Q1 Chair: Good morning. This is our annual session looking at the Channel 4 Annual Report and I welcome the Chairman, Lord Burns, and the Chief Executive, David Abraham. Can we start by talking about the various changes that followed the passage of the Digital Economy Act, which obviously broadened your remit across all your channels? What happened as a result of the passage of that Act in terms of the way you approached your jobs?

David Abraham: Certainly. Good morning, everyone. I think, in broad terms, I would describe Channel 4 today as a slightly purer form of public service channel than it may have been three or five years ago. If I just take last night’s schedule as an example, a fairly common Monday evening, which started at 7 o’clock with the Channel 4 News breaking an exclusive story about child protection and an arrest in Kenya; 8 o’clock, Dispatches on South African police corruption; 9 o’clock, Undercover Boss, talking about workers’ relationships with their bosses in Hyundai UK; at 10 o’clock, Run, a new drama that is being stripped to 10 o’clock every night this week with brand new writers working on television for the first time; and at 11 o’clock, Coming Up, our new talent strand in drama as well.

There are very few channels, I think, that could probably match that degree of delivery of public service in news and current affairs, exclusive stories, big mainstream shows in primetime dealing with issues that matter to the public and developing and breaking new talent in drama along the way.

To come to the specifics of the question about what shifted. There was recognition in the Digital Economy Act in 2010 of specific public delivery in the digital space, and in film. I can point to strong progress in those areas in addition to the broader objectives of the remit. In film, we have more than doubled our budget in the last three years. We spent £17.9 million on British independent filming in 2012. I hope you noted that we got another BAFTA this year for The Imposter and the leader of Film4, Tessa Ross, got a lifetime recognition award, which was very well deserved.

Working with a range of new and established British talent in the field of independent film, most recently the Spirit of ’45, Ken Loach’s film about the National Health Service, and A Field in England, which was a very experimental digital film that launched on all platforms just last week. We had a very big film with Steve McQueen, the artist, called 12 Years a Slave, which will be launching in the autumn.

In the delivery of the remit in the digital space, we had the honour of being nominated in all the categories for digital innovation at the recent Digital BAFTAs and we won for work that we did on the Paralympic Games, Property Scandal, Foxes Live and My Healthchecker. These are public service projects that are working in the digital multi-platform space.

More broadly, what we have also sought to do in the last few years is to think about how we can engage with audiences more directly. We introduced a direct audience relationship strategy two years ago and, as of the end of 2012, we had 6 million registered with that programme and, as of today, 8 million. This opens up a new front really in terms of how we behave as a public service broadcaster, how we can tailor what we do to make it more individual but also how we can tailor the value of our audiences to advertisers in more innovative ways.

I would describe Channel 4 as delivering a purer public service delivery, as I said. This year, for example, if you just look at the highest-rating shows of the year, whether it was the Grand National that peaked at 8.9 million, Richard III: the King in the Car Park, 5 million, the highest-rating factual programme pretty much in our history, 24 hours in A&E, 4 million, The Undateables, 3.8 million, The Hotel, 2.8 million, Derek. These are all shows that deliver strong public service in a variety of different ways in a variety of different genres that are working as break-out programmes on our schedule.

We are very proud of the fact that in 2012 we spent over £600 million on content overall. That is the highest ever in our history, and £434 million of that was spent with UK independent companies. 72% of the top 50 shows in our schedule were new and that compares very favourably with our competitors where top shows tend to be the older shows. For Channel 4, the diversity of the schedule is really coming through.

As I say, we work with over 460 companies and 274 of those were genuinely independent; 51 were completely new to working with Channel 4 and have network commissions with us. Our first run originations in primetime are up by 5%.

In terms of our support of the creative economy in the UK, I think we are very much pulling our weight. I think the number of companies we work with compares very favourably with our main terrestrial competitors. We are still working with pretty much the same number of companies, if not slightly more than the BBC, and considerably more than ITV.

Obviously, we are very proud of the progress we made in 2012, and already midway through this year. We are very excited about the delivery of what we have coming in the fourth quarter as well.

Lord Burns: Could I add, Chairman, that the updated Act also introduced some new accountability arrangements with Ofcom via the statement of media content policy. This is, we hope, very much reflected in the annual report in the way that we have set out what we have been seeking to do. We have also established some new arrangements with Ofcom for our discussions on what we are proposing for the following year and then a series of meetings afterwards to assess how the year panned out. An exchange of letters takes place at the end of that process where they comment on areas where they feel there are directions we might like to take in the following year and to which we then issue a reply.

That is a very important part of our alliance.

Q2 Chair: Have you always accepted what Ofcom has suggested to you? Have you always agreed with Ofcom’s brief?

Lord Burns: Broadly, yes. Sometimes there are nuances in what it is that they say that we do not necessarily agree with but I would say that in most cases they highlight areas that we usually recognise require attention, sometimes because the environment is changing, sometimes, of course, because audience behaviour is changing. In some cases, it is where we try to find new ways of addressing issues with respect to the audience.

I would hate to think that it was just some cosy little arrangement. It is something that we regard as very important in terms of our accountability and something that we think matters a great deal. I have said before to this Committee that I regard my role and that of the board as very much the oversight part of trying to ensure that we abide by the remit that was given to us in the Digital Economy Act, as well as maintaining stable finances, values and so on.

David Abraham: It might be worth adding that another shift that occurred was the focus on outputs as well as on inputs-the statement of media content policy, the way in which we use public attitude surveys to pinpoint aspects of the remit that we are expected to deliver to and are held accountable towards. It is good to see again in the 2012 report that on measures such as innovation, inspiring change, taking risks, being distinctive, the public’s view is that Channel 4 is delivering more strongly in 2012 than in prior years. We have seen strengthening and improvement in those measures by the end of 2012. We are already seeing a continuation of that in the early part of 2013.

Overall, the way in which the remit is being delivered, through the relationship between Channel 4, the channel, and the portfolio channels and the funding model that works between them is delivering the outcomes in the round that are expected of us.

Q3 Jim Sheridan: David, that was an impressive list of programmes that you gave us during that commercial break. Do you export any of the programmes you make? If so, is there much money or resources coming back to the taxpayer?

David Abraham: To the taxpayer? In the terms of trade under which Channel 4 operates, the independent companies we work with have contracts that allow them to exploit the secondary rights and international rights of their IP, which of course has been fantastically valuable with the creative economy. Under the basic terms, around 15% of those revenues come back to Channel 4 in revenue stream that we can then reinvest in programmes in the future.

If you were to ask producers around the world where they would quite like to get contracts of work, they would definitely say London because these terms are very favourable for producers, allowing them to retain the value of their IP and then exploit it internationally. This is a very valuable part of the creative economy. Of course, we can point to Undercover Boss, for example, which appeared first on Channel 4 a few years ago. Studio Lambert, the production company of that show, took it to America and sold it to CBS. I think I am right in saying it has been the biggest factual hit on American primetime television, obviously earning great rights for Studio Lambert and All3Media who are the holding company behind that outfit.

There is a virtual circle of investment. Obviously we are operating our model on a not-for-profit basis, so we are not seeking to maximise the amount of tax we pay but we are seeking to support the creative economy and its growth.

Q4 Chair: Lord Burns, you talked a bit about accountability through Ofcom and so on. You also said that you and Ofcom had agreed further mechanisms to ensure independent oversight and evaluation. What are they?

Lord Burns: They are largely to do with the process by which we set out what we are hoping to achieve over the following year and the meetings that then take place both in agreeing those things and the evaluation of them afterwards. We have not been at this for very long, but I think that each year we are getting a bit further forward. Some of it is a question of synchronising the way planning takes place within Channel 4; we can synchronise that with these arrangements, so they have a clearer view of what we are proposing to do. David attends meetings of the Ofcom content board to also set out what it is that we are hoping to achieve and the pattern of delivery over the past year.

At this stage, it is largely a question of making sure that the various strands come together in a coherent way, which means that there is a clearer document that sets out what we hope to achieve, against which we can then be challenged in the following year, because the annual report, which is really the main route through which we account for this, is rather backward-looking. One of the things we have been discussing with Ofcom is how, in parallel to that, we can have some mechanism that is a bit more forward-looking.

