MEDIA & MARKETING: TV3's licence fee complaints reflect bigger picture of its financial woes
SEÁN LEMASS might have smiled at the heat being generated around the issue of broadcast funding.
As the begetter of the national public television service at what is now RTÉ, he established the principle of dual funding of the broadcaster though a balance of TV licence fee and advertising.
As we pass the 50th anniversary of Lemass becoming taoiseach, a new Broadcasting Act is becoming law.
It further alters the distribution of the television licence fee fund that used to go fully to the not-for-profit public broadcaster. Since 2003, a “topslice” of 5 per cent of the licence fee has gone not to RTÉ but to the Broadcasting Commission of Ireland (BCI) as regulator.
Through its Sound and Vision scheme, it then disburses that fund, on competitive application, to projects of a public-service type from all broadcasters.
The new Broadcasting Act raises the topslice of the TV licence fee to 7 per cent.
RTÉ is under pressure elsewhere, but the change is public policy and is accepted.
TV3 and its chief executive, David McRedmond, have taken a different view. Calls for additional licence payers’ money for itself, or attacking RTÉ’s dual funding base, are now frequent.
In this space recently, McRedmond made some conspicuous claims. He said the proceeds of the Sound and Vision fund were “never intended to go back to RTÉ” – an unfounded claim. RTÉ is invited to compete alongside other broadcasters. The latest tranche of awards gave €1,132,000 to RTÉ and €985,000 to TV3.
He also suggested that, as the Government advertising spend with TV3 has fallen, BCI funds should compensate. McRedmond further indicated that the funding gift should be related to audience figures and was quoted as saying TV3’s audience share is 27 per cent. RTÉ shares the same data received by TV3 and in the week of this claim TV3’s national peaktime share for 2009 to date was 11.7 per cent.
Choice in broadcasting is of critical value and the work done to build TV3 to its current position is respected. But there are realities.
TV3 is a middling player in Ireland. But its successive owners – CanWest, Granada and now the multinational private-equity firm Doughty Hanson – have pockets far deeper than RTÉ’s. The TV3 licence was secured in 1993, and service began in 1998, on the crystal-clear basis that it would be fully commercial. Its shareholders had a clear run at the national commercial opportunity as we entered the decade of plenty.
TV3’s allowed advertising minutage is more, and the requirements around reporting and delivery of content less, than RTÉ’s. There was little comment on the unfairness of the dual funding model at RTÉ – where licence fee goes to pay for extensive radio and performance group public services, as well as television – until recently.
The private equity firm that purchased TV3 in 2006, Doughty Hanson, is based in London, with offices in Frankfurt, Madrid, Milan, Munich, Paris and Stockholm. The firm has invested more than €23 billion globally.
Within the industry, its strategy around TV3 quickly seemed clear: to build its portfolio through acquired programmes and sports rights around the base of simulcast ITV programmes, and to seek a profitable sale.
Within that strategy, the company’s previous lack of interest in BCI funding changed and it began to apply for funds.
It was notable in RTÉ’s view that TV3 secured BCI funds for highly populist programming such as Paul Williams’s series on gangland crime, Dirty Money.
The scheme’s remit stresses high-value projects of a cultural bent. RTÉ has told the BCI that it would not anticipate being funded for similar programming.
But as huge pressure falls on all advertising spend, the Doughty Hanson strategy for TV3 may not be bearing fruit. The company’s reporting, understandably, is far less public than RTÉ’s.
In so far as can be established, TV3’s turnover in 2007 amounted to circa €62.5 million. It seems unlikely that ebitda exceeded (a very healthy) €21.5 million.
It appears, from published accounts, that TV3 was purchased at a very high multiple and the acquisition financed almost entirely through bank debt: €140 million is owed to Anglo Irish Bank and €160 million owed in mezzanine funding to Mellon Corporation, giving total bank debt of about €300 million. It is estimated the annual interest bill in 2007 would have been of the order of €30 million if all covenants were met.
Even if the entirety of licence fee funding for 2008 was given to TV3, it would still have potentially challenging levels of debt. The company and its investors accepted the original licence and the business risks, and the new investors have done likewise since 2006. The Irish television licence fee-payer is now being asked to contribute more to TV3 in this scenario.
It may be, therefore, that TV3’s interest in licence fee funding, and in RTÉ’s income base, has more to do with pressure resulting from its financial situation than simple concern over fairness. Lemass, accustomed to the political tactic of raising dust in one direction to hide a real issue elsewhere, would surely understand.
Kevin Dawson is RTÉ’s head of corporate communications
