U.K. cuts Channel 4’s tie$ to ITV

LONDON — The British government has given a huge financial boost to Channel 4 by ending the minority web’s obligation to pay more than $100 million a year to the rival ITV network.

Instead, C4 will be allowed to retain the money for investment in original TV production, British movies and its new digital services.

Channel 4 is the alternative station that has helped develop or fund such films as “The Madness of King George,” “Four Weddings and a Funeral” and “The Crying Game,” and shows a number of quality U.S. network sitcoms in high-visibility timeslots.

Culture secretary Chris Smith announced that the annual levy C4 pays to ITV will be reduced in 1998 and abolished completely from 1999 on.

This marks the culmination of a long campaign by C4’s recently departed chief exec Michael Grade. Since the levy was introduced in 1993, C4 has handed over a total of £257 million ($427 million) to the much- richer ITV companies, and will pay another $141 million next year.

Spend on local production

C4 bosses promised that if allowed to retain this money, they would spend it on more local production, reducing the web’s dependence on reruns and U.S. imports. The web has already increased its film production budget significantly in the past two years as evidence of its intent.

The new C4 chief exec, Michael Jackson, said, “I am thrilled that Chris Smith has finally signed the death warrant for the funding formula. Instead of enriching ITV’s shareholders, this money will enrich British viewers and help support the independent production sector throughout the United Kingdom.”

Smith said C4’s extra income must be used to strengthen its “distinctive public service identity.” Although entirely funded by ads, C4 is effectively a pubcaster with no shareholders and a unique mandate to cater to auds not served by other national nets.

Smith also announced that this remit will be revised into a more positive description of what the channel should be, rather than what it should not be.

Historical hangover

The annual ITV levy is a historical hangover from C4’s infancy, when the web’s advertising time was sold on its behalf by the regional ITV stations. In 1993, C4 started selling its own airtime in competition with ITV, but there were fears that its minority mandate would prevent it from earning enough revenue to survive.

So the ITV companies were required to guarantee C4 a financial safety net if its sales fell below 14% of all Brit commercial TV revenues. In return, ITV was promised half of C4’s earnings above that 14% threshold.

In the event, C4’s quirky blend of innovative programming proved a soaring success, breaking through the 20% barrier and forcing the web to write bigger checks to the much higher-rating ITV web.

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