Letter: TV funding formula
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Sir: In his article, "The future for ITV" (4 June), Mathew Horsman appears to have misunderstood the facts underlying the current debate on the funding formula subsidies paid by Channel 4 to the ITV companies.
Channel 4's revenue is not a pot of money for competitors to use as they think fit. We are talking about the advertising revenue that we, in competition with ITV and satellite, earn in the market place. Under the existing funding formula arrangement the Channel is effectively required to pay half of everything we earn over 14 per cent of terrestrial net advertising revenue to ITV. Consequently last year we paid pounds 74m (the equivalent of one quarter of our annual programme budget) to ITV's shareholders. This year it will be nearer pounds 90m.
Mr Horsman advocates "leaving the levy in place until 1998" as if that were some novelty: it is in fact precisely what is going to happen. The Channel has agreed to continue the payments to ITV until the end of 1997, by which time the ITV companies will have received pounds 300m from us, three times the amount they expected when they bid for their licences.
There is no reason whatsoever for Channel 4 to continue to subsidise ITV. Indeed, in the debate in the House of Lords on 16 January, the Heritage minister Lord Inglewood confirmed that the formula was not intended as a subsidy. Government has also made a clear statement of policy - which it reiterated in the Commons Standing Committee yesterday - that it wishes the formula to be subject to a two-stage phased reduction leading, in principle, to zero for calendar year 1999. This is a sensible compromise and we await the final confirmation of the details of the phasing-out of this unnecessary and damaging drain on Channel 4's programme budgets.
MICHAEL GRADE
Chief Executive
Channel Four Television Corporation
London SW1
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