Digital revenues save C4 in worst-ever ads market

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The Independent Online

Channel Four said it had survived the worst advertising downturn since it was launched in 1982 by slashing costs and bringing in record profits at its digital media operation.

The broadcaster's new management team said yesterday that it recorded a surplus of £300,000 in 2009 – down from £1.8m the year before – against a backdrop of a 12 per cent fall in advertising revenues across the television industry.

Lord Burns, the company's chairman, said: "The most important factor is that Channel 4 weathered the storm in what was an unprecedented collapse in TV advertising."

Turnover fell by 8 per cent to £830.3m from £906m in 2008. The broadcaster partly offset this by cutting costs by 8 per cent to £779m. At the end of 2008, it slashed its total workforce by 23 per cent to 696.

David Abraham, who took over as chief executive in May and unveiled his vision for the future this week, said: "We have created a stable financial base that allows us to commit with confidence to a fresh round of creative and commercial innovation."

C4's programme budget was cut by £50m and Lord Burns admitted that this had "inevitably" had a negative impact on its schedules and audience share. He said: "We had no option but to make significant cutbacks in programme investment in 2009. The biggest ever annual cut to the programming budget was the correct approach but we sought to protect core public-service broadcasting."

The company was keen to highlight the improved performance of its digital operations. Its digital channels, E4, Film4, More4 and 4Music helped its pre-tax profits to grow by 43 per cent to £53.4m. The management said the digital growth largely offset a £61.6m loss on the core channel, up from £9.9m the previous year.

"Channel 4's ratings and financial stability in 2009 was underpinned by the strong performance of its digital media activities," the company said. in a statement. C4 also expanded its online operations last year, signing a landmark deal to put its content on YouTube, while hits on rose 31 per cent.

Mr Abraham said he believed that this year was looking more optimistic, adding: "2010 has started stronger than forecast. After the cuts, Channel 4 is well placed to take advantage of the improved advertising market." The company is also looking forward to life after Big Brother. The 11th and last series of the reality show;s run on C4 will free up hundreds of hours of broadcasting time.

Lord Burns said: "David has given us the opportunity for creative renewal in the wake of Big Brother."

Mr Abraham added that the end of the long-running programme offered Channel 4 the "greatest commissioning flexibility for a decade".

Lord Burns would not be drawn on the issue of executive pay, which hit £3.8m in salaries, bonuses and benefits in 2009. He said it was "important to stick to contractual arrangements".

Andy Duncan, who left as chief executive in November, saw his pay hit £1.5m last year, which included a £731,000 payment in lieu of notice. The head of programming, Kevin Lygo, who has joined ITV, received £785,000, down from £1.1m the previous year.

Mr Abraham unveiled a restructuring of Channel 4 on Monday, cutting a quarter of senior managers and giving a more prominent role to digital operations, of which he said C4 had just "scratched the surface". He added: "It's often said that linear TV is a sunset industry. I don't take that view."