David Abraham: While retaining, obviously, some commercial confidentiality in terms of what is published.

Lord Burns: Yes, we are reluctant to put too much forward-looking material in the annual report because this gets into areas of commercial confidentiality, but we are hoping that we can find an arrangement whereby we share more of it with Ofcom.

Q5 Chair: In terms of your investment, particularly in original content, you said that your total investments have now gone back up to £608 million, which is roughly where it was four, five years ago.

David Abraham: At its peak, yes.

Q6 Chair: Do you see that continuing to increase?

David Abraham: We would probably expect it to maintain at a similar level. Obviously we will probably get into a conversation about, say, the ad market and where that is projected to be next year. Obviously that is our main source of revenue.

The key number I look more closely at is the originations budget with UK independent companies. That is at £434 million. We are working very hard to try to maintain that level of investment both this year and hopefully next year. Obviously, the remainder is going mainly on movie acquisitions and-

Q7 Chair: That is £170 million which is not on UK original content. That is quite high.

David Abraham: Relative to our history, it is a lower proportion of the total, so the proportion that is made up for the UK originators has been increasing. Obviously, as with all channels, we have to compete for the right kind of content, like Homeland, for example, or The Returned, which is running at the moment on Sunday nights-high quality content that we can acquire on the international market.

Lord Burns: Of course, the growth of E4 has also meant that there is quite a lot of acquired content on the other channels apart from the main channel.

David Abraham: I am sure there are many fans of Big Bang Theory in the ring.

Q8 Chair: It is hard to escape the Big Bang Theory. It seems to be broadcast 24 hours a day.

David Abraham: Not quite.

Lord Burns: It continues to do jolly well on all of them.

David Abraham: It is the most successful sitcom on American television at the moment.

Q9 Chair: You say you have to compete. Obviously you do not have to compete, but you feel you need to compete for Homeland, for instance.

David Abraham: Interestingly with Homeland and many of the other key acquisitions, we are not competing head to head with our competitors. We are looking for things that have a brilliant fit with the Channel 4 brand or the E4 brand. There are occasions when that is very unique content that we are the best place for and the supplier is very keen to work with us on it. There are, of course, occasions when we get involved in bidding wars but those tend not to be as often as the occasions when we just find the right content for the channel. To be honest, if we get involved in a bidding war with the likes of Sky, we are unlikely to win it, so, we usually walk away.

Lord Burns: Many of these programmes are quiet programmes, which turn out to be very successful. A judgment has to be applied at the time because very often the choice as to whether to bid for them or not is based on scanty previews of what it may be. There is quite a lot of skill involved; it is not just a question of throwing money at it.

Q10 Chair: I remember sitting in this chair three or four years ago listening to your two predecessors. You will recall the dire picture that was painted; the revenue gap that was slowly going to open up, the need for public subsidies and possible supplement. All that has now gone, has it?

Lord Burns: Let me start and David can continue. Two things: we are very aware of just what a competitive world we live in. There are many channels. There is huge viewer choice, and being able to be in a position to generate the income that enables us to put on the programmes that we want to put on is, and remains, a tough challenge. It is also the case-to be fair to our predecessors-that we were in a world where there were significant implicit subsidies to the channel by way of spectrum, which of course have been declining. One of the most remarkable things that has happened in the last two years is that as the number of channels has increased and we have seen the audiences fragment, much of that fragmentation has been to channels that are owned by the traditional broadcasters. We still get a very high amount of viewing that is not only in the suite of channels that Channel 4 has but also the BBC, ITV and Channel Five. The share of those companies, although it is not quite as high as it was 10 years ago, still remains very high. What our predecessors had possibly not quite anticipated, and certainly from the outside I had not anticipated, was the extent to which the traditional broadcasters would be able to keep their audiences but spread over a larger number of channels. That obviously has costs because we are having to run more channels, but the traditional broadcasters, if I can call them that, have been very successful at holding on to the audiences.

Looking back to when I was working with the Secretary of State on the BBC licence renewal in 2005-06, I think the expectation at that stage was that the fragmentation of audiences might well have gone much more to other broadcasters and to other channels. That is one of the things that has been important.

The decision taken by our predecessors to invest in what they described as the digital channels has turned out to be a very good decision. The same has happened, as you can see, with ITV. ITV1, 2, 3 and 4 have become very good channels in their own right and have allowed a much wider range of content to be available.

David Abraham: Just building on that, obviously there were two things going on in that period. One was we had a deep recession in the sense that television as a medium was broken and would not return to the level before the recession. Also that was compounded by the decline of Big Brother, which was clearly the biggest show on Channel 4 for a decade. Putting those two things together, there was clearly a gap.

The ad market did recover and we, as a team, have had the interesting challenge of building a schedule that does not have Big Brother in it. That is a long process and we are significantly into it now and what we feel, and what we feel the audience is telling us, is that in terms of delivery of the remit and the diversity of the schedule, we are making good progress.

That is not to say that the Channel 4 model, in some sense, is not a miracle and is not potentially fragile. It just requires a heck of a lot of focus to keep it competitive in this world where we are not seeking money from the taxpayer.

Lord Burns: The other miracle, which I have spoken about to this Committee before, has been the extent to which television as a whole has held on to its audience. If one compares it with the way that the digital world has swept into things like books, newspapers and music, television, by one means or another, has held on to its audience, partly because of the improving technology and these wonderful flat screens, high definition, and so on, but also because of the content.

Lying beneath that is still the lurking fear that many people have and many people still write about as to whether or not alternative methods, particularly via the internet, of delivering television and delivering other forms of content will, at some point, take that audience away and with it, of course, the advertising market into other kinds of distribution.

That would then begin to put some real pressures upon television on what is available to be spent on content, certainly for ITV and for Channels 4 and 5. Now, it has been threatened for a long time. It has not happened. As I say, television has hung on to its audiences. Advertising income, while recovering from its dip, is probably in slow decline as a share of GNP. There is some pressure, as obviously advertising revenue is going to some other forms of-

David Abraham: The growth is going elsewhere.

Lord Burns: Elsewhere.

David Abraham: That is why our proposition online with 4oD and our registration strategy is so key. If you look at our numbers in detail, you will see a 50% growth in our non-linear online revenues in 2012 and we are seeing good growth this year as well. Advertisers are responding to the opportunity to use moving video online as a medium, which can be very highly targeted. There is a lot of innovation occurring in that area; we are seeing good growth. The question is does that allow us to compete for a bigger slice of the overall cake of advertising and marketing expenditure in the future.

Lord Burns: The last five to 10 years have been about the move to multi-channel through broadcasting. The next five to 10 is probably going to be about the impact of the internet. We will have to meet those challenges and we will have to be able to build that into our own models to continue to generate the kinds of income we need for the content we want to put on.

Q11 Steve Rotheram: You mentioned some of your competitors. Do you believe it would be helpful if there were common criteria in which a like-for-like comparison could be carried out in regard to originated content?

David Abraham: It is possible for us to sit down and look at all the available data and make broad comparisons as to what I think is underlying your question, which is UK investment in content. Some of the shareholder-owned entities are not compelled to unpick their data beyond a certain level of detail for competitive reasons and I am not sure by what mechanism we can force that.

It is possible to make some broad comparisons and to see that, in its environment, Channel 4 remains a very, very significant investor in the UK independent sector and I think if you spoke to PAC, they would support you on that.

Q12 Steve Rotheram: In your written evidence to the Committee, there was an underlying complaint of yours that Sky had been here and said that they were increasing their investment in originated content to £450 million. Did you not feel that was slightly unfair on yourselves because you did not believe that they were using like-for-like comparisons?

David Abraham: Firstly, I would say it has to be a good thing that more money is being spent on UK content. It is great for the industry and it is great for the competition, so I make no complaint there. I accept that Sky is run in the interests of its shareholders and, therefore, is only obliged to disclose information as it needs to.

One thing I would note is that the view of Broadcast magazine, which is a respected organ in our sector, is that they spent £136 million or £137 million in 2012 on what would be described as UK originated content, outside sports and news production and acquisition, which would be the comparative number that you could set beside the £434 million in our numbers. If that is accurate, I think it indicates the extent to which we remain a very big engine for the independent sector. I do not think it is helpful to get involved in a tit for tat. It has to be good news that more money is spent.

