Written evidence submitted by Channel 4
Introduction: About Channel 4
- Channel 4 is a distinctive, free-to air, public service broadcaster. It is publicly owned, yet commercially funded. Channel 4 has a unique public service statutory remit which enables it to take risks and deliver specific social, cultural and economic impacts – such as to innovate, develop talent, promote alternative views and stimulate debate. As a publisher-broadcaster, Channel 4 does not own the intellectual property (IP) in the TV content commissioned, and instead commissions from – and supports the growth of – independent production companies, including in Wales.
- Channel 4’s unique not-for-profit model means that we put public impact at the forefront of everything we do. We support national values and priorities, including levelling up. And we are a major investor in the UK independent production sector. Last year, we spent a record £222m on programming in the Nations and Regions – 55% of our original content budget. Channel 4 creates opportunities for creative talent on and off screen, including through our 4Skills programme which provides career development and training opportunities across the UK.
- In that context, we are pleased to respond to the Welsh Affairs Committee’s inquiry into Broadcasting in Wales. In this response, we set out examples of where Channel 4 has made a significant contribution to broadcasting and the independent production sector in Wales, and why a change to Channel 4’s model risks detrimentally impacting the wider broadcasting ecology.
Are the current models of funding for public service broadcasting in Wales sustainable to ensure the future of a successful and dynamic broadcasting industry in Wales?
- Welsh viewers benefit from the plurality of business models in the finely balanced PSB ecosystem, which Channel 4 contributes to uniquely. This ecosystem – with its range of models, remits and sources of funding – drives innovation and competition, and increases viewer choice. Channel 4 helps support and deliver a world-leading broadcasting and independent production sector, including in Wales, with economic and cultural benefits.
- Channel 4 is in the best creative and financial health in its 40-year history. As set out in our annual report, last year we exceeded £1 billion of revenue for the first time ever, with £1.2 billion revenue (+25% year-on-year) and a pre-tax surplus of £101 million. We also invested £671 million in content, of which £492 million was original content. We are delighted to have won ‘Channel of the Year’ at this year’s Edinburgh Festival, recognising our continued creative excellence. Our Future4 strategy sets out how we intend to build on this success, ensuring that we meet challenges in the market and continue to grow from strength to strength, particularly by becoming a digital-first PSB. We have made good progress in our digital transformation, digital advertising revenue grew 40 per cent year on year in 2021, and now accounts for nearly one-fifth of total corporation revenues, and our share of the digital advertising market hit 35 per cent.
- Over the last 10 years, Channel 4 has invested around £1.8 billion in content made outside of London and spent over £90m on Welsh production. In 2019, Channel 4 contributed approximately £20m to GVA in Wales and supported 200 jobs. Channel 4’s 4 All the UK strategy is building ever closer relationships with independent producers in Wales. In 2021, Welsh investment rose by c.75% to £10.7 million and is forecast to grow again in 2022 to a record £17m - over four times what it was 8 years ago. Importantly, this growth is not limited to Cardiff. Channel 4’s work with companies like Chwarel in Criccieth, who we have supported through our Emerging Indie Fund, is helping to produce green shoots in the North Wales production sector. Channel 4 is keen to see this growth continue.
What impact will the privatisation of Channel 4 have on the broadcasting sector in Wales?
- A change in Channel 4’s ownership model could have a profound impact on the broadcasting sector in Wales and may result in less investment in programmes that matter to and represent Welsh people. Channel 4’s remit is unique. We support SMEs across the UK, level-up the creative economy by taking risks on programme ideas and talent (on and off screen) when other broadcasters might not, invest in British films, cater for underserved audiences, and nurture a diverse range of talented professionals across many different disciplines. This is at no cost to the British taxpayer, and our current ownership structure is a core part of our ability to prioritise and deliver these goals.
- As highlighted in our response to the UK Government’s consultation on Channel 4, privatisation risks fundamentally altering the organisation and our impact. The UK Government plans to remove Channel 4’s publisher-broadcaster status (instead requiring Channel 4 to meet a 25% qualifying indie quota in line with the BBC and ITV’s requirements) which could mean investment is taken out of the external production sector and instead invested in in-house production. A new private owner of Channel 4 without a not-for-profit model is also likely to review content investment costs which could result in significant cuts. Many areas of existing investment, such as our commitment to spending over half our content budget in the Nations and Regions, would not be protected. Nor would our investment in film or regional skills.
