How the not-for-profit broadcaster was “a market intervention that succeeded in creating an industry” – and continues to push the boundaries
“Five years ago, iPads were still very new, most people did not have a smartphone and you could not watch internet TV in your living room,” says Channel 4 chief executive David Abraham. “Now it’s a battle as to who can operate in that new environment in the most effective way.”
With a public service remit that has seen it become the edgier alternative to the BBC, the not-for-profit broadcaster is no stranger to innovation or risk taking.
Abraham describes the channel, as it was envisaged before its launch 30 years ago, as the “television industry’s R&D arm which has some scale and reach to it”.
“Effectively everything you see on Channel 4 is made by an independent company,” he continues. “We work with more companies up and down the UK than any other broadcaster and we work with more smaller and younger companies than any other broadcaster.”
Although he admits it might be more efficient to do more in-house, work with fewer companies and take fewer risks, he’s proud of the way the channel acts as a stimulant to the country’s creative economy. The broadcaster employs under 850 people but, by spending more than £600m a year on content, it supports around 19,000 jobs, he says. Approximately half the content it broadcasts is made outside the M25.
“30 years ago, there was no independent sector in the UK. If you were a programme maker, you almost certainly were an employee of either BBC or ITV. We were a market intervention that succeeded in creating an industry.”
Today, Abraham still regards Channel 4 as a niche player with national scale – and one which has successfully redefined itself from the “Big Brother era”, with its Paralympic coverage and Stand Up To Cancer, and shows such as Gogglebox, Humans and Hunted. “These are shows which speak about society as it is now and the issues that we care about,” he says.
I always take the view that we're not going to have much money... so let's just be agile and focussed on the resources that we have
But while the channel’s content strategy has evolved, the digital age has led to even greater change in terms of competition and distribution. And although Abraham says he is not intimidated by the channel’s rival – whether that’s the BBC, Sky or Netflix – it’s what drives Channel 4’s innovation.
“I always take the view that we’re not going to have as much money as the BBC to produce something like the iPlayer, so let’s just be agile and be focussed within the resources that we have,” he says. “You have to have a start-up mentality.”
He points to the channel’s All4 online, on-demand service – a £100m business that continues to grow – which hosts all its content, both present and past, and has already won several awards. But its real power lies in the data it collects from viewers as, among its core target audience of young people, half of all 16-34 year olds in the UK have registered to use it.
Knowing who is watching what, among the hundreds of millions of hours of viewing – and knowing something about them – gives Channel 4 the opportunity to personalise the viewer’s experience. This includes content recommendations, but also more targeted advertising, which the channel can charge a premium for.
And with digital revenues growing 30 per cent year on year in 2015, that helps to protect it from the vagaries of the ad market – particularly at a time when Abraham has noticed “a bit more uncertainty in the marketplace” after the vote to leave the EU.
The next wave
Supporting a broad base of independents also gives Channel 4 the opportunity to predict, and prepare for, further disruption in the industry.
18 months ago it launched its £20m Indie Growth Fund for the “smaller guys” who are finding it difficult to raise capital, against a backdrop of consolidation in the sector.
“Banks are not necessarily that conversant with the dynamics of creative businesses, so we thought there was a market gap for funding and investment. Channel 4 doesn’t have any debt and quite large cash reserves. In a low interest rate environment, we took the view that it was not a bad idea to convert some of that cash into equity.”
So far the fund has seen 11 deals in a variety of production companies and creative business. The most recent has seen Channel 4 co-invest with Sky in TRX, a global online platform “seeking to disrupt how TV rights are traded”.
It marks a move away from the current process that is far more manual and face-to-face, and enables distributors to reach buyers in new international markets. For Abraham, it represents an important innovation that can continue to support the UK’s creative industries’ success overseas in a post-Brexit Britain.
Abraham is keen to fly the flag for the UK’s creative industries – he also sits on the board of industry skills body Creative Skillset to promote and maintain world-class standards. And Gogglebox, now one of its top performing shows, features as a case study in the CBI’s recent report, All the World’s a Stage, which focuses on how to better support exports from the sector.
But the chief executive also gave the MacTaggart Lecture at the Edinburgh TV Festival last year in which he was adamant that international appeal shouldn’t come at the expense of the quality and independence of UK-owned assets.
“It’s still remarkable to me that after 25 years of Sky and audience fragmentation, 70 per cent of the UK viewing is still to UK content. Ultimately, we enjoy watching television about our lives and the world that we live in, even though we also enjoy Game of Thrones or Homeland.”
His mantra for government as it looks at how creative industries will be treated as part of exit negotiations is “do no harm”.
There's no strong case to meddle with the Channel 4 model. It's working, it's robust and it's delivering
“It’s not difficult to trace back the roots of all of our global stars to early work that they did on a public service channel,” he says, adding that it’s good that the BBC’s charter has been extended, as the licence fee model encourages high quality in UK content across the board.
But Channel 4 is still looking for clarity over its own future, as last year the then Secretary of State John Whittingdale suggested he wanted to privatise the channel.
“The impression that we had is that Number 10 and 11 were less convinced of the logic of this because they understood what we were doing from a creative economy point of view,” Abraham explains, ahead of meetings with the new Secretary of State, Karen Bradley, in the coming weeks. “We’re very hopeful that she agrees with what the House of Lords recently said, which was that there’s no strong case to meddle with the Channel 4 model. It’s working, it’s robust and it’s delivering.”
The fact that Channel 4 was named Channel of the Year at the Edinburgh TV Festival at the end of August, has films at both the Toronto and London Film Festivals this year and is hoping to have similar success with its coverage of the Paralympics in Rio as it did four years ago, is testament to that, he says.
“Unlike aerospace or pharmaceuticals, the creative industries don’t speak as one unitary group. We’re a set of industries, which nevertheless add up to having a big effect, certainly on employment and on export.
“But what creates the value is the public service system, that’s the BBC and Channel 4. We are able to take greater risk because we’re not driving an X per cent profit margin. We create opportunities for young writers and actors and filmmakers and presenters to learn their craft and become nationally and globally successful.”
He adds: “The need for Channel 4 is as strong as it’s ever been."
Want to here more from David Abraham on how disruption can help your business grow? He's one of the speakers at this year’s CBI Annual Conference: Innovation, Growth and Prosperity in a World of Disruption