Channel Four Television Corporation Report and Financial Statements 2012 Incorporating the Statement of Media Content Policy Presented to Parliament pursuant to Paragraph 13(1) of Schedule 3 to the Broadcasting Act 1990 The paper used in this publication is sourced from responsibly managed forests and is a FSC certified material. Printed in the UK by a FSC and ISO 14001 certified printer. © Channel Four Television Corporation copyright 2013. The text of this document (this excludes, where present, logos) may be reproduced free of charge in any format or medium providing that it is reproduced accurately and not in a misleading context. 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 must be sought. This document is available for download from www.official-documents.gov.uk and from www.channel4.com/annualreport Table of contents Channel 4 remit 04 Chairman’s statement 06 Chief Executive’s statement 08 2012 highlights 10 Statement of Media Content Policy Financial Report and Statements Investing in creativity 12 Report of the members 110 Investing in data 16 Independent auditor’s report 122 Investing in the Paralympics 18 Consolidated income statement 124 Doing things the Channel 4 way 30 Statement of changes in equity 125 Factual 42 Balance sheets 126 Film & drama 52 Cashflow statements 127 News & current affairs 60 Significant accounting policies 128 Comedy & entertainment 72 Notes to the financial statements 135 Education & older children 80 Corporate governance 168 Engaging the audience 86 Members 179 Thank you 92 Report on members’ remuneration 183 Awards 94 Programmes and the licence 188 Looking forward 99 Historical record 191 Assurance report 108 4 CHANNEL 4 REMIT Why we do what we do Channel 4’s guiding light is its remit, as laid out in legislation by Parliament. At its heart the remit requires us to be innovative, experimental, distinctive and diverse. It is multi-faceted, with different components, such as supporting and stimulating well-informed debate and inspiring people to make changes in their lives. The remit also suggests how we can deliver outcomes – for example by investing in high-quality media content and nurturing creative talent. It applies across the full spread of our genres – from comedy and film to news and education. “INNOVATIVE” “INVEST IN HIGH-QUALITY CONTENT” “ALTERNATIVE “STIMULATE VIEWS” DEBATE” “DIGITAL” “EDUCATIONAL” “PARTNERSHIP” CHANNEL FOUR TELEVISION CORPORATION REPORT AND FINANCIAL STATEMENTS 2012 CHANNEL FOUR TELEVISION CORPORATION REPORT AND FINANCIAL STATEMENTS 2012 CHANNEL 4 REMIT 5 Channel 4 is unique in the way it is We seek to operate the business to This year’s SMCP can be found on pages set up. It operates as a publicly owned, break-even over the long term, with 12 –109 of the Annual Report – and commercially self-sufficient, not-for- more profitable programmes and includes case studies and public value funding profit entity. This model is activities cross-funding high public ‘metrics’ aimed at demonstrating how integral to the fulfilment of the remit. value content that is less profitable. we have performed against our remit. It means Channel 4 is neither like the This model means that across our A detailed breakdown of the remit, CHANNEL 4 REMIT publicly funded BBC nor our commercially output we are able to sustain levels along with background to the selection driven competitors whose concern is with of investment in programmes that of the public value measures and delivering shareholder value. are central to delivering our remit. discontinued metrics, can be found in the methodology document Channel 4’s sole concern is the Under the Digital Economy Act, that accompanies this report delivery of its remit and we design our Channel 4 is required each year to (www.channel4.com/annualreport). commercial and financial strategy to publish a Statement of Media Content support that end. Our model ensures Policy (SMCP), outlining how it has we can invest the maximum amount delivered against its remit in the of revenue back into fulfilling the remit. preceding year as well as its plans for the year ahead. “DISTINCTIVE” “CULTURAL DIVERSITY” “NURTURE The graphics on this page show the TALENT“ main components of Channel 4’s remit – they can be found throughout the SMCP to draw the reader’s attention to the way that different programmes and “INSPIRE activities have contributed to the overall CHANGE” delivery of the remit CHANNEL FOUR TELEVISION CORPORATION REPORT AND FINANCIAL STATEMENTS 2012 CHANNEL FOUR TELEVISION CORPORATION REPORT AND FINANCIAL STATEMENTS 2012 6 CHAIRMAN’S STATEMENT Channel 4 exists to deliver to its remit, as set by Parliament. 