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Britain's hybrid TV network, Channel Four, supports its mission with advertising

Originally published in Current, Nov. 25, 1996

By Karen Everhart Bedford

LONDON--Borne of the Thatcher Revolution that set market forces to work in nearly every aspect of British society, Channel Four offers a concrete example of how high-quality, innovative programming can coexist with advertiser support.

In particular, advocates of Lawrence Grossman's "Spectrum" proposal for commercially funded weekend programming on U.S. public TV cite C4 as a "useful precedent" for their plan [related story].

C4 may be a target for comparison but it is a moving target. In its 14-year history, the channel has transformed itself from a quirky stepchild of Britain's commercial Independent Television (ITV) network into a hip, aggressive competitor for viewers and ad sales that still occasionally challenges its audience.

But whether it made this transition at the expense of its programming mission--or, in Britspeak, its "remit"--remains a matter of some debate.

Now C4 faces challenges that could further alter its nature--a recent privatization threat from the Tory government and expected stiffening competition from Channel Five, an upstart coming next year to an increasingly crowded British media sphere.

Channel Four was created in the early 1980s through an extraordinary act of Parliament that granted a second nationwide channel to ITV, then the country's only commercial television network. ITV was permitted to sell C4's ad time but had to guarantee to cover its budget.

The law spelled out C4's program remit: it was to "appeal to tastes and interests not generally catered for by ITV," to innovate and experiment, and to provide a high quality, wide-ranging and distinctive service.

"We were expressly ordered by Parliament, if you like, to make programs for gays and for blacks and for communists," said Peter Moore, C4's commissioning editor for documentaries.

C4's charter not only told it to serve minority audiences, but its funding structure removed the incentive to push for higher ratings. Initially, ad sales were divorced from its budget; since reforms in 1993, only a quarter of any surplus earned above a certain amount is available for C4 spending, and that must go to programming.

In another innovation, Parliament gave most of C4's production work to independent producers, then a fledgling industry. The channel was forbidden from producing its own programs, and ITV's big producing stations such as Granada could contribute no more than 40 percent of the schedule.

The channel's commissioning editors, whose authority combined the powers of PBS's top programmers with those of executive producers, were given budgets and autonomy to bring to air programs that couldn't be found elsewhere.

This commissioning system, widely credited for bringing fresh programs to air, paved the way for Channel Four to get into feature films. Recent successes include Four Weddings and a Funeral, The Madness of King George and Trainspotting.

"The original way it worked was very much like a print publishing company," recalled Stephen Segaller, a British producer now working for Oregon Public Broadcasting. C4's editors were able to quickly commission shows that appealed to them, and this system produced an "amusing and interesting mishmash of programs" scattered throughout the schedule.

"Cunning mix of ingredients"

In the early years, C4 had to compete for audiences only enough to show that it was progressing toward financial viability. "I had to provide what I used to say was a cunning mix of ingredients," recalled Sir Jeremy Isaacs, Channel Four's first chief executive, who will retire as the head of Britain's Royal Opera House next year to produce a major series about the Cold War. "There was sufficient stuff there that I could claim was distinctive that would really deliver a sizable and adequate audience." This included U.S. imports like Hill Street Blues, Cheers and I Love Lucy.

"Basically, the commercially viable programs of some quality that we were able to offer helped us sustain in the schedule the stuff that appealed initially to very small audiences," explained Isaacs.

That other stuff quickly gave C4 a reputation for controversial programming, for pushing the envelope in taste and subject matter, for being unpredictable. And, in spite of or because of this, C4 attracted increasingly larger shares of the TV audience.

Michael Grade photoMichael Grade, former controller of BBC1 and London Weekend Television, succeeded Isaacs as C4 chief executive in 1988. He continued to build the channel's audience with cohesive scheduling strategies that presented more commercially viable programs.

"We were able to grow from a seedling and be nurtured and provide an alternative service which people really started to watch," said Andrew Brann, head of coproduction and acquisition. By the end of its first decade on the air, C4 was turning a profit.

"That's when the jealousies start"

With its financial viability no longer in question, the next wave of Thatcherite reforms freed Channel Four from dependency on ITV. But not without a price.

Under reforms adopted by Parliament in 1990, C4 was allowed to sell its own advertising, but its earnings were capped at 14 percent of the combined advertising revenues of ITV and Channel Four. If it earned more, C4 had to split the additional revenue 50-50 with ITV. Moreover, half of the channel's share had to be put into a reserve fund, the remaining half spent on programs.

The funding scheme still included a "safety net" provision--if C4 earned less than its 14 percent share, ITV would have to cover its shortfall.

But Channel Four was so successful at marketing itself that an ITV bailout was never even a remote possibility. By 1994, the second year that C4 employed its own sales force, the channel's advertising share was nearly 20 percent. As of last year, its payments to ITV companies totalled about $253 million. The channel's cash flow for the year was $696 million.

