Channel 4 declines as digital show growth

Channel 4 Group took its highest ever share of the advertising market last year despite a lacklustre performance from the flagship channel. The group took a 24.1% share of the ad market, driven by its digital channels, as Channel 4 grew by just 1.9%, lower than the 3.2% growth of the overall market.

The main channel’s slow advertising growth is coupled with an 11% decline in ratings to 8.7% compared to 9.8% in 2006. The drop is attributed to a changed in ITV1’s afternoon schedule and lower ratings for flagship summer show, Big Brother.

The group says the decrease was offset by a 35% increase in ratings for E4, More4 and Film4 although it still recorded a drop for the group overall from 12.1% in 2006 to 11.9% last year. The digital channels were also collectively “in the black” for the first time as predicted in Marketing Week (MW October 11). The channels reported an operating profit of £16.2m compared to a loss of £17.6m in 2006 but this did not stop the group’s pre-tax profits plummeting from £21.3m to £1.6m.

The group turnover was flat for the year with the £48.1m increase in advertising offsetting a fall in revenue from rights and other sources such as reduced income from premium rate services.

Meanwhile, its New Media division saw revenues grow by 44% to £26.7m although it recorded an operating loss of £15.4m compared to a loss of £6m in 2006. It says this was due to the launch costs of its video-on-demand (VOD) service, 4oD.

Despite the mixed results, the group says that it “rose above difficulties across the UK TV industry” to deliver record creative investment. It increased its spend on programme and content by 3% last year to £624m.

Channel 4 chairman Luke Johnson says: “2007 will be the last year in which Channel 4, under its current funding model, managed the difficult balance between increase creative investment and financial break-even. The tipping point we have been warning about has been reached, with the core channel now in deficit and being supported by profits from secondary activities.”