Where did it go wrong for Britain's fourth channel?

It's shortly to be 20 years since Channel 4 burst on the air, resolutely cutting edge, determined to challenge and provoke the establishment, and to change the face of television. The morning after the first night back in November 1982, the critic Nancy Banks-Smith declared the fourth channel "trendy enough to make your teeth peel".

OK, not everyone was convinced. Chris Dunkley in the Financial Times deemed it "almost beyond credence" that 22 years after Coronation Street a new "distinctive" channel should set a soap opera in a single Lancashire Street.

But as Brookside developed, making stars of Sue Johnston, Ricky Tomlinson and Anna Friel, and using the soap format to explore social issues, it was clear that Channel 4 could mould even the most conventional television forms to its new realism. There had been no lesbian kisses in the Rovers Return.

Those first-night schedules back in November 1982 signalled the way the fourth channel would develop. The most genuine innovation – which even now seems an innovation – was the hour-long Channel 4 News (presenters included Sarah Hogg, Peter Sissons, Godfrey Hodgson and Trevor McDonald).

Brookside, of course, made its first appearance. Even the very first programme, a quiz show, the still on-air Countdown with Richard Whiteley and Carol Vorderman, seemed a novel idea back then, though in hindsight we may have been charitable. Cutting-edge comedy was certainly there at the start, as The Comic Strip presented Five Go Mad in Dorset (and Enid Blyton's family duly went mad the next day).

There were other signs of a distinctive flavour. The channel demonstrated on that first night its desire to commission challenging British films, with Ian McKellen as the mentally handicapped Walter; there was a feminist revue, in sharp contrast to the fare on other channels. There was a showcase for the Australian comic, Paul Hogan, an early flirtation with comedy from abroad.

The early Eighties were, of course, the ideal time for the launch of a channel with sharp political instincts, a pioneering liberal, Jeremy Isaacs, in charge and a former broadsheet journalist Liz Forgan in a senior post, commissioning programmes – she later went on to become director of programmes. Isaacs introduced Film on Four, which gave us 20 low-budget films a year at £300,000 a time – Channel 4's equivalent of The Wednesday Play. He put on The Tube and redefined the pop-music programme. He brought anarchic left-field shows such as his own personal favourite Max Headroom, with its pretend computer- animated frontman.

But most pertinently, this was the height of the Thatcher years, and Channel 4, not bound by strictures of balance, was alone in mounting a critique from a left-wing perspective, which it did with its now-forgotten weekly investigative and polemical show, The Friday Alternative.

A couple of years ago, I asked Michael Jackson, then the C4 chief executive, why he didn't commission just such a programme to give a left-wing take on Blairism. Too boring, he said. No one would watch, least of all the young audiences he craved.

That was a graphic indication of the way Channel 4 had changed. It was a change that started in 1987, when Jeremy Isaacs handed over the reins to Michael Grade, declaring he was handing Grade a "sacred trust". Grade was a scheduler without equal, and managed to honour the original remit for minority programming by pushing much of it to the nether reaches of the schedules, while booting C4 into the mainstream with imports such as Friends, Frasier and ER. The ratings improved, and the sheer class of the American imports distracted attention from the nagging feeling that Channel 4 might be losing its sense of purpose.

But it was 10 years later, when Michael Jackson came from the BBC, that Channel 4 underwent a seismic shift. The affable and cultured Jackson, the man who invented The Late Show for BBC2, seemed to undergo a life change as he redefined Channel 4 as a youth brand, started E4 and littered the main C4 schedules with sex, too often of the sleazy variety. Forgetting the fact that this was a most condescending view of what young people were interested in, why was it Channel 4's job to show Eurotrash and The Girlie Show? What on earth possessed Jackson, in his last and most bizarre move as chief executive, to poach Richard and Judy from ITV? And let's not forget, from a glance at the recent schedules, Lesbian Love Stories, Position Impossible, Designer Vaginas, Sex Tips for Girls and The Truth About Gay Animals. A preoccupation with trivia and titillation is in danger of putting more upmarket programming into the shade.

Zoe Spyropoulos, who quit in disgust last year from her job as a director of a C4 political programme, gave an insight into the commissioning strategy in the youth-obsessed channel. "I have sat through pitching sessions with Channel 4 commissioning editors," she said, "where we, the young programme-makers, are finally granted that much coveted access to those exclusive ears, and we get our five minutes to sell our ideas.

"The sense of disillusion is palpable. We sit there to be told that Channel 4 is going after a young audience – between 15 and 30 – the advertiser's dream. We learn how concerned Channel 4 is with ratings – they obsessively track audience figures – and that they are, understandably, trying to spot new trends all the time. But what really strikes me is how lost they seem. Ideas are flung about, as though they have no clue which programmes will work. We are told to pitch ideas with titles that alliterate."

