Pressure mounts on Duncan at Channel 4

Andy Duncans four-year tenure as chief executive of Channel 4 has seen the station soar to lofty heights of success but also occasionally scrape the barrel.

f1_120Andy Duncan’s four-year tenure as chief executive of Channel 4 has seen the station soar to lofty heights of success but also occasionally scrape the barrel.

While Duncan claims credit for the high points – such as the channel’s much-lauded digital strategy and its increased share of TV viewing – there are those who believe the former Unilever marketer should also shoulder blame for some of the lows.

Last week’s collapse of C4’s plans to launch three digital radio stations is seen as a blemish on Duncan’s reputation.

The decision to axe 4 Digital Group leaves 15 people out of a job and is a harsh blow to the prospects for digital radio in the UK. It is also a humiliation for Ofcom chief Ed Richards who awarded C4’s consortium the licence last year and gushed about how radio listeners would benefit from the move.

Critics blame Duncan for creating the failed radio strategy and backing it in the face of opposition from other C4 executives. It had been apparent for some time that it was a costly non-runner, say the detractors, but Duncan’s hubris and his blind faith in C4’s golden touch merely put off the day when he would have to admit defeat.

However, Duncan denies that pulling the plug on radio reflects a misconceived strategy. He lays the blame on the economic downturn which has devastated advertising revenues and triggered a round of fierce cost-cutting across commercial TV channels, leading to significant down-sizing at C4. Pulling the plug on digital radio is expected to save the channel some £10m next year.

“There is only one reason we pulled out – we’ve got to make short-term cuts in investment and it is not the right time in the business cycle for new launches,” Duncan tells Marketing Week. But he strongly defends the strategy: “It was a very frustrating decision to take, but DAB radio will remain strong in the long term. For us it was a good opportunity on two levels. Firstly, to make money to re-invest in the core channel and then the opportunity it offered to develop our public value. We stand by the basic strategy.”

One highly placed media source is critical: “C4 is a highly resilient brand but they’ve made some bad mistakes and the radio episode is one of them. It was a waste of resources and they didn’t handle the publicity very well. It looked like a questionable investment in the first place.”

Even in the face of such criticism, there is little doubt that C4 has excelled in the good times under Duncan’s leadership. Its portion of total TV advertising revenue grew from 20.4% in 2003 to a high of 24.1% last year, while its share of all TV viewing increased from 10.4% to just under 12%. History will judge him as a marketer who has successfully made the transition to senior management.

But a familiar criticism of marketers is that they thrive in the good times and struggle in an economic downturn. Their skill lies in spending money and getting good returns on investment. But are they any good at saving cash and operating in a skid-row environment? We shall soon find out at C4.

The general advertising downturn is set to lop £50m off C4’s £600m-odd revenues this year, and wreak even greater havoc in 2009. Duncan will cut £25m from the programme budget and take out another £25m from marketing, new business investment, new media and general overheads.

Some 15% of the 1,000 strong workforce face redundancy and the job cuts are already starting to bite. Last week, director of marketing Polly Cochrane accepted voluntary redundancy and announced she was leaving the station after ten years. A couple of days later another senior executive, 4Creative managing director Richard Burdett – former chief at CIA UK – also announced his departure in a restructure of the in-house creative team. With a depleted marketing department and cuts planned in the programme publicity budget, some worry that C4’s powerful brand equity could be watered down during the downturn.

As Jim McDonald, head of broadcast at MPG, says of the marketing budget cut: “It is not ideal. Every strong brand needs to be marketed and advertised. There is a long history of seeing top quality C4 posters in outdoor such as Gordon leering at you with a kitchen knife. If that were to be lessened it is going to have an implication.”

C4’s £15m advertising budget is expected to be cut, though Duncan says the fact that there are no big new programme launches next year will lessen the impact. The emphasis over the coming year will be with on-air trailers on C4 and ads on other TV channels, he says. “Our powerhouse in marketing remains intact. We have made improvements and efficiencies to media on air. The budget may come down, but only because we haven’t got any major launches next year,” he adds.

He insists that the C4 brand will not suffer from declining support. “The brand remains very strong. From the audience tracking work we’ve done, the brand family has done very well. We are in good shape to weather what’s going to be a difficult downturn. I expect good brands to come through in good shape.”

Duncan also has high hopes that the Government will shore up the channel’s funding gap of £150m which will emerge by 2012, recognising C4’s vital public service role. He believes that C4’s lobbying for further government aid is one of the high points of his time at the channel. “We’ve won the campaign to convince people C4 needs to retain its public purpose,” he says. So when culture secretary Andy Burnham announces early in the New Year his conclusions on a funding formula for C4, Duncan is optimistic that the channel will be gifted a way to fill the £150m gap.

The pressure on Duncan could not be greater to show the Government that C4 is a well-run business. As Chris Locke, UK trading director at Starcom, says: “This is an opportunity to show the Government they are wise with cash, not awash with it and are not spending it like the BBC – Duncan’s saying: ‘We are not that, we are this. We need more money to be like this.’”

The newly appointed communications minister Stephen Carter is considering two possible funding alternatives for the station. One option is privatisation and the other is giving C4 part of the BBC’s licence fee.

If Burnham comes up with the cash, it will be a crowning achievement in Duncan’s time at C4. Reflecting on his time in office, he says “We’ve had more high points than low points.” On the plus side, he rates strong programming and winning more Royal Television Society and Bafta awards than any other channel. The digital portfolio has outperformed rivals, he claims. E4, More4 and Film Four have 4% of TV audiences, the same as BBC and ITV’s digital channels, despite the fact these broadcasters are three times and twice as big as C4 respectively. Locke adds that the jobs cull could be an opportunity for C4 to staff up at a later date with expertise in new media areas.

Burnham admits that “the row around Big Brother was a low point”, when Duncan was hauled over the coals for failing to adequately address the racism issue. But for critics, the digital radio pull-out will be a black mark against his name. And for advertisers, downsizing the programme promotion budget could turn out to be a nadir if it hits public perceptions of the brand and means C4 fails to attract new viewers.

Duncan has helped C4 perform strongly. Whether it maintains that performance as the economy turns sour and cost cutting kicks in will be a test of his ability to plough a furrow through stony ground as well as more fertile terrain.

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