I would also note more generally that a programme like Run last night-first-time writers, straight out of Brixton, writing a four-part drama that is being stripped every night this week at 10 o’clock-was seen last night by nearly 1.5 million people, probably consolidating at nearly 2 million. That is the power of the public service platform because a significant proportion of the population are seeing that content. When original content is shown behind a pay wall, what we are seeing, even though the pay platform is in 10 million homes, in the case of Sky, that the cut-through for that original content is not half what it might be on a terrestrial, but 10%.

We have to ask ourselves the question about the ecosystem-how great are our creative ideas and how our culture moves forward and what the impact of those ideas is. That is why Channel 4 remains tremendously important as a platform for getting new work out into the world, particularly with the slightly younger audiences that Channel 4 tends to appeal to.

There are a broader range of issues underlying the question but the facts speak for themselves.

Q13 Steve Rotheram: Do you believe there should be greater clarity of content of investment among broadcasters?

David Abraham: I do not know by what means one could compel a commercial operator to disclose information beyond the level that they are required to under Stock Exchange rules. That would be more for regulators than for us to pursue. I will just make the observation that we work from available data and the data is pretty clear.

Q14 Angie Bray: Channel 4 has maintained its overall portfolio share in recent years but focusing strictly on Channel 4’s main channel, how concerning really is it for you that audience share has continued to fall every year in the last five years?

David Abraham: The rate of decline in 2012 was less than it had been for the last five years. A lot of the decline is obviously driven by the phenomenon of digital switchover where suddenly homes that only had a small amount of choice get exposed to much more choice. We believe that most of the erosion we have encountered is as a result of that process. Obviously we are a somewhat smaller channel than BBC1 and ITV, so we have, as you rightly say, mitigated that by the strength of our portfolio overall and done a pretty good job over a 10-year period in holding on to our audiences. Our audiences overall are greater than they were 10 years ago.

What we would say is that as the process of digital switchover slows, we would expect to see greater stabilisation occurring. In the last 12 months, we launched 4seven, which is a very specific strategy to ensure that with all the new shows that are being launched on Channel 4, we have an opportunity for them to be seen again in a seven-day period so they can seed more easily. We have seen good growth on 4seven in the nine months since it was launched, which adds to the overall share of Channel 4. Quite often what you see in published numbers is that they take the Channel 4 only number without the plus 1 and without the 4seven. What we would say is that we are working in an advanced digital environment in which our overall share should be calculated in the round.

Then you can break the question down into specific genres. Obviously we do not have as many soaps as our competitors. We do not rely on big entertainment hits. We are delivering our share primarily through the public remit, as I was saying earlier.

You are right: it remains very competitive but we are also measuring our impact in a variety of different ways, both in terms of the impact on the individual, which shows in their engagement with the audiences, and in looking at the strength of our 4oD platform, which of course adds to the level of engagement around traditional ways of measurement.

The big debate in broadcasting now is at what point will the traditional measurement systems be augmented by new ways of measuring.

Q15 Angie Bray: Did I hear you predicting-you used the word "stabilising"-that you foresee a time when the main Channel 4 channel will be going up, not down, in terms of audience share?

David Abraham: There are no terrestrial channels that have been showing significant growth over the last 10 years because of the phenomenon of digital-

Q16 Angie Bray: Stabilise means that you hope to hold on to what you have?

Lord Burns: Ten years ago, the main five channels accounted for 76% of viewing by my calculations. In 2012, they accounted for 54% of viewing, which is a reduction of about 30%. The Channel 4 decline for the main channel over that period is almost exactly 30%. The BBC did a bit better than that. For ITV it was slightly larger. For 4 and 5, it was about the same as ours. What we are also seeing now is some evidence that as people become more and more familiar with the remote control and the enormous range of channels that are available they are continuing to dip into them; there are also signs that this is very much the case with the older audience. We have been slightly caught out by this, because digital switchover is over and we had hoped to see an earlier bottoming out of that decline.

Q17 Angie Bray: If I could just stay with the main Channel 4 for the moment, most of your public service broadcasts is on the main Channel 4, so it would seem, therefore, from your papers that you are seeing a decrease in the viewing of your public service content as a result. That must be a concern as well.

David Abraham: I would not necessarily agree. In the era, for example, of Big Brother, or other periods where we relied for our biggest ratings on, say, American shows, which we do not any more, the argument is the other way round: your overall share is very good but the proportion of public service is secondary to that share.

The reason for mentioning our biggest shows this year and the ratings we are getting from them is, I would argue, that they are all delivering very strong public service value. Of course, looking at the 2012 results, the biggest thing for our channel was the Paralympic Games which in our entire history was not just the biggest event ever but also the greatest delivery of public value in our history. It is about the balance of what is on the schedule as well as looking at the whole share.

Lord Burns: For individual programmes, I think what you say must be correct. We have seen this, for example, in terms of Channel 4 News, where viewing has declined more or less in line with the decline in the share of the main channel in total. As David says, the attempt has been made to increase the number and proportion of public service programmes that we do, but any individual programme is probably now being watched by fewer people than would have been the case before this diversification of viewing took place.

Q18 Angie Bray: I guess sometimes it is how you go about your public service content. For instance, your Call to Prayer at 3 in the morning, would you consider that to be part of your public service broadcasting?

David Abraham: Absolutely.

Angie Bray: You would?

David Abraham: Yes.

Q19 Angie Bray: Would it not have been perhaps a greater service to the public if you perhaps put that into some very interesting programmes on Islam and the Muslim community rather than some kind of alternative approach at 3 in the morning, which in many ways, is a bit patronising to the great history of Islam, which would have been available to make a great series of programmes on?

David Abraham: Yes and, in fact, we did a History of Islam series last year that was broadcast in primetime and last week, there was some primetime coverage of Ramadan as well. We did a programme called A Very British Ramadan on the eve of Ramadan. It is just the practicality that the first Call to Prayer happens to be early in the morning this year.

Q20 Angie Bray: That could be seen as a bit of a box-ticking exercise, "Oh, we’ve done a bit of public service broadcasting here" but at 3 in the morning, does it really deliver very much for a large number of the public?

David Abraham: For members of the Muslim community-

Q21 Angie Bray: That tune into television?

David Abraham: Yes, last week, we had about 186,000 tuning into that first Call to Prayer.

Q22 Chair: Six-

David Abraham: 186,000.

Q23 Chair: Really?

David Abraham: On Thursday or Friday.

Lord Burns: When a normal audience would be 30,000, 40,000.

Q24 Chair: At 3 or 4 in the morning?

David Abraham: Yes. This is a very challenging Ramadan because it is happening in the middle of the summer.

Q25 Chair: How long are you going to do it?

David Abraham: For the whole of Ramadan.

Q26 Chair: Just Ramadan?

David Abraham: Yes. This idea springs directly from the remit. The remit is asking us to appeal to the interests and views of a diverse society. It is our view that this is not exclusively so but it is one of the things that we can do to demonstrate that we take the remit very seriously. We have had a tremendous amount of support for it from all walks of society.

Q27 Angie Bray: You have certainly had a lot of publicity about it anyway.

Lord Burns: Every night at 7.50 there has been the-

David Abraham: The 4thought strand obviously is covering Ramadan closely but the 4thought strand covers all religious views and has been on air for nearly three years now. I think it is a very thoughtful exercise in public broadcasting. Also on a more general level I think it is the case that the dominance of coverage in and around the Muslim community is associated with issues that are not positive. This is positive and I think we should be supportive of that.

Q28 Angie Bray: Why do you think that with record investment in original content, Channel 4 is not retaining the audiences?

David Abraham: Well, I will come back to the facts, which are that the rate of attrition last year was the lowest for five years. We launched 4seven and did the Paralympic Games. What one might argue is whether or not the decline would have been greater had we not made those investments.

