Channel 4’s chief executive has said the TV industry is reeling from the worst advertising downturn in 15 years, forcing the state-owned broadcaster to consider tapping an emergency £75m credit facility next year.
Alex Mahon said that Channel 4 expects the traditional TV ad market to slump by 14% this year, which will see the broadcaster move to a loss in each of the next two years.
“We are in what I would call market shock territory,” said Mahon, speaking to the House of Commons culture, media and sport select committee of MPs on Tuesday. “This level of advertising fall has only been deeper during the 2008 recession.”
Channel 4 reported a third successive overall “profit” in 2022 – a pre-tax “surplus” of £20m – as Mahon took home the highest annual pay and bonus package for a chief executive in the broadcaster’s 40-year history.
However, Mahon said the dire state of the traditional UK TV ad market, which is not being bridged by a 14% increase in digital advertising on its Channel 4 streaming service, means management will have to consider a request to tap a £75m credit facility in meetings with officials from the Department for Digital, Culture, Media and Sport and the Treasury next year.
“We all expected a hard year but we have not seen the predicted recovery in the second half or the fourth quarter,” she said. “As a result our performance will be affected this year and we will have a deficit this year. I imagine for next year we will look at how to use that debt facility.”
To cope with the advertising downturn Channel 4, which spent a record £730m on original and acquired productions last year, has cut back on commissioning to stretch its budgets.
“We have had to adjust our costs,” she said. “We have slowed down [spending] on projects, technology and content as a reaction to the ad market. Although we are still buying [shows from producers] we are buying at a slower place than we normally would be at this time of year. It is really difficult for producers.”
Channel 4 set up the facility in 2018 as a financial backstop for exceptional circumstances and last considered tapping it at the start of the coronavirus pandemic in April 2020.
Mahon rejected the assertion that Channel 4, which the government has repeatedly considered privatising, might need “state subsidies” to survive in the future.
“I don’t think we will be depending on state subsidies, it is the normal course of business for us [to look at using the credit facility],” she said. “I don’t forsee that. Over the past 10 years in six we have had a surplus and four years a deficit. The past three years we have had unprecedented surpluses. This year and next year will be a deficit. We are exposed to the ad market. The cycle of surpluses and deficits is completely normal for Channel 4 and I don’t see that changing.”
Asked about widespread rumours that she may depart after a six-year stint running Channel 4, amid speculation about roles at Google and the fashion house Chloe, Mahon said she was not leaving.
“I will stay as long as I am relevant to the business but I don’t think anyone is relevant to the business forever,” she added.
