In the eye of a media revolution

Rumours of television takeovers swirl around the media sector like the cigar smoke that circles Michael Grade's head. But the 53-year- old chief executive of Channel 4 needn't fear that his own company will succumb. Whatever the outcome of the current consolidation in commercial television, the public service broadcaster remains aloof and protected.

Still, the media revolution is bound to have an effect on the way Channel 4 is run, a point Mr Grade concedes. "In the new environment, we have to play to our strengths," he says. That means providing quality programming, with due regard to "minority tastes", and continuing the fourth channel's commitment to the British film industry, of which Mr Grade is particularly proud.

Mr Grade, quintessentially a television man, is never less than relaxed and confident. Receiving the Independent recently at Channel 4's "love it or hate it" modern building in Horseferry Road, just adrift from the sprawl of London's Victoria Station, his first manoeuvre is to secure a cigar from the ample supply on his desk. He then strides to a low, long table in the large corner office, and leans back far enough to test his chairback severely.

Mr Grade is never long without a cigar. Nor do many minutes pass before the conversation turns to his favourite subject, some say his obsession - the "funding formula".

In the arcane world of British television, there are many anomalies. None can be more contentious, and as worthy of such a long, drawn out debate, as the way Channel 4 and ITV share advertising revenues. When the fourth terrestrial channel was launched 15 years ago, the Government was concerned about its viability. A complicated funding formula was established, whereby ITV companies would be required to bail out the channel if problems arose. Conversely, if the new service proved a wild success, a certain proportion of revenues would be paid to ITV.

So successful has the channel been, particularly in recent years, that Mr Grade has forked out pounds 169m to ITV, including pounds 74m last year alone. Its reserve fund now tops pounds 80m.

Two years ago, Mr Grade went on the warpath, mounting a relentless campaign to force the Government into scrapping the formula. Earlier this year, he won at least part of the battle: the Government is to cap the reserve fund, and will look at phasing out payments to ITV starting in 1999.

"We seem to have won the intellectual argument, certainly," Mr Grade says. "We have been arguing these points for some time, and have finally got some recognition for our view."

The capping of the fund will provide Mr Grade with pounds 17m additional revenues this year, that he says will be spent on programming. "Our priorities will be more money for films, more drama, and we definitely seek to have an aggressive and original daytime schedule. We also want to reduce the percentage of repeats."

Channel 4 Films has been a particularly fruitful sideline for the broadcaster. Mr Grade and his team have financed, fully or jointly, a number of films, including Four Weddings and a Funeral, the mega-hit, The Madness of King George, Shallow Grave and Trainspotting.

In its mainstream operations, Channel 4 has not escaped controversy, however. Famously dubbed Britain's "pornographer-in-chief" because of his string of provocative programmes (The Word, the Red Light Zone), Mr Grade strenuously defends the channel.

One can hardly fault the ratings. When Mr Grade joined Channel 4 in 1988, the service had an audience share of 8.3 per cent. It is now hovering at about 11 per cent.

Nor can one doubt the talent of Channel 4's assembled programmers, some of the best in the business. Mr Grade is proud to the point of arrogance about the stable of talent nurtured over the years. Channel 5, the new terrestrial service launching next year, managed to pinch one such Mr Grade protegee, Dawn Airey, formerly with Childrens' BBC, then controller of arts at Channel 4, and now C5's head of programming.

"For a long time now, C4 has been the nursery for the entire industry. We plucked Dawn Airey from the children's ghetto at BBC. We developed Don't Forget Your Toothbrush, which is now going to BBC1, although without [host] Chris Evans."

His victory in the funding debate more or less assured, what will Mr Grade do now? His many friends in broadcasting wonder how long he will be willing to stay at a public service broadcaster. A journalist by training, he spent a few years at the Daily Mirror in the 1960s, including a stint as a sport columnist. His television career included a long stretch at LWT and then the coveted job of Controller of BBC1. Surely there is another move to come?

Well paid at pounds 450,000 a year, he is nowhere near as wealthy as some of his contemporaries in UK television - men such as Sir Christopher Bland, now Chairman of the BBC or Greg Dyke, the head of Pearson Television, who both made millions out of controversial share options at LWT.

Mr Grade missed the gravy train, having left LWT before Granada's hostile bid in 1993, which triggered the lucrative share options. There are some who believe he would like to see Channel 4 privatised, giving him the chance of a windfall. Indeed, the campaign against the funding formula seemed to many a first step in making a case for a privatised status.

Mr Grade denies all this. "We will remain public service broadcasters, because there will be a demand for it and an audience for it," he says.

Still, there is more than a hint of frustration in his apparent jealousy of private-sector colleagues. "At Channel 4, we are committed to programming, and no one is getting fabulously wealthy."

Mr Grade reckons he has plenty to work on in coming years. The introduction of Channel 5 will pose a competitive threat, while the introduction of digital television will require careful planning.

"I can't think of anything else I would like to do," he says. "This is an amazing place to be. It is an intellectual challenge, and there is still a lot to play for."