Q29 Angie Bray: I would certainly say you have some great programmes-Channel 4 News-for which you are politically slanted, but I do not have a problem with that because it is excellent news and anybody who understands that comes from a particular slant. It has a great reputation. Dispatches, fantastic reputation. Your Paralympics was fantastic. You had an exemplary summer you. I am a great supporter of Richard III, so I enjoyed your Richard III: the Car Park too. It seems to me that part of the Channel 4 problem might be that you have such a mixture that you are trying to do so much; you are trying to be alternative, you are also trying to do serious stuff. You tend to be all over place and you do not have a reputation or a brand that people can say, "I will go to Channel 4 because I know I am going to get X".

David Abraham: Interestingly, we have a tremendously strong brand. All the research we do shows that, versus all our competitors, we are known for that distinctiveness. It is one of the brand attributes that we are admired for.

The argument, interestingly, could be flipped entirely round the other way. If we were a channel that was relying on an X Factor or a show like The Voice, would you be asking us whether or not we were being as true to the remit.

Q30 Angie Bray: I guess you were with Big Brother, in a sense.

David Abraham: It was, and with all of these things it is a question of how innovative they might be early on and then for how long you exploit them if you are trying to be true to the remit. There is no doubt about it; we have to pedal very hard at Channel 4 to keep the audiences coming in.

There is a great value, and there has been historically, in the idea of the light viewer. Channel 4 has never been the channel that someone will put on in the morning and leave on all day and watch in a very passive way. We have always been the fourth choice. We have always been a place that you go to when you are in a slightly different mood, when you are looking for something that might be a bit thought-provoking and a bit different. What is very interesting about that is that we index very highly for these light viewers and for the younger viewers whose attitudes are evolving and affecting society. Advertisers really value that. What advertisers are paying for is to reach, as it were, the parts of the audiences that are more difficult to reach with other channels. We have perfected the positioning of our media product in that way. If anything, we are delivering more purely to that today than we may have been some years ago when we had a different structure to the schedule.

In a sense, it is apples and pears. It is measuring us by the relevant measurements for the delivery of the remit. If we were to be a commercially owned channel, we would obviously run it in a different way. There is a brilliance to the remit and it delivers things that are as extraordinary as the Paralympic Games.

Q31 Angie Bray: Do you think that trying to continue to appeal to the younger audience, which you do successfully, makes it more difficult to appeal to the older audience?

David Abraham: There are many parts of the schedule like horse racing and Channel 4 News and Dispatches that appeal to upmarket people who might be somewhat older but I think this is a critical issue for public broadcasting, because if you look at the median age of the other terrestrial channels, you will find that it is becoming increasingly older and in the case of some channels, extremely old.

The question will be how does the next generation get exposed to public service content. What is very interesting, if you take the top 20 shows, say documentaries, on Channel 4-24 hours in A&E, One Born Every Minute, The Undateables, shows like that- they index seriously younger than those shows might index if they were on other channels. There is an expectation around the Channel 4 brand that brings in this younger and this lighter audience.

We have our role in the ecosystem. We are not trying to appeal to all of the people all of the time. We are trying to do something distinctive. It is connected very powerfully to the way the creative economy works. Essentially, it is the way that innovation works in the creative economy. You have to have a player that will take the risks that other people will not take, that will do things like Run last night, working with people who frankly would not get a four-part drama with Olivia Coleman on a terrestrial on primetime. It just would not happen. Because our remit compels us to take those creative risks, we set in train a process that creates value for the future. We were once described as the R&D land of British television.

As a lot of television becomes more homogenous, the need for Channel 4 increases; it does not decrease, it increases. What it does is to become even more distinctive.

Q32 Angie Bray: Your audiences will start going up again.

Lord Burns: You are absolutely right. What you are absolutely right about is that we have to run very hard all the time to generate new programmes because we do not have these great blockbusters like the soaps or the Saturday night events or some of the major live-

Q33 Angie Bray: Or the longer series.

Lord Burns: The longer series. Homeland is probably the-

David Abraham: Hollyoaks.

Lord Burns: Apart from Hollyoaks.

David Abraham: We do have some long-running franchise, Come Dine With Me- those things are on the schedule.

Q34 Angie Bray: Yes, it is on the main schedule.

Lord Burns: Yes.

David Abraham: Often, we are criticised for them being on the schedule often because people know they are supporting the funding of the remit but they are not necessarily delivering to the heart of it.

Angie Bray: Thank you.

Q35 Jim Sheridan: Can I ask another question on the Call to Prayer? Obviously the decision for this Call to Prayer did not go down very well with some in the popular press. Given that your audience is up from 30,000 to 180,000, have you had any negative reaction in terms of people contacting you, complaining, and so on?

David Abraham: Very little.

Lord Burns: Very little, very, very little.

Lord Burns: At 3 in the morning, this is something you choose to do. It is not being inflicted upon you. It is a matter of choice. As has been pointed out elsewhere, there are other Islamic channels that are available to people but this is an attempt to bring it to a wider group. We feel that this should not be a hugely controversial issue, certainly not in terms of our remit and the way that one is trying to get involved with the things, possibly to do with minority viewing and various minority groups, that we are constantly doing.

Q36 Jim Sheridan: Obviously the huge public outcry that was predicted has not materialised.

Lord Burns: No, there has been no public outcry.

Q37 Philip Davies: There are a few things I want to ask about. Sticking to the audience issues, I have been described as many things in my time, but I have never been described as upmarket before for watching Channel 4 Racing. That is a new one on me. Obviously I have always been supportive of Channel 4 and its commitment to horse racing and I still am but you mentioned at the start the fantastic audience figures that you had for the Grand National. I just wondered, stripping out the Grand National, how you felt the audience figures were going for Channel 4 Racing and The Morning Line, excluding a big thing like the Grand National?

David Abraham: The first thing I want to say is that we are extremely pleased and proud about the quality of the coverage that has been put together by the team. We think they are doing an excellent job. We have taken on, obviously, a much bigger scale of coverage than we had before but it has evolved from the heart and the commitment that we have shown over the years. I am sure you saw the Racing Post this morning, and the many supportive viewer comments out there about how our coverage has evolved over the last few months.

The facts are pretty straightforward. We are covering more hours than the BBC with more commitment and we are reaching some great peaks. You mentioned the Grand National peaked at 8.9 million. We had a great Cheltenham. There are no calls that we are aware of that want the coverage to go back to where it was before.

This is a long-term relationship and it is one that is evolving. We are continuing to build on and improve the technical aspects of the coverage but we are very pleased with it and the cumulative viewing figures for Channel 4 Racing in 2013 are significantly up on what they were a year ago. That is all that matters to us.

Q38 Philip Davies: You are not disappointed in the viewing figures for The Morning Line, and Channel 4 Racing at all? You are not concerned about them?

David Abraham: Sporting coverage goes up and down according to the story of the day. If you want to be very specific about it, last year, as you well know, there was a massive story around Frankel that built a lot of interest. But if you were to compare it with two or three years ago, a slightly quieter year in horse racing, our numbers compare very, very favourably.

I think the important thing, Philip, is to look at the long term and the long-term trajectory is very positive.

Lord Burns: If we take those meetings that were on Channel 4 previously, and are still on Channel 4, as David says there are cycles in the numbers. I do not think anything major has happened.

David Abraham: We had terrible weather in January.

Lord Burns: Morning Line is down but in terms of those we have taken over from the BBC, apart from the Grand National, those numbers are down for both Epsom and for Ascot; but anything that moves from BBC1 to almost anywhere else does suffer very significantly in terms of the raw numbers.

The question that David has put is do we have any worry about the quality of what is being produced? I do not know how much you have watched on television but I certainly watched quite a lot of the Ascot meeting. I thought the production was very high.

Q39 Philip Davies: I think you probably know where I am getting to with this, because the figures for The Morning Line are down and of course the controversy has been over the presenters and the changing presenters, which coincided with the change in production company. Obviously there is the high profile case of John McCririck, who was a bit of a Marmite presenter in that people either loved him or hated him but they certainly noticed him whichever way you look at it. But also there were other people like John Francome, who was a very popular presenter, Mike Cattermole, again, was another popular presenter and I just wonder whether you felt that this change in personnel had any impact at all on the viewing figures, for example, on The Morning Line.

