David Abraham speech to the Oxford Media Convention

25 January 2012

Last summer I was invited to a dinner here in Oxford with Anthony Smith, who was a key architect of Channel 4.  He told me the story of how Channel 4 came about; how Channel 4 was to be the R&D lab of creative Britain; and how a strong indie sector meant a strong Channel 4. 30 years later the same is true, even if the context has changed.

For decades, Channel 4 has been one of the ventricles at the heart of the UK creative industries - helping hundreds of companies to grow and supporting several generations of creative entrepreneurs.

Today, I'd like to talk about our plans to continue to create distinctive cultural, social and economic value for Britain, in this era of converging global media. 

The central leadership question for creative organisations today is how best to meet an on-going need for creative innovation - whilst at the same time navigating through the greatest level of technological and behavioural change any of us have witnessed.  As an organisation driven by innovation and progress, we are embracing social and technical convergence as an opportunity. Our approach is to innovate our business model so that it works in harmony - rather than in conflict - with our core creative ambitions. 

Last May I set out the broad direction of my vision at a speech to the RTS.  Today I want provide an update on the progress we have made so far and our exciting plans for 2012. There are 3 key inter-related aspects to this:

1.            Returning Channel 4 to its creative roots

We are re-focusing our creative output on innovation, diversity and seeing the modern world in new ways. We call it Mission with Mischief. We are also recommitting ourselves, as Jeremy Isaacs once said, to make a thousand flowers bloom in the creative community by investing in independent companies throughout the length and breadth of Britain.

2.            Pioneering progress in digital

We are continuing our pathfinder approach to digital: leading a surge into multi-screen programming and maximising the distribution of our content across still proliferating digital platforms.

3.            Evolving our business model

We are re-tooling our self-funded commercial model by investing in more direct connections with our audiences and engaging viewers ever more deeply. We will pioneer the use of data to innovate our advertising model - in turn contributing to future investment in content. 

 

Progress to date

During 2011 Jay Hunt has been establishing the foundations for the creative reinvigoration of Channel 4 and our digital channels. In our first year without Big Brother we've seen experimentation and diversity across the slate. Some programmes have become extraordinary agents for change - Hugh's Fish Fight, Sri Lanka's Killing Fields, My Transsexual Summer and The Great British Property Scandal, for example. Meanwhile comedy, drama and documentaries have brought unique perspectives on our world to wide audiences - with Top Boy, The Promise, Black Mirror, Educating Essex, 24 Hours in A&E, Street Summer and My Big Fat Gypsy Wedding. And a refreshed Channel 4 News has broken stories home and abroad, from phone hacking to Syria's torture machine, with fresh faces and fresh approaches.

We were also delighted to have fully funded the most successful comedy movie in British Box office history and the number one selling DVD this Christmas - The Inbetweeners Movie - and to have been involved in creative successes such as Submarine, The Iron Lady, Dreams of a  Life, Shame and Tyrannosaur - the fruits of Channel 4's increased commitment to British film.

A year ago I announced a major new effort to diversify our supply base and, in 2011, our teams engaged with nearly 400 emerging film, TV and online content companies - more than twice as many as in 2010.  82 projects were put into paid development via our new Alpha Fund - most from companies Channel 4 has never worked with before. The Alpha Fund has also had a big regional impact - with 60% of projects coming from the devolved nations.

All this has been achieved whilst maintaining our impact. 2011 was a big year for digital switchover and our first year in a decade without Big Brother.  It was also a year in which our portfolio share actually went up - from 11.4% to 11.6%, close to its highest ever. 4oD was up too, with 430m VOD views, and we remain the leading commercial VOD platform in the UK.  The main channel did decline marginally - but there are important signs in that modest decline. Firstly, the audience loss was the smallest for 5 years.  In my view, that's a bottoming out. And, what's more, it's been achieved with a more diverse and original and public service schedule than before. Commentators sometimes say that Channel 4 needs to replace Big Brother with a franchise of similar industrial scale. I'm not so sure. Our remit is to experiment, not commoditise. That's the point of Channel 4 and it's a purpose that has become more distinctive as the market has become more homogenous.

In digital content we pioneered the two-screen experience with The Bank Job, Million Pound Drop and Misfits. Our ‘awkward squad' programmes are driving social engagement too: both Hugh's Fish Fight and the Great British Property Scandal have garnered over 100,000 petition signatories, and the former led to a review of EU fishing policy.  We have also been spreading our digital wings, launching 4OD on PS3, iPad, iPhone, Android and most recently Xbox - as well as continuing to support the development of Youview.

Let's look now at a TAPE that showcases some of the interesting things we have done in this space in recent months.

All this co-ordinated activity is designed to capture value in new ways. We have recruited a team of data experts from other sectors and are investing in new IT infrastructure. Today I am proud to announce that since we began this plan in mid-2010 we have already recruited 2m viewers to our new relationship management platform. That's not just 2m random email addresses - its 2m new, demographically profiled C4 fans. The explosion in social media and twin screens is helping to increase the discoverability and the magnetism of content and at Channel 4 we are embracing its potential fully.

On the commercial front, we broke the £1bn sales-house revenue target we set ourselves for 2011. In November, we also topped the £100m ad revenue mark for a single month, for the first time ever. Our UKTV deal is going well and we've recently added PBS to our commercial portfolio. And, most importantly, for 2012, our talented new Director of Sales Jonathan Allen has concluded successful deals with all the major agencies.  

