In the first of a series analysing niche channels Ed Shelton considers whether the Paramount Comedy Channel will be outflanked by British newcomers like E4.
Research panels consistently report that Friends is one of the Paramount Comedy Channel's best shows. The only snag for Paramount is that it doesn't broadcast Friends. But the finding does reveal that in the five years since the channel launched it has succeeded in establishing itself as the natural home for US comedy hits - even if people aren't sure which ones it actually shows.

During the past few years the accuracy of what its brand represents may have been less important, but now with new heavyweight competition imminent, the strength of the brand is going to be crucial. Channel 4's new E4 channel, the BBC's new comedy-based BBC 3, and ITV2 are all seeking to challenge Paramount in the comedy and entertainment channel niche.

The channel (75 per cent owned by Viacom, 25 per cent by BSkyB) is going to need more than a strong brand to thrive against the new competition. More than ever before individual programmes define success and strip-scheduled comedy channels are no exception.

On the whole, Paramount has been very fortunate with its programming.

The US shows that make up some 60 per cent of its schedule have become increasingly fashionable during the channel's five-year life. Those it does actually broadcast - such as Frasier, Cheers and Roseanne - have brought small, but very desirable up-market audiences.

'Originally people said they hated US programming when we started but they always named three or four US comedies in their top 10. They learned that US comedies were smart - shows like Friends became hip and chic.

Now people think of the shows we broadcast as smart comedy,' says general manager Tony Orsten.

'The audience we have is enough to make money - 40,000 to 50,000 a night on average. By comparison with us, a channel like UK Gold is old and downmarket - our audience is 16 to 44 ABC1 and very valuable to advertisers.'

But Paramount's main problem in going forward is likely to be maintaining the supply of top programmes when the new channels arrive.

Around 40 per cent of the current schedule is UK-produced programming such as C4's Drop the Dead Donkey and Father Ted. Paramount admits that it is unlikely to have such easy access to their successors when Horseferry Road is running its own entertainment channel. Hence there is an urgent need to find good quality, affordable replacements.

Ordinarily, the channel might expect to pick up replacement shows from the US relatively easily, but current inflation in the cost of premium programming has made this impossible.

Sky's recent purchase of the most successful US series since Friends, Malcolm in the Middle, for the reported figure of $170,000 (£117,000) an episode is the most extreme instance, but programming costs have been rising steadily, making it harder for smaller channels like Paramount to compete.

The channel already gets around 30 per cent of its programming from its giant US parent, Viacom, (examples include Frasier and Becker) and may be looking to secure more via this route. But with much of the new Ch4 programming off limits and the vast majority of existing UK programming with UK Gold, Paramount needs a way to maintain the diversity of its content-hungry strip-schedule with more UK shows.

In the past, the channel has made its own shows. But production was halted two years ago owing to a lack of resources. Spaced was made by Paramount but it was fully funded by C4. A second series is currently in production.

Now the channel is proposing to start afresh with a meagre£1.6m budget for commissioning, rather than producing, its own shows. It already has two series in development, although details are sketchy.

Managing director John Partridge says the first is a comedy drama made by a production company with which Paramount has a close relationship.

'It is based in a Sardinian holiday camp and is likely to hit the screens next autumn. We will probably do two runs of 10 programmes each.'

Paramount will get some finance from its sister channel in Spain, which launched in March 1999. It is looking for further funding involvement from other European channels as it seeks to expand into other markets, kicking off with France in a couple of years' time.

The second production is a talent-spotting comedy game show which should, according to Partridge, culminate with the winner having his or her own show at the Edinburgh festival next year.

Additionally, the channel says it is also negotiating for the rights to a new source of classic British programming, and is hoping the non-US aspect of the schedule will be boosted as a result.

Assuming the channel can find the programming it needs, it expects to make a return on the£20m invested by shareholders Viacom and BSkyB by 2004 or 2005. The channel broke even for the first time last year, and a profit of over£1m is expected this year.

Profit would have come sooner were it not for the 1998 change in the Independent Television Commission rules that had the effect of cutting the cable carriage fees (generally paid as a set amount, say 15p a month, for each home taking the channel) that niche channels secured.

Now there is a new threat to Paramount's revenues, with a switch in ad sales houses from Sky to MTV planned. It will entail an improvement in Paramount's distribution, the addition of digital transmission and more broadcast hours, but the smaller MTV operation may be hard pushed to win as much revenue as Sky does.

And with Paramount facing additional competition, the audience could be about to become even more niche. Still, niche channels are the future and even if it cannot get the most expensive new shows, Paramount will still have its parent's programming - even if some people aren't sure what that is.

PARAMOUNTDate started: November 1995Ownership: Viacom (75 per cent), BSkyB (25 per cent)Format: Comedy programming (60 per cent US, 40 per cent British)Distribution: Satellite (digital and analogue), cable and digital terrestrial from next year.

Homes connected: 5,347,000Broadcast hours: 19.00 - 04.00Top shows: Frasier, Married with Children, SeinfeldAverage audience share: 0.4 per cent (Barb)Average weekly hours per person (for all cable/satellite subscribers): 0.0-0.1Countries: UK, Spain.