Analysis of Resource and Capabilities
Classification
Financial
Tangible
Physical
Technology
Intangible
Reputation
Human
Resources
No debt
Net cash flow £5m
Profit £1.8m
Total current assets £530.3m
Non-current tangible assets £104m,
TV programmes, films collection
Don’t own studios
Future Media and Technology:
4oD, channel4.com, e4.com
Research and Development £9.5m
Latest technology for filming, website maintenance,
streaming technology;
Implement new innovative technologies on a regular basis
often faster than competition (on-demand player, time-shift
“+1” channels, HD technology);
Incorporation of social networking websites
4iP Fund to support ideas for websites, digital businesses,
platforms, online games
More youthful – most viewers 18-25 year olds
Provide original public content
Risky and experimental
Creative and fun
Contribute to development and involvement of fresh talent
Develop educating thought-provoking programmes
Offer strong multi-cultural and international perspective
Appeal to a minority groups
Quality award-winning productions
Contribute heavily to maintaining pluralism in British TV
broadcasting
News programmes are considered to be fair, accurate and
give an alternative and well-rounded perspective
Run by CEO Andy Duncan (previously director of marketing
at BBC) - “digital champion”;
New chairman has just been appointed by Ofcom – Lord
Burns;
Headcount: 705 (reduced by 25% since 2008)
Invest in finding fresh untried talent;
4Talent development programme
Gave creative grounds to such artists as Danny Boyle, Peter
Kay, Russel Brand, Gordon Ramsay
Regular trainings provided and accredited by Investors in
People standards,
Employees are given voice and room for creativity
Functional classification of resources and capabilities
Function
Corporate
management
Technology,
R&D
Production
Features of resources
Funding from advertising
Resulting capability
Creative independence from the
government and license fee payers,
possibility for taking on more
experimental, risky projects
Significant cash reserves, no debt, 5 mln
net cashflow, claim to diversify and protect
cash holdings
Efficient financial management,
potential for more investment,
partnerships
CEO Andy Duncan is about to resign,
appointment of new chairman
Possibility of a new fresh strategic
change under new managment
The first broadcaster to launch an ondemand player (4oD), time-shifted slots for
their channels (+1), HD channelsi
Innovative thinking, development of
innovative new ideas faster than
competition.
Future Media and Technology strategy:
channels digital development, 4oD, HD
offering (potentially online as well),
programmes extended across platforms,
4iP fund
Investment in new comedies, dramas,
adaptations, risky projects
Constant search for tech solutions
providing superior quality; strong
technological focus, enhancement
of digital content availability
Gained reputation of a risky,
experimental channel
Focus on producing original public content
with the aim to educate, entertain viewers,
broaden their horizons
Established reputation of an
educating, thought-provoking
channel
Most of production is outsourced to
independent partners
Heavily support creative industry
and enjoy creative independence
Award-winning programmes
Reputation of a channel producing
high quality content
Import popular programmes from USA
Target younger viewers, support
their reputation of a fun channel
Update content regularly (cancellation of
Big Brother, transfer of Deal or no Deal to
other channels)
Marketing
Increase in total share of advertising
revenue since 2004
Award-winning productions (Film4
Slumdog Millionair)
Opportunity to launch new fresh
programmes, give opportunity to
new innitiatives
Efficient advertising policy
Reputation of a company making
quality films and programmes not
just for advertising revenue
Increased expenditure on content targeting Efficient target marketing and
Design
Sales and
distribution
teenage audience (Battlefield);
Channel4 News are better perceived by
younger viewers and minorities
market research; better appeal to
minority groups and young people
Increasing amount of content available on
4oD, across different platforms;
partnership with YouTube that will make
Channel 4 the first network allowing uk
viewers to access all their on-demand
content on YouTubeii
Responsiveness to market trends,
expanding sources of online
advertising revenue in the
conditions of falling returns from TV
advertising
Channel 4 news provide wide international
coverage, multicultural perspective,
possess higher trust rating than other
channels (56% of ch4 audience)
The website is designed to sustain big
numbers of users and big amounts of
content, yet be interactive and easy to use
Reputation of a channel offering
well-rounded, quality news, better
trusted by their audience
Design is consistent between all channels
and online platforms (purple colour
scheme)
Main distribution channels of the content
are online (on the website and soon on
YouTube), on TV, in cinemas and on DVDs.
