Channel Four Television Corporation Report and Financial Statements 2013 Statements Financial and Report Corporation Television Four Channel *viewer award promise winning investment in original content Channel Four Television Corporation Report and Financial Statements 2013 Channel Four Television Corporation Report and Financial Statements 2013 Incorporating the Statement of Media Content Policy Presented to Parliament pursuant to Paragraph 13(1) of Schedule 3 to the Broadcasting Act 1990 Contents Chairman’s statement 4 Financial report and statements 131 Chief Executive’s statement 5 Strategic report 132 2013 at a glance 6 Report of the members 144 Independent auditor’s report 148 Statement of Media Content Policy (SMCP) 8 Corporate governance 151 Investing in innovation 10 Members 156 Making an impact 28 Audit Committee report money 159 Our programmes 46 Members’ remuneration report 163 Thank you 114 Consolidated income statement and Awards 116 statement of comprehensive income 171 Forward look 120 Consolidated statement of changes in equity 172 Assurance report 130 Consolidated balance sheet 173 Consolidated cashflow statement 174 Group accounting policies 175 Notes to the consolidated financial statements 181 Channel 4 financial statements 207 Programmes and the licence 212 Historical record 215 This report is printed using vegetable-based inks on Heaven 42, © Channel 4 Television Corporation copyright 2014. which is sourced from well-managed forests independently certified according to the rules of the Forest Stewardship Council (FSC). The text of this document (this excludes, where present, logos) may be reproduced free of charge in any format or medium providing Heaven 42 is manufactured at a mill that is certified to the ISO14001 that it is reproduced accurately and not in a misleading context. and EMAS environmental standards. This report was printed by an FSC and carbon neutral printing company. The material must be acknowledged as Channel Four Television Corporation copyright and the document title specified. Where third-party material has been identified, permission from the respective copyright holder has been sought. This document is available for download from www.gov.uk and from channel4.com/annual report. 4 CHANNEL FOUR TELEVISION CORPORATION REPORT AND FINANCIAL STATEMENTS 2013 LordChairman Burns Channel 4 is a unique and important organisation. Its focus is on delivering its public service remit – but it must fund its ability to do so by generating revenues in the commercial market place. This means that Channel 4 must consistently balance creative and commercial objectives. 2013 was another very successful year for Channel 4 in its delivery of both of these elements. In 2012 the Board supported the executive’s two-year plan to draw a relatively small proportion of the reserves, accumulated in previous years, in order to support its strategy of ‘Investing in Innovation’. 2013 represented the We are encouraged to see strong results in many areas second year of this approach, and I am pleased to see the of our performance – continued growth from Channel 4’s returns of innovation ahead of plans to break-even in 2014. digital channels and platforms for example, as well as Creatively, 2013 was full of success stories. It is clear that significant uplifts in several of the remit reputational Channel 4 still frequently sets the national conversation – statements presented in this report – demonstrating the whether through agenda-setting exclusives from Channel strength of Channel 4’s public service impact over the last 4 News, or the charm and insight of Educating Yorkshire. 12 months. This performance is evidence that the Investing Programmes such as Southcliffe, Utopia, My Mad Fat Diary in Innovation strategy that the Board approved is working. and The Mill hailed a new era for drama on Channel 4, while Drawing down on surplus cash reserves to boost investment Murder Trial, Gogglebox and D-Day: As it Happens broke new in content and key strategic projects are proving successful ground in factual formats. These programmes, and the creatively and commercially. Across the report, the Board is many others highlighted in this report, are a credit both confident that Channel 4 is an organisation in good health – to Channel 4 and its partners across the industry. making a substantial public service contribution while also innovating to achieve a sustainable commercial future. It is the role of the Board to oversee the public service and commercial objectives of Channel 4, ensuring that its remit In regulatory terms, we are pleased that Ofcom has is effectively delivered and its finances are in good health. confirmed it will renew our ten-year public service There are a range of metrics that the Board reviews to broadcasting licence from 2015, providing crucial long- help inform this evaluation – looking at investment data, term stability to the organisation. I am confident that the consumption