Is this the end for Elstein's Channel 5?

Channel 5's diet of sex, films and football has been a resounding success for the fledgling company. But that is not a formula that pleases the new owners. Are heads about to roll?
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Over the next few months, executives at Channel 5 will be meeting to discuss whether the station should shed its tacky image and replace it with a broader and more grown-up approach to programming.

Over the next few months, executives at Channel 5 will be meeting to discuss whether the station should shed its tacky image and replace it with a broader and more grown-up approach to programming.

In its early days, the director of programmes, Dawn Airey, unashamedly proclaimed that Channel 5 was about the three Fs: "films, football and fucking". Her strategy has proved successful. Not only are Channel 5's ratings at 6 per cent, easily exceeding targets, but last week it moved into profit for the first time - well ahead of the projections in its business plan.

Even if Channel 5 simply carries on as it is now, much bigger profits will start to roll in. Start-up costs have been covered, the three-Fs approach is liked by the advertisers and, says the chief executive, David Elstein, every time the press publishes another tale about Channel Filth (with pictures), "we fall about laughing... the articles seem to have a slight positive effect on ratings."

Its autumn line-up suggests that the channel is, more than ever, honing its skills as a purveyor of gruesome, titillating and generally voyeuristic material. Body Farm, for instance, follows the work of the University of Tennessee in the long-term study of rotting corpses, shutting them in car boots, shallow graves and rolls of carpet to see how they decompose. "Channel 5 is a necrophiliac delight," says the media buying company Zenith, and Body Farm can be expected to attract C1 and C2 men aged 45 plus.

Animal ER, which tends to focus on equine intestines and aborted foals rather than Rolf Harris's fluffy hamsters, has been given a 14-week run, while Post-Mortem deals with a forensic autopsy each week. The channel has really taken to heart the popular theory that death is the new sex.

But such schedules might soon be a thing of the past. Five's majority shareholder RTL is indicating that it has a more ambitious vision for the channel. Last Wednesday it's Chief Executive, Didier Bellens, said publicly that he thought it could move to a 10 per cent share in two to three years. At the same time, RTL's Head of Development, Richard Eyre, said Channel 5's programme budget could rise from its current (tiny) £120m a year to £200m. RTL insiders suggest that, if Channel 5 comes up with a convincing enough strategy, the amount could be much higher still.

Ten per cent share would mean that Channel 5 would no longer be the poor relation of terrestrial television - instead it would be snapping at the heels of Channel 4 and BBC2. "Our biggest moan about Channel 5 is that it didn't have the idea for Big Brother first," says Adam Smith at media buying firm Zenith... "We really expect Five to be a prime mover in voyeuristic exploitation, sorry, that's sociological investigation."

With more clout, a higher profile and a bigger budget, it could well be that in future Channel 5 does get in before Channel 4 when independents like Endemol set about selling mega successful formats like Big Brother, rather than limping along behind with "A me-too" programme like the current Jailbreak.

But just how fast and far Channel 5 will change its approach is, for the moment, undecided. "A £120m budget has got us to six per cent share, says Elstein "But that does not mean another £120m would take us to 12 per cent; there are diminishing returns."

And, in any case, it can be argued that the biggest factor in determining Channel 5's commercial success does not lie simply in the ratings, but rather in narrowing the discount to ITV advertising rates. At the moment each Channel 5 viewer is worth considerably less than each ITV viewer. That is because buying ads on Channel 5 secures "frequency" (showing one individual the same commercial several times over) rather than range. (Showing the commercial the same number of times but reaching a wider selection of viewers).

In the trade spending money on Channel 5 ads is referred to, rather unattractively as "bulking up".

"We can't afford to target the small but beautiful audience that Channel 4 has," says Elstein, "That will be an inefficient way of proceeding." And no one expects Five suddenly to start commissioning the "whither Nato" programmes that Four and Two feel obliged to serve up. None the less, there is a feeling around that Five needs to focus on bigger, more wholesome subjects than Keith Chegwin's not-so-private parts and old corpses.

The desire to move on to a higher plain is a function, not just of Channel 5's three-year transition from start-up to mature company, but also of the nature of RTL which owns 65 per cent of Five.

Earlier this year RTL, a Luxembourg company with links to the German media and publishing giant, Bertelsmann, took over Pearson television, which is no longer owned by Pearson at all.

As a £16bn company RTL is a huge player. "It's as a big as Granada, Carlton and United put together," says Director of Communications, Roy Addison. As such, RTL is unlikely to be content with a presence in the UK market which can be summed up by a low-brow sleazy image and a mere 6 per cent of the audience. "We get irritated when people ask why RTL did not buy into ITV," says Addison. "Why would it want to buy a small minority in a declining business? With Channel 5 it has a big stake in a company that can only grow."

There are two reasons to suppose that growth will come from broadening the Channel out into a general entertainment channel. First, is that Eyre would clearly like to see that happen. He has said for instance that he would like to see far more home-grown material on Channel 5.

Second, the model for growth already exists in the form of RTL Germany - a channel that started out like Channel 5 with a reputation for sexiness, smut and low life, and is now Germany's most popular channel, showing programmes such as the local version of Big Brother and Who Wants To Be A Millionaire?, "At some point a new channel, if it wants to keep progressing, has to develop," says Addison. "It can't be laddish for ever."

But he acknowledges that the way RTL Germany developed was by "natural evolution rather than strategy", and that Channel 5 does not necessarily have to follow the same route.

Right now it is budget time at Channel 5 and Elstein and Airey are expected to give some indication of which strategy should be adopted and how much cash needs to be injected to make it succeed.

The television business is alive with the expectation that "two brains" Elstein will not stay long at Channel 5 and that Airey will either get his job or move elsewhere.