C4 boss pleads for help to pay for switchover

Channel 4 has announced that it has made record profits of £48.5m, but warned it would still need millions in public subsidy if it is to survive digital switchover.

The broadcaster pledged to plough an extra £50m into programming in 2006 as advertising growth boosted its turnover last year by 6 per cent to £894m.

But despite its short-term riches, Andy Duncan, the chief executive, said the company still faces a shortfall in an increasingly competitive multichannel world, in which people can skip commercials using personal video recorders.

He added that he expects the BBC to fund part of Channel 4's costs in digital switchover, including masts and transmission, which could mean up to £70m of licence-fee money being diverted to Channel 4 over the next five years.

Mr Duncan unveiled a three-pronged strategy, which focuses on developing its digital channels, More4, E4 and FilmFour, and spending more on new media, including mobile television and broadband, as well as maintaining the strengths of its core terrestrial channel.

Luke Johnson, the chairman, warned: "We want to be able to expand and innovate rather than stagnate and that's the risk if we get no form of subsidy." Executives also defended paying large sums to celebrities such as Jonathan Ross, whom they are trying to poach from the BBC.

The extra programming budget gives Channel 4 deep pockets to negotiate a deal with Ross, whose contract with the BBC expires next July. ITV is reported to have offered the television and radio presenter a £15m three-year-deal to jump ship from the BBC and Channel 4 is believed to have matched the offer. Insiders say that Ross, who has been offered £12.5m to stay at the BBC, would prefer to move to Channel 4 than ITV.

If Ross accepts, he would sit at the top of a super-league of presenters on multi-million pound deals. Channel 4 recently poached Paul O'Grady from ITV for £3m, while Noel Edmonds is paid £1.3m to host the hit game show Deal or No Deal.

Kevin Lygo, Channel 4's director of programmes, defended paying high sums to "talent". He said: "On individuals getting paid a lot of money, they have always been paid a lot of money. The prices always go up. If you want certain people, you have to pay a price." If Ross joined Channel 4, he would present a similar program-me to his BBC1 chat show and would be able to continue his BBC radio show.

"I've worked with Jonathan over the years and he's at a renegotiation point at the BBC," Mr Lygo said. "He's doing what he should do, talking to everybody. ITV has made an enormous offer, apparently. We'd be interested in keeping him being the best at what he does. That's what a discussion would be about - is there any point changing it if it isn't broken? It's a moment when the BBC has to decide whether to renew his contract."

According to Channel 4's own surveys, it is perceived by viewers as the most innovative of all the terrestrial broadcasters. But Mr Lygo admitted that poaching Paul O' Grady from ITV to share the teatime slot with Richard & Judy was not an innovation. O'Grady's new show is remarkably similar to his ITV series.

Channel 4 is also poised to overtake ITV by attracting a higher share of the key 16- to 34-year-old viewers across its portfolio of digital channels, the chairman, Mr Duncan, said.

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