Public & Proud

 

This article originally appeared in the MIPTV 2013 issue of TV Europe.

 

As the television business mutates in the digital multiplatform universe, Europe’s public-broadcasting companies are strong and vulnerable at the same time. While financial and political pressures endure for many of the institutions, seemingly permanent features of the public-sector landscape, they are not under regulatory siege from their commercial TV competitors as they once were. The market has moved on into a new phase of competition being played out digitally, with more players and a new tug-of-war over the rules.

 

Like Gaul of ancient times, the present situation of public broadcasters is divided into three regions in terms of the biggest challenges facing them, according to Ingrid Deltenre, the director general of the European Broadcasting Union (EBU), which includes 74 active members in 56 countries.

 

In Northern and Western Europe, including Germany, the U.K., Benelux and Scandinavia, public broadcasters face economic challenges of course, as do all companies nowadays. “But the bigger challenge is driving innovation and staying relevant to younger audiences,” says Deltenre.

 

“In the former Soviet countries and in North Africa, the challenge is mainly about independence and dramatically improving editorial standards,” continues Deltenre. “Their situation is probably the most challenging because funding is a serious issue and it is also a weapon used to limit their independence.

 

“In the Mediterranean area, it’s all about increasing efficiency and productivity, which is quite difficult because of strong unions and heavy internal structures,” she says. “This takes away a lot of managerial attention. They are very busy with internal discussions about how they’re going to organize themselves and what they are going to look like in five years. It’s definitely not an ideal world when you’re being distracted from your core business.”

 

The financial pressure has been particularly acute in Spain and Portugal.

 

In Spain, there have been cutbacks at the regional public channels. In 2012, the national broadcaster RTVE took a massive budget hit. The government cut funding by €200 million from €1.2 billion in 2011. In 2013, the reduction has been about €50 million to around €950 million.

 

Personnel costs account for an estimated 40 percent of RTVE’s budget. The public broadcaster is looking to trim these costs. In February, its board stated that in negotiations with the unions it would aim to maintain staffing at current levels in return for greater flexibility in order to increase productivity and cut costs—with a goal of a €35 million reduction.

 

In 2009, a new law on the funding of RTVE took effect and advertising was removed from all TVE channels at the start of 2010. The change introduced taxes on the revenues of the private broadcasters and the telecom operators (later dropped) to fund public TV. At the end of 2012, the Spanish government said it would not backtrack on the removal of advertising from the RTVE channels.

 

The French government decided to ban prime-time advertising on public broadcaster France TV in 2009. The 2012 Olympics scored big ratings for public TV in France, but advertising revenue from the games was estimated to be less than half of what it was during the 2004 Athens Games (the previous edition in a European time zone).

 

In Portugal, the government has debated a proposal to privatize or partially privatize RTP, which is a state-owned corporation. 

 

Earlier this year, the government postponed the plans but said it would still aim to sell off one channel at the right time—and stressed that RTP would have to live on its fee income (levied though electricity bills) and advertising to cover the budget (about €540 million in 2012). The government, which has underpinned RTP with subsidies in the past, said the company would face a “painful” restructuring program of cost cutting.

 

This isn’t the first time privatization has been on the table for a troubled public broadcaster. It happened in Italy in 1996.

 

“You had exactly the same kind of discussion about RAI,” explains Deltenre. “They even passed a law saying that RAI might be privatized. But there is a market reality. Public-service broadcasters are not-for-profit organizations. That’s not going to change, because in many countries state broadcasters are part of the constitution and you would have to change the constitution. So you have big not-for-profit organizations, with political influence involved in many cases. Why on earth would any bank or anyone else want to invest money and buy shares knowing that they will never have a dividend? In Italy it has never happened and I think that will be the case in Portugal. You can have the idea that it might be better to have the private sector running the broadcaster, but privatization means you need someone to invest. I think it’s just not an attractive proposition for a commercial entity. They can launch their own channel.”

 

French market leader TF1 remains the only case of a major public channel being privatized, way back in 1987 in a very different world.

 

One development to keep an eye on, however, is experimentation with a new mixed model, a sort of semi-privatization. In Denmark, the private sector has been allowed to take on a public-service role in broadcasting—with public funding. It was decided that one of the radio channels would not be run by the public broadcaster but by a commercial broadcaster, and the commercial broadcaster has been given public money to do so. This has not been tried in television yet, but in principle it would seem that it could be applied, at least to digital niche services.

 

The advent of new ways of consuming TV content on multiple devices has fundamentally changed a market in which the public broadcasters are central providers. Germany has been the first country to change the funding of public broadcasting to reflect this. At the start of the year, Germany abandoned the concept of basing the license-fee payment used to fund public broadcasting on ownership of a TV set or other device and instead charges a fee for every household. Since 2009, Germany had charged one fee for a radio or a computer with Internet access and another higher one for a TV. Smartphones and other mobile devices were left out. The new model does not differentiate between devices. One household equals one fee. Where several people share a place, one person must pay the fee.

