British broadcaster Channel 4, led by CEO Alex Mahon, reported a record full-year 2023 loss of £52 million ($68 million) in what it called a sharp and “prolonged” advertising downturn that has saw UK advertising revenue decline by 9%, partly due to a correction following the post-COVID boom, as well as a “strategic decision” to continue investing in digital transformation and to continue investing in original content. But in its annual report and a related news conference, the public service broadcaster forecast a narrow deficit for 2024 and a return to breakeven “in the medium term,” while also touting signs of success in its digital push.
During Tuesday's press event, Mahon emphasized that “it's a record [deficit] but I would like to remind you of the years of record surpluses.” Indeed, after the loss in 2019, Channel 4 reported a surplus in 2020 of £74m, followed by a surplus of £101m in 2021 and a slight surplus of £3m in 2022.
The chief executive also touted digital gains on Tuesday, pointing out that Channel 4 last year managed to increase its overall viewing minutes slightly, by 1%, as digital growth outpaced linear decline, making it “ the only major commercial broadcaster in the UK to do so.”
2023 revenues topped £1.0 billion ($1.3 billion) for the third consecutive year, “representing a resilient economy”.
performance in a year of significant advertising downturn,” said Channel 4. Mahon touted a 10% increase in digital revenue to £280m ($367m), equivalent to 27% of total revenue, which the CEO said it is “way ahead of the market”.
A chart shown by Channel 4 management on Tuesday highlighted “the acceleration of digital success in 2024”, with streaming viewing minutes set to rise 15% from 55.9 billion in 2023 to 64.2 billion, views streaming up 6% from 1.6 billion to 1.7 billion, Channel 4, streaming viewing will increase 15% to 18% and digital advertising revenues will increase from 27% in 2023 to 30% in 2024 , one year ahead of the original target. The broadcaster's goal is to reach 50% in 2030.
COO Jonathan Allan said current levels are already “significantly higher” than what one chart lists as an average of 10% digital advertising revenue at UK and international commercial broadcasters. With non-advertising revenue accounting for 10% of total revenue, it also highlighted that 37% of Channel 4's total revenue now comes from sources other than linear advertising, up from 33% in 2022.
Channel 4's total investment in content was £663m ($868m), or 65% of revenue, which Allan said was “higher than key commercial rivals”. The total spending figure included £520 million ($681 million) for original content, the company's second-highest figure ever.
“We've seen a more stable advertising market this year than last year,” Chief Financial Officer Lucy Thomas told reporters at the same event. “However, factors such as high interest rates, the cost of living and low business confidence also continue to influence the television market. The story so far is of a brighter first half followed by a more challenging second half, … with uncertainty over the impact of the autumn budget statement [expected soon] impact consumer confidence. So the forecasts this year are rightly cautious. Industry forecasts suggest the full year will be slightly up.”
Channel 4 expects total revenue in 2024 to be “broadly in line with last year, despite the challenging market, digital advertising revenue is expected to achieve double-digit growth again this year, offsetting the linear decline”. If you add continued investment in digital transformation and continued investment in UK content, “there will be a deficit in 2024, albeit smaller than in 2023,” the CFO concluded.
Earlier this year, Channel 4 unveiled a five-year strategy titled “Fast Forward” to reshape itself and “accelerate its transformation into an agile, genuinely digital public service streamer by 2030”. Proposing to reduce headcount by 18%, including around 200 layoffs and closing around 40 vacant roles, it said in late January that “around 70% of the closed roles would result from legacy operations”. He added: “This would bring headcount back close to 2021 levels, but with the organization in the right shape to deliver further digital growth and lead public service media into the future.”
Channel 4 CEO Alex Mahon
Courtesy of Canale 4
Asked whether there would be further job cuts, Mahon said the broadcaster had overcome “the vast majority of redundancies” announced earlier this year, but would keep an eye on possible cost cuts amid linear decline.
“In 2024, we embarked on the next phase of Channel 4's growth with a robust and ambitious plan
strategy for the future and we have seen a stabilization of the advertising market,” said Mahon. “We are also at the point where digital viewing outpaces linear viewing across the market,” he added, highlighting predictions for digital viewing in the UK to reach 52% this year. “By further committing to our digital transformation with our Fast Forward strategy, we are keeping Channel 4 at the forefront and protecting its ability to continue to deliver trusted and distinctive content to British audiences,” he concluded.
The Channel 4 team has mentioned further details about its push towards digital. “Digital advertising shows no signs of slowing down and, if anything, what we see is that advertisers really appreciate what we would call video on demand from broadcasters because it's high quality, it's viewable and it's sitting alongside very good content,” he shared Mahon. “So we see the demand for this is increasing. … There is also no sign that viewers are rejecting advertising. People still like freedom. Digital natives are used to it, so the younger ones are completely taken by it and do not reject it. You see it on TikTok, you see it on YouTube.
Overall, he described the move to becoming a digital broadcaster and diversifying the business beyond traditional revenue sources as the key dual transformations for his team, with Channel 4 being further along in the digital shift.
“We need to make sure we distribute content in all the ways that young people want to view, and that's why YouTube is really interesting for us because it offers additional reach,” Mahon further emphasized. “We're getting viewers who don't come to broadcasters' platforms.”
Since “a large part of young people's day is spent watching social and short-form videos,” “we have made social media a priority,” he also pointed out. “In 2023, Channel 4 was the biggest [U.K.] a commercial social media broadcaster, and by 2024 we have developed more than 200 hours of Channel 4 programs published on YouTube every month.”
Ian Katz, Channel 4's Chief Content Officer, added that “we are the only British broadcaster to regularly make full episodes of our content available on the platform immediately after [their premiere]and this year we have seen a 300% increase in viewership of these programs. Overall growth in YouTube views for Channel 4 will reach 50% this year, he said, concluding: “We are at the forefront of social media.”
Boris Johnson's former Conservative Party-led government had considered a possible privatization of Channel 4 a few years ago, but then abandoned the idea amid much opposition from the industry. Asked by a reporter whether Channel 4 would perhaps be open to a joint venture or other partnership suggested by the government, now led by the Labor Party, to give the broadcaster more scale and resources, the chief executive dismissed such ideas. “We don't want the government to do anything,” Mahon said. “We are not looking for the government to assist us.” And he stressed: “Being independent is what we think gives us the most advantageous advantages” to do what is needed to transform the business.