Channel 4 boss Alex Mahon has agreed to delay the over £100,000 bonus after cutting the production budget. Credit: Leon Neal/Getty Images Europe
Channel 4's senior executives must have been in a festive mood after dinner at a London hotel.
Led by CEO Alex Mahon, the public broadcaster was swept by success – and relief – after emerging victorious from the battle with privatization.
Nevertheless, according to one of the participants, the dinner was hardly a celebration. Instead, the head of the broadcast department was focused on what would happen next.
Mahon's reluctance to open the champagne now seems prudent. Just a few months later, Channel 4 has experienced a slump in advertising that has seen it clash with production companies.
At the same time, the youth channel has experienced a slump in traditional viewing figures as it tries to ramp up its streaming capabilities in complex transition to the digital age.
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The latest crisis has caused another headache for Mahon and other senior executives as the company prepares to release its financial report. accounts this week.
At the same time, it raises fundamental questions about Channel 4's strategy and what role it will play for itself in the era of streaming.
“It's quite a sobering a reality check of how the world can evolve,” says John. McVeigh, CEO of Pact, which represents independent manufacturers. “It's not always sunny at the top.”
At the heart of the new crisis is the slowdown in advertising growth that is hurting the commercial television sector. Enders Analysis expects the advertising market to fall by 10% in the first half of the year.
While the downturn has also affected competitors such as ITV, Channel 4 is more vulnerable due to lack of in-house production. facilities. Advertising generated 91% of revenue in 2021.
The ad slump forced Channel 4 to drop programs like SAS: Who dare to win. Image Credit & Copyright: Pete Dadds/Channel 4
As a result, the TV company was forced to cut its programs. The reality shows “Four Weddings” and “SAS: Who Dare Wins” were cancelled, as was the daytime series “Kirsty's DIY Christmas”.
In a message to producers earlier this month, Jan Katz, director of content, acknowledged that Channel 4 had failed to predict the depth of the advertising decline and said the broadcaster would receive “relatively small commissions over the summer months.”
However, there are glimmers of hope: last week, Channel 4 announced an extension of its agreement with Sky to provide free-to-air Formula 1 broadcasts until 2026.
Channel 4 has now accepted a pay-as-you-go model for production companies to alleviate problems with cash flows.
At the same time, the channel is facing a decline in traditional TV viewing. Audience share fell to an all-time low of 4.48% in May. Data from ratings agency Barb shows it reached 35.8 million people, up from over 39 million a year ago.
For Channel 4's bosses, this decline in so-called “linear” viewing is inevitable as the company places more importance on streaming.
April saw a record 5 billion minutes of Channel 4 programming, a 20% increase . last year, helped by shows including Married At First Sight Australia.
A Channel 4 insider downplayed cancellation concerns, saying many of them were unrelated to the cyclical downturn in advertising.
A spokesman for Channel 4 said: “Now our ownership model has been resolved, Channel 4 is focused on its future and prioritizing digital growth to be where our audience is.”
“Our role, outlined by Ofcom and expanded in an agreement with the government in January, is to serve youth. Our strategy is to meet their needs, and our digital transition is faster than any other broadcaster with double-digit growth this year.”
But the crisis has put Channel 4 in direct conflict with independent production. the sector that so vehemently defended it from privatization.
Stocking up on programming during a post-pandemic production boom, Channel 4 imposed an effective freeze, prompting accusations that it was mishandling the show's supplies.
Pact's McVeigh says, “I wish all commercial broadcasters, not just Channel 4, would just be more open about what the economic landscape looks like for their suppliers and freelancers.”
Many producers are reluctant to talk about the situation on Channel Four, fearing that this would ruin an already strained relationship. As one source put it, “It's all a little shit.”
It faces further production challenges as Liberty Global, ITV's largest shareholder, is a likely challenger for All3Media, Britain's biggest independent television producer. The company behind Hollyoaks Channel 4 is up for sale for around £1bn.
The complication is that the focus is on executive salaries and expenses at a time Channel 4 cites to financial problems. .
Mahon, along with Katz and COO Jonathan Allan, have already agreed to defer more than £100,000 in bonuses.
Tom Harrington of Enders Analysis says: “Given its structure and role, Channel 4 is in for a tough spot, but there are times when it could probably be a little more street-smart.”
More importantly Channel 4 is facing questions about its commission choices as it harasses youth viewers on social media. media platforms such as TikTok and Snapchat.
Sluggish acceptance of recent bookings has boosted old shows like Great British Bake off. Credit: Mark Bourdillon/Channel 4
Some recent bookings have been seen as gaffes, including Rise and Fall, a reality show hosted by Radio 1 DJ Greg James, which required significant production costs but was lukewarm.
Instead, the channel is still dependent from a small number of shows such as Gogglebox and Great British Bake Off.
“Channel 4 has seen fewer new shows in recent years than its direct competitor,” says Harrington. “Essentially they are relying more on older content.”
The Drought highlights the difficulties Channel 4 faces as it targets a younger audience – a key tenet of its expertise when it was created under Margaret Thatcher . in 1982.
As the broadcaster experiments with new formats such as short shows that can go viral, it risks missing out on the types of programs that have a broader, more culture-defining appeal , like “Derry Girls” and “It's a Sin.”
One TV industry source says, “When it comes down to it, TV is a hit business, and if you don't have anything for a while, turns out it starts to matter.
Thus, for Makhon, the victory in privatization was only the beginning. After a costly and distracting struggle to survive, Channel 4 is now grappling with a perilous transition into an era of streaming that will define its offering to the youth audience of the future.
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