Channel 4’s Alex Mahon Says “We Are In Market Shock Territory” & May Draw Down On $94M Credit Facility Next Year

Channel 4’s Alex Mahon Says “We Are In Market Shock Territory” & May Draw Down On $94M Credit Facility Next Year

Channel 4 is in “market shock territory” and may finally look to use its £75M ($94M) revolving credit facility next year, according to CEO Alex Mahon.

Mahon faced a barrage of questions about the embattled Gogglebox broadcaster’s finances from the Culture, Media & Sport Committee this morning and was at pains to stress how bad the ad market has been this year and its impact on Channel 4.

In line with rivals, she said Channel 4 hasn’t seen predicted recoveries in H2 or Q4 of 2023 and revenues will likely be down around 8% for 2023, while the channel expects to post a deficit following three years of surplus.

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“We are in what I would probably call market shock territory,” she told MPs. “This level of ad fall was only deeper in the 2008 recession.”

In a marked change of position, Mahon said she “imagines” Channel 4 may “look at how to use” the credit facility next year, which she described as “the normal course of business.”

Channel 4 last drew down on the facility, which has just been renewed until 2027, at the start of the Covid-19 pandemic, but it has been under pressure in recent months to explore the move once again, given the commissioning slowdown and amidst criticism from producers for declining program spend.

Mahon stressed that Channel 4 “won’t be depending on state subsidies.”

“The reality is that over the past years we have made a surplus in six years and a deficit in four,” she added, pointing out that while last year’s surplus was just £3M, the year prior it was at a record £101M, which led to a big boost in content spend.

The use of the credit facility could come as Mahon and her chair Ian Cheshire launch a strategic review early next year into Channel 4 strategy for the following decade, which they announced today.

There will, however, be “no handbrake turn on existing strategy,” Cheshire said. That current strategy includes a prolonged push to be less reliant on linear advertising while boosting streaming revenue, which currently sits at around a quarter of overall turnover – “way ahead of our peers,” according to Mahon.

Cacophony of criticism

Alex Mahon and Ian Cheshire
Alex Mahon (left) and Ian Cheshire Karwai Tang/WireImage / In Pictures Ltd./Corbis via Getty Images

Responding to a cacophony of recent criticism from the production sector around a lack of commissioning spend and poor finance management, Mahon acknowledged the current landscape is “really difficult” for the indie sector.

“When Channel 4 has slower revenues and has to make decisions about costs it has a really big impact on producers,” she added, citing further difficulties arising from the post-Covid landscape and the impact of the U.S. labor strikes.

Mahon stressed that Channel 4 will “spend the same amount of money on commissions this year as last year” but that these shows are being phased through 2023 and 2024 due to the poor ad market. She said Channel 4 has slowed down costs in areas such as projects and technology, as well as content. High-profile cancelations have included a planned reboot of reality series Four Weddings, which was culled a couple of weeks into filming.

“There were a number of shows that producers expected to be recommissioned or to return which we had to make decisions on,” she went on to say. “They might come back. We are still looking at whether they return.”

One show that most likely will be returning is Studio Lambert’s channel favorite Gogglebox, which the network is rumored to have just paid a big sum to renew following an attempted poach by ITV.

“It’s still important to renew really important shows and I don’t recognize that characterization [of the big sum],” she said. “I wouldn’t expect Gogglebox to go anywhere else. It’s a classic Channel 4 show but also everyone will always want great shows.”

“Most” rumors untrue

During the wide-ranging session, Mahon attempted to scotch rumors in TV circles that she is planning to leave the broadcaster after six years at the helm.

She said “there is lots of speculation” about her departure, adding intriguingly: “Most of which is untrue.”

“I will stay as long as I’m relevant to the business,” she added. “I don’t think anyone is relevant to the Channel 4 business forever though.”

In the midst of recession, Mahon’s potential bonus has also been a key topic of discussion for next year after she earned a record pay packet but chose to forego her retention bonus for 2022. Mahon stressed that she has no control over exec pay, which is tied to performance.

Cheshire, meanwhile, described the decision taken by Mahon, programs boss Ian Katz and commercial head Jonathan Allan to defer their retention bonuses as “signalling,” as it will have a tiny impact on the circa-£700M content budget, amounting to a saving of around £300,000.

Russell Brand update

Elsewhere, Mahon updated on Channel 4’s investigation into Russell Brand’s time working on shows for the broadcaster following the allegations published in The Times with Channel 4’s Dispatches earlier this year.

Mahon said publication of a report will come in “weeks not months” and that she would be happy to come to the committee once it has been published. Similar investigations are being carried out by the BBC and Big Brother maker Banijay, while Brand is also being investigated by the police. He denies all allegations and says all relationships were consensual.

Mahon said she is “particularly proud” that a Channel 4 news team helped break the Brand story, which speaks to the news team’s independence.