Sir Jeremy Isaacs, the founding chief executive, was equally forthright about the sense of weariness he felt over what Channel 4 had become, in its obsession with the brand and its overwhelming desire "to target and reach a demographically clearly defined audience – the 18- to 35-year-olds – and single-mindedly commission a bulk of programmes that suits their tastes, however laddish."

Now it is up to Jackson's successor, Mark Thompson, to restore Channel 4 to its glory days. The first signs of how he will do this should come on Friday, when he delivers the MacTaggart Lecture at the Edinburgh Television Festival. Thompson will use the lecture to outline his vision. By the end of the evening we might know whether Channel 4 is about to rediscover its soul.

In his first briefing to staff last month, Thompson whetted the appetite. It was time, he said, for "radical change". It was time to be more "imaginative" and grow the schedule "competitively and creatively". It was time to make money. Last year, for the first time in a decade, the channel failed to make a profit. In fact it made a loss of £29m.

Inside Richard Rogers' modernist glass building that is C4's London headquarters, staff will be less concerned with November's 20th-anniversary celebrations and more concerned with whether they will have a job at all by then. In that same internal briefing, Thompson used the dreaded "L" word. The channel, he said, must be "leaner".

He intimated that there could be at least 200 job losses among the 1,100-strong staff. He reminded them that the advertising recession had hit Channel 4 hard, with a £32m loss in revenue on the previous year. He sighed that the days of expanding into digital channels under his predecessor Michael Jackson were over. He confirmed that Film 4, the channel's film production and distribution unit, was to be closed down. The subscription channel E4, Michael Jackson's paean to youth, will remain, but it has to improve. When Big Brother isn't showing, its figures are low, far worse than Sky One. And 4 Ventures, the commercial arm of which it is a part, has been losing £68m a year. Denise O'Donoghue, the joint managing director of the indy production outfit Hat Trick, wants Thompson to drop the digital channels altogether, saying: "If they don't make money, what's the argument for keeping them?"

What sort of vision can Mark Thompson give at Edinburgh to make Channel 4 distinctive again – and put it in profit, too? He could do worse than recall those early days, which he would have watched from the opposition bench at the BBC, before rising to become director of programmes at the corporation then taking the Channel 4 job at the end of last year.

He might, if he is given to the dramatic gesture, enliven his Edinburgh speech by holding up a piece of paper: the original remit. Though Channel 4 is still governed by it, and its funding as a public-service broadcaster depends on honouring it, it will be a bit dusty now. To judge from the schedules in recent years, it is not often consulted. But, as a piece of broadcasting history, it makes fascinating reading.

Headed simply "The Fourth Channel: Programme Policy Statement", it stressed that Channel 4 would have "as a particular charge the service of special interests and concerns for which television now has lacked adequate time". After this commitment to minority programming, it went on to promise "a place for the untried to foster the new and experimental in television".

Other cornerstones of the remit included giving "15 per cent of its broadcasting time to educational material"; reflecting the continuing debate on a wide range of issues of social policy.

It is too simplistic to say that Channel 4 has totally lost its way since those early days. As Lucy Rouse, the editor of Broadcast magazine, points out, it has not lost its touch for innovative programming. She says: "It has been an incredibly valuable addition to the TV landscape over the last 20 years, bringing us programming gems that no other channel would. Brass Eye and Queer as Folk are just two relatively recent examples that spring to mind." One can add to that other achievements, from its coverage of cricket to the sponsorship and coverage of the Turner Prize.

But, Rouse adds, "it has a huge problem today that it didn't have when it launched – namely that it has to make its money from selling its own advertising. That puts a pressure on ratings, and Big Brother is the only thing that has held up the channel's share so far this year. But Big Brother is hardly intellectual TV."

That is one of the conundrums with which Thompson will have to deal. The ratings versus the remit. He must somehow marry the two. So far he has given us little idea what he has in mind. When considering the sort of programmes that should be the model for the future, he lapses into the tiresome jargon of media dinner parties: "a powerful arsenal of entertainment programmes", "factual entertainment", whatever that may be, and "event programming".

He does advocate risk, however, saying: "Risk means trying brave new interesting programmes – of which Big Brother is a very good example. And if they work you get big audiences. Risk is not about making obscure, old-fashioned public-service programmes no one wants to watch. It's about finding new programmes, new creative ideas."

Yet his biggest outlay in his first six months was to authorise spending £14m on The Simpsons. Thompson says it will make money and it is the best of American TV, but it will be disappointing if, on Friday, he doesn't promise much more radical and hopefully home-grown examples. He wants British drama to learn from American hits such as The West Wing and Six Feet Under. He wants more big-noise dramas such as the £10m epic Shackleton, and sexy history programmes such as David Starkey's Six Wives of Henry the Eighth. And yet, this is hardly radicalism.

At Friday's MacTaggart Lecture, Thompson should perhaps whip the Channel 4 remit out of his jacket pocket. He could then give the hushed hall his definition of public-service broadcasting and minority programming, explaining just how his channel will be distinctive, different not only from BBC1 and ITV1, but also from BBC2. He could promise a weekly, prime- time, probing, political programme that would shame the BBC for moving Panorama into a graveyard slot.

