Where can you find a Tube driver who sounds like Gary Lineker, a flirtatious pig, talking steamrollers, girl explorers, a troubleshooting postman, roaring racing cars, and news presented by an ant and an oversized anteater who believes he, too, is an ant?

Welcome to the surreal world of preschool television. According to my colleague Jeanette Steemers, professor of media and communications at the University of Westminster, this landscape of primary colours, cuddly characters and catchy songs has long constituted a fiercely contested territory - ever since Muffin the Mule danced on the piano and the Flower Pot Men made merry with Little Weed.

In her new book, Creating Preschool Television: A Story of Commerce, Creativity and Curriculum, Steemers shows how, from its very early days, there have been concerns about whether television is harmful for the very young; how educational their programmes should be; and what kind of stories are appropriate for them. The BBC originally rejected the wildly successful Sesame Street because it overtly set out to teach literacy and numeracy; and remember the furore over the accusation that since Teletubby Tinky Winky was purple and liked his handbag, he must be gay?

Over the past two decades, though, the battleground has shifted. Deregulation of television means more channels and more content, but not necessarily more choice or variety. Original programming is expensive and often requires additional revenue from merchandising. This is especially true for the under-fives, the age group most likely to play with cuddly toys. So firms will sponsor programmes with the most product potential or those that are "toyetic".

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Mind you, this is hardly a new departure. The targeting of children as consumers dates back to the 19th century. One of the shrewdest exploiters of spin-off merchandising was Beatrix Potter, who took keen control of the soft furnishings, breakfast sets and toy animals based on her creations. Disney was making a fortune from licensed spin-offs as far back as the 1930s.

But, argues Steemers, whereas merchandising used to be an offshoot of programmes, it is now frequently an essential part of their funding. And that means manufacturers will sometimes try to dictate characters and content. One production team was encouraged to include bedroom scenes, for example, to go with their pre-existing sets of toy furniture. On another series, it was suggested that the main character should dress up occasionally as a fairy princess, so that "fairy princess" merchandise could be developed.

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In addition, the commercial pressures for marketable programmes that can cross cultures and continents can compromise diversity and variety. Programmes featuring real children, for example, are less exportable than animations, and animals or toys have less cultural specificity even than cartoon kids. So more and more programmes for children tend to avoid any hint of local distinctiveness in the push to sell to as many countries as possible. Underground Ernie avoids the problem by giving each train a different nationality in the first place. And the wholly invented stars of Teletubbies may at least partly account for its global success. It is now viewed in 120 countries, bringing in revenue of ?116 million for BBC Worldwide, and an estimated ?1 billion in retail.

But this tendency, according to Palestinian programme-maker Daoud Kuttab, can have disastrous consequences in the Arab world. Kuttab, who is executive producer of Shara'a Simsim, the Palestinian version of Sesame Street, was speaking earlier this month at a conference on Arab children's television organised by Westminster's Arab Media Centre. Television production in the Arab world, he claimed, has been short-changed, with producers and broadcasters generally opting for the cheapest acquisitions at the expense of quality. UK-based producers who attended the conference also testified to the difficulties of creating suitable content specifically for young Arab audiences. A major problem is language: the programmes will be handled by translation agencies without the skill to make credible scripts. Even worse, said Kuttab, broadcasters trying to save money will settle for translations into classical Arabic, alien to most young viewers, rather than dubbing series into local dialects.

What is needed, argued Kuttab, who is also director general of the non-governmental organisation Community Media Network, is far more investment in training local talent. And companies profiting from this vast market should be obliged to contribute.

Sesame Workshop, the US non-profit organisation behind the production of children's educational programmes, has a long-standing commitment to facilitating co-productions with local talent. And there is now some local investment in children's programming by the major Arab channels such as Al Jazeera.

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But, as our conference revealed, homegrown programming for children can also unleash more sinister forces. Perhaps the most disturbing example came from the Iraqi scholar Rafid Fadhil Ali. He showed footage from the Islamic satellite channel Toyoor al-Jannah (Birds of Paradise), featuring very young, very sweet children singing a song extolling the joy of becoming martyrs and going to heaven. They are joined by an avuncular young man, telling them how God loves martyrs, and "martyrs have shown us how to be real men".

Although it is now banned from broadcast, the song is available on YouTube, where it has attracted more than 59,000 hits. So there is clearly a market out there. I wonder what kind of merchandising would be suitable. Bin Laden the Bear, perhaps?