Channel 4 moves into in-house production amid flat revenue growth
Channel 4 plans to start building majority stakes in independent production companies as part of a two-pronged approach to invest in intellectual property (IP) ownership.
The broadcaster will begin developing in-house production capabilities and is launching a Creative Investment Fund, built on its existing Indie Growth Fund, to invest further in IP creation.
It follows last year’s passing of the Media Act, which removed restrictions on Channel 4’s ability to produce its own content.
Channel 4’s in-house production operation will be established as a separate company with distinct management and reporting lines.
“It’s a huge change to in our potential business model — one that we believe is essential to the long-term sustainability of Channel 4,” said chief operating officer and soon-to-be interim CEO Jonathan Allan during a presentation of Channel 4’s 2024 annual report on Wednesday.
Allan stressed that the move is “going to be very carefully managed” and “gradually” developed over time to ensure its scale “will not disrupt the market”.
As Channel 4 moves into IP ownership, it is committing to a “package of robust measures” to ensure independent producers will continue to have fair access to Channel 4 commissions.
As part of the framework, Channel 4 has published new commissioning guidelines to ensure a level playing field and has committed to publishing a new annual statement of commissioning policy later this year. Ofcom will further oversee the process.
“Because of our not-for-profit model and our high ratio of content spend, a stronger, more secure Channel 4 means a stronger production sector,” Allan argued.
Channel 4 invested £643m in content last year, down from £663m in 2023. The investment included £489m in UK-originated programming — equivalent to 62% of total revenue. It is also committing to raise its independent programming quota from 25% to 35% going forward.
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The broadcaster is actively hiring for a creative lead to head the new division. Meanwhile, Caroline Murphy, head of the Indie Growth Fund, is stepping down and will depart the business later this year.
Allan declined to commit to a specific investment figure for the in-housing effort. He admitted: “Clearly, we don’t have the funds of ITV Studios, but we’ll be investing reasonably over five to six years into this new venture.”
Revenue flat amid digital growth
In its annual earnings report, Channel 4 posted 1% year-on-year total revenue growth to £1.04bn in 2024.
Digital ad revenue rose 9% to £306m, now accounting for 30% of total revenue — a year ahead of the broadcaster’s target.
Non-linear revenue more generally now accounts for 39% of total revenue.
While outgoing CEO Alex Mahon admitted that 2024 “was not without its challenges”, she touted the progress Channel 4 has made this year on its Fast Forward strategy and its ability to “evolve what we do yet never stand still”.
The broadcaster also highlighted its streaming and social performance. Streaming views grew 13% to 1.8bn and now account for 18% of total viewing time.
Meanwhile, on social platforms, views on YouTube grew 26% year on year to 340m, with views of full episodes growing by 169% to surpass 110m. Views on TikTok and Instagram grew 81% and 25% respectively.
Channel 4’s relationship with platforms has become increasingly important as part of its Fast Forward strategy. This week, the broadcaster announced it was launching video programming on Spotify in a UK industry first. Ad revenue will be gained via revenue sharing, much like Channel 4’s model on YouTube, Allan explained.
Allan said Channel 4’s strategy is not necessarily “trying to bring people back out” of platforms like Spotify and YouTube and back to streaming and linear, although he admitted that platform revenue is currently dwarfed by that from linear and streaming.
When pressed on the long-term implications of providing programming on platforms despite the relative lack of revenue, Allan, Mahon and chief content officer Ian Katz defended the strategy.
“It’s additive, not cannibalistic,” said Mahon. “It’s also brand reach and impact on those platforms. You want people to know about you and if you’re not on those platforms, you can’t.”
According to Katz, a pattern has emerged where “it takes for a show to become a social hit for awareness to reach young audiences that the show is out there”. Once awareness reaches a certain level, audiences come back to Channel 4 to watch programmes, he suggested.
Allan added that broadcaster VOD revenue has consistently held a compound annual growth rate of between 13% and 17% in recent years, making for a “big growth market”.
“We’re keeping pace with the digital giants in terms of that,” he said, noting that Channel 4 is focused on making its streaming platform and data products “more compelling for advertisers”, including by “collaborating with our broadcast chums about building a better, more compelling platform”.
Channel 4 is set to relaunch its streaming proposition for advertisers this year, with an eye towards attracting more small and medium-sized advertisers.
Channel 4 to relaunch streaming offering as it doubles down on digital strategy