Record digital profits and tight cost controls help Channel 4

23 June 2010

Financial and competitive highlights in 2009

• Surplus of £0.3m (£1.8m, 2008), with profit contribution of £53.4m from digital TV and £3m online/on demand offsetting £61.6m loss on core channel
• Total revenues down 8% to £830.3m (£906.1m, 2008)
• Advertising revenues down 10.5% to £706.7m (£789.7m, 2008), compared to TV market decline of 11.9%
• Share of TV viewing down marginally at 11.5% (11.9%, 2008) with programme spend reduced by 8%/ £50.3m to £548.3m (£598.6m, 2008)
• Costs on continuing operations down £68.2m/ 8% to £778.7m (£846.9m, 2008)

Record profits from digital media and rigid cost control helped Channel 4 achieve break-even in 2009 in the face of the worst advertising downturn in its 28-year history.

Channel 4's Report and Financial Statements for 2009, published today, reveal the not-for-profit broadcaster avoided falling into loss during the year despite experiencing an unprecedented drop in its TV advertising revenues, which fell more than 10% year-on-year to £706.7 million against a decline for TV advertising as a whole of nearly 12%.

In response to adverse market conditions, which led to an 8% decline in overall turnover to £830.3m (£906.1m, 2008), the Corporation also reduced costs on continuing operations by 8% or £68.2m to £778.7m (£846.9m, 2008).

This included cutting spend on programmes and content by 8% or £50.3m year-on-year to £548.3m, but the impact of this enforced cutback was successfully mitigated, with share of total TV viewing down just 3% to 11.5% (11.9%, 2008).

Channel 4's ratings and financial stability in 2009 was underpinned by the strong performance of its digital media activities. The Corporation's digital TV channels - E4, Film4, More4 and 4Music - grew their combined share of total TV viewing by 9% to 4.1% and bucked the market trend to increase revenues by 4% or £6.3m to £181.3m (£175m, 2008), delivering a 43% increase in profit before tax to £53.4m (£37.4m, 2008).

The Future Media division also performed robustly, with revenues dipping just 2% or £0.6m to £32.8m (£33.4m, 2008). A decline in display advertising online was offset by improved revenues from video-on-demand service, 4oD, which delivered a 60% year-on-year increase in full length programme views to 218 million, contributing to a 31% year-on-year increase in visits to channel4.com and e4.com to 230 million. Savings on platform costs helped to deliver a profit before tax of £3m against a loss of £7.3m in 2008.

Profits from digital largely offset a loss of £61.6m on the core channel (£9.9m loss, 2008), which experienced a 14% or £93.6m decline in revenues to £575.1m (£668.7m, 2008).

The Corporation's average monthly headcount was 23% lower year-on-year at 696 (905, 2008) as a result of a redundancy programme in the fourth quarter of 2008, which contributed to an £8.7m year-on-year reduction in employment costs in 2009.

Group Finance Director, Anne Bulford, who was Acting Chief Executive from October 2009 to the start of May 2010, said: "These results clearly demonstrate the value of Channel 4's long-term investment in making our content available digitally and the tight controls we have exercised over costs."

Chief Executive, David Abraham, added: "It's credit to everyone working here that Channel 4 has come through such a sharp downturn with our share of advertising revenues and ratings and our cash reserves intact and that we've continued to deliver creative excellence despite having significantly less money to spend on content. We have created a stable financial base that allows us to commit with confidence to a fresh round of creative and commercial innovation, renewing Channel 4's schedules post Big Brother and positioning ourselves to take advantage of the opportunities that arise from the ongoing convergence of television and other media."

Public Impact Report
The 2009 Review includes a second annual public impact report, giving a detailed assessment of Channel 4's delivery against its public service purposes during the year.

Giving an overview of this report, Channel 4 Chairman, Lord Burns, said: "We had no option but to make significant cutbacks in programme investment in 2009 and this inevitably resulted in some dilution of our public impact. But what is clear from this report is that Channel 4 continued to make a very significant contribution to the range and quality of British television during the year and to the UK creative economy. Our public impact report demonstrates that in the eyes of viewers Channel 4 has maintained its distinctiveness and in many cases has enhanced its key public service reputations." 

Measurable outcomes in the public impact report for 2009 include:

• £373m spent on UK originations (£431.7m, 08), including £291.6m on qualifying independent productions (£331.2m, 08) from 275 companies (300, 08)
• £117m spent on first run originated content from production companies based outside London, a 1% increase on 2008, representing 37% of total spend on originations on 45% of originated hours
• £145m spent on key public service genres, 5% less than in 2008
• 272 new/one-off programmes (6pm-midnight), just 1% less than 2008
• 257 hours of long-form news & current affairs in peak, 3% less than in 2008 but still more than any other channel
• 271 hours of first run documentary across Channel 4 and More 4, a 5% drop on 2008
• 114 hours of first run originations covering diversity issues, a 4% increase on 2008

Creative highlights across Channel 4's network in 2009 include recent BAFTA winners Dispatches: Terror in Mumbai, The Inbetweeners, Inside Nature's Giants, Misfits, Red Riding and The Unloved, as well as Britain's Forgotten Children, Cast Offs, Christianity: A History, The Family, The Force, The Hospital, Katie: My Beautiful Face, Race: Science's Last Taboo.  Key initiatives in digital media include interactive games 1066 and Routes, which attracted 10 million and 19 million plays respectively.