"By the time we were cut lose and had to sell our own advertising, we were strong enough to do it very effectively and to target particular advertisers," explained Brann.

Moore noted that having its own sales force allowed the Channel to establish its own pricing policies and more effectively market its niche audiences. "We could argue, for instance, that a gay audience is a sophisticated audience and also a childless audience largely. Therefore, they have a lot of spending power. You can advertise Audi cars and Volvos and Saabs."

"Suddenly, the price that we're able to sell advertising goes up, so we're making more money," Moore adds. "That's when the jealousies start."

Housed in a new, modern, $52.5 million building, Channel Four became the target of critics who said it had gone too commercial. To them, C4's circular glass headquarters was symbolic of how far it had strayed from its original mandate.

ITV "sponges"

An aggressive campaign to remove the advertising cross-subsidy, initiated by Grade in 1995, later sparked a nasty public spat with the ITV companies, which said C4 was getting an "insurance policy" for hard times by paying part of its profits to them.

Grade contended that Channel Four never wanted or asked for such protection, and the formula meant C4 had less to spend on new British films and programming. If the fees were dropped, he pledged, C4 would commit its excess profits to domestically produced films and programs, and cut back on American program imports.

Grade draped C4's building, near the Parliament, with a huge banner that read "Stop cheating the viewers, scrap the funding formula." And he reportedly sent sponges to every MP attending the 1995 party conferences. The message: ITV should stop "sponging" off C4.

ITV fought back, holding a press conference at which a popular television host accused Grade of eyeball-chasing and airing too much "low-brow" entertainment programming.

The feud ended in Channel Four's favor earlier this year--the levy will be phased out beginning in 1998, although details have yet to be finalized. But even before Parliament agreed to the change, government officials had begun hinting at plans for C4's full-scale privatization.

The Tory government recently backed away from a C4 sell-off, floated by Prime Minister John Major this summer as the means to pay for an election-year tax cut. The proposal met staunch resistance from Grade. Several sources said it's unlikely that the government would pursue such unpopular legislation before next year's general election.

Upmarket and young audience

Channel Four's audience share peaked at 11 percent in 1993, and has since hovered slightly below that, according to its 1995 annual report.

Like PBS, C4 offers a variety service that professes to have something for everyone. But, unlike PBS, the public views it as the "youthful channel," according to Brann.

"Some of that is more perception than reality in terms of the audience," he acknowledged. "It obviously is something that we don't discourage to be seen as youthful .... It is good for perception among advertisers."

Also unlike PBS, Channel Four has a generous program budget. In 1995, C4 spent $342 million on programming, according to its annual report. (PBS, in comparison, controlled $114 million, not counting underwriting.) More than 65 percent of C4's program budget went to independent producers.

Though less than 10 percent of C4's program spending went to U.S. imports, they are prominent in C4's schedule. E.R. and Roseanne were among its top performers in 1995. The channel brings in Ricki Lake and Montel Williams as well as Friends, Frasier and N.Y.P.D. Blue.

But the full range of programming in a typical broadcast week is quite broad, and much is quite unlike anything U.S. audiences find on the tube.

Brookside, a popular Everyman soap opera set in Liverpool anchors the primetime schedule several nights a week. Countdown, a quiz show featuring contestants from all walks of life, airs weekday afternoons. A cooking show, Here's What I Made Earlier, submits regional chefs' recipes to taste-testing by finicky kids.

There are flagship series: Channel Four News, the hour-long program that newsmakers watch; Equinox, C4's signature science series; and Cutting Edge, an acclaimed documentary showcase that sometimes tops C4's weekly ratings. The schedule also includes educational fare, such as "Learn Sign Language," U.S. football highlights, and films, both old and new.

Can't afford to lose audience

"It has to be said that the channel is a tad more predictable, partly because it doesn't take anything like the risks that we took or tried to take with scheduling," commented Isaacs. "And there are some people that say it is resiling from its remit. I don't think that's totally fair, but I have always said that if the channel sold its own airtime, it would find itself taking fewer risks."

"Channel Four still has the ability to surprise, and they still come out with programs you wouldn't actually find anywhere else, and that's their strength and that's what everybody likes about it," said Andre Singer, head of Cafe Productions who, as a commissioning editor for BBC2, set up an independent film unit to rival C4's. "But I don't feel that the channel as a whole is quite as starkingly original as it once was, and I think that's because they're forced into a position of being competitive. They've got to keep audiences."

BBC2 has competed strongly with C4, and Channel Five will further heat up the competition, he noted.

"It now is a much more commercial environment, and we're having to fight for our share," acknowledged Brann. "With an advertising sales team, we have become more commercial in the way we schedule things," he added. "Not necessarily changing the programs, but being clever about the way you schedule things, the runs you commission, and so on."

"I don't think we're corrupting an ideal," said C4's Peter Moore. "I think we're doing the best that we can under the circumstances, but inevitably there will be a lot of people who will take a different point of view."

