U.K.’s Channel 4 to Unveil Cost-Cutting Measures This Week as Ad Revenue Plummets

Alex Mahon Channel 4
Courtesy of Alex Mahon

U.K. broadcaster Channel 4 is understood to be preparing to announce a range of cost-cutting measures this week as it wrestles with a major slump in advertising revenues due to the coronavirus crisis.

Channel 4 is examining a range of options, which include a 20% voluntary reduction in the salaries of its executive board — which includes chief executive Alex Mahon and director of programs Ian Katz — as well as furloughing some staff during the crisis.

Channel 4’s £1.1 billion ($1.35 billion) in annual revenues have been particularly hard hit in the second quarter of 2020 as it is almost entirely dependent on advertising revenue, which has fallen dramatically as brands have slashed marketing spend during the coronavirus crisis.

As a not-for-profit publisher-broadcaster, Channel 4 has not been able to diversify into production like rival U.K. broadcaster ITV which now derives a large portion of its revenues from program-making arm ITV Studios.

Last week, ITV announced that its board and senior management will take a 20% pay cut and forgo bonuses for the year.

Channel 4’s cost-cutting measures will be announced shortly after it paid out bonuses to senior executives and staff worth a reported £5 million ($6.1 million) last month, according to a report in The Guardian. The bonuses relate to the performance of Channel 4 last year, and it is understood that the award was worth up to 10% of pay for most of Channel 4’s staff.

“Channel 4’s variable pay award for 2019 was agreed by the board in January, reflecting the strong progress made last year against corporate objectives,” a Channel 4 spokesperson told Variety. “The award was communicated to all staff in January and was committed through the payroll system in February.”

Channel 4 has also raised the prospect of tapping a £75m ($92.4 million) credit facility during a regular meeting with officials from the Department of Digital, Culture, Media and Sport and the Treasury, according to The Guardian. Channel 4 set up the facility in 2018 as a financial backstop for exceptional circumstances.

Last week, Channel 4 also joined the UK’s major broadcasters and producers to call on the government’s Culture Secretary Oliver Dowden to ensure a key group of television industry freelancers will be eligible to qualify for government support schemes during the coronavirus crisis.

In a joint letter, ITV, BBC, Sky, Channel 4, Viacom and producers trade body Pact wrote to the Culture Secretary pointing out the risk of freelancers paid through tax scheme PAYE “unintentionally falling through the cracks” of the furloughing and freelance schemes announced last week by the Chancellor of the Exchequer.

ITV pays around 400 freelancers through PAYE each month, while the number is just over 1,000 freelancers for Sky.