Channel 4 pays millions in bonuses amid coronavirus TV ad slump

Channel 4 has paid out millions in bonuses to bosses and staff while opening talks with the government about potentially tapping an emergency £75m credit facility as the coronavirus hammers the TV industry.

The broadcaster, which is publicly owned but funds itself mostly through TV advertising, is estimated to have paid out more than £5m to its 903 staff last month.

The payouts, which include hundreds of thousands of pounds in bonuses each to the chief executive, Alex Mahon, the director of programmes, Ian Katz, and commercial boss, Jonathan Allan, relate to the performance of Channel 4 last year.

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It is understood Channel 4 will this week announce a range of cost-cutting measures for this year, one of whichincludes a temporary 20% reduction in the salary of the executive team and board.

If Channel 4 follows the measures announced by ITV last week, which it is likely to, top executives will give up bonuses for this year while staff can expect, at minimum, a pay freeze. It is understood ITV is looking to furlough some staff, with Channel 4 may be forced to do the same.

The timing of the 2019 bonus payouts has come at a politically sensitive and commercially dire time for Channel 4.

The broadcaster says it was “committed” to making the bonus payments last month in its February payroll, which was when advertisers in travel-related sectors began to pull TV advertising as the coronavirus spread. At the beginning of March, rival ITV warned investors of a significant slump in TV ad spending due to the coronavirus.

Later in March, Channel 4, which had about £180m in cash reserves according to the last publicly available figures, raised the prospect of tapping the £75m credit facility during a regular meeting with officials from the Department of Digital, Culture, Media and Sport and the Treasury. Channel 4 set up the facility in 2018 as a financial backstop for exceptional circumstances.

“Channel 4’s variable pay award for 2019 was agreed by the board in January, reflecting the strong progress made last year against corporate objectives,” said a spokesman for the broadcaster. “The award was communicated to all staff in January and was committed through the payroll system in February.”

The bonus awards range from a maximum of 10% of gross salary for a typical staff member to 30% for a head of department and 50% for the broadcaster’s executive team. It is understood that last year’s payouts failed to hit the maximum award.

Channel 4 is under particular pressure during the coronavirus crisis as its £1.1bn in annual revenues are almost all totally derived from advertising.

According to industry sources, the broadcaster is facing a slump of more than 40% in TV advertising in the second quarter. ITV and Sky, which have more diversified income from TV production and pay subscriptions, are on track for declines of 37% and 34%, respectively. ITV has said that by year-end each 1% decline in advertising revenue it fails to recover post-coronavirus will reduce revenue and profit by £17m.