Those creative and commercial successes mean that things are shaping up well for 2012.

 

Investing in the UK's creative economy

When I joined Channel 4 in 2010 we spent just over £360m on commissioning content through UK indies. It has always been my ambition to increase that.

From the start I agreed with the Channel 4 Board that the right course of action was to get the new Executive team in place and to steady the ship post Big Brother. These important steps have now been taken.

So today I am delighted to announce that in 2012 we are increasing our UK commissions budget to nearly £450m.

The highest it has ever been in Channel 4's history. 

This means that, since I joined Channel 4, we will have increased the annual level of investment in the British creative economy by over £80m - and across a wide spread of companies, both large and small, and throughout the UK.  It means jobs for British companies, especially the critical SMEs. And it means the creation of IP, which indies can use to generate additional export revenue, further boosting the UK economy.

A couple of months ago Lord Burns, our Chairman, gave a talk to the senior management entitled: "Recessions: I've known a few...". He reminded us of the growing evidence of companies that succeed by being bold when times are tough - businesses that, rather than cutting back, do the opposite: they invest. They invest in gaining market share from their competitors and seeing the full reward when the economy bounces back - as economies have tended to do.

How are we able to afford this bold step? At a time when companies throughout the economy may be reducing investment in their products and services?

First of all, it is not from slashing jobs. Channel 4 is already a lean and efficient operation. As Lehman Brothers collapsed, we reduced the headcount of the organisation by 25%. Since then, we have further reduced senior management by 25%. But we have also increased the number of services we offer to viewers.

Channel 4 is the most productive it has been for many years, possibly ever.

In part, we're taking this step by pro-actively shifting some of our existing content spend from acquired, mainly US, programming into UK commissioned programming. That is a welcome development.

But also by spending some of the "transitional reserves" we reported last year.  Built up so prudently over the last few years, we will now be investing a proportion of them in UK content.

We've always said that C4 needs a certain level of reserves - half for working capital - in large part to ensure that we pay our indies in the timeliest manner possible - and half to buffer us - and our suppliers - against the ad sales cycle and strikes of economic lightning. These new investments in content still leave us a cushion above that level.

And we, Channel 4, can do all this - at a time when the creative economy needs it most - because of our unique status. None of our funding comes from the taxpayer, so we can cut our own cloth, and we don't have commercial shareholders, so we can take the long view.

One practical accounting upshot is that Channel 4 will actually be planning for a reported deficit in the twelve months of 2012. Out of context, I can imagine the possible headlines. However, this is a temporary deficit, funded from transitional reserves and invested in the future.  By using surpluses built up over the last few years, we are able to smooth our investment into 2012 and beyond. We want to grow Channel 4 and we want to grow the UK creative economy. To do that we need to invest and, as every entrepreneur knows, ‘you need to put down in order to pick up'.

 

2012 creative plans

We believe that our investment strategy will have a huge impact on screen.  So, what's in store creatively for 2012?

The spirit of Mission with Mischief will run right through our schedules this year.  We will be even bolder than before: taking on subjects that no-one else would; inspiring change; delighting and, inevitably, sometimes infuriating, with new voices and perspectives; and empowering people by helping them navigate the complicated and volatile world around us.

The political thriller, Coup - which I'm very pleased to announce will star Gabriel Byrne - will explore the relationship between a democratically elected Government, big business and the banks. Guy Hibbert's drama Complicit, meanwhile, will look at the ethics of torture.

Other new programmes will explore issues such as unemployment and the impact of technology on society.  Make Bradford British will be a bold exploration of multiculturalism and The Undateables an unusual perspective on the emotional life of those with disabilities. And while Niall Fergusson presents a major series on China, there'll be lighter notes too - with new comedy from Noel Fielding, Angelos Epithemiou and the Midnight Beasts.  We will continue to surprise people with insights into our public services, whether the education system, the health service or the police force.

Two weeks ago we announced the first four production companies to be awarded contracts for Channel 4's flagship current affairs strand Dispatches: Blakeway Productions, October Films, Nine Lives Media and ITN Productions. The contracts are to provide paid work and mentoring as part of the Channel 4 Investigative Journalism Training Scheme and output deals to deliver a minimum of eight programmes. We have also renewed and increased our commitment to the Britdoc documentary foundation by 25% and are moving the True Stories documentary strand back onto Channel 4.

2012 will also see what promises to be the biggest single event in Channel 4's history - the London 2012 Paralympic Games - including over 150 hours of live coverage and a raft of programmes in the build-up. As a major sporting event, we aim to take the Paralympics to a new level. We will also be changing attitudes to disability, as well as nurturing much-needed disabled presenting talent.

 

Conclusion

This strategy builds on what Channel 4 has always been about - supporting our investment in UK content and delivering our remit. It will also enable us to grow ratings and viewer engagement, and pump the revenue benefits back into content -and back into the UK creative industries.

It is the right strategy, at the right time, for the right company, in the right sector of the economy.

So, while the outlook for 2012 may be uncertain, I enter this year with a sense of confidence, excitement and optimism that Channel 4 is in the midst of one of the most inspiring and creatively stimulating periods in its history.

Ends