When Channel 4 unveils its 2014 results tomorrow it will be in upbeat mode, banging the drum about its recovery at last from the predicament caused by the 2009 decision to axe Big Brother, its biggest source of income and audiences.
After three years of drawing on cash reserves in the hunt for replacement primetime hits – which led to it posting losses – it is now back in modest surplus. Its financial position is far removed from the precarious status of residents of Benefits Street, a show which, like The Island, Gogglebox and the Educating series, has assisted the fightback. As Jay Hunt, Channel 4’s creative director, told the Guardian last week: “The channel itself is in a very good place.”
But with a new Conservative government hungry for cash cows to milk and assets to sell, chief executive David Abraham, who has driven the overhaul since 2010, will also deliver a carefully modulated message and reminder about the broadcaster’s value in tricky times. New culture secretary John Whittingdale, who has already had a cordial meeting with Channel 4’s chiefs, has a questioning stance towards public service broadcasting and there have been sporadic flirtations with privatising it. In 1996, when John Major’s government toyed with it, he put forward a parliamentary amendment on privatisation. In 2003 he said he had changed his mind.
Last September the Telegraph reported the Conservatives had drawn up plans to sell Channel 4, which could be valued at around £1bn, but Vince Cable blocked them. Media analyst Claire Enders says: “It is a live issue. No smoke without fire.” The story gained credence after Channel 5’s ownership changed last September when Viacom bought it for £450m, indicating a buyer for Channel 4 might be forthcoming.
Channel 4’s 2013 annual report valued its assets at £458m. It had “prudent levels of cash reserves” of £238m, a freehold building worth £73m, programme rights in excess of £224m, and a strong brand, Film 4. Shares are held by the Department for Business, Innovation and Skills.
However, the Conservative manifesto, emphatic on the frozen BBC licence fee, was silent on Channel 4. Ed Vaizey, now reappointed culture minister, denied any selloff plans in March, insisting: “It is not on anyone’s agenda.” It is also, almost, a sacred Conservative cow, the creation of the first Thatcher government, laying the foundation for the independent production sector.
That sector is a key ally. But despite determined efforts to portray itself as a not-for-profit body, it does pay its top executives handsomely; Abraham’s package was £739,000 for 2013, Hunt’s £497,000.
The Ofcom Public Service Broadcasting Review consultation published last December expressed concerns about Channel 4’s failure to cater for older children and weakening audience share, though this problem is shared by ITV.
It is arguably still struggling to find stability: the main channel saw its overall audience share fall to 5.9% during 2014, down from 6.1% in 2013 and 6.6% in 2012. However, it points to growth year on year in its key advertising-earning peak time slots, 8-9pm (audiences up 4%) and 9-10pm (up 2%).
There is also work to do to gain a bigger share of valuable programme rights, and in moving into the kind of international drama co-production exemplified by its forthcoming scifi about androids, Humans. The key to its survival remains balancing lucrative programmes with those of clear public service value that never cover their costs from advertising, such as Channel 4 News and Unreported World.
Part of the organisation’s argument for being left in public hands will rest on its drive to innovate digitally. At the Westminster Media Forum last week, Gill Whitehead, director of audience technologies, fleshed out its move to register users of its online catchup service, relaunched as All4 in March, which then allows it to target consumers and charge higher prices for advertising. Registrations have risen to 12m from 10.2m, average age is 28. Twenty-six independents are making “snackable” content for the site.
“I think that innovation means ensuring we have a deep understanding and connection with younger audiences. Think of the Googlebox family, sitting on a sofa together, we offer a bit more they might like online – personalised, relevant, individual,” said Whitehead.
This hold on younger audiences is key to Channel 4’s importance in the overall supply of public service broadcasting content; the theme of Ofcom’s review, designed to guide BBC Charter renewal. Enders notes: “!t covers audiences so others don’t have to worry about them.”
So Abraham will tomorrow point to what Channel 4 contributes at no cost to the taxpayer, with 90% of its income raised by advertising. Besides digital pioneering - its charge into the online space - these vital contributions include the £430m-plus patronage annually spent with more than 360 suppliers, 55% of them located outside of London. Ofcom’s final review is not expected to recommend changing the status quo.
Enders argues the 2014 results show “It is not a problem-causing channel”, and it fits into the established ecology of British broadcasting. Channel 4, and the rest of the industry, will be waiting to see whether the new government wants to protect or disrupt that ecological balance.
