Channel 4 2016 Annual Report

12 July 2017

 

Channel 4 well prepared for future after second successive year of record revenues and record content investment

• Record corporation revenues of £995m (2015: £979m)
• Record British content investment of £501m (2015: £455m)
• Record delivery of public service remit metrics
• +13% increase N&R content spend and record Nations spend
• +21% increase in All 4 views to 620m (2015: 512m)
• +24% growth in digital revenues achieving over £100m for the first time
• 327 awards incl. Edinburgh TV Festival and Broadcast Channel of the Year
• 2017 commercial innovation momentum includes sale of MyBuilder.com stake for £5.9m, True North Indie Growth Fund stake sale, launch of new data-led Smart Curation and roll-out of new brand idents

Channel 4 is well positioned for the future after delivering a second successive year of growing revenues to record levels as the 2016 Annual Report published today shows. Corporation revenues totalled almost £1bn (£995m), with digital revenues making up over 10% of the total, at £102m (up +24% on 2015), for the first time.

This enabled a record £695m to be spent on programming in 2016 – up +10% on 2015 – £501m of which was original content spend on British programmes produced across the UK.

£169m was invested in content produced in the Nations and Regions – up +13% on 2015 (£149m) – with a record 55% of first-run originated programming hours produced there, significantly in excess of Ofcom’s requirement of 35%. This included a record amount £36m spent with producers in the UK Nations – up +28% on 2015. Channel 4 worked with 317 suppliers across the year (295 in 2015), including 70 which were new to the broadcaster. Film4’s budget was also boosted significantly to a record £25m (2015: £15m).

Following successive years of revenue growth Channel 4 had a very strong balance sheet position at the end of 2015 (totalling £495m). In 2016, following the advertising market going into decline following the EU Referendum in June the Channel 4 Board took the decision to deploy £15m from the corporation’s content reserves to protect remit delivery and invest in core projects such as the Rio 2016 Paralympic Games – resulting in a deliberate £15m accounting deficit. At the end of 2016 Channel 4’s overall cash reserves stood at a healthy £215m (total balance sheet £477m) – including £35m content reserves which will continue to be deployed prudently to ensure content investment is maximised regardless of a challenging ad market outlook in 2017.

A range of highly successful public service programmes were delivered in all genres across 2016 – led by the 2016 Rio Paralympic Games, which was presented by a team of which more than two thirds were disabled. Paralympics coverage reached 27m people, and both it and the We’re the Superhumans marketing campaign helped change public attitudes towards disabled people. Further schedule highlights included National Treasure, We’re Going on a Bear Hunt and Stand Up to Cancer – and a strong spine of returning series such as Gogglebox, Humans, The Secret Life Of 4, 5 and 6 Year Olds, First Dates and Hunted.

The success of this creative renewal strategy ensured that audience perceptions of Channel 4’s remit delivery reached new all-time highs, with the remit reputational trackers at their highest ever levels and Channel 4’s average lead over the other main PSBs also at a record level. It also ensured that Channel 4’s main channel viewing share was held stable at 5.9% (2015: 5.9%), and portfolio viewing stable at 10.5% (2015: 10.6%). Channel 4 won 327 industry awards in 2016 including seven BAFTA TV Awards, both Edinburgh TV Festival and Broadcast Channel of the Year, and Marketing Society’s Brand of the Year.

Channel 4’s significant increase in digital revenues – which comprised more than10% of total revenues – were driven by innovation such as programmatic trading and data-led ad products. All 4 views over 2016 were up +21% to 620m, with almost 15 million users registered with Channel 4 at the end of the year including over half of all UK 16-34s. Channel 4’s long-term sustainability was also enhanced with the continuing investments from its Indie and Commercial Growth Funds; and the success of its long-term advertising sales partnerships with UKTV and BT Sport, helping achieve record Sales House revenue of £1.2bn.

Charles Gurassa, Channel 4 Chair said: “In 2016 Channel 4 invested over £500m into independent creative businesses across the UK, helping to both stimulate growth and innovation in the sector and produce award-winning public service programming that has delivered record levels of public impact.

“As the results today show, David will be leaving Channel 4 in strong financial health and creatively at the top of its game. The Government’s recent decision to commit to Channel 4 remaining in public ownership is testament to both the commercial and creative health of the Corporation and the work that David and the wider team have done over recent years.

“I am delighted that Alex Mahon will be joining us as our new CEO this autumn. She hugely impressed all of us on the Board at Channel 4, brings an excellent track record as an experienced CEO in both the creative production and technology sectors and is a proven and respected leader.”

David Abraham, Channel 4 Chief Executive said: “The 2016 results demonstrate the scale and range of Channel 4’s creative and commercial innovation, with the second successive year of record revenue delivery underpinned by strong digital growth and our highest ever investment in UK-produced content which culminated in the exceptional delivery of the 2016 Rio Paralympic Games.

“In a few months I will be stepping down as Chief Executive and I am very proud of everything that Channel 4 has achieved over the past seven years.   I will hand over a business with a strong balance sheet and in good brand health – well positioned to successfully navigate the current economic uncertainty affecting the advertising market.”

 

2017 Commercial and Creative update:

Over the first half of 2017, Channel 4 exited from two of its SME shareholdings which generated strong returns back to the business.

In January Channel 4 successfully sold its stake in Leeds-based production company, True North, as the production company was bought by Sky. One of the first tranche of investments from the £20m Indie Growth Fund, in just two years the Fund helped secure True North’s future as the leading indie in the north of England.

Channel 4 has also sold its long term investment in MyBuilder.com to HomeAdvisor, part of InterActiveCorp (IAC), following early investment in this digital marketplace eight years ago, netting the Corporation a £5.9m profit.

The Corporation’s Commercial Growth Fund has also formed many equity partnerships in digital consumer businesses which have not previously advertised on TV and has helped several companies achieve impressive growth through Channel 4 airtime – and stimulate the UK TV ad market. One investee Eve Sleep has seen sales increase threefold since launching on TV just under a year ago and in May successfully floated on AIM.

This year saw the launch of the most personalised All 4 viewing experience yet developed using a new data science meets human curation approach. Using five years of viewing insight from All 4’s 15m registered viewers, data-driven algorithms are supported by a curated and personalised experience to ensure that new, different and diverse content is served to All 4 viewers – in a first for a public service broadcaster. This marks Channel 4’s first foray into mining viewer data for creative content following the development of its well-established data-driven commercial products.

Later this summer, Channel 4 will also unveil its next wave of brand idents – with a new set of films created by outgoing Heads of 4Creative, John Allison and Chris Bovill and the award winning director of the We’re the Superhumans campaign, Dougal Wilson of Blink Productions.

On screen, the second half of 2017 will see a number of major launches culminating in The Great British Bake Off making its debut on Channel 4 in the autumn. Other major schedule highlights include BAFTA-winning director Peter Kosminsky’s new four part-drama, The State; Electric Dreams, a new ten-part drama anthology of the work of Philip K Dick with an all-star cast including Bryan Cranston, Steve Buscemi, Timothy Spall and Anna Paquin; the Women’s European Football Championships and Paralympic World Championships; the return of hit documentary format Educating.....in Manchester; and Escape, a new factual entertainment series hosted by SAS and Mutiny star, Ant Middleton.

Access the Channel 4 2016 Annual Report here.

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