David Abraham: It is an impossible hypothetical to prove one way or the other. What we have done is cast a team we really believe in, that we know the audience responds very positively to. All the research I look at says that the cast that we have on air at the moment is perceived to be very knowledgeable, very likeable and very dynamic. I think this has much more to do with oddities of year on year comparisons. We had very many race meetings cancelled in January. There was snow. Because we are extending our coverage, for example with Ascot, we went all the way through to the end of the afternoon. That was not done by the BBC, so that also affects it; if you are doing more coverage over a long period that will also affect the comparisons.

We are very confident in our team. We are very confident in the production. Last time you were asking me about issues around the previous production company, all of which I am pleased to say were resolved satisfactorily. I am sure, as with all teams, we will continue to make improvements but is the basis of this coverage and all the evidence that we have saying are we doing the right job, the answer is yes.

Q40 Philip Davies: My view, for what it is worth, which may not be a great deal, is that I think the challenge of horse racing on TV is that the actual amount of time when there is some action taking place, as a proportion of the show, is quite limited. You might have a minute and then you have half an hour until the next race or 10 minutes or 20 minutes.

Lord Burns: Apart from that Saturday afternoon when it was on almost-

Q41 Philip Davies: Occasionally when you are covering different meetings, absolutely. But there is a small amount of action followed by what some people might call a lull. It seems to me that one of the great attractions of horse racing is the fact that it generates more characters than any other walk of life. There are some amazing characters in horse racing. It seems to me you have an opportunity to fill the gaps with some amazingly entertaining and charismatic people. I wonder whether or not your current presenters meet up-they are very knowledgeable, I do not disagree with that, but whether or not they are as entertaining as they might be is the one thing I would question.

I will also say in passing that Nick Luck, who is one of your main presenters, is a brilliant forecaster. I think he is brilliant. He is probably wasted just doing Channel 4 Racing. If there was one plea to you, I would say you should use him as a much more high profile broadcaster because he is an absolute star broadcaster.

Outside that, I just wonder whether or not the people you have are sufficiently entertaining in a way that horse racing should be able to generate.

David Abraham: But Clare Balding is widely recognised as the most knowledgeable and the most charismatic broadcaster in Britain today. She is the lead person on the main events. I do not think you can argue that we do not have, both in Clare and in the team around her, a fantastic group of people.

Your point, to be frank is a very subjective one. There is a counter-argument that says that for the sport to evolve, it has to evolve as a sport. The way of betting has changed fundamentally over the last few years. It is conducted much more electronically and so to evolve the appeal of the coverage, which we have done-interestingly, it has become younger and it is appealing more to a female audience as well-for the industry to evolve, these changes are positive.

I do not doubt that there is a role for characters and, indeed, our coverage has a lot of characters, but there are lots of different ways we can do that.

Q42 Jim Sheridan: Just before we leave horse racing, I look forward to the day when we interview the horses and ask them if they want to run four miles round the track and jump the high fences and see what they say.

Can I move on to the educational content?

Lord Burns: We can ask the cyclists in the Tour; even though they are pretty exhausted, they still do it again and again.

Q43 Jim Sheridan: Yes, I know. On the educational content, the Children’s Media Foundation is pretty critical of Channel 4, saying that not enough is being done to cater for children between the age of 10 and 14. Would you agree with that?

David Abraham: I think that point may have been made prior to some of the recent investments that have hit the screen. Most prominent of those is a fantastic series called Youngers that follows a group of young people as they approach and go through the GCSE period. That ran on E4 and did very well and it has been recommissioned. We are also thrilled that we had a break-out hit with the 30th anniversary version of The Snowman, which was also made into a fantastic game that over one million people downloaded at Christmas. Investments in the 10 to 14 area are happening.

To your broader point about content that is, in our view, educational, which obviously is also part of the remit and tends to focus more on the 14 to 19s, the first thing to say is that obviously the index of the channel overall, as we have been saying, is younger than our main competitors. Often some of the big primetime shows, like The Undateables or Beauty and the Beast, index very, very strongly to that group. But we have break-out hits like Educating Essex that is going to come back in the form of Educating Yorkshire in the autumn, which is a huge show for us. D-Day Live, which is an amazingly innovative series that ran on the anniversary this year, used all sorts of multi-platform content to inform the audience. We continue to invest in our digital propositions as well, mixing the strength of the TV with the strength of what can happen online with Fresh Meat House and Gok’s Teens.

Overall as we have been discussing with Ofcom, we are continuing to focus those investments. We are seeing progress. We are seeing impact and innovation. We are taking it seriously. We spent £7 million on this, which is beyond the minimum requirements in the remit and we will remain very committed to it.

Q44 Jim Sheridan: How do you measure success? Is it by viewing figures?

David Abraham: A combination of viewing figures and the impact of online games-the number of people following those things.

We are obviously, with the 14 to 19s, thinking about the experiences of how young people are transitioning through different stages of education, what issues that puts them into and how we can support them. We are always looking at all parts of the schedule to do things that will be relevant to the lives of young people. I think we are following up on a documentary about Facebook called Don’t Blame Facebook. How can young people get themselves into difficulties-navigating Facebook in a way that protects them, for example? There are many examples through the schedule of shows like that, that we know are very relevant to that group.

Q45 Jim Sheridan: We have also had the CMF report that there was a lack of a 10+ champion apparently. Your response was that Jay Hunt, whoever Jay Hunt is, is the champion. She has both demographics in mind. CMF also concludes that Channel 4’s output does not really bear witness to that good intention.

David Abraham: Jay is the Chief Creative Officer at Channel 4 and she has day-to-day responsibility for overseeing the schedule. She runs a team of professional commissioners who are allocated budgets to spend money in all of the areas that deliver to the remit. She has a member of her team specifically tasked with this. Their objectives are very clear and the remit is very clear to both of them; it is an area that we believe we are delivering to and will continue to deliver to.

Q46 Jim Sheridan: Just in terms of children’s education, do you do anything about educating children about alcohol, drugs or smoking and things like that?

David Abraham: We have covered those topics regularly. Embarrassing Bodies Live is obviously a very big show on the schedule that has an online component; it has a Healthchecker that allows people to self-diagnose around issues. Whenever we are coming across drug-related topics in our dramas or in Hollyoaks, we refer the audience to those resources at the end of the programme. Those topics remain absolutely front of mind and we hope we make a valuable contribution to those issues.

Q47 Jim Sheridan: Can I move on to Channel 4’s regional output? "In 2010, this Committee proposed that Channel 4 should be more ambitious with the amount of production that took place throughout the Nations. The Committee recommended that Channel 4 set a medium target of 15% for network spend on originated programming from the Nations". Has that happened?

David Abraham: Well, we have exceeded our remit requirement for nations and regions output in 2012, which is great progress. I said to the Committee that we would set that target and we have achieved it; 5.4% of spend in the nations, which is an increase on the previous year.

As I think we said in previous meetings, for us this is about seeking ideas in production companies and then supporting them to grow over a period of time. We have certainly seen companies in Scotland, Wales and Northern Ireland achieve that over the years. Could we stretch that target further? I think if the production resources stay in the regions, then we should see an increased capacity to do that. Of course, one of the challenges ironically is that sometimes when companies grow, they can become takeover targets for companies that are based elsewhere, and then you are back to the beginning again in terms of being able to seed money outside the M25.

Q48 Jim Sheridan: They would then be taken over and relocated back to London?

David Abraham: It then becomes a technical issue of whether they are qualifying or non-qualifying under the terms of trade. The fact is that to ensure the talent stays in a region while working at national level is a constant challenge. We are doing what we believe we should be doing. Jay spends a lot of time on the road visiting production companies in Northern Ireland, Wales and in Scotland, talking about the requirements of our remit. We have seen really good progress both in development deals with those companies and in seeing people migrate from one-off programmes in primetime towards making a series.

We think we have made quite a lot of progress on this topic in the last three years. We are in discussions with Ofcom as to whether or not the bar can be set higher. We would be supportive of that as long as the production industries in all the regions have the capacity to deliver the ideas. We make no distinction about the locality of the productions. We obviously believe in the idea that diversity of ideas helps in the strength of our schedule.

Q49 Philip Davies: Could I ask you what your view is about Channel 4 News? Do you share Angie’s view: excellent, a bit left-wing but excellent. Would that be your summary of it as well?

David Abraham: I would categorically state that the Channel 4 News is a balanced news programme. If it was not, I am sure Ofcom would be knocking on our door telling us as much.

