Channel 4 linear ad revenue down 16% after TV market recovery ‘failed to materialise’
Channel 4’s total revenue fell 10% to £1.02bn in 2023, the broadcaster revealed in its latest earnings report.
Linear advertising revenue notably declined 16% to £642m. Other broadcasters have reported a similar trend; ITV said in its March earnings that its linear revenue had dropped 15%.
Digital ad revenue did, however, increase 10% to £280m. Digital now makes up 27% of Channel 4’s total revenue (up five percentage points year on year).
In the earnings release, Channel 4 said an “initially anticipated” recovery in the TV market in the second half of 2023 “failed to materialise as business confidence remained low”.
It continued: “2023 saw extremely challenging trading conditions across the industry, with a market correction after the post-Covid boom in TV advertising translating to the deepest year-on-year declines since the 2008-2009 financial crisis.”
Channel 4 additionally posted £101m in revenue from non-advertising sources, meeting its target of achieving 10% non-advertising revenue. However, the broadcaster warned that “while we continue to develop strategic new revenue streams, 2023 saw revenues slow somewhat, particularly as a result of existing partnership deals coming to an end during the year”.
The broadcaster accrued a record £52m deficit in 2023. It recorded surpluses in both 2020 and 2021, and intentionally sought a deficit to enable investments in its digital transformation. Channel 4 says it expects a “smaller deficit” in 2024.
Despite this, Channel 4’s spending on content dropped 7% in 2023 to £663m due to “pressure on our revenues” causing a need to “implement material cost savings, unavoidably impacting on-screen spend as well as our operating cost base”.
The broadcaster said it “reset” levels of content investment after a record year of spending on content in 2022 (£713m). The cost measures have meant “rephasing on-screen delivery of certain titles” — or providing re-runs.
In a statement, broadcast regulator Ofcom nevertheless concluded that Channel 4 “performed well against its remit and media content duties in 2023”. However, it added that the broadcaster “must ensure it is investing in commissioning and programming outside London”, including through being “much more open and transparent about its impact in the nations”.
“Our planned deficit and reduced cash were the intentional results of financing our transformation from linear to digital,” said Channel 4 CEO Alex Mahon. “During this transition, we need to keep buying the different formats and genres people like to watch on linear and streaming. As a result of our investment in this transformation, we are already seeing the upside of prioritising spend on content and digital innovation.”
Mahon added that Channel 4 is “at the point where digital viewing overtakes linear across the market”, with the broadcaster’s Fast Forward strategy designed to “keep it ahead of the curve”.
Fast Forward, a five-year strategy to become a digital-first “public-service streamer” by 2030, included business restructuring efforts that have this year led to a lay-offs equal to 18% of staff, or around 200 redundancies and the closure of 40 unfilled roles. Channel 4 also previously announced that it would leave its current headquarters on London’s Horseferry Road, reduce its London headcount and enable more flexible working.
Ofcom said it recognises Fast Forward as a “positive step” but now expects “to see more detail on how these high-level strategic aims will be implemented, as well as specific targets for delivery”.
“In delivering its digital-first commissioning strategy, we also want to see Channel 4 striking the right balance between tried-and-tested programming and innovating, and taking risks on new commissions and formats,” Ofcom’s statement continued.
To help boost sales amid the digital transition, this week the broadcaster poached Spotify EMEA head of sales Rak Patel to become chief commercial officer. Chief revenue officer Veriça Djurdjevic announced her departure in July, although she remains at the broadcaster until the end of the year.
On Tuesday, Channel 4 also announced new ad innovations for its streaming proposition.
Despite the decline in revenue, Mahon accepted a £247,000 bonus for 2023. Chief operating officer Jonathan Allan also accepted a £128,000 bonus. Chief content officer Ian Katz elected to decline a 25% bonus that would have equated to around £108,000.