Channel 4 says it has reached the “crossover point” between linear and digital viewing despite its biggest deficit in its history.

While digital ad revenue increased by 10%, rising from £255m in 2022 to £280m in 2023, linear ad revenue fell 16% from £766m to £642m, according to its 2023 annual financial results released today (8 October). Digital now accounts for 27% of total revenue.

At the start of this year, the business launched its ‘Fast Forward’ strategy, aiming to become a digital-first public service streamer by 2030 and claims it is on track for digital revenues to hit 30% in 2024.

However, the broadcaster reported a 10% year-on-year decrease in total revenues to £1.02bn last year, down £120m from 2022. According to Channel 4 CEO Alex Mahon, the £52m deficit was the “intentional result of financing our transformation from linear to digital”.

We’re going through those two transitions at once: diversifying the business and switching it to digital.

Alex Mohan, CEO

“We chose to prioritise investment in content and recorded a significant deficit in 2023 as a result,” Mahon said at a media briefing this morning, noting that surpluses and deficits are part of the “natural ebb and flow of Channel 4’s unique model”.

The broadcaster’s chief operating officer Jonathan Allan said last year the TV ad market “suffered its steepest decline since the financial crisis of 2008”, with Channel 4 ending the year 9% down.

But Channel 4’s CFO Lucy Thomas noted that this year has been a more “stable advertising market” than last. However, factors including high interest rates, the cost of living, and low business confidence continue to affect the TV market.

In 2024, the company expects its total revenue to be in line with last year, while digital ad revenues are expected to achieve double-digit growth.

“As a result of our investment in this transformation, we are already seeing the upside of prioritising spend on content and digital innovation,” she said.

Streaming

Channel 4’s streaming views reached 1.6 billion in 2023, up 14% from 2022, and is set to surpass 1.7 billion in 2024.

Streaming minutes also rose 23% in 2023 to 56 billion and made up 15% of total Channel 4 viewing. Its streaming performance from January to August 2024 was also up 25%.

Mahon noted that in 2017, digital viewing made up 22% of the market total, and live TV dominated at 78%. But this year, “digital overtakes linear in the market”. She said that because its audience skews younger, Channel 4 is prioritising digital to ensure it is “ahead of the competition”.

Mahon also discussed its digital-first brand, Channel 4.0, noting it had 160% growth in UK audiences.

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“We’re going through two transitions at once: diversifying the business and switching it to digital. We’re more ahead on switching it to digital, but I don’t think we need a different structure of organisation to do that,” Mahon noted. “We do need to make sure that we distribute in all the ways that young people want to view content.”

Looking ahead, Thomas said the three key areas for the remainder of the year will be its continued investments in British content, its digital transformation, and its “continued sharp focus on operating costs”.

“As we go into the final quarter of the year, we have a clear strategy focused on the content we need to drive our streaming and social growth, maintain our linear share and deliver our written content,” Mahon added.

Restructure and advertising

Earlier this year, Channel 4 announced it would be cutting up to 200 jobs as it looks to reduce costs in its linear business.

Mahon noted that the “big programme” of redundancies is mostly complete, but there will be a continued focus on how it manages operating costs over the next few years because “linear reduction takes time and needs to be done”.

In July, the business appointed Katie Jackson as CMO after Zaid Al-Qassab left to join ad agency M&C Saatchi as CEO. Before taking on the interim CMO job, Jackson led 4Creative, the broadcaster’s creative arm, as its managing director since 2022.

The company is also launching a slate of advertising opportunities for brands on its streaming business. Brands will soon be able to measure streaming’s impact on consumer spending, target Channel 4 streamers through customer profiles, and optimise where their ads appear on Channel 4 streaming.