2012 was a year in which Channel 4 delivered to this Investing objective in abundance – through major landmark programming events as well as innovation and experimentation in new ideas across the schedules and in our remit our business. It is the job of the Channel 4 Board to Lord Burns ensure that the remit is being delivered Chairman to maximum effect and that the organisation’s finances are in good shape now and in the years to come. For that reason the Board set the Corporation stretching performance targets in relation to audience share, revenue and viewer registrations, and also scrutinised programme quality. Everything Channel 4 does is ultimately focused on delivering the remit and because of this, and the fact that we are commercially self-sufficient, it is important that we have the right commercial and financial strategy in place. Our unique model is deeply ingrained and determines the extent to which the Corporation can fulfil its purposes. On the economic front, 2012 continued to present a mixed picture. The economy as a whole continued to show very little growth, whilst it was also a year of many extraordinary broadcasting events – with the Paralympic Games bringing record audiences to Channel 4 as well as several major events delivering bumper audiences to competitor channels. Against this backdrop it is significant that Channel 4 showed strong performance in terms of the remit – with positive trends in a number of key measures. This included growth amongst many of the remit reputational statements presented in this report. It was also impressive to see the overall portfolio share holding up, and the digital channels and on-demand viewing seeing continued growth. Overall revenues remained remarkably stable, with more than £1 billion generated through the Channel 4 sales house. CHANNEL FOUR TELEVISION CORPORATION REPORT AND FINANCIAL STATEMENTS 2012 CHANNEL FOUR TELEVISION CORPORATION REPORT AND FINANCIAL STATEMENTS 2012 CHAIRMAN’S STATEMENT 7 Creatively, quality of output in 2012 To fund creative renewal and these Finally, I would like to thank my was extremely strong. The Paralympic business innovations, the Board endorsed colleagues on the Channel 4 Board for Games in particular were undoubtedly the plan to boost investment by using their commitment and insight over the a highlight of our 30-year history. some of the reserves accumulated in past year. I would particularly like to pay Evidence of Channel 4’s ambitious previous years, resulting in a temporary tribute to those members of the Board spirit and commitment could be seen accounting deficit. By the end of 2011, who are stepping down: Tony Hall and throughout the build-up, marketing and our reserves had reached a level higher Anne Bulford. Having been an active coverage of the Games. It was an event than is necessary to run the business. Board member for several years, that lived up to our mission to creating Despite the continued uncertainty of most recently as Deputy Chairman, lasting change – with evidence of positive the economic climate, this enables us to Tony will be departing in order to take shifts in public attitudes to disabled sport increase investment at a critical time in on the leadership of the BBC. Anne has and disabled people. the development of the digital market- played an instrumental role in securing place. The Board feels strongly that it is Channel 4’s health as a business and Elsewhere, it was pleasing to see the the right thing, given Channel 4’s remit as a creative organisation, both as level of range and experimentation and not-for-profit model, to invest even Chief Operating Officer and in her time across the schedules – including new when times are tough, if we have the as Acting Chief Executive. We will miss comedy in the Funny Fortnight season CHAIRMAN’S capacity to do so. The results set out them both but wish them the best of STATEMENT and bold and agenda-setting news in this report show that this strategy luck in their next endeavour. coverage from Syria to the ‘Plebgate’ is reaping rewards in terms of both our affair. The range and diversity of output creative and commercial record. And it As we celebrated Channel 4’s 30th was supported by the commissioning is a strategy that we will again pursue birthday, 2012 was a remarkable year team’s success in introducing many new in 2013. marked by successes of which we can titles to the schedules and working with all be proud – and one which I am a broader range of suppliers. The year ahead promises to be one of confident has set us in good stead to continued innovation, with many exciting build on in the future. In order to maximise the impact of programmes on the horizon. We look creative renewal, the commercial forward to securing a new Ofcom licence strategy to evolve the business by from the end of 2014, providing us – investing in digital activities and and our audiences – with the certainty innovation through data is vitally to ensure Channel 4 can continue to important.