Focus on Nations & Regions – 4 All the UK Strategy
- In 2018 we announced our 4 All the UK strategy, the biggest structural change in the organisation’s history, aimed at supercharging our impact and presence across the UK. As an institution that prioritises public purpose, we were able to change our geography, investing millions of pounds in a transformative strategy to more fully represent and serve the whole of the UK. We now have over 400 roles in our offices across Leeds, Manchester, Glasgow, and Bristol including many senior decision makers such as Head of Drama, Head of Sport and Head of Features and Daytime.
- The Bristol Hub works closely with Welsh production companies, and we also hold annual ‘Hub Days’ to bring together Welsh production companies with Channel 4 commissioners and other relevant teams from across the business. Channel 4 News also has a Cardiff bureau with a multi-award-winning team, who tell national stories from across Wales and work closely with Welsh indies. We have also built close relationships with Creative Wales and the Cardiff City Region and are a partner in media.cymru.
- As a publisher-broadcaster, we commission our programmes from independent production companies, investing our revenues into our supply chain. This means we invest in small and medium businesses with British entrepreneurs and new talent across the UK including Wales, supporting growth not just in the television production sector, but in consumer digital businesses and advertisers too.
- The UK Government has made clear in the ‘Up Next’ White Paper that it will maintain Channel 4’s current formal Ofcom quotas for Nations and Regions, which are 35% of production out of London and 9% of production outside of England. However, Channel 4’s programme investment currently goes beyond the minimum regulatory requirements, with a voluntarily commitment to spending 50% of our commissioning budget outside London - exceeding Ofcom’s 35% licence quotas.
- An independent Ernst & Young (EY) analysis commissioned for Channel 4 estimates that jobs supported by Channel 4 in the Nations and Regions each year (both directly and in its supply chain) could reduce by 60% (2,300 fewer jobs supported each year) compared to a scenario where Channel 4 is not privatised. EY also estimates that if the publisher-broadcaster restriction was removed, Channel 4’s contribution to GVA generated in its supply chain could decrease by £2.1 billion (-29%). As such, there is a real risk that moving Channel 4 into private ownership will reverse the progress made towards rebalancing the creative sector across the UK, including Wales.
Impact on investment, jobs and distinctive UK content
- Despite the multiplicity of channels and streaming options available, viewers come to Channel 4 because we do things in a fundamentally different way to global streamers, US based multinationals, and our fellow UK PSBs.
- Privatising Channel 4 could result in reduced choice, diversity and quality of content for UK viewers. In comparison to global streamers, Channel 4’s model incentivises it to make distinctive British public service content, including content that speaks directly to a Welsh audience, reflecting their lives and experiences. Channel 4’s programming in Wales, includes collaborations with S4C such as The Light in the Hall, a new drama from Triongl and Duchess Street Productions.
- Chwarel has secured two new series of BAFTA winning The Great House Give Away, with 50 hours in Channel 4 daytime and 10 in peak. Avanti’s The Perfect Pitch has also been recommissioned for series 2. Find It, Fix It, Flog It and The Great Big Tiny Design Competition have been commissioned from Yeti. Britain’s Beautiful Rivers: Richard Hammond was produced by Cardiff Productions, and we are working with Boom Cymru and Outline Productions Wales among others.
- Channel 4’s remit requires it to represent unheard voices and opinions from across the UK, addressing issues that matter to them. We recently announced the commission of Welsh language opera Un Nos Ola Leuad (One Moonlit Night) from Welsh production company Avanti and True North’s six-part Epic Wales: Valleys, Mountains & Coast which takes viewers into the heart of Wales’ three national parks.
- Film4 has also played a crucial role for the Nations and Regions, including Wales. Dream Horse, from Welsh Director Euros Lyn, was filmed all over Wales including in Merthyr, Pontypool, Barry, Cardiff, Newport, Blaenavon and Powys. Yet in the Government’s White Paper, there is no requirement for a new Channel 4 owner to have any formal obligations in relation to film. With an annual budget of £25m, Film 4 is one of the biggest investors in UK independent film, contributing to the Nations & Regions, the UK’s economy and our reputation abroad through film exports.