Recognisable brand, consistency in
the company activities, a different
fun look
Wide range of distribution channels
matching up-to-date standards,
exploring new partnership
opportunities for online content
distribution
Negotiating the partnership with BBC
Worldwideiii
Business opportunities in DVD
distribution and advertising sales
Efficient design in terms of both
functionality and technological
architecture
Appraisal of resources and capabilities: C4 vs BBC
The analysis of resources and resulting capabilities shows that C4 corporation possesses a wide
range of competences. In order to see what competencies play the most important role in
establishing and sustaining its competitive advantage, the resources and capabilities need to be
assessed with regards to those of the major player in the market – the BBC. It has to be said though
that because of the nature of the work, a certain degree of subjectivity is involved when attempting
to analyse the relative strength of intangible resources and tacit knowledge possessed by the two
companies.
Corporate management
The fundamental difference defining how the two corporations operate lies in the way they are
funded and resulting stakeholder relationships. C4 gets its funding from commercial partners – 86%
of its revenue comes from advertising, - while BBC is funded by TV license fees. In order to ensure
efficient use of public money BBC’s activities are monitored by two agents – The Trust and DirectorGeneral, while C4 is run by a board of directors (chairman appointed by Ofcom) and the CEO elected
by the board. Thus, BBC has to answer to the public and the government about the quality and
morality of the content they produce. C4 while still having to agree with Ofcom standards, enjoys
more creative freedom and room for experimentation. Even though BBC had a much bigger surplus
than C4 in 2008, it makes sense simply because BBC is a much bigger corporation and is not
dependent on what’s happening in the TV advertising market (mention liquidity rations instead?).
The fact that in the recession C4 managed to produce so much original and award-winning content,
and still make some profit, shows that C4 can manage its resources very efficiently. In absolute
terms though BBC has much more financial resources than C4, but so they have responsibilities –
managing the digital switchover programme and producing non-profitable programmes like children
TV and orchestral performances.
Technology
In the age of digitalisation and multichannel TV, technological focus for TV broadcasters is more
important than ever before. Led by “digital champion” CEO Andy Duncan, C4 made a big progress in
technological sense. They were the first to launch an online on-demand player, time-shifted versions
of their channels, and HD channels. Notably, 4oD was launched a year before BBC’s iPlayer. They are
constantly investigating ways how online TV experience could be enhanced by launching sites like
Test Tube Telly1. The 4IP fund is another initiative that supports ideas that can develop online
interactive platforms, thus aid British television industry. BBC however, has a variety of technological
tools that match and sometimes outperform C4’s technical solutions. BBC Red Button, iPlayer, BBC
Online to name just a few are all hugely popular. Besides, BBC R&D labs are currently working
projects like Canvas2. Thus, even though C4 has a very innovative thinking, their technological
solutions were relevant and scarce which helped to establish competitive advantage in the
beginning, but not sustain it over time. This is due to the fact that technological resources in this
1
2
where Facebook users can see what their friends are watching at the moment on 4oD
Creating universal internet standard for online TV
case are transferable and replicable given enough financial resources are present. Both networks
have started appreciating the importance of future 3DTV technologies. BBC is looking for ways to
transfer their existing production technologies into the new field, while C4 is planning to run the “3D
week”. In this context it’s important for C4 not to miss out on involvement in R&D of edge
technologies.
Production
Firstly, C4 produces 87% of its content in cooperation with private sector, while BBC’s figure is only
around 35% on average. On the one hand, the capability that results from it for C4 is that they
contribute to development of creative sector and get access to innovative, experimental, new ideas.
At the same time vertical integration allows BBC to have more consistency and control over the
production process. Given the differences in funding, the two strategies are most suitable for the
two networks.