 

The annual fee in Germany of €216 per year remains less than the license levels in Switzerland (€377 for TV and radio) and Austria (about €250, but this varies by state), but exceeds the levels in the U.K. (€168), France (€131) and Italy (€110).

“Everybody is watching Germany carefully to see how the new household fee works,” says Deltenre, who was CEO of Schweizer Fernsehen, the public broadcaster in German-speaking Switzerland, before taking over at the EBU. “If it works, it’s a model that may be adapted elsewhere. The license fee based on the television or radio set is probably not going to last forever, but there will probably always be a fee. The German model looks promising.”

 

When it comes to how they invest their funding, public broadcasters face more constraints than ordinary companies that don’t have a public-service remit.

 

“As public broadcasters they have an obligation to provide a service to a universal audience, meaning young and old, minorities and others, and it’s not an easy task,” she says. “They cannot focus on only the young, the audience between 15 and 40 or 45. They have to provide programming for everybody. They have embraced new technologies very well and are present on new platforms where the young audiences are, and if you look at the content that young people are accessing, it is still predominantly TV content. Some broadcasters are doing better than others. I don’t think any of them would say they are getting it exactly right, but all of them probably now have specific objectives in terms of young audiences in their annual or short-term plans.”

 

To fulfill their public remit, state broadcasters need more than one channel, ideally a family of channels. How many channels are sufficient depends not only on the market conditions of the individual country but also on the financial limits of each broadcaster.

 

The big public broadcasters already operate a slew of digital channels in addition to their main networks. The audiences are relatively small, but they add up. In Germany in 2012, the public children’s channel KiKA averaged a decent 1.4-percent share. ZDFneo averaged 0.6 percent, ZDFinfo 0.4 percent, ZDFkultur 0.1 percent, 3sat 1 percent, Phoenix 1.1 percent and ARTE 0.8 percent. On the digital front in Italy, RAI’s channels, including RAI Premium, RAI 4, RAI Movie and RAI YoYo, earned a 6.2-percent share. In the U.K., at the end of 2012, BBC Three’s audience share was up to 1.4 percent, BBC Four had 1 percent and the preschool channel CBeebies had 1.2 percent, while the children’s service CBBC had 0.6 percent. BBC News had 1.1 percent. In 2012, France 4 averaged 2.1 percent overall and was the prime-time leader among digital terrestrial channels 42 times during the year. It had 54 programs pulling audiences of over a million viewers. France 5 grew to a share of 3.5 percent, with 87 programs drawing more than a million viewers. In Spain, RTVE’s children’s channel Clan equaled free-TV network La 2’s share for the year with 2.5 percent, while RTVE’s news channel 24H had 0.9 percent and sports channel Teledeporte had 0.8 percent.

 

The present cornerstone of relevance for public broadcasters (other than news) is probably strong sports programming. Major sports events always draw large audiences, and if state broadcasters want to remain relevant and offer water-cooler events, they must offer sports.

 

While many countries have so-called “listed events” regulation for major sports tournaments, this only requires that events like the Olympics and the FIFA World Cup be on free-to-air television, not on public TV. In some cases, public broadcasters, such as BBC, have shared rights with pay-TV operators.

 

Public-broadcasting channels were the market leaders in three of the five biggest West European markets—Germany, Italy and the U.K.—and the sports offer played a big part. Sports programming also pulled the biggest audiences for Spanish and French public broadcasters.

 

In Germany in 2012, ZDF scored a daily average of 12.6 percent, up from an overall share of 12.1 percent in 2011. ARD scored a daily average of 12.3 percent, down from 12.4 percent overall in 2011. The two main public channels pulled 15 of the 20 biggest audiences in 2012, eight of them Euro 2012 football matches.

 

In Italy, RAI maintained leadership in audience last year with 39.8 percent for the whole day and 41.3 percent in prime time. RAI 1 earned 18.3 percent overall (19.4 percent in prime time), RAI 2 had 8.4 percent and RAI 3 had 7.7 percent. RAI 1 pulled nine of the top ten audiences of the year, seven of them Euro 2012 matches.

 

LONDON CALLING
In the U.K., the Euro 2012 championships and the Olympics, along with the Queen’s Diamond Jubilee, helped deliver a year-on-year improvement in market share for the BBC as viewing grew from 20.7 percent in 2011 to 21.3 percent in 2012. The top four programs of the year were on BBC One: the Olympics closing ceremony (24.5 million and a share of 79 percent), followed by the opening ceremony, England’s last game (versus Italy) during Euro 2012, and the Olympic 100 meters final. BBC One pulled 13 of the top 20 shows, including its version of The Voice format and its own Strictly Come Dancing.