The programme received an avalanche of awards at the RTS journalism awards in the last few months, Best News Programme, Best Anchor. It has been a fantastic period.

We have been focusing, under the new team and under the new leadership, on exclusive reports. There has been a steady pulse of scoops that have come out of the team over the last few months, which has set the news agenda more widely. I think that is the ripple effect of Channel 4 News; it is something we are very excited about. For example, the Stephen Lawrence investigation with the police that ran on the news and on Dispatches was covered by everyone that night and became a very huge story a few weeks ago. Plebgate was similar.

I think the ability of the team to deliver exclusive stories is extremely strong at the moment and I believe that in the structure of the interview we are showing a relevant appetite to get to the truth and to be balanced.

Q50 Philip Davies: You have no concerns about the balance on Channel 4 News, political balance? You have no concerns at all about that?

Lord Burns: Concerns? No, I think, as David points out, it is something that one does need to monitor, something that one needs to keep one’s eye on. There are two aspects, I think, that you are possibly hinting at. One is the range of stories that are covered by Channel 4 News. I know of no sign that the range of stories that are chosen show any issues with political balance.

There is then the issue of the attitude of the interviewers when it comes to interviewing people. As you know, there has been a trend over a period of time that generally interviewing has become probably more hostile-

David Abraham: Trenchant.

Lord Burns: Trenchant. I see this everywhere and, indeed, when you see some of these wonderful programmes of what it was like 40 years ago when people were being interviewed by people in dinner jackets, it was different.

You see this on Newsnight, you see it on Channel 4 News; the interviewers are quite tough with people but I do not think there is any political bias in terms of that toughness other than they are generally after those people who are the makers of the news.

The Government of the day tends to get a harder time because they are the people who are coming forward with the proposals, they are the people who are making the news and I think that applies across through time.

Q51 Philip Davies: Obviously recently, Stuart Prebble did a piece of work for the BBC about its political coverage and all the rest of it. As a result of that, the BBC acknowledged that certainly on many issues there was a "deep liberal bias" I think was the phrase that was used. Are you sitting there today complacently saying that that is partly the fault of the BBC but Channel 4 is not affected by it whatsoever?

David Abraham: We are never complacent.

Lord Burns: No.

David Abraham: We must never be complacent.

Q52 Philip Davies: Are you adamant that Channel 4 is not affected by the same deep liberal bias that the BBC-

David Abraham: The presence of, for example, the Plebgate investigation that ran just before Christmas, I think, ought to be taken as evidence that there is not bias at play because what Channel 4 is interested in is getting to the truth and doing so in a fair and balanced way. I think there may be reasons for all political parties to have been irritated by Channel 4 News over the last year and that must demonstrate that they are doing their jobs properly.

Q53 Philip Davies: How have you escaped? What lessons can you give the BBC? It is amazing, is it not? The BBC has this deep liberal bias in its coverage that it acknowledges itself and you have not, it seems. What have you been doing right that they have not been doing? How have you managed to avoid it at Channel 4?

Lord Burns: As David said, we are not complacent about this. I would like to think that it is something that we do keep under investigation. We keep our eye on it. Ofcom are also, of course, looking at it. We have to judge this in terms of people’s reactions also to the programme. We have one news programme. The BBC has a whole range of news output that they are covering. Channel 4 News is also, by its nature, a discussion-based programme, as opposed to simply running through the news headlines.

All I can say to you is that we are not complacent about this. It is something that we think is extremely important and we regard Channel 4 News as a great flagship programme of the channel.

David Abraham: As is Dispatches.

Lord Burns: As is Dispatches. The last thing in the world would be to see it damaged in the way that you mentioned.

Q54 Philip Davies: In your annual report, page 63, you talk about how five-sixths of the new people joining the Channel 4 News senior management team in 2012 were women, five out of six. I wondered if that was a deliberate thing or whether that it just happened by accident, five out of six of them.

David Abraham: Those five people obviously were the best five people for those roles. There is a-

Q55 Philip Davies: Why is it such a big thing that five out of six are women?

David Abraham: It is worth noting, only in that there is a broader debate about representation in senior jobs in the industry and also on and off the screen. We make no apologies for pointing that out.

Q56 Philip Davies: It is a big thing here. I am not bothered whether they are all women, all men, all ethnic minorities, I am not really bothered. For me, that is irrelevant. I would be more interested to know what their political viewpoints were and what their political starting point was. Do you not monitor? Do you not think it would be healthy in a news broadcast that among the senior people within the news team, rather than it being a balance of men and women or ethnic minorities or white people, or whatever it might be, Christians or Muslims, do you not think the most important diversity to have in a news team is a viewpoint diversity and a balance in that?

David Abraham: We want to make a distinction between the objectivity that is expected of journalists-

Lord Burns: It is dangerous territory.

David Abraham: -and the opportunity to voice opinions in varying ways. Those are two different things. Journalists are expected to remain objective in the way they cover a story.

Lord Burns: I thought I saw a story yesterday that was complaining, which said that surely it is right that journalists should never disclose how they vote because that is immediately telling you something about the position they are coming from. The notion that we are going to be profiling journalists in some kind of way to try to find out their voting behaviour-their whole history-is not something I find at all attractive. You expect journalists to be professional. You hire the people who are capable of dealing with the news stories of the day in an objective way and I hope that we do that. If there were signs that they were not doing that job, I think alarm bells would go off.

Q57 Philip Davies: Do you think Jon Snow conceals his political allegiances? Do you? Are you going to sit there with a straight face and say that?

Lord Burns: I think that Jon would probably fall into the liberal bias category that you described, and if you were in any doubt, you could just follow his Twitter feed on a regular basis.

Q58 Philip Davies: You just said it was essential that you did not know what the political allegiances of the journalists were.

Lord Burns: I do not know how Jon Snow votes. I do not care-

Q59 Philip Davies: You are probably the only person in the country who does not.

Lord Burns: Ask him. I have spent my life-well, I have spent the last 30, 40 years around this political world and I do not have a habit of going around asking people how they vote, but I do not think that detracts at all from the way that he does his job on the screen and that he will give a huge range of people a tough time. I see no sign that he eases off on people who come from what you describe as being of liberal bias.

Q60 Philip Davies: Would you ask someone like Stuart Prebble to do a similar piece of work for Channel 4 as he did for the BBC?

David Abraham: We do not think that there is need for that because we believe, when we look at the editorial choices, because you are making a distinction between the flavour of certain voices on the channel versus the way the editorial structure works. I am just looking at the list of Dispatches programmes from the last few months. There are titles like Tricks of the Dole Cheats and Rich and on Benefits, How Councils Waste Your Money, Secrets of Your Boss’s Pay, The Truth About Leaseholds, Britain on the Sick. You could take a view as to which of those programmes may be coming from a certain point of view from all angles of the political spectrum. What we expect at Channel 4 is that curiosity and seeking after the truth come before any element of bias. We can point to strong examples where we covered at the waterfront without a sense of bias. As I say, we have been an irritant to all political parties where we have felt the public should be enlightened on certain issues. We do not think that we are in need of a review of that kind.

Q61 Philip Davies: One final subject area that I want to ask about is what you might broadly describe as the Paralympic legacy, which we discussed at last year’s session. I just wondered how you felt that had gone and what plans you have for the future.

David Abraham: I am glad you asked the question, Philip. I was at an event with the Mayor of London just last night and with Lord Coe, looking at the momentum that now has been created behind the legacy. We are just a short number of days away from the Anniversary Games, which I am thrilled to say is sold out for both the Olympic and Paralympic events in a few weekends’ time.

Lord Burns: I saw the posters this morning.

David Abraham: We are promoting that very heavily and stars are coming back to recreate the magic. We have a number of Paralympic events we are covering that week and then we start our preparations for the winter Olympics and Paralympics that happen next year in Sochi. We will be giving a lot of support to that and then rolling through on to Rio.

In parallel, we have given opportunities for many of the Paralympic presenters to appear in documentary programmes of their own. Just a few days ago, I was screening a wonderful film with Ade Adepitan going back to Nigeria, looking at the polio issues there and how they are being dealt with; a very powerful film that will go out quite soon. The Last Leg, which is the entertainment programme that came out of the Paralympic Games, has returned already and will return for a second time quite soon as a fun Friday night show.

