Channel 4 slashes costs as TV ad market drops more than 50% in April and May

Broadcaster will cut content budget by £150m and furlough 10% of staff.

Channel 4: reducing marketing budget
Channel 4: reducing marketing budget

Channel 4 has warned the TV ad market will be down "in excess of 50%" in April and May and outlined a raft of cuts, including slashing its content budget by £150m and furloughing 10% of staff, as a result of the coronavirus crisis.

The state-owned commercial broadcaster has around 950 staff and it is understood that close to 100 people are likely to be furloughed.

Channel 4 relies heavily on ad sales for the vast majority of its revenues  upwards of £900m a year of its near-£1bn turnover.

Two months of ad sales could equate to nearly £150m in revenue and a 50% plunge would mean potentially losing in the region of £75m.

Channel 4 said it will cut its annual content budget by £150m, with £95m of "further savings targeted across the organisation", including "a reduction in marketing budgets".

The board of directors is also taking a 20% pay cut and bonuses for executive directors have been suspended.

Campaign previously reported that the UK ad market was facing a drop of 50% in April.

"Channel 4 has prudently managed its finances over successive years and is well-equipped to navigate normal cyclical pressures on the advertising market, but the unprecedented impact of this crisis on the worldwide and UK economy has had a severe effect on the demand for advertising in the UK – with the TV ad market set to be down in excess of 50% over April and May, and limited future visibility," the broadcaster said.

"Therefore, we have today outlined a number of immediate financial measures which, taken now, will enable us to successfully navigate through the crisis and protect Channel 4’s ongoing ability to serve its audience and invest in the UK creative industries."

Alex Mahon, Channel 4’s chief executive, said the broadcaster has "demonstrated the importance of its role" during the coronavirus crisis with rising viewing figures in both linear TV and online.

"However, as a commercially funded business, the Covid-19 outbreak has had a severe impact on our advertising revenues, and so we are taking action now to manage our costs appropriately and ensure that we both protect our staff and our ongoing ability to serve our audience," Mahon said.

"We know that these are exceptionally challenging times for everyone in the UK, particularly many of the producers, talent and freelancers we work with across the television and creative industries, and we are committed to safeguarding our long-term ability to invest in distinctive and challenging content and create jobs and opportunities in the sector across the UK."

Maggie Brown, author of forthcoming book Channel 4: The Story from Big Brother to The Great British Bake Off, said: "Channel 4 has been well-run and well-managed, but the model is inherently problematic because of its almost complete dependence on advertising – more than 90% of revenues." 

She added that the broadcaster’s finances have been stymied to an extent by legislation that means it does not own the rights to its programmes, which are held by independent production companies.

"Channel 4 hasn’t got a bank of rights to draw on [financially] and doesn’t get a payback from taking a creative risk on a show like Catastrophe," Brown explained.

The timing of the ad slump has been "unfortunate", because Channel 4 has been spending heavily in the past year on opening offices and relocating staff outside London, but there could also be a bounceback, according to Brown.

"What is clear from the 2008-09 recession is that advertising came back fast," she noted.

Channel 4’s sales house, 4Sales, also looks after third-party sales for BT Sport and the former UKTV portfolio.

Together with Channel 4’s own channels, they represent as much as £1.2bn or about a quarter of all TV ad sales in the UK.

Channel 4 has cut late booking charges over the next three months and reduced its advanced booking deadlines from eight to four weeks, as it looks to support advertisers, encourage advertising and protect its own revenue from the impact of the coronavirus pandemic.

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