 

“The Olympics were undoubtedly a centerpiece moment for us,” Danny Cohen, the controller of BBC One, said of the year’s performance, “but it was 17 days out of 365 and you can’t get that growth, and growth in peak time, without a strong year overall.” BBC Two, which did not carry Olympics programming, suffered an audience drop from 6.6 percent in 2011 to 6.1 percent last year (down from over 11 percent a decade ago).

 

In Spain, RTVE did not show Euro 2012, but had the other national team matches and the UEFA Champions League, which delivered its top audiences last year. Flagship public channel TVE1 fell in viewing share from 14.5 percent in 2011 to 12.2 percent in 2012, dropping from first place to third place. La 2 slipped slightly, from 2.6 percent to 2.5 percent. Spain’s regional public channels also lost share, dipping to 9.8 percent in 2012 from 10.4 percent the previous year.

 

The Olympics gave the main channels in France their best viewing figures in years. France 2 was the number one channel every day for two weeks during the London games with an average audience share of 22.6 percent, while France 3 averaged 15.3 percent. The 2012 Olympics also produced the biggest audiences (other than news and current affairs), appearing 11 times in the top 100 (10 times on France 2, once on France 3). 

 

France TV’s overall market share grew to 30.3 percent in 2012 from 29.9 percent the previous year. France 2 held steady at 14.9 percent—the first time since 2004 that the channel has not lost share. France 2 was the prime-time leader on 48 nights in 2012 versus only 31 nights in 2011. France 3 also stayed level, for the first time since 2006, with a share of 9.7 percent.

 

Part of the reason for French public broadcasting’s success was the strong performance of fiction programming, as 59 episodes of dramas and comedies on public channels pulled more than 3 million viewers in 2012, against only 14 episodes the previous year.

 

In Spain, TVE 1 was the most successful channel with fiction series. Its top series, Águila Roja, was the only program other than football to average more than 6 million viewers last year, with 6.076 million for three episodes. Historical drama Isabel averaged 4.035 million for 13 episodes.

 

BBC continues to be the U.K. market leader in drama, while Italy’s RAI 1 scored with last autumn’s six-part Questo nostro amore, among others. A symbol of longevity, German channel ARD’s police show Tatort, on the air since 1970, is still a ratings winner.

 

A good many years ago, commercial broadcasters were busy lobbying against public broadcasters because the latter not only received public funding but they also collected advertising revenues. Commercial networks maintained that this constituted unfair competition. Since then, in a number of countries, the commercial activity of public broadcasters in advertising has been reduced, most notably in Spain and France. You don’t see commercial broadcasters fighting against the public-service side in the same way.

 

“We define public broadcasters as the ones who receive public funding, whether through license fees or government grants,” says Ross Biggam, the director general of the Association of Commercial Television (ACT), a mirror image of the EBU on the Brussels lobbying front, with 33 member companies active in 37 countries. “Public support remains strong in the traditional bastions of public broadcasting, and that translates into political support. The biggest issues for ACT are now the protection of exclusive content and antipiracy. The competition with public broadcasters is always bubbling, but it is not at the top of the list as it was ten years ago or more, when it was a defining issue. The rules are well understood and better implemented than they were.

 

“The emphasis now is very much on how far the public broadcasters can extend their services into the new-media space, especially online,” continues Biggam. “It’s not about radio and television. The debate is being pushed much wider to include telcos and newspaper publishers. The latter have had to move online and they come up against competition from the public broadcasters, which have good journalists working for them and almost by definition offer their information for free. So the print groups that are struggling with finding ways to monetize their content online have a real issue. It’s more of an existential issue for the publishers than for commercial broadcasters.”

 

The European Newspaper Publishers’ Association (ENPA) has stressed that more should be done to ensure that the huge investment of publishers in developing online services is not undermined by the digital activities of public-service broadcasters. Ivar Rusdal, the president of ENPA, has said: “The rapidly expanding online offers of public-service broadcasters are distorting the digital market…and too often go far beyond their public-service remit.”

 

This is a battle that will undoubtedly continue, as publishers struggle with trying to migrate online, establish pay walls and find business models that will ensure their survival. The ENPA wants the online activities of public-service broadcasters made subject to a public-value test through independent bodies.

Public broadcasters, on the other hand, feel they have a responsibility to the people who pay the license fee. “It’s in the interest of citizens to have strong public broadcasters on the Internet because they provide the service that others have never provided or can’t provide,” says the EBU’s Deltenre. “I respect that the publishers have financial problems and that newspaper journalism is valid and very important. I hope that we can find a way to co-exist without weakening the public-service broadcasters, whose services are essential and are going to be even more important in the future than they have been in the past.”

 

In this new digital playground, just as in the traditional tele­vision world, the challenge for public broadcasters is to remain relevant while providing content and services that justify the public funding they receive.