A sharper picture on C5

Today the ITC finally receives a clutch of mighty bids for Britain's fifth and last 'free' television channel.

Today, by high noon at the latest, three bidders for the licence to operate Channel 5 will deliver applications, up to 12 inches thick, to the offices of the Independent Television Commission. One of these will be the blueprint for Britain's fifth terrestrial channel, likely to be the last "free" TV offered to Britons.

The list of interested partiesreads like a media who's who. Within the ranks of the three consortia likely to bid are Rupert Murdoch, Richard Dunn, the former head of Thames Television; Greg Dyke, the Pearson Television chairman and former head of LWT; Sir David English, chairman of Associated Newspapers; and the ubiquitous Richard Branson.

The proposals contain programming schedules, business plans, technical data and the most important information of all: the figures - just how much the bidders are willing to pay to the Treasury for the licence.

No one is breathing a word about just how much that might be. This is a blind auction, with the highest qualified bid winning. Analysts suggest a range of £10m to £25m a year, but they admit they are guessing. One media executive who doesn't wish to be named but whose company decided against entering the fray thought £1,000 annually might do it. After all, the successful bidder will have to shell out as much as £70m to retune VCRs up and down the country, to ensure they receive a clear signal for the new channel (see box).

"Maybe the retuning costs should be the licence fee, period," the executive says.

Whoever wins, Channel 5's character is already becoming apparent. There will be no catering to "minority views", as Channel 4 is mandated to do. Nor will there be any regional programming, as ITV and the BBC routinely provide. Instead, we will be treated, in varying amounts, to drama, films, sport, children's programming and light entertainment.

All have promised significant spending on independent British production. Virgin TV - backed by the Virgin Group, the electronics company Philips, the US-based Paramount Television, the ITV company HTV, and Associated Newspapers - is promising to set up a credit facility with Coutts to offer as much as £100m to help fund British independent production. Virgin TV would have first call on UK television rights.

Film is a favoured strand of all three bidders. BSkyB, with partners TCI, PolyGram, Goldman Sachs, the European broadcaster Kinnevik and perhaps Granada, is expected to offer big-event television premieres of popular movies, probably earlier than the three-year waiting time currently imposed on Britain's earthbound TV channels. These might be made available for terrestrial broadcast as part of a broader deal with film producers to show them on Sky and Channel 5 at different times.

Virgin plans to show 1,000 films a year, at the rate of about 20 a week, many at peak viewing times. These would be a mixture of classics, made- for-television movies and a pinch of first-run fare.

Robert Devereux, head of Virgin TV, says the presence of Paramount Television in the consortium is an indication of the importance of made-for-TV films to Virgin's plans. But, he insists, "all Paramount product in the schedule will be negotiated on an arm's length basis. There is no obligation to purchase".

All three proposals are believed to include talk show formats as well. Virgin TV would show The Big Lounge every evening at 11pm, featuring guests and regular routines and hosted by a newcomer whom Devereux describes as being "the next Chris Evans".

News programming, an important part of the ITC's requirement for Channel 5, is likely to differentiate each bidder from its competition. Pearson, publisher of the Financial Times and 50 per cent owner of the Economist, has a strong franchise in business news and would be expected to make it a prominent part of its schedule. BSkyB would also be likely to tap its own resources at Sky News. Virgin would go a different route, offering hourly bulletins of about three minutes each but no flagship evening news programme. It would, however, produce a current affairs news magazine programme - lighter in content and tone than the BBC's Panorama or ITV's World in Action.

Children's programming is where Virgin TV hopes to win big audiences. With partner HTV, already an important producer of children's fare, Virgin plans to develop 12 new programmes and to broadcast 30 hours of children's programming a week, eight times the minimum required by the ITC.

When it comes to sports programming, however, neither Pearson nor Virgin can come close to competing with BSkyB, already a dominant sports broadcaster. Indeed, Virgin TV is steering clear of sport.

The real battleground may be drama. All three bidders have set up arrangements with independent television producers, in an effort to meet the minimum requirements set down by the ITC for original programming. A favoured approach has been to sign producers of current hits, hoping they can make lightning strike twice by supplying another highly popular show.

For example, Virgin has an understanding with the producers of Poirot and the Ruth Rendell Mysteries. And Pearson can call on Grundy Worldwide, maker of game shows and soaps such as Neighbours. Pearson bought the Australian company earlier this year for £175m. All three bidders are likely to want a soap.

The winner will need to build an audience quickly if it is to clinch the lucrative advertising contracts needed to turn an operating profit within the projected three to five years. Simply attracting audiences won't be enough, however. The winner will first have to overcome the retuning hurdle.

BSkyB is thought to view retuning as an opportunity as much as an obstacle. Having to send representatives into perhaps 6 million homes would provide a chance to sell satellite services. Virgin believes it would not have to visit every home. Instead it would provide a freephone number for Channel 5 viewers to ring; Virgin representatives would then judge whether an in-home visit was necessary.

In the end, whoever wins the licence is likely to receive approaches the next day from independent producers in bed with other bidders. The final product may not look precisely like any of the bids landing today, with an almighty thump, on sundry desks at the ITC.

Business, page 24

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