Maximum bonuses at Channel 4 as bosses warn privatisation carries ‘irreversible’ risks

Revenues fell only 5% last year despite pandemic.

Channel 4: Mahon (left) and Allan, along with Katz, received bonuses totalling more than £600,000
Channel 4: Mahon (left) and Allan, along with Katz, received bonuses totalling more than £600,000

Channel 4’s bosses collected maximum annual bonuses as the Gogglebox and Great British Bake-Off broadcaster recovered from the coronavirus slump to end 2020 with revenues down only 5% and a record cash surplus of £74m.

Alex Mahon, the chief executive, speaking at a Zoom news conference from Channel 4’s new national HQ in Leeds, said it was an “outstanding” performance that showed the state-owned, commercially funded broadcaster is sustainable in its current form, even as the Government plans a consultation on privatisation.

She said it was important that any change to the ownership of Channel 4, which was founded in 1982, is based on “evidence” and “data” and warned against any moves that would be “irreversible”.

Mahon gave a strong defence of Channel 4’s current not-for-profit model, its remit to commission alternative and diverse programming and its decision to move operations outside London to Leeds, Glasgow and Bristol.

“The return we are looking for is not a boost to our share price but is a more regionally inclusive and balanced creative economy – one that is as open to young people in Hartlepool or in Hull as it has traditionally been to those from Hammersmith and Hampstead,” she said.

“We’ve never been about accumulating scale. We were created as a partner for others. We take money invested by advertisers and we plough it into new ideas, into new talent and social good for our owners – the British public – whilst helping the businesses we partner with grow and flourish.”

She went on: “I think Channel 4 is as needed today as when it was created.”

Mahon conceded the Government “has a right to look at” privatisation but any change would need to make Channel 4 “stronger”.

“We’ve always got to be careful of doing anything that might be irreversible, that could possibly damage some of the things that we do for the sector and that we do for the UK,” she said.

A different owner would be likely to focus on profits and driving revenues from other parts of its business, according to Mahon, who suggested Amazon’s planned purchase of James Bond studio MGM was partly motivated by the desire to “sell us more toilet paper”.

Resilient TV ad sales 'confound the sceptical'

Channel 4’s annual revenues fell 5% to £934m – with advertising revenues down 10% – a performance that Jonathan Allan, chief commercial officer, described as “remarkably resilient” and “was not our prediction back in May” in the depths of the downturn in 2020. Digital advertising was up 11%.

He used slides to show how Channel 4’s quarterly ad sales were flat in Q1, down 40% in Q2, down 10% in Q3 and up 10% in Q4, including November up 15%.

“Television performed particularly well relative to other media in 2020, down to the powerful combination of huge audiences and competitive pricing and also the fact that certain other media were unfortunately struggling to hold onto their own audiences due to circumstances,” he said, in a nod to outdoor and cinema.

Allan added Channel 4 refunded all of the Government money it used when some employees were put on furlough and is to repay a £75m revolving bank credit facility, which it drew down as a precaution last year but did not use.

“Demand for television advertising continues to impress and potentially confound the sceptical,” Allan said, noting he expects Channel 4’s revenues to be up 30% in the first six months of this year and is “quietly confident” they should pass £1bn for the first time in 2021.

Enders Analysis pointed out the bounceback in the ad market in the final four months of 2020 was the chief reason that Channel 4 ended last year with its first surplus since 2015.

The positive cash position was “likely” helped by “the amount of programming deferred”, according to Enders, which predicted a lot of the money will need to go back into content.

Channel 4 plans to invest an extra £40m in programming in 2021 and 2022, which should mean the broadcaster’s content spend returns roughly to pre-pandemic levels, Ian Katz, chief content officer, said.

Defending bonuses

Charles Gurassa, the chairman, said the remuneration committee decided maximum bonuses were “richly deserved” because of a “remarkable” financial performance in “the most extraordinary, volatile and difficult circumstances”.

He noted the executive directors took temporary salary cuts of 20% but then “they shot the lights out” in terms of revenue, digital growth and audience growth and share.

Mahon earned a pay and pension package of £991,000, including a £293,000 bonus. Allan was paid £690,000, including a £194,000 bonus. Katz earned £536,000, including £146,000 bonus.

Channel 4 offered further explanation in its annual report: “After a careful and detailed consideration, following a strong year of creative, commercial and financial performance in response to a once-in-a-generation challenge, and as a reflection of Channel 4 staff’s dedication during a difficult period, the Committee recommended that it was appropriate to set the award for 2020 at the maximum opportunity under the Corporate Variable Pay Scheme.”

Channel 4’s decision to pay bonuses contrasts with other leading UK media businesses such as WPP and ITV, which paid no short-term bonuses to its executive directors in 2020 because of the coronavirus slump.

However, senior executives at listed companies are eligible for long-term share awards – unlike Channel 4 bosses, who do not receive shares.

A Channel 4 spokesperson said the bonuses reflected how the broadcaster was “in the best financial health in its 38-year history, despite the challenges of Covid”.

Many creatives have come out against privatisation of Channel 4 as it has loomed on the agenda.

Armando Iannucci, the writer and producer behind shows such as The Thick of It, Veep and The Day Today, wrote on Twitter this week: “Our TV industry is a British success story. Channel 4 profits go back into the industry: selling it off will give them to American shareholders. When we should be promoting our creative skills across the world, the Govt launches a ‘consultation’ on how best to muffle them.”

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