A 46% increase in sales revenues from Channel 4's digital channels helped compensate for falling advertising sales from the core channel. Group turnover rose 5% to a record £937m in 2006. The core Channel 4 service suffered declining revenues in line with the market to £696m, down from £735m in 2005, while digital channels More4, E4 and Film4 generated combined advertising revenues of £128m, up from £88m in 2005.
"This growth in revenue was a strong endorsement of Channel 4's strategy to expand the audience for all its digital channels by taking them free-to-air," said Channel 4 as it released its 2006 financial review. Channel 4 increased its investment in programming and digital content by 6% to a record £608m. Channel 4 enjoyed a 10% lift in share of TV viewing across its portfolio to 12.1%, and notched up its highest ever annual share of the UK's TV advertising market, with an increase of 1.5% to 23.5% (22%, 2005).
However, the group's cash surplus fell by 70% to £14.5m as Channel 4 invested in new programming and on-demand distribution. Channel 4 CEO Andy Duncan said 2006 illustrated the financial pressures that faced the broadcaster. "We comprehensively out-performed our competitors in 2006, both critically and commercially, but our financial surplus fell sharply as a result of tough market conditions and our need to invest in creativity to maintain our audience share."
Channel 4 chairman Luke Johnson reiterated the group's belief that without "some form of assistance to help us continue to adhere to our public service remit, we may be faced with a stark choice; either we will have to reduce our output of public service programming, and focus more of our schedule on commercial programmes, or see Channel 4's finances continue to deteriorate".
Last month a report for Ofcom produced by consulting group LEK warned that Channel 4 was likely to be loss making after 2010. Ofcom this week ended a consultation on options it presented as possible responses to LEK's analysis.
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