Both in the presenters appearing on our coverage, whether it is on the news or on their own shows, or whether it is continued coverage of Paralympic sport, we at Channel 4 remain very committed to maintaining the progress that was begun with the Paralympics and are very proud to do so.

Q62 Philip Davies: After last year’s session I asked if you had plans for other programmes. I will quote what I said, "Do you have plans for other programmes" this is on disability "just for argument’s sake that will show people with disabilities getting into employment, to show what they can do rather than what they can’t do? Is that type of thing on your agenda?" Your reply was absolutely-

David Abraham: Yes.

Philip Davies: -"Those types of programmes are constantly in development." I just wondered-

David Abraham: We have run a whole season of programmes for the public on the Channel 4 News. Some months after that meeting we did a whole week of programmes on that. Ade has done a Dispatches on the issue of Government support for disabled people in this country and the changes that are going on.

I think we have done a good job in keeping the top end front of mind. I, myself, am speaking at an event that the Minister for Disability is holding tomorrow in fact. We are very actively involved in this area. I think we are doing as much as any broadcaster to pursue that agenda.

Q63 Philip Davies: Is this an agenda that Channel 4 is in for the long haul?

David Abraham: Absolutely, absolutely. What is great is having Rio on the horizon several years ahead. We know we need to keep the lights on between now and then and we are doing it in a variety of different ways. We have Jordan Jarrett-Bryan now presenting sport on Channel 4 News. All over the schedule there have been changes, as well as those programmes that are dealing with other aspects of disability. We have a music season that starts just this week called Mad for Music, which is dealing with mental health issues and the relationship between the arts and mental health, which is an incredibly powerful series. Across the waterfront these are topics that are very much part of our remit.

Q64 Angie Bray: I want to come back very quickly on the issue of the news programme, Channel 4 News. As I said earlier, and as my colleague mentioned, I happily see it as a news programme that comes with a slightly left-wing slant, but I do not think that is a problem because I think most people recognise that and they build it into their viewing of the every programme.

Many moons ago, I did provide a series of programmes for Channel 4 with Diverse Productions. We produced a series of programmes called Right Talk, which was all strictly centre-right politicians. That was, again, something which Channel 4 was interested in programming.

What would you say to the proposition that we should perhaps go the routes that they do in America, where you have a Fox News and a left-wing news. Would that lead to a more exciting kind of news coverage, do you think?

Jim Sheridan: Like what?

Angie Bray: In America, you can take your pick

Jim Sheridan: What is the starting point of left-wing?

Angie Bray: We can debate that.

Chair: Let us not have a debate across the issue.

Angie Bray: Exactly. Centre-right, centre-left.

Lord Burns: What is at stake here is that at the moment, the law requires that broadcaster should show no political bias.

Q65 Angie Bray: I agree. Is that something we should look at?

Lord Burns: You are raising the question should that be relaxed and should we be allowed to do it-

Q66 Angie Bray: Would it not make more interesting news coverage?

Lord Burns: Well, it may be more interesting in many ways, but would it benefit in terms of the quality of the news? Personally, I have my doubts but I am pleased to say this is not something I have either given any deep thought to, nor am I required to do so.

Q67 Angie Bray: It is quite exciting though.

Lord Burns: It is but my personal-distinctly personal-observation is that taken in the round we have very good news coverage in this country. Obviously when there was only a small number of professional broadcasters, the requirement that broadcasters should be without political bias was probably even more powerful. My feeling is that we have the benefited from it both in terms of the news but also in terms of the news-type programmes that surround them.

If you go down the route that you go down, you end up with channels that have that particular bias rather than existing broadcasters who somehow or other have a political bias.

David Abraham: If I just add to that, we welcome polemics. When Margaret Thatcher died, there were several polemics on Channel 4.

Q68 Angie Bray: You did an amazing programme, Margaret Thatcher, the radical-I think it was one of the most interesting programmes after her death.

David Abraham: Yes. To give a platform to voices that have strong, trenchant points of view and give them a primetime platform to pursue that at full length is something that should be part of the mix. You will regularly see those trenchant views given a voice on Channel 4 and it is what makes the mix as rich as it is. On the news itself, one of the challenges I think you would find if Jon Snow were sitting here is that we do not get as many politicians coming on and sharing their views directly with the public as perhaps we would like them to. There is a struggle to get people to come on and have their say.

Q69 Angie Bray: Why?

David Abraham: Often different reasons are given.

Q70 Angie Bray: We see plenty of politicians on news programmes. Are you saying that Channel 4 is having difficulty-

David Abraham: No, I do not think it is a Channel 4 issue. It is a broader issue of politicians’ willingness to make themselves available at a senior level on news programmes on a daily basis. We quite often have to say, "We asked so and so and they weren’t available". That is an issue.

Q71 Paul Farrelly: I am sorry I have come back late because I had another event to host, I am afraid. But it is nice to be back to give a bit of balance, sitting where I am. I am very glad to say, when I asked the same question that Angie asked you of the then Secretary of State very quickly after the 2010 general election: "Should we have a Fox News here?" I was very glad to hear the Government’s settled opinion was no; the present arrangements worked quite well

One of the things that we are looking at very closely is the issue of press regulation after the phone hacking scandal. One of the causes of concern is that the press themselves or the majority parts with a vested interest do not give much airing to the alternative view and those who might are a little bit afraid of some of the more strident opinion-formers among the tabloids.

Could I ask you a question, for people to get an alternative view that television is very important? What programmes have you done on this big story of phone hacking and the future of printed press regulation in the country to inform your viewers?

David Abraham: We regularly covered it on Channel 4 News. When it was a rolling issue it was pretty much every night. There have been one or two Dispatches looking at the practice of phone hacking and looking at the background and trying to explain it to the public, for a general audience. It has been covered as a news strand.

Q72 Paul Farrelly: As a news item.

David Abraham: Well, as a news issue but occasionally as an issue for documentary coverage in the form of Dispatches.

Q73 Chair: Was it you who broadcast the spoof comedy on the phone hacking scandal?

David Abraham: We did, we did.

Chair: Which was very funny. I seem to remember this Committee featured in it quite significantly.

David Abraham: Jimmy Mulville produced that piece called Hacks at the end of 2011.

Q74 Paul Farrelly: This is a question I will put to the BBC and ITV as well, because it is important that where one view is monopolised in one still influential part of the press that the rest of the media is given the opportunity of hearing a different voice.

David Abraham: Yes and we are covering a story as it unfolds. I think you saw that 10 days ago when we first broadcast to air the recordings that were made when it became public. So, it gets covered as a news item.

Q75 Chair: Can we go back quickly to look a little more at the financial position before we finish? You talked a bit earlier about the fact that your investment in original content has gone back up to a high point, but I understand that, in some part at least, that is being financed by you drawing on your reserves.

David Abraham: Yes.

Q76 Chair: We also talked about the outlook and the continuing decline in market share, and that must have a likely impact on your advertising revenue. If your advertising revenue is probably going to fall and you are, sooner or later, going to run out of reserves, how are you going to maintain investment?

David Abraham: In actual fact, our revenue mix is changing. If you look at the 2012 numbers, you will see overall our revenues are pretty much flat with the market. The mix has changed because obviously there are other ways in which we make revenue in terms of 4oD, DVD revenue and such like. As far as there were drops in 2012, they were really because in the prior year we had a hit with the In Betweeners movie and it was a bit of a windfall on top of our other revenues.

But if you draw back to the general point, we began just-

Q77 Chair: The In Betweeners movie brought you in significant revenue?

David Abraham: It was a windfall in DVD revenues for that year, north of £10 million. If you stand back, we entered 2012 with reserves of around £296 million and assets of around half a billion. With the board, we took the view that to continue to invest in the momentum of the schedule, and with the Paralympic Games and our plans around 4seven, that we could afford to draw down, relatively modestly, around 10% of those reserves to keep the momentum going. Obviously we did not do that blindly. We knew that we were on a two or three-year plan to build the revenue such that we would break even and keep our reserves above the £200 million that we know very safely we would require to pay our suppliers and keep Channel 4 moving forward.

