When Alex Mahon takes over at Channel 4, she will face some of the most daunting on- and off-screen challenges in the broadcaster’s 35-year history.
Mahon, head of the special effects company behind Gravity and Guardians of the Galaxy, will arrive as chief executive in the autumn, as Channel 4 relaunches the post-BBC Great British Bake Off and discusses a proposed move out of London.
Throw in wider issues including a steep decline in TV viewing (especially in C4’s heartland of 16-to-34-year-olds), the rise of the streaming services Netflix and Amazon and the deterioration of the advertising market, and it is clear that Mahon will have to act quickly. Here are her main challenges:
Relocation, Relocation
The issue that will define Mahon’s tenure most strongly is her handling of the relocation of parts of Channel 4’s operation out of the capital, as demanded by the Conservative manifesto. The current chief executive, David Abraham, has been an outspoken opponent of any move from its £100m headquarters on Horseferry Road, but Mahon will take a more diplomatic stance.
The Tories’ weakened political position could, however, encourage Channel 4 to resist a wholesale move and float a compromise. Mahon will be involved in the broadcaster’s response to the proposals, which is due next month and could suggest moving some operations. The government will then have up to 12 weeks to deliver its verdict and Mahon will be in place when the negotiations begin in earnest.
The 43-year-old will be a poacher turned gamekeeper, having worked closely with the Department for Culture, Media and Sport as a member of the advisory panel on the renewal of the BBC’s royal charter.
Cities across the UK are lobbying furiously to be considered for relocation, with Birmingham and Leeds thought to have pulled ahead of Manchester as frontrunners.
The proof of the pudding
Last year, Channel 4 pulled off the stunning coup of poaching The Great British Bake Off – the biggest show on TV by some distance – from the BBC in a £75m, three-series deal.
Mahon is unlikely to be in post when the new-look show starts in the early autumn – it has been shorn of all its original presenters bar Paul Hollywood – but she will be there for the verdict.
Channel 4’s Bake Off is unlikely to reach the heady heights it did at the BBC, when it garnered 14 million viewers for the final last year, representing more than half the viewing public. Failure to match that will allow for unflattering comparisons in the press, although a critically well-received production could help.
But for commercially funded Channel 4 it is about making money, and the show will only need 3 to 4 million viewers to draw a decent return from advertisers. However, media industry sources say the broadcaster is struggling to achieve its £8m-£10m target for sponsorship. And one source says that a £2m-plus target for licensing the Bake Off brand outside the TV show has also now been lowered. “They were asking more than even Simon Cowell does for his shows,” says the source.
Better not call Saul
Channel 4’s traditional popularity with youth audiences has left it exposed to the rise of YouTube, Amazon and Netflix. YouTube’s clips provide a continuous stream of comedy and light entertainment, while Amazon and Netflix are regularly producing world-class dramas from Transparent to Better Call Saul.
In 2014, audience share on the broadcaster’s main Channel 4 station fell to a 31-year low. So far this year its share of 16-to-34-year-old viewers, an age group that is highly prized by advertisers, is down at least 10% to its lowest level since 2002.
“Bake Off will help them with volume of audience but in terms of younger viewers they are losing their point of difference in the market,” said a top executive at one media agency that helps companies buy advertising slots from broadcasters.
Stop money going down the YouTube
The most difficult strategic question facing Mahon is how to secure the long-term commercial viability of Channel 4. It depends almost solely on advertising revenue as a business, making about £1bn a year from its own channels and selling ad slots on behalf of BT’s sports channels and UKTV, owner of the Gold and Dave channels.
While performing better than its peers, Channel 4’s digital advertising revenues, mostly from its All4 on-demand and catch-up service, accounts for only about 10% of total revenues.
The obvious solution is to grow online services as the audience shifts away from conventional viewing. But the problem for Mahon is that advertising revenue from viewers watching on catch-up services is worth just 10-15% of the money made from traditional TV ads, when people watch a programme live.
“The reason TV has been so successful is it provides a mass audience,” says Phil Hall, chief commercial strategy officer at the media buyer MediaCom. “Mahon’s big challenge is: does she throw a load of time, effort and money into trying to turn back the tide and get young people to engage in Channel 4 content in a traditional TV way, or does she continue the broadcaster’s admirable on-demand and catch-up service and leave young viewers to haemorrhage away on the main channel? Or is it somewhere in between?”
The television advertising market has deteriorated significantly this year, with ITV reporting that its revenues will be down as much as 9% in the first half. The broadcaster is on track to record the worst decline since the recession almost a decade ago.
The industry has always argued that ad-spend downturns are related to cyclical shifts in the market, or short-term impacts like the Brexit vote causing advertising budgets to be held back.
However, analysts believe that the rise of online video, led by YouTube, poses a serious longer-term threat. “There are clear signs of growing intrusion by online video advertising on traditional broadcast TV advertising,” says Toby Syfret, an analyst at the consultancy Enders Analysis.
Breaking Ads
Channel 4 employs about 820 staff, with fewer than 30 based outside central London. History says most won’t want to give up life in the capital. The BBC found that nearly 60% of managers refused to move from London to MediaCity in Salford, while just 31 of 144 agreed to relocate to Birmingham.
However, a more immediate concern for Mahon will be what happens to the top team. Jay Hunt, Channel 4’s chief creative officer, responsible for the broadcaster’s £629m annual programming budget, announced she was leaving in September days before Mahon was appointed as chief executive.
Jonathan Allan, the sales director who also applied for the top job, is likely to want additional responsibility, potentially in the form of a chief operating officer role, having made it clear he is after a bigger challenge.
When Mahon starts, Channel 4 will be heading into TV trading season, where a vast majority of its £1bn annual advertising deals will be done, and if the broadcaster’s poor performance continues she will need a strong team in place to hold its own against advertisers seeking discounted deals.
