C4 renews public cash plea as flagship channel loses £8m

by Daniel Farey-Jones, Brand Republic 23-Apr-08, 11:00

LONDON - Channel 4 bosses have warned that the company has reached the 'tipping point' of its incipient funding shortfall, after its core channel suffered its first annual deficit since 1992.

The core channel recorded an operating loss of £7.8m, and the pre-tax profit for the group as a whole plummeted from £21.3m to £1.6m.

The group struggled despite recording its highest share to date of the total television advertising market, at 24.1%, and its second highest annual share of all TV viewing, at 11.9%.

Luke Johnson, Channel 4 chairman, said the company urgently needs a public funding solution as it was now having to cut editorial budgets after spending a record amount on programming and content in 2007. The amount spent rose 3% to £624m.

He claimed that without a new funding model, 2007 will be the last year in which the group managed to break even and increase creative investment.

"The tipping point we have been warning about has now been reached," he said.

Revenues were flat, after a £48.1m increase in advertising revenues was balanced out by declines elsewhere, including reduced income from premium-rate phone-in competitions after problems on 'Deal or No Deal' and 'Richard and Judy'.

The start-up costs of the on-demand service 4OD ate into the new-media division's results. Although the division's revenues increased 44% to £26.7m, its operating loss widened from £6m to £15.4m.

But there were positives, such as the fact that the digital channels collectively made a profit for the first time.

The channels, including E4, More4 and Film4, swung from a £17.6m loss in 2006 to a £16.2m profit.

Andy Duncan, chief executive, saluted the broadcaster's creative output, saying its 25th year had been a vintage one.

Channel 4 won eight Baftas on Sunday for programmes including 'Boy A', 'The Lie of the Land', 'Ramsay's Kitchen Nightmares' and 'Peep Show'.

Duncan said: "In a difficult year for television, it was a significant achievement to be able to make our highest ever investment in award-winning UK content while still managing to break even."

Comments

Fred Perkins - 23/04/2008

Hmmm. So, to maintain a position of winning awards for great programmes, Ch4 wants public funding support. Wouldn't we all like to receive handouts in order to grow our business?? It's too easy to say "We've done a few great things, but unless government throws some cash at us, we'll not be able to do as many". One has to challenge a management mindset that sees winning awards as a primary objective, while keeping the corporate head in the sand re commercial realities. If someone gives you a blank chequebook, it's pretty easy to generate award-winning content, if that's the corporate objective. But what's the value basis as to how thick the chequebook should be? Ch4 had a tremendous start, with privileged access to scarce spectrum. The world has moved on; we have hundreds of channels, and the spectrum privilege no longer is worth as much. On what basis is Ch4 saying that it - and it alone - 'needs' a new funding model from government???

Alastair Bevan - 23/04/2008

I was troubled by a strange whining noise as I was reading that article until I realised it was the sound of the world's smallest violin. Short of cash? Cut back your spending. Losing viewers? Work harder on your output. Going cap in hand to the govt at the first sign of trouble (barely months after Northern Rock) smacks of opportunism.