I am pleased to report that we are very much on plan with that. We are in the second year of it now. I think we said, in our annual results in May, that we would certainly not expect to be exceeding drawdown from 2012 in 2013, but we are on plan to deliver to that objective. Indeed, with my head of finance, who is sitting behind me, we are very deep in plans now to ensure that in 2014 Channel 4 will break even again, which is the normal course of events that you would expect for us as a not-for-profit organisation.

The market remains challenging. The ad market for this year, we had prudently modelled to be marginally down 1% or 2%. In actual fact, at the mid-year point it might be somewhat better than that. Obviously, we are getting a sense that the economy in certain areas is improving, but we have been here before, so we have to remain quite prudent. Certainly, we are delivering to the plan that we presented to the board at the end of last year and we are going to be putting in a plan for 2014 that we believe is deliverable.

Lord Burns: There are two sets of metrics that we keep our eye on. First we are of course interested in the share of viewing because this tells us a lot about the reach of our programmes and what kind of audiences we are managing to get for them.

When it comes to the income side, it is not just the general viewing numbers that matter. It is our numbers basically in competition with the other broadcasters who are in the advertising market. As David mentioned earlier, we sell advertising specifically in relation to the 16 to 34 year-old group and the ABC1 group. What matters from the point of view of our income and what we put forward is our performance in those markets. They have held up much better than has, particularly, the share of viewing on the main channel.

There is a whole range of metrics that we need to look at here; some of which are particularly important from the point of view of our income, some of which are important from the point of view of our reach and what we are able to achieve in getting our programmes across to their audience.

I would never ever underestimate, though, the market challenge. One of the things emphasised to me over and over again since I have been in this job is just what an extraordinarily competitive world broadcasting is. You have a lot of very talented people who are trying to reach viewers and who have come up with all kinds of wonderful and imaginative programmes and you have to work jolly hard to keep your position.

Q78 Chair: Can I touch on a couple of specific items of expenditure? You will have watched with some interest, I am sure, the various problems that have afflicted the BBC in recent months; one of them, which obviously has caused a lot of concern, is the level of remuneration and pay-offs and so on. We have now come to a position where both the Chief Executive and the Chief Executive Creative Officer of Channel 4 are being paid considerably more than the Director General of the BBC, yet obviously the BBC is a far larger organisation. Do you find that looks a bit out of kilter?

Lord Burns: Between Channel 4 and the BBC there has been some downward ratcheting of remuneration levels. As I have pointed out before to this Committee, the people we have recruited over the last three years were basically recruited on the basis that they were being paid less than their predecessors in those roles. We have now seen the BBC ratchet downwards. I must also take account of what is happening in other media companies, both in terms of independent production companies, but also other media companies generally. Of course, when you look at both those categories, for companies of our size, with a £1 billion turnover or so, our remuneration levels are well below what is happening in those markets.

We now find ourselves a little bit above the BBC but still considerably below what is happening in shareholder-owned companies. You take these decisions when you hire people. When we hired David, when we hired the Chief Creative Officer, in both cases the pay was well below that of their predecessors. Once we have made that contract, it is a contract. I have watched with interest what is happening in the BBC. I watched with interest what is happening in the independent production sector to the shareholder broadcasters and to the wider media more generally. We are attuned to this. I can assure you, Chairman, that the issue of pay is something I keep a very close watch over but I think you also have to recognise that we make decisions at a particular point in time and those are then decisions that we live with.

David Abraham: I think it is also worth adding that sometimes-because we disclose all our figures completely, all the see-through numbers-in the base pay, we are not able to see what other allowances may be available to people at the BBC in terms of pensions, etc. Certainly some of that has come out more recently.

I would also add that at the level below the executive, we are finding that when we are competing for talent with the BBC their pay levels are pretty competitive; there have been instances where we have lost quite senior executives who have gone for pay improvements at the BBC. It is a competitive marketplace and our pay levels are, as the Chairman says, far closer to the BBC than they are to ITV and Sky.

Lord Burns: Or to other media companies.

Q79 Chair: On the issue of bonuses, the remuneration committee set specific targets and, in actual fact, of the six targets set, two of them were missed but that did not seem to have an impact on bonuses.

Lord Burns: Two things: one is those things where we have specific targets, they account for around about 60% of the bonus potential. There is another 40% is based upon a view of the programme content and of individual performance. Taking those into account, we then average it out to the number that we presented. In addition to which, we took the view that the remuneration committee did, and put it to the board, that in the very exceptional circumstances of the Paralympics there should be a special fixed bonus, which is described in the report, that was paid to everyone.

David Abraham: The answer is they did have an impact

Q80 Chair: Otherwise bonuses would have been even bigger, would they?

David Abraham: The potential was greater than what was awarded because effectively we described this to our staff, until I started, as performance-related pay. We had everyone in our organisation understand that they were delivering a remit but they were also trying to bring in £1 billion. It is a very particular thing. No one else is trying to do this. The scheme exists to focus everyone’s attention on that balancing act. If we do not meet the minimum gate on revenue and if we do not meet the remit requirements, there is no pay-out whatsoever. It is zero. Once we have got through those key critical things, we regard this as stretch targets to incentivise people, to work together to deliver to achieve this challenging balancing act. It is proportionate. If they achieve the stretching targets it is all available, if their personal performance is strong. If they do not, then it is reduced accordingly.

The distinctive thing about 2012 is that it was reduced in the light of the marginal reduction in the Channel 4 share.

Lord Burns: Which we just missed.

David Abraham: Which we just missed. Then the board took a view about the extraordinary collective achievement of the Paralympic Games and there was a modest payment that for most people was around £1,000 that, given the exceptional ambition of the event, was very well earned.

Lord Burns: We ended up with somewhere between 65% and 70% of the population but if we-

David Abraham: Which for the average person was about 7% of their salary. These are modest schemes by comparison to the private sector.

Q81 Chair: Just one other item of expenditure: how much have you spent on YouView?

David Abraham: We spent both in cash and in kind around £7 million in 2012; that was the cost internally of providing to the platform, investing in it and the in-kind services in terms of marketing. The number into YouView was around £5 million.

YouView is going pretty well. I think the last published numbers that came out were around £400,000. That was a few months ago. I would hope to be sitting here next time we meet and that number will be over £1million. I do not know when that will be achieved but it is on track to hit that, I would expect, over the next period. As I think we have said in previous meetings, for the DTT platform to be future-proofed through connected devices is an important aspect of our overall strategy, so we are content with the investment we have been making, and we are now working on the next iteration of the shareholder agreement.

Q82 Paul Farrelly: I am one of the people who has not caught up, as it were, on YouView, I am still on Freeview but I imagine initiatives such as BT’s with sport and broadband should give it a bit of fillip.

Lord Burns: Other telecoms companies are doing a similar thing; if you subscribe to their broadband telephone service they have offers with regard to the YouView box. It has always been felt that that would probably be a more important way for the distribution of this than simply people going into a shop in the high street.

Q83 Chair: You are not disappointed about the performance of YouView?

David Abraham: No, I think the challenge before it was launched was that everyone was saying, "Will the technology work?" and the fact is that the technology is outstanding. It has five star reviews in the consumer press. It is very reliable. The complaint rates are negligible, so it is a great British technology.

Lord Burns: And we are gaining a lot of VoD views.

David Abraham: Yes, the VoD views are growing exponentially. It provides, I think, a simple navigation environment that works in the mainstream that compares very favourably to the complexity of connectivity. We know people are buying TV sets with these portals available but very few of them are using them because they are quite challenging and they are quite complex. YouView provides a very simple interface and that is its greatest strength. It is worth us investing in the future of connective television with a mind to the value of public service broadcasting. This is the central challenge we all collectively face: are we prepared to think in a visionary way on how we are going to maintain the health of that environment and all the things we are talking about this morning. YouView is a part of that.

Q84 Chair: On 4oD, are you going to move to allow download?

David Abraham: We are and I think that is available as of next week.

Jim Sheridan: As of next week? Very good answer.

Lord Burns: It is for people on the move, it is available to download things before you go on the move. It is very viewer-friendly.

Chair: Precisely. In that case, I do not think we have any more questions. Thank you very much.

Prepared 25th July 2013