Growing pains of channel 4

Channel 4 is 25 years old next month, but the milestone falls in what has been a difficult year for the broadcaster. It has been rocked by the Celebrity Big Brother racism row and fake phone-ins on Richard & Judy, and courted controversy with programmes such as The Great Global Warming Swindle and Diana: The Witnesses in the Tunnel.

Channel 4, which will mark its birthday with initiatives such as airing “retro” advertising (MW last week), has also suffered a slump in viewers on its terrestrial channel and saw 2006 profits plummet by 70% to £14.5m.

As commercial rival ITV continues to enjoy a honeymoon period under new chief Michael Grade (himself a former Channel 4 chief executive), some are questioning whether Channel 4 is past its prime. Chief executive Andy Duncan says not, arguing that the broadcaster’s remit remains as relevant as it was a quarter of a century ago.

The station was established to provide a fourth television service to the UK that would break the duopoly of the BBC’s two stations and commercial broadcasting network ITV. It enjoys – or endures – a unique position in the UK broadcasting landscape: though entirely commercially self-funded, it is ultimately publicly-owned.

Channel 4 committed itself to providing an alternative to the existing channels when it launched – an agenda in part set by its remit which required the provision of programming for minority groups.

Procter & Gamble associate director of UK media Bernard Balderston says: “In the early years, clearly advertisers benefited from additional targeting, when there were so few channels around. It has performed an important service because of the way its public service remit has focused on targeted audiences.”

During the station’s formative years, funding came from ITV companies in return for the right to sell ads in their region on the fourth channel. But in 1993, following the abolition of the Independent Broadcasting Authority (IBA), Channel 4 became a corporation and established its own sales house, giving brand owners much-needed negotiation power.

It is now deflecting criticism of its unashamedly commercial leanings as a means to its public service end, according to Duncan. But that was not the case in 1982 when, despite a high-profile launch, the station was struggling to find its feet. Having set an eventual target of a 10% audience share, Channel 4’s figure for the first week was 6.6%. 

That had slumped to just 2.8% by Christmas, the lowest in the channel’s history, leading the Daily Mail to proclaim that “judging by the first month’s ratings, there have been more people in the Queen’s bedroom”.

Launch chief executive Jeremy Isaacs (now Sir Jeremy Isaacs) said at the time: “Channel 4 has set out to give you an alternative to whatever ITV is showing at any time of the evening.”

Viewers did not initially fancy the alternative, but, despite low ratings, advertisers and their agencies were beginning to see the channel’s potential for delivering young, upmarket viewers – an audience it still professes to have 25 years later. Audiences grew and, in 1986, ad revenue exceeded costs for the first time, providing a £20m profit and heralding the end of Isaacs’ launch era.

Isaacs’ “nemesis”, Michael Grade, took over as chief executive in January 1988, prompting Isaacs to warn Grade that he would physically harm him if he messed with his inheritance. Under Grade’s leadership, lasting almost a decade, came headline-grabbing TV events, such as the UK’s first primetime lesbian kiss on Brookside. Such output led the Daily Mail to label Grade “pornographer in chief”, while his departure led The Sun, which said he took “TV into the sewers”, to comment: “Decent people will not mourn his passing.” Later, he joined the BBC and now presides over ITV as executive chairman.

Anecdotally, several media heavyweights have suggested that Channel 4 “lost its way” following Grade’s arrival in January 1988. Others point to 1993 as a turning point. Being able to raise its own revenue through advertising gave the corporation a freedom not previously enjoyed. It also meant the importance of ratings – leading to an increasingly populist stance – grew.

Programming such as the Red Triangle series and The Tube dominated early schedules, but, tasked with making its own money, Channel 4 moved towards the edges of the mainstream. In came populist, and increasingly popular series, such as US imports Friends and ER.

It also began broadcasting various reality formats – most obviously Big Brother – and focused on heavily formatted “lifestyle” programming, particularly in the early evening. Some have suggested that this lack of innovation, a tired format in Big Brother and the successful, but derided Deal Or No Deal is at the forefront of Channel 4’s woes. Duncan almost agrees: “This year we are down a bit [on ratings], but specifically what’s behind that is daytime.”

He points to Deal Or No Deal, which, with about 2 million viewers, still performs “strongly” but has half the audience it did in 2006; and Big Brother, down almost 20%.

If you discount those two as one-off adjustments, he says, Channel 4 has held up in the peak “slightly better” than its competitors. “Our traditional strengths of upmarket, young audiences and light viewers is still very strong,” adds Duncan.

Yet the broadcaster must tread carefully. After a sparkling 2005, main channel ad revenues fell by about 7% in 2006 and, coming into 2007, the broadcaster pushed prices by 5% to offset a trading deficit.

One media executive says Channel 4 has “enough credit in the bank” to overcome a poor 2007 performance, but warns it faces another tough trading season ahead. The source says: “There is a slight lull in terms of some of its credibility. It is enough of a drop to be a concern and an issue the trading team could do without. They will struggle to put the case forward for a greater share of budgets, at a time when ITV seems to be getting its act together.”

Duncan slams suggestions that Channel 4 programming is not innovative (“it seems fashionable to say so, but our audiences disagree,” he says) and points to its burgeoning, and increasingly successful, ventures outside the main channel.

The digital channel portfolio – comprising stations including the youth-oriented entertainment offering E4, Film4 and More4 – will make a profit for the first time in 2007.

Meanwhile, Channel 4 was the first UK broadcaster to offer a meaningful on-demand internet offering, allowing viewers to download content or watch simulcast shows at the same time as on TV. Later this year, Channel 4 will launch a high-definition version of its flagship station on the BSkyB satellite platform and it also led the consortium which, this summer, won the second UK digital radio multiplex and will launch Four-branded stations from next year.

The New Year also sees the publication of a remit review, announced by the broadcaster following a challenge from media regulator Ofcom to clarify how it intends to fulfil its public service broadcasting remit before it allows additional financial support ahead of digital switchover.

Channel 4’s 25th year has not been its easiest, but it seems there is opportunity ahead.

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