The coming year will determine the future shape of children’s television in the U.K.–and the likelihood is that the BBC will emerge even stronger than before. Its commercial rivals are looking increasingly jumpy, with CiTV facing a budget cut of up to 25% due to the prolonged advertising recession. The network claims it can no longer afford to compete with the BBC, awash with cash thanks to a generous license fee hike and an effective cost-cutting program. With no prospect of an immediate upturn in revenues, the chances of ITV launching its own digital children’s service look more remote, and some fear that it might abandon kids shows altogether.

But despite the BBC’s dominant position–soon to be boosted by the arrival of its two long-heralded CBBC digital nets, which are set to launch next month–there are no guarantees that everything will go the BBC’s way.

Questions are being raised over whether CBBC’s enlarged budget, around US$140 million, is enough to fund all its extended commitments. Skeptics also question whether producers will give their best ideas to the Beeb when the organization insists on rights deals that leave producers with little control over their properties.

With 14 commercial nets to choose from, British kids now spend half their time watching non-terrestrial services. The crowded kids dial is the main reason why Disney and Nickelodeon lobbied so hard to prevent the government from greenlighting CBBC (aimed at older children) and its preschool sister station Cbeebies. ‘Everyone must be asking themselves what will happen to their audiences when the BBC digital channels go on air,’ says a veteran kids broadcaster. ‘In real terms, individual cable and satellite channels get a tiny audience share, and the arrival of the two new channels will mean that those audiences are going to be spread more thinly still.’

The prospect of intense competition and the possibility that one or more channels could be forced out of business in the months ahead is on everyone’s mind, and the signs of defensive action are apparent. Last month, Cartoon Network launched a new interactive games service called Cartoon Network Games, accessed via Sky Active on the Sky Digital platform. The operation kicked off with games based on The Powerpuff Girls and The Flintstones. Fox Kids Europe also launched an interactive games channel into the U.K. last month. Reaching 5.5 million subscribers via the brightBlue service on Sky Digital, Fox Kids Play initially features remote-controllable games based on FKE library gems like Digimon, Princess Sissi and Power Rangers.

Next month, Nick Jr. (the most vulnerable of the BBC’s competitors because its schedule most resembles that of Cbeebies) will relaunch with a new on-screen look and more interactive material. The entire schedule is being revamped. There will be a special interactive part of the lineup, screened in four 30-minute blocks, featuring interactive versions of Blues Clues, The Hoobs, craft show You Do Too and Dora The Explorer.

But just how good will the new BBC channels be? The British government has insisted they provide a ‘distinctive’ service and boost U.K. production by investing in original, domestic programming–90% of Cbeebie’s schedule must be homegrown, with the older channel mandated at 70%.

Both CBBC and Cbeebies will offer a stripped schedule. Flagship CBBC brands like Blue Peter and Newsround (played up to three times daily on CBBC) are being extended to help encourage viewers to switch across from the BBC’s terrestrial services to the new digital channels. Spin-off shows Blue Peter Flies The World and Blue Peter Unleashed are also in production. The new programs will feature archive material as well as new segments; Flies The World intends to concentrate on Blue Peter’s global travels, while Unleashed will focus on sports.

New 13-ep commissions for CBBC include daily live show Xchange; Cave Girl, a drama from Two Hats Productions; and four new 30-minute live-actioners–Stitch Up, Call The Shots, Rule The School and The Raven, all made by either CBBC or CBBC Scotland. Stitch Up is a hidden camera show in which kids play tricks on the public, and role-reversal vehicle Rule The School allows pupils to swap places with their teachers and test their knowledge on such kid-friendly subjects as text messaging and hip hop. The Raven, meanwhile, is a game show shot on location and featuring its eponymous character as the host.

On the preschool service, the centerpiece is 126 episodes of a new drama from CBBC Scotland called Applecross, which is set in a fictional Scottish village and features child and adult actors. This live-actioner will be joined by puppet offerings like The Shiny Show and Bits and Bobs.

Pickard has more than US$56 million to spend on his new diginets, and has commissioned 700 hours of shows thus far. But does he have enough money to assemble a compelling schedule? ‘It’s adequate, but not lavish,’ says a colleague. ‘He’s going to have to be pretty innovative to make dramas on his stated episode budgets of US$70,000 to US$115,000,’ adds a former CBBC exec. ‘Normally, BBC children’s dramas cost upwards of US$215,000 per episode.’

Pickard claims it is not his job to encourage more cheap kids shows. ‘Our budgets for the digital services are pretty much in line with those for analog. I have always said that digital should not be a byword for cheap programming, and I am not going to ask people to do shows for US$15,000 an hour.

‘Of course if we’re commissioning a long drama series, say 26 parts, I’ll be looking for economies that wouldn’t be possible if it was only six or seven parts. And there are always opportunities for co-production, where deals can be brokered with Canada or Australia.’

He may not have a fortune to spend, but compared with CiTV, the amount is megabucks. CiTV children’s controller Janie Grace has warned that she will have to run more repeats and less drama, as well as increasing the number of video diary-style documentaries.

She is lobbying the Independent Television Commission for permission to set up CiTV Ltd. Under this model, CiTV would be able to acquire full property rights that it could then exploit across ancillary merchandise categories, rather than just buying TV licenses. This would clear the way for ITV to emulate the BBC, which, via its commercial arm BBC Worldwide, has made big money from properties like Teletubbies and Tweenies; in fact, Teletubbies has generated more than US$160 million for the Beeb to date. However, such a scheme may prove problematic because the producers that make shows for CiTV are unlikely to let go of their rights easily because they will want to exploit them for their own companies.

In such testing times, Grace can take comfort from the fact that there is one thing that unites the U.K. children’s TV industry. The BBC may be more dominant than ever, but well-funded competition is essential for the sector to thrive. As Pickard says: ‘We need a strong CiTV. Not only to ensure the audience has a choice, but so that the competition remains balanced and healthy.’