Figures for 2010 boosted by ad market upswing as broadcaster warns revenue looks flat for coming year
Channel 4 increased its profits from �300,000 to nearly �40m in 2010 thanks to a big upswing in the advertising market, but warned revenues for the coming year looked flat.
The broadcaster's total revenue increased 12.6% to �935.2m in 2010. Operating profit rose to �49.3m from �3.9m the previous year, with profit after tax of �38.6m, up from just �300,000 in 2009.
Channel 4's main network continued to lose money, albeit sharply reduced on the previous year; the loss for 2010 was �7.7m, down from from �59.4m in 2009, according to the broadcaster's 2010 annual report published today.
Digital TV business 4Channels, which includes E4, Film4, More4 and 4Music, continued to perform strongly, with revenues up �23.3m year on year to �204.6m. But operating profit at 4Channels was only marginally up at �54m, with higher digital distribution costs blamed.
The Channel 4 chairman, Lord Burns, said the growth in advertising revenue last year was "more significant than anyone had expected". Burns added that TV audiences had been "relatively unaffected" by digital media, but warned it was an "intensely competitive environment".
"On the other hand we also believe that our recent robust commercial performance coupled with prudent financial management during the last few turbulent years does mean we are in a good position to face the challenges and the opportunities of the future," he said.
Channel 4's share of the audience across all its TV channels was 11.4% in 2010, down 0.1 percentage points on 2009. The main network and its timeshifted sibling, Channel 4 +1, were also down, from 7.4% to 7.0%, offset by a strong performance by the digital services.
The broadcaster spent �50m more than it had expected on content in 2010, up �32m year on year. The majority of this went on US drama Desperate Housewives and other acquired programming, which accounted for �152.2m of its spending compared with �123.7m in 2009.
Spending on original programming from independent producers fell from �291.6m to �269.2m.
Channel 4 also increased the amount of cash it holds in reserve by �49.5m over the course of the year to �261.2m.
Burns said a working cash reserve of around �200m was necessary, leaving a "transitory surplus" of �50m to �60m which the broadcaster would spend on content and "key strategic objectives" in the years ahead.
The Channel 4 chief executive, David Abraham, described 2010 as a "year of transition" with a new management team and the axing of Big Brother.
He admitted much-hyped Notting Hill-set docusoap Seven Days "didn't take off", but said it was a consequence of being a broadcaster "taking creative risks that others don't" and said Channel 4 would learn from it in the future.
He said the decline in Channel 4's audience share was similar to that suffered by BBC2 and ITV1, a "result of the structural change going on around digital switchover which is now nearing completion".
Abraham said the advertising market in 2011 "will clearly not be as strong as 2010, we already know that. "We are currently tracking around flat year to date," he added.
He said Big Brother was a "once in a decade" hit and he was not looking for a single like-for-like replacement. "I would rather have three things that worked that way rather than one on which we are reliant," he added.
He predicted there might be "ebbs and flows" in Channel 4's performance over the next few months but said: "We are not going to give up overnight."
"We are in this for the long term," he added. "I am not expecting a decline [but] I am realistic about what concentration of new shows is required to recover the share we have lost in certain day parts. This is the exciting thing about television, this is why we are here."
Of the extra cash in Channel 4's coffers as a result of a buoyant 2010, Abrahams said: "I didn't want to spend it just for the sake of it. If you get a few extra million coming in every month you have to be prudent with it."
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Source: http://www.guardian.co.uk/media/2011/may/11/channel-4-profits
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