Shareholder Executive

Channel 4

Purpose

Channel Four Television Corporation (C4C)’s core terrestrial channel, Channel 4, fulfils a distinctive public service broadcasting (PSB) remit across the UK. C4C also operates a number of related businesses and services. C4C’s public service remit only applies to the core Channel 4 television service, but all other services operated by C4C (including its digital channels) must be incidental or conducive to the carrying out of C4C’s core public service function.

Legal Status and Ownership

C4C is a statutory corporation without shareholders established under the Broadcasting Act 1990.

DCMS is Channel 4’s sponsoring department. Major changes to its legal status and remit are a matter for Parliament. Ofcom, the independent regulator, issues the broadcasting licence and appoints the Chair and Non-Executive Directors, subject to approval by the Secretary of State for Culture, Media and Sport.

Government Objectives

C4C was established to make a distinctive contribution to PSB. It has a public service remit in relation to its core Channel 4 service to:

• demonstrate innovation, experimentation and creativity
• appeal to tastes and interests of a culturally diverse society
• include programmes of an educational nature
• exhibit a distinctive character.

C4C is also required to assist with the implementation of digital switchover in the UK.

Financial Performance¹

£m	2008	2007	2006
Turnover	906	945	937
Operating Profit	(1)	(9)	14
Profit/(Loss) for the year2	2	1	15
Net Cash flow3	9	14	13
Net Operating Assets	278	296	275
RONA	(0.2)%	(3.0)%	5.1%
Shareholders' Funds	435	452	437
Dividends	-	-	-

Notes

¹ Channel 4's year end is 31 December
² Profit/(Loss) for the year is defined as earnings post-tax, interest and exceptionals, and before dividends
³ Cash flow adjusted for £56m investment in deposits maturing between 3 and 6 months

Commentary

C4C is operating in a rapidly evolving environment, driven by increased digitalisation and the convergence of broadcasting and telecommunications.These developments pose immediate financial challenges, as well as having implications for C4C’s future operating model.

The C4C Group continued to face demanding trading conditions in 2008.The core channel’s audience share and advertising revenues fell during the year, although this was partially offset by a growing contribution from C4C’s digital channels. Channel 4 faced the additional pressures of a severe decline in the television advertising market as the year progressed. Significant spending cuts were required in programming and marketing, as well as material overhead reduction, in order to achieve financial breakeven. 2009 is expected to continue to be difficult due to the ongoing effect of digital switchover and the challenging economic environment.

In spite of these challenges, C4C’s programmes and films won critical acclaim with significant success at the BAFTAs, International Emmys and Oscars. Additionally, C4C launched the 4iP digital media fund to explore with partners new tools, applications and content supporting public service values and qualities online. C4C also unveiled its first public impact report, an innovative new approach to measuring its broader creative and economic impact, which highlighted high levels of public appreciation of its unique role and value.

The future role of, and model for, C4C was examined in detail in the Government’s Digital Britain review of the creative and communications sector in 2009. The Digital Britain report concluded that C4C should evolve its remit to further champion and promote creativity and new talent across all digital media, and encouraged C4C to stimulate competition for innovation and quality in content for older children.The Government invited the Channel 4 Board’s comments on these proposals.The report also concluded that the Government welcomed the commercial partnership opportunities C4C has identified with BBC Worldwide; and also encouraged C4C to explore other partnership opportunities.The Shareholder Executive, alongside DCMS, has been working hard with C4C and other parties throughout the review on assessing and progressing partnership options. Should any of these move to the next phase, the Shareholder Executive will continue to play a role in providing advice to DCMS and C4C on implementation.