Secondly, C4 has a reputation of a fun, experimental, entertaining channel, while the BBC is better
known for being educating, traditional, professional. C4 established its reputation through various
activities – investing in comedy, taking risky projects, doing efficient market research and targeting
younger audience and minorities. The popularity of entertainment programmes has risen by 6.49%
since 2003 while all other genres have lost popularity points. In this context C4’s strategy of
producing fun content is strategically relevant. In 2008 almost every comedian on C4 was nominated
for awards. The Comedy Lab and Funny Cuts programmes give an opportunity to young comedians
to start their careers on TV and already proved to be successful in identifying great talent (Peter
Kay). C4 invests £10m every year in developing new fresh on-screen and off-screen talent as part of
their 4Talent initiative. BBC is also known for making quality comedies (Little Britain, Monty Python),
however, they don’t have a focus in this field, they make a bigger emphasis on objective and
professional journalism, catering for a wider audience. Thus, people consider C4 being experimental
ranking it 27 points above average in the industry, and 43 points – for taking risks others wouldn’t.
As a result of promoting creative initiative and experimentation C4 scooped more BAFTAs, RTS,
Oscars and International Emmys than other broadcasters in 2008. This contributed highly to
sustaining reputation of C4 as a broadcaster producing high quality, different and fresh programmes
and films. BBC boasts their award-winning projects like History of Modern Britain and Parallel
Worlds, Parallel Lives which were a big success without a doubt, but could hardly be considered a
match to the worldwide success of Film4’s Slumdog Millionaire.
Marketing
By providing more fun, yet thought-provoking content and open-minded perspective, C4 achieves its
goal of targeting younger audience and niche groups better than other channels. Increased
spending on content targeting 10-15 years olds3 resulted in such ideas as Battlefront, which caters
for the audience that has outgrown CBBC and CBeebies. Channel 4 (core channel) news is known to
be perceived better by younger people and minorities because it provides a wide international
coverage (40%), well-rounded multicultural perspective, and an independent view. Thus, YouGov
survey shows that Channel4 news have a 56% trust rating within its audience, which is bigger than
3
Next on 4
that average for respected news channels. According to the Ofcom report C4 channels are
considered much more “youthful” than the BBC channels. Only BBC3 is positioned near the cluster of
C4 channels on the “younger” side of the chart (figure X). Even though BBC attempted to promote
their channels on YouTube, twitter, facebook and such, it appears that they are not as good at
targeting younger people. This could be an advantage for C4 since the tendency is towards switching
to digital platforms that are more popular within younger audience. BBC acknowledges the need to
target younger audience in their annual report by identifying that viewers of iPlayers are within a
younger range than their regular TV audience.
Figure X. Age and demographic profile of entertainment channels in multichannel homes.
On-demand television online is getting bigger and so do the online advertising revenue streams. By
providing increasing amount of content on 4oD and across a wide range of online platforms,
including securing a deal with YouTube, C4 tries to maximize revenues from online advertising,
which helped them increase their total advertising revenue since 2004. Due to the nature of BBC
funding, marketing activities are not as important for them as they are for C4. Yet BBC has a
reputation to protect that has a lot to do with the way they market their programmes and what
audience they target.
Design (take it out?)
Distribution and Sales
In sales and distribution BBC has an advantage of having a bigger number of channels and being
successful in the radio industry as well, which gives them additional means to market and distribute
their programmes. Attempts to launch a digital radio failed for C4 in the beginning of the year due to
lack of investment. The focus that C4 has at the moment is on spreading content availability across
online platforms, which is a relevant strategy in the sense that it’s their online content that brings
the most revenue. The BBC is aware of that, and so they have introduced their own YouTube
channels and currently the iPlayer is the 6th most visited UK website. At the moment there are
negotiations between BBC and C4 regarding a possibility of partnership between BBC Worldwide
(BBC’s commercial arm) and C4’s 2Entertain (DVD distributor) and E4 that could result in a £200m
profit potentially re-invested back into two companies. This would be of great help to C4 in terms of
expanding distribution channels and gaining additional funding, however, BBC there is not much
evidence of BBC being enthusiastic about this deal.