Levelling up through the development of talent and skills
- 4Skills is a hallmark of Channel 4 which also plays an important role in levelling-up, delivering extensive training, skills and outreach work across the Nations and Regions. Our investment goes far beyond our remit requirements, helping to address skills shortages and creating opportunities for thousands of people across the UK. The Government’s White Paper has no formal requirements for a new Channel 4 owner to support training and skills.
- Channel 4’s flagship Production Training Scheme has a Nations and Regions focus, and this year will give over 30 people from across the UK with no experience in the industry the opportunity to get into TV production. In the past year, four trainees have undertaken placements with Bad Wolf, Yeti and Cwmni Da and two placements have just been recruited at Outline Productions and Cardiff Productions.
- The Factual Fast Track scheme is also supporting progression and addressing skills gaps in the Welsh sector. Following the success of its first year, Channel 4, BBC Wales, S4C and Creative Wales are supporting a second Welsh cohort of seven. The aim is to help promising producers by giving them the skills they need to take their careers to the next level. Channel 4 also supports RAD Wales, Culture Connect Wales and Screen Alliance Wales’s schools work.
- We are investing £5 million annually to reach 15,000 young people a year with training and development initiatives; a new digital academy including paid three-month training and work placements for young people from lower socioeconomic backgrounds; and a new pan-UK schools engagement programme.
Investing in economic growth and emerging producers
- Channel 4 plays a unique role in commissioning and developing smaller indies and entrepreneurial producers. We contribute to regional economic growth through our innovative investment in independent production companies during different stages of growth.
- Lack of access to finance and investment are obstacles to growth, so our Emerging Indie Fund, Indie Growth Fund and Indie Accelerator are designed to address this. In addition to funding, they provide bespoke support and mentoring from across the business.
- The Emerging Indie Fund has been designed to help small, new or emerging indies outside of London to get a first commission, by providing slate development funding, mentoring and advice. In its first two years, it has helped 23 indies across the UK to break through key stages of growth, providing discretionary awards to a further 13 companies. Companies in the fund include Chwarel in Criccieth, North Wales, and Postcard Productions, and Crash Productions in Cardiff with a further discretionary award to Cardiff based Hall of Mirrors.
- Our Indie Accelerator is working with ten companies across the country with ethnically diverse leadership, providing development funding and bespoke support, including to Welsh indie Cardiff Productions. We are about to announce a second cohort of six companies.
- Channel 4’s Indie Growth Fund – our Leeds-based investment arm –supports the independent creative sector by investing in UK-based SMEs. It helps these companies grow their businesses to the next stage via mentoring, advice and other support alongside financial investment. The Fund prioritises investment in the Nations and Regions, diverse-led and digital businesses across the UK. In 2020 the Growth Fund had its first Welsh investment in Yeti.
- Channel 4’s model and support for production companies in the Nations and Regions has encouraged companies to establish businesses outside London and has been pivotal to their subsequent success. Sioned Wyn, award-winning director and producer who created North Wales indie Chwarel said: “We would not be here, making programmes in this part of Wales, without Channel 4”.
- Channel 4’s publisher-broadcaster role, together with the culture and incentives of public ownership allow us to provide long-term strategic support for the sector, like no other broadcaster. Our rights model also allows independent producers in the Nations and Regions to retain IP and export content rights globally, providing those companies with additional income streams that allow them to invest in further growth.
- If the UK Government’s proposed privatisation of Channel 4 goes ahead without careful and comprehensive protection of Channel 4’s remit, this could have an adverse impact on public service broadcasting and the independent production sector across the UK, including in Wales. We welcome this Committee’s consideration of the issue and stand ready to provide further insights as required.
1 September 2022
 See the Ernst & Young analysis referred to in: https://assets-corporate.channel4.com/_flysystem/s3/2021-08/EY%20Report%20for%20Channel%204%20-%20Channel%204%27s%20contribution%20to%20the%20UK.pdf
 https://annualreport.channel4.com/assets/pdf/annual-report-2021.pdf pg 78