trends, revenue figures, audience research, renewal of this licence, along with the preservation of programming quality and social impact. These metrics are Channel 4’s remit and status as a not-for-profit, publicly presented within the Statement of Media Content Policy owned broadcaster, as well as a healthy balance sheet that makes up the first half of this report. As is required of us, and its own plans for creative and commercial innovation, we have consulted with Ofcom around its preparation and mean the organisation is in good stead for the future. taken into account its feedback on some particular areas of provision following last year’s report. Our progress is Finally, I would like to thank my colleagues on the Channel 4 referenced in the relevant genre chapters. Board for their valued contribution over the past year. I was pleased in July to have been able to appoint Mark Price to his role as Deputy Chairman and to renew the terms of Alicja Lesniak, Monica Burch and Richard Rivers. I would also like to welcome Stewart Purvis as a new non-executive member of the Board. I look forward to working with them all in the months ahead. I would like to thank Anne Bulford, who left the Corporation in April after eight years to take up a new role at the BBC. She made an immense contribution to the future of Channel 4, including a period when she acted as Chief Executive. CHANNEL FOUR TELEVISION CORPORATION REPORT AND FINANCIAL STATEMENTS 2013 5 Chairman’s & CE f ’s DavidChief Executive brahamfficer statement 2013 was a year of tremendous quality and variety in the creative output of Channel 4. It was also the year in which we achieved significant scale in our plan to develop more connected relationships with our audience by attracting our 10 millionth registered viewer. As the findings of this report also demonstrate, we saw returns on our Investment in Innovation strategy, with strong public perceptions of Channel 4 delivering its remit in 2013. Standout moments for me were comedies Toast of London and Drifters; Bedlam was phenomenal public service television; equally rewarding were our Film and Drama, In 2013 we continued to focus on aspects of our remit that which hit new heights of originality – from the Oscar-winning encourage us to work with emerging creative companies. 12 Years A Slave to Southcliffe, Run and Utopia. It was also We also focused on deepening relations, with a planned another great year for original journalism as our award- reduction in the total number of companies we worked with winning team punched well above its weight in revealing in 2013, and for the first time made more than half of our both national and international stories. We now have many commissions in the Nations and Regions. Through tight more popular series returning into the schedule such as control of costs, we also delivered on our plan to reduce the Gogglebox, The Mill and Gadget Man as ongoing creative level of drawdown from reserves, ending the year with cash investment bears fruit. of £238 million, well ahead of the level required to operate the business. We remain on track to break even in 2014 having With careful planning, for a third successive year we were invested for the past couple of years from surplus reserves able to invest more than £400 million in original UK content; into strategic projects, including creative renewal and our advertising and sponsorship revenues remained stable for data strategy. This Investing in Innovation strategy is now a fourth successive year at £846 million and we increased beginning to deliver returns – in delivery of the remit, more growth in revenues from our online activities to reach returning hits and growth in our data initiative. £61 million. Together with our partners at UKTV and BT Sport our sales house delivered record revenues of £1.03 billion. Television is changing rapidly in an era of connected devices 4seven has achieved all its business plan objectives and and we remain convinced that our focus on investing in is in profit within a year of launch. content and in viewer engagement will position us well for the future. Globally, advertising revenues towards mobile, From a viewing share perspective, 2013 was always likely to social and other digital segments such as short-form video present challenges in terms of matching the heights created are experiencing exponential growth and are predicted to by the London 2012 Paralympics. In peak-time – where we continue to be an engine of advertising innovation for the deliver the bulk of our remit – the important 16–34s and rest of this decade. ABC1 demographics saw stability. But across the daytime schedule we experienced some share erosion, largely as Our leadership team remains focused on building upon a result of BBC One moving out of children’s programming. the long term sustainability of our model by adapting the However, our portfolio channels continue to perform well Channel 4 proposition to take advantage of these trends.