"There isn't a great incentive to make lots of millions, and nor would we want to, if you asked me," Moore added. "I don't want to. I want to make the best programs."

Moore arrived at Channel Four in 1990 with a mandate to "try to bring some sense of order" to the network's documentary programs. He created Cutting Edge, among other strands. "It's been immensely successful--not because of me, but because of the incredible producers who made it."

Moore said he enjoys enormous autonomy to commission all sorts of films--from a tabloid-style expose of Britain's most notorious shoplifter, to a grisly film about the aftermath of the civil war in Grozny, Chechnya. The latter documentary, "The Betrayed," featured scenes of the war-torn capital set to Russian pop music, and documented the opening of a mass grave of civilians. It swept British awards for documentary film last year. "You don't do that if you're showing bland, cheap and nasty [film], catering to the masses," said Moore. "I don't think more than half a million people watched 'The Betrayed'--every member of the liberal intelligentsia no doubt, but it wasn't a mass critical audience."

Isaacs noted that the distinctiveness of Channel Four's service can "only be determined by the choices and ideas and lunacies and cunning of the people making the commissioning decisions."

"It's up to others now to demonstrate that they can keep Channel Four alive by keeping it responsive to audience needs that only their noses detect."

When Isaacs departed Channel Four, he issued a threat that has since entered the lore of British broadcasting. "I am handing on to you a sacred trust," he reportedly told Grade in a hallway encounter. "If you screw it up, if you betray it, I'll come back and throttle you."

As yet, Grade remains unthrottled, and Isaacs is supporting the Channel's effort to fend off full privatization.

"I wouldn't start from here"

As Grossman has described the weekend commercial network proposed for U.S. public TV, it would have a charter requiring it to meet certain program objectives, like C4. But ratings and profits would not be structurally divorced from program decision-making. And most of all, the U.S. network would not grow out of British media tradition, whose tone was set by the BBC.

Grossman hired the BBC's former chief rep in New York, Jonathan Crane, to study C4 as a precedent.

"The U.K.'s Channel Four appears to have squared the roundest of circles: an advertiser-supported broadcast network which features innovative, worthwhile programming, and makes a handsome profit," Crane concluded, according to the Spectrum prospectus.

But his report also acknowledged that a "vast gulf" separates the British and U.S. television systems. Sources interviewed for this article pointed to those differences as they expressed great doubts that C4's structure could be the answer to U.S. public broadcasting's funding dilemma.

"The uniquely British thing about Channel Four is not just an act of Parliament that legislated for qualitative broadcasting," said Isaacs. The British viewed broadcasting from the start as a powerful force that must be regulated. "We didn't have commercial broadcasting in Britain until 1956, and then we asked it to behave as if it wasn't commercial broadcasting."

At about the same time, the Americans imposed quality broadcasting "as a very puny, minor addition" to commercial TV.

"What you have to have, and what Channel Four always had in spades, was an adequate, guaranteed income," continued Isaacs. "That income was a tax--unthinkable in the United States--on the revenues of ITV companies."

On the cost side, U.S. public broadcasting developed hundreds of local stations, while U.K. television operated at a national or regional level. Isaacs observes that U.S. public television mortgaged "the whole of its income" to localism--"another great public consideration that has nothing to do with broadcasting and certainly nothing to do with making good programs."

"That's the problem," Isaacs continued, "a huge proportion of the total cost of maintaining the [U.S.] system is devoted to maintaining the system, not to making programs."

Both Singer and Brann agreed that public TV would benefit by adapting C4's commissioning system.

"What you would have to do--which they've never grasped the mettle of--is to have a central commissioning system the way we do, and people actually able to make those decisions, and to have budgets and to know how much they can spend," Brann said. "You'd have to change the model so radically, I don't know whether it would be achievable."

"I would suspect that in America one of the criticisms of public broadcasting--the blandness of some of the material that's broadcast through it--is because of the process," said Andre Singer. "The originality is there, the talents are there, but they have to go through this endless cycle to get it up to broadcasting level."

He already sees evidence that PBS recognizes this, and has learned from the strengths of Channel Four's commissioning structure. "I think it's beginning to make commissioning decisions quite fast now."

"The key success of Channel Four has been the speed, its ability to devote resources as a publisher and, perhaps in the past, the lack of too much editorial imposition and shaping things to fit profiles [strands of programming]."

"The thing is, you cannot export broadcasting systems," commented Isaacs. "Broadcasting systems derive from the pressures of a society. You cannot take something up, clink it down in another environment, and expect it to work there."

"Or, to put it another way, to give an Irishman's answer to the question--if I was trying to get there, I wouldn't start from here."


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Related story: Pointing at Britain's Channel Four as a precedent, former PBS President Lawrence Grossman proposes mandate-directed commercial-supported programs on U.S. public TV.

Outside link: Channel Four's web site in Britain.


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