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Channel 4 posted its biggest deficit of all time last year in what was a chastening financial year, with content boss Ian Katz deciding to reject his bonus.
The Gogglebox network, which at the start of 2023 avoided being sold off by the government, revealed a deficit of £50M ($65M) for full-year 2023, with bosses stressing today at an annual report briefing that it had prioritized content spend over keeping the deficit down.
No Channel 4 deficits in recent years have come close to the £50M, with the previous highest being £27M in 2012. A smaller deficit is expected this year, CEO Alex Mahon and Katz said today, but the second half of 2024 in particular has still been challenging financially due in part to the government’s upcoming fall budget and its impact on consumer confidence. “We chose to prioritize content investment and record a significant content deficit in 2023 as a result,” Mahon said as she introduced the briefing. “The single biggest contribution we can make is what we spend on British IP.”
Mahon and Katz stressed that the record deficit came after three consecutive years of big surplus, which totalled almost £180M and can still be used to help with content spend and cashflow. Channel 4’s £75M revolving credit facility is also used to “manage cash flow throughout the year,” according to new finance boss Lucy Thomas. And Channel 4 is not the only British broadcaster struggling with a deficit. The BBC’s annual report revealed a near-doubling of its deficit to almost £500M recently as it announced 500 more layoffs.
“We had to change course a bit”
Channel 4 made its second-highest original content spend of all time last year of £520M, it revealed today, along with spending £663M on shows overall – both of which were down from a record 2022 but still high and meant it spent around two-thirds of its turnover on shows.
But in a year that was characterized by sour relations with indies amid the tricky financial situation, Katz said “we had to change course a bit” from what was originally planned to be splashed on content.
“We were planning a higher [content] budget and we had to change tack when the revenue picture changed,” he added. “So we commissioned more at the start of the year and less at the latter part of the year, and had to delay some content and not move forward with one or two projects. This all had tough consequences.”
Mahon added: “We still spent more than we could have done which is why we recorded such a large deficit but we had to balance that throughout the year.”
With the indie sector’s criticism front of mind, the report revealed that Katz had foregone his entire bonus for the year, while Katz, Mahon and Chief Operating Officer Jonathan Allan’s combined pay fell to a 12-year low.
Deadline had initially revealed several months back that the trio would all take bonuses – a decision that was criticized in some quarters of the indie sector as it came amid a 250-person layoff program – but Katz then decided to reject his due to the pain suffered by producers, Mahon said.
“Ian declined to take an exec bonus which we all support him in as a decision particularly because he feels close to the indie community, the complexity of last year, the downturn and what [indies] went through,” she added. “For him that was an important decision in terms of his work with indie producers.”
Mahon added that herself and Allen took “significantly reduced bonuses in line with KPIs and how the remuneration committee decided to award it.”
Mahon’s pay fell by one third to £993M last year from its record 2022 high, with Katz’s nearly halving to £481M and Allan’s dipping to £682M.
For the third consecutive year, Channel 4’s revenue topped £1B. In line with its Fast Forward strategy, published at the start of this year, digital revenue increased 10% to £280M, which accounted for 27% of total turnover. Similar digital growth is expected in 2024.
Channel 4 today promoted record streaming growth as it focused on shows such as The Piano, Big Boys and its Russell Brand exposé. It said it is the only major commercial broadcaster to grow overall viewing in 2024 so far, a fact that was being touted at the recent Edinburgh TV Festival.
Future layoffs
The “vast majority” of the 250 layoffs are now complete but there are “still a couple of little bits going on,” Mahon said, and the CEO didn’t rule out more layoffs in the near future especially in departments that focus on linear.
“We will still focus on how we manage operational costs over the next couple of years,” she added. “That linear reduction takes time and has to be done with how the audience moves.”
Commercial rival ITV has enacted a similar number of layoffs, with the majority taking voluntary redundancy.
