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C4 bosses take pay cut, Sky say they’re rubbish anyway

By | Published on Tuesday 10 March 2009

The boss of Channel 4 will take a voluntary pay cut of 35% as part of widespread cuts at the struggling state-owned commercial broadcaster, though he was one of the highest paid execs in British television, so I don’t think he’ll starve.

Andy Duncan had had a pay packet said to be worth £895,000, but moving forward he’ll earn less than £600,000. The network’s Director Of Television, Kevin Lygo, will also take a cut, of about 25%. The voluntary pay cuts were announced as C4 confirmed it would have to fire a third of its staff and freeze the wages of those left in a bid to make the books balance as advertising revenues slump.

Confirming his pay cut, Duncan told reporters: “Executives volunteering to reduce their own pay is very unusual but these are exceptional times. Both Kevin and I are strongly committed to the future success of Channel 4 and believe this step demonstrates that commitment in a practical and meaningful way. Both of us believe this is the responsible course of action, as we enter discussions with our suppliers about extracting greater value from our programme investment”.

That last point will mean Channel 4 will be looking to reduce the cost of its programmes, by persuading the production companies who make their shows, and the celebrities who front them, to charge lower fees.

Duncan and Lygo’s pay cut announcement followed the release of BSkyB’s response to the previously reported Digital Britain report published by the government which considered, among other things, the future of the British TV industry amid rising competition and declining ad revenues.

The future of Channel 4 was, of course, a big part of that review following the network’s claims that it could not continue to provide its public service programming long term with just ad revenues as income – bosses there were angling for a cut of the TV licence fee, though that is an option not favoured by either the BBC nor Digital Britain report writer Lord Carter. The report proposes Channel 4 merge with a commercial rival, like Channel 5 or maybe even ITV, to become more profitable, or form an alliance with the commercial division of the Beeb, BBC Worldwide. C4 execs reportedly favour the latter proposal.

But the Rupert Murdoch-dominated Sky say that Channel 4 wasted millions on pointless new ventures outside its core remit – including the whole Channel 4 digital radio debacle, a costly new venture now scrapped – and that it therefore brought much of it current woes on itself. They seem to be suggesting that the government and broadcasting industry should be less forgiving, and that the government should not be pushing for – nor twisting competition rules to allow – any merger between C4 and BBC Worldwide or another terrestrial broadcaster.

They argue that, despite the slump in profits, Channel 4 is sitting on healthy cash reserves and could survive by slashing back its operations to its core activities, and then investing time and energy into developing new revenue streams other than advertising and state subsidy – possibly subscription-based services (though C4 did dabble with that before). They indicate Sky would be willing to form an alliance with Channel 4 to help them do just that, adding that they have suggested such an alliance previously but have been knocked back by C4 execs.

Sky’s agenda re C4, unsurprisingly, seems to be driven by the aim of stopping the state owned TV firm from merging with another commercial terrestrial broadcaster, something that would create a formidable competitor for Sky. If there are going to be any alliances with other broadcasting companies, they’d prefer Channel 4 to work with them. And, if C4’s new ventures mean they rely less on advertising revenues, and therefore compete less with Sky for advertising income, all the better.

Sky’s response to Digital Britain is one of many responses from media, content and telecommunications companies expected to be submitted this week. The responses will be considered before Carter publishes a second final report later in the year.