Import Ch4
Relative
ance
Strengt
h
Comments
Resources
R1 Financial
6
4
R2 Physical
4
3
R3 Technology
8
5
R4 Reputation
8
7
R6 Human
Resources
9
6
BBC has more financial resources than C4, but
BBC has less creative freedom and ability to
experiment than C4
C4 manage their finances rather efficiently,
obtained positive cash flow, however their
liquidity could be improved through further
partnerships and investments
BBC owns its production facilities, while C4
outsources most of its production to private
sector
Financial ratios about fixed assets ?
Technologies of C4 are comparable to those of
BBC
BBC labs have access to more finances
BBC is involved in managing digital switchover
and a number of projects aimed at modernization
of British TV industry (Project Canvas,
involvement in 3DTV development)
C4 deal with YouTube
BBC has more TV channels than C4
BBC operates a number of well-known radio
stations
C4 outperformed BBC in 2008 in the number and
quality of film and TV awards
C4 is more creative, experimental, and risky than
BBC
BBC is more educative, traditional, objective,
aimed at a wider range of viewers than C4, caters
better for children audience
C4 is considered to be more “youthful” than BBC
Channel4 news provides a different perspective
from traditional BBC news channel
C4 Talent4 initiative contributes to development
of on-screen and off-screen talent
C4 offers more room for creativity and
experimentation to its comedians
BBC relies more on established actors and
managers
BBC however has its own Writers academy,
College of Journalism online courses to nurture
new talent
C4 has a big number of award-winning producers
and actors that outperformed BBC’s in a range of
categories in 2008
Capabilities
C1 Corporate
management
7
5
C3
R&D/Technolo
gy
7
4
C4 Production
9
5
C5 Design
C6 Marketing
4
9
6
6
C7 Sales and
distribution
8
4
C4 is more independent from the government
BBC has more reserves, can invest in more projects
Ratios again?
C4 had the first mover advantage when introduced ondemand content online, HD channels, time-shifted channels
BBC is more involved in 3DTV which could be the future of TV;
making on-demand services available on TV sets as well
(project Canvas)
C4 has more motivation to look for ways to expand their
content online because they need to maximize online
advertising revenues
C4 will be the first broadcaster to make its on-demand
content available on YouTube in full to uk audience
BBC is vertically integrated, thus has more control over the
production process
C4 outsources its production, thus having access to fresh
innovative ideas, and being able to give creative freedom to
its actors and producers
More comedy is produced on C4
More educational content is produced on BBC
C4 produced more quality entertaining award-winning
content than BBC in the last year
Take it out?
Reputation explained above helps to build the image of C4 as
being a fun, innovative, experimental channel
BBC reputation
C4 is more motivated to innovate in marketing because that’s
what brings them money
C4 target younger people and minorities better than BBC
BBC has access to more channels and their own radio stations
to market their shows
BBC enjoys more channels of distribution
C4 is better at exploring online content distribution platforms
C4 and BBC Worldwide partnership
Superfluous Strength
C4 – Design
Zone of Irrelevance
R2 – Physical assets
Key Weaknesses
R3 – Technology (border)
C1 – Corporate management (border)
C2 – R&D/Technology
C3 – Production (border)
C6 – Sales and distribution
Key Strengths
R4 - Reputation
R5 – Human Resources
C5 – Marketing
Appraising CH4's resources and capabilities
10
Superfluous Strength
Key Strengths
9
8
R4
Relative Strength
7
R5
C4
6
C1
5
R3
R1
4
C3
C2
R2
3
C6
2
1
0
0
1
2
3
4
5
6
7
8
9
10
Strategic Importance
Zone of Irrelevance
i
Key Weakness
http://www.telegraph.co.uk/technology/6468317/Andy-Duncan-Next-on-Channel-4.html
http://www.telegraph.co.uk/technology/google/6336020/YouTube-and-Channel-4-confirm-three-yearlandmark-content-deal.html
iii
http://www.guardian.co.uk/media/2009/nov/04/bbc-more-help-channel-4
ii