Channel 4 to reduce acquisitions spending


LONDON -- U.K. broadcaster Channel 4 will cut back on acquisitions spending in a bid to shore up its finances, the company said Tuesday in unveiling its 2006 report.

The state-owned broadcaster, which airs such shows as "Ugly Betty" and "Desperate Housewives," posted a 5% hike in revenue in 2006 to a record £937 million ($1.9 billion), driven by strong growth across digital channels including E4, More4 and FilmFour.

But the group's overall retained-surplus cash fell 70% to £14.5 million ($29 million) "as a result of cost pressures facing the group in challenging market," chief executive Andy Duncan said.

Program director Kevin Lygo said the ax will likely fall on acquisitions spending because such local fare as news and current affairs must be maintained. But he acknowledged that the broadcaster already was committed to spending for key series and movies for the next few years under existing contracts.

"The last thing we are going to interfere with is part of the remit, news or current affairs," Lygo said. "Our preference and priority will be to cut on acquired programming, absolutely first. But most of it is spent in advance, years ahead, and it's quite hard to cut quickly. That will be where we cut before we cut the domestic commissions.

"Nothing gets cheaper -- the price of people goes up, and the price of programming goes up. That combines with revenue coming down and there's a crunch," Lygo added.

The broadcaster has been one of the most prolific international consumers of U.S. fare in the past 2 1/2 decades, airing a roster of series including "ER," "Frasier," "Sex and the City" and "The Sopranos." More recently it set a high-water mark for acquisitions, paying about £20 million ($40 million) for the third season of "Housewives."

Channel 4 said that terrestrial advertising revenue for the core channel fell £39 million ($78 million) to £696 million ($1.4 billion) over the year, despite the channel registering a slim gain in audience share, to 9.8% from 9.7%, over the period. Advertising and sponsorship revenue across all channels for the year were flat at £824 million ($1.6 billion).

But the results were boosted by a 46% increase in revenue from its digital channel portfolio, which contributed £128 million ($255.9 million) to the bottom line as a result of the shift to a free-to-air model for E4 and FilmFour and the October 2005 launch of arts channel More4 (which commissioned controversial docudramas "Death of a President" and "The Trial of Tony Blair").

Programming expenditures over the year were up 6% at £608 million ($1.2 billion), including such multiple award-winning productions as "Low Winter Sun" and "Longford."

Duncan said the broadcaster will have to continue to invest in programming in order to maintain its standards of quality.

"Our record spend on high-quality programs and digital content resulted in a record year of ratings and our highest-ever share of the U.K. TV advertising market," Duncan said. "Channel 4 did everything that could have been asked of it in terms of creative and competitive performance in 2006, and more."