And no, of course Channel 4 should never be worthy but dull. Let's have plenty of Friends, The West Wing and other buy-ups of the best of American TV; more Brass Eye and equally anarchic successors to Graham Norton and Ali G, as they reach their sell-by dates. Let's acknowledge that the world and the world of television have moved on since 1982. That feminist revue from its first night epitomised what is now seen as the right-on, left leaning academic didacticism of the early Channel 4. Successive controllers have redefined bold experiment as innovation meets a big audience – Father Ted, Big Brother, The Word, Time Team.

But something has been lost in the process. There is not enough challenging political or cultural programming. There is certainly not enough that eschews the world of sex or celebrity to tell the story. Last week's programme on ancient Greece was, almost inevitably, about ancient Greek women's attitudes to sex. We need more groundbreaking political and cultural programming – more essential now than ever, as the BBC ghettoises much of its cultural coverage on a digital channel. Show more innovative comedy that can astound as the Comic Strip astounded on that first night. Most of all, give us a Channel 4 that once again opens our eyes to the world and takes on the establishment, not least the broadcasting establishment. Otherwise, it is hard to see how it is fulfilling its remit.

The last word should go to Sir Jeremy Isaacs. He wants Thompson to make an uncompromising statement in Edinburgh that Channel 4 will "aim high", saying: "I just hope he will sustain the notion that Channel 4 is about variety and inventiveness and not about the formulaic. Give the channel back its image for aiming high."

From the sublime to the ridiculous: the highs and lows of Channel 4

The best

1. V (1987)

Even before it was broadcast, on 4 November 1987, the film of Tony Harrison's poem about the desecration of his parents' grave caused unprecedented controversy, thanks to liberal use of the F-word. "A cascade of obscenities," said the Conservative MP Teddy Taylor, and much of the press supported his call for the programme to be withdrawn. Channel 4 stood firm, and hardly any members of the public complained.

2. The Tube (1982-87)

Jools Holland and Paula Yates presented the coolest youth programme ever broadcast: irreverent, in-yer-face, image-obsessed, but with a saving sense of humour. Sadly, Jools's liberal use of coarse language hastened its demise.

3. Friends (1994-)

Not just a charming, slick comedy – admit it, you enjoy it – but a neat example of Channel 4's shrewd way with the classiest transatlantic product. Not only does it buy the best – ER, The Sopranos, The West Wing, and let's not forget Roseanne, The Golden Girls and Hill Street Blues – it knows how to use them: regular, prime-time slots, building loyalty and ratings. So Friends is the fortress from which Channel 4 dominates Friday nights.

4. Father Ted (1995-98)

Just to remind you that Four doesn't just import the best comedies, it has made some of them, too. This semi-surreal whimsy is many people's favourite, but don't forget pioneering stuff like Saturday Live ("Whoo, bit political!") and Whose Line Is It Anyway?, and TV breaks for Harry Hill, Vic Reeves and Jack Dee.

5. After Dark (1987-91; specials 1993-97)

Most people's memory of this is Oliver Reed staggering about; they forget what a weird and wonderful experiment this series was, a chatshow without any of the usual boundaries, including a scheduled finishing time. Like the earlier Videobox, it was an admirable venture in non-interventionist TV.

6. Beyond the Clouds (1993)

A poetically-paced, wrenchingly beautiful series about life in the Chinese countryside, which set new visual and intellectual standards for TV documentary.

The worst

1. The Word (1990-95)

Who can forget Hufty, TV's only shaven-headed Geordie lesbian youth presenter? This was the flipside of The Tube, youth TV with no redeeming features, and the locus classicus of a genre Four pioneered: post-pub TV, watchable only when you're smashed. Not to be confused with The Girlie Show or TFI Friday, which were post-pub TV in a pre-pub timeslot.

2. Eurotrash (1993-)

As for The Word, but with a French accent and a wafer-thin protective layer of irony.

3. Big Brother (2000-)

Schadenfreude masquerading as mass entertainment. The first was tacky; the third, dropping all pretence of psychological experiment in favour of naked carnival parade, was degrading.

4. Brookside (1982-)

Early on, Phil Redmond could claim to have wrenched British soap opera out of a cosy rut, but recently it vies withEastEnders for the most bizarre and sensational storylines – lesbian kisses, religious cults blowing up houses, that sort of thing. Its ratings have been in decline, too.

5. Top Ten . . .

In its first weekend, Channel 4 broadcast the epic RSC Nicholas Nickleby; these days, it broadcasts numbingly repetitive lists of old chart hits, TV shows, and other pop-culture ephemera, with witlessly facetious scripts.

6. Ancient Sex Mysteries of the Secret Nazi House

And we've only got 24 hours to do it! Recently, Channel 4's version of the past has mostly been a lurid composite of gameshow, peepshow and freakshow. The idea that viewers might want to know what happened in history would baffle Four's commissioning editors.