Channel 4 slips into the red

Station saved by digital bouquet

LONDON — Channel 4, Blighty’s edgy pubcaster, has posted its first operating loss since 1992 — and predicted a gloomy financial outlook in a deteriorating advertising market.

The core channel recorded an operating loss of £7.8 million ($14.8 million) for the year to December 31, but revenue from the outfit’s suite of digital channels — in the black for the first time — helped lift Channel 4 to a net profit of £0.5 million ($950,000).

The chairman of the state-owned station, Luke Johnson, warned that Channel 4 had reached a “tipping point” that would result in the broadcaster having to abandon its public service remit unless the British government agreed to give it a subsidy.

He said: “2007 will be the last year in which Channel 4, under its current funding model, manages the difficult balance between increased 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 from secondary activities.”

Channel 4 would only be able to be to continue to compete with the BBC if the public purse provided the station with extra coin, he added.

Johnson and CEO Andy Duncan are lobbying for around $300 million a year — likely to come from the BBC license fee, paid by all U.K. TV watching homes.

They claim this sum will offset the damage done to Channel 4 in a fragmented, all-digital TV market place — and predicted that the main channel’s ratings would decline more steeply as digital switchover took effect.

But at a press call, questions were raised over whether the broadcaster genuinely needs the money — and if its financial case stands up to close scrutiny.

Attention was focused on Duncan pocketing a loyalty bonus, which had resulted in his pay packet almost doubling from $1.18 million in 2006 to $2.28 million last year.

Johnson defended his chief executive’s remuneration package. He said Duncan had defied gravity by keeping Channel 4 in such good financial shape during challenging times.

Ratings for the core channel, Channel 4, dipped by 11% in 2007, a year marred by a row over racism in “Celebrity Big Brother” and abuses of phone competitions, which led to regulator Ofcom fining the station $2.85 million.

Sales were $1.808 billion, a small increase on $1.78 billion in 2006.

A record $1.18 billion was spent on programs, a level likely to be unmatched in the near future as budget cuts take effect, said Duncan.

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