The Stage

Channel 4 reaches ‘tipping point’ chairman warns

Published Wednesday 23 April 2008 at 12:10 by Matthew Hemley

Channel 4’s main channel has recorded an operating loss for the first time since 1992, according to the broadcaster’s annual report issued today.

The report said programming costs in 2007 “increased more rapidly” than revenues, leading the flagship channel to make losses of £7.8 million, which Channel 4 said was its core channel’s “first annual deficit since 1992”.

Ratings for the main channel also fell 11% to 8.7%, which Channel 4 said was the result of a decline in afternoon performance after ITV1 moved CITV out of its schedule, and lower ratings for Big Brother.

Luke Johnson, chairman of Channel 4, said the broadcaster had reached “tipping point” and said the results proved that a new funding model was required in order to maintain “such impressive levels of public service plurality in competition with the BBC”.

The broadcaster has persistently warned that new funding is needed to replace the increasingly redundant analogue spectrum it was “gifted” when Channel 4 was launched.

Johnson said: “2007 will be the last year in which Channel 4, under its current funding model, manages the difficult balance between increased investment and financial break-even. The tipping point we have been warning about has been reached, with the core channel now in deficit and being supported by profits from secondary activities.”

Elsewhere in the report, Channel 4 said 2007 had seen programme and content spend across the group rise to an historic high, reaching £624 million, compared with £608 million in 2006.

It said more than £400 million was invested in commissioning original UK content, with “the lion’s share being spent with UK-based independent producers”.

The broadcaster showed more than 350 new programmes in peak time during the year, which it claimed was more than any other channel and twice as many as ITV.

Its annual share of all TV viewing was 11.9%, with digital channels E4, More4 and Film4 increasing their collective share of all TV viewing by 35%.

In 2007, 26% of all viewing of Channel 4’s channels was to its digital services, which Channel 4 said made them the “most successful digital portfolio of any terrestrial broadcaster”.

The digital channels made an operating profit of £16.2 million, putting them into the black for the first time.

Meanwhile, Channel 4’s new media division recorded an operating loss of £15.4 million, which it blamed on the start-up costs of its video-on-demand service, 4oD.

Overall, group turnover was flat.