C4 records first loss since 1992

Channel 4 has recorded its first operating loss since 1992 as competition from digital television services squeezes its audience and income.

The broadcaster's flagship channel made a loss of £7.8m on revenues of £715.3m in 2007, according to its annual report released today, down from a 2006 operating profit of £21.8m.

Channel 4's share of overall viewing also fell - from 9.8% in 2006 to 8.7%. The digital channels increased their share of viewing by 0.9% but the figure for the group as a whole declined by 0.2 percentage points to 11.9%.

The spread of digital television - and the associated increase in TV channels - means Channel 4 faces tougher competition for advertising spend and for audiences. In turn, declining audiences bring about further drops in advertising revenue.

The annual report noted: "The growing contribution from the digital channels is helping to mitigate, but is not expected to eliminate, the impact of declining audience share and advertising revenue."

Chairman Luke Johnson said: "The online revolution means the competition for eyeballs and advertisers is more intense than ever. We have to work harder and harder to attract audiences and find original ideas that will make compelling viewing"

He reiterated calls for policymakers to supply Channel 4 with funds - estimated at £150m - to plug its funding gap.

"We need a revised remit, which reflects today’s media universe. We need a funding mechanism to replace the diminishing value of our gifted spectrum," said Johnson.

Chief executive Andy Duncan added: "After a run of growth in audience share that has more than held up against the competition in recent years, we did experience a drop in all-time share on the core channel, although within this the peak-time schedule performed better.

"Across the digital channel portfolio we enjoyed an all-time high in peak time and our second strongest portfolio performance ever. Nevertheless, the revenue trend is clear and our surplus was only just above break-even... The need to agree an updated form of public support to replace the historic subsidy of analogue spectrum is growing in urgency."

Ofcom is currently consulting on the future of public service broadcasting, including the role of Channel 4. Last night Peter Bazalgette, ex-chief executive of Endemol UK and a former Channel 4 board member, said the broadcaster should be privatised but retain its PSB duties.