Press release

Strasbourg, 9 April 2002

The financial situation of public radio-television companies in Europe is deteriorating

• The growth rate of the public broadcasting companies is significantly lower than that of the private channels
• The levels and methods of financing the public sector differ widely from one country to another
• Commercial income is becoming increasingly important.

The European Audiovisual Observatory (Council of Europe, Strasbourg) announces publication of the first volume ("The Economy of the European Audiovisual Sector") of the 2002 edition of its Yearbook.

For its eighth edition the publication has a new look and provides, in particular, deeper financial analyses of the main areas of the European audiovisual sector. These new analyses have been developed from a database showing the accounts of 25,000 companies in the sector. In analysing the income of public broadcasters the Observatory has the benefited from the collaboration of the Information and Statistics Network of the European Broadcasting Union.

Content overview of the present press release

The Diversity of Public Broadcasting Systems in Europe
Diversity of Financing Sources
Very Different Levels of Contribution per Inhabitant
Growth Rates Sluggish and Divergent
Deteriorating Financial Results
A Multiplicity of Causes
The Need to Achieve Greater Transparency in the Countries of Central and Eastern Europe

Table 1: Radio and TV licence fee per household (2000) - In EUR
Table 2: Average revenue per capita of the public broadcasting systems (2000) - EUR / habitant
Table 3: Financial results of the public television companies in the European Union (1997-2000)
Table 4: Profit margin of public television companies (1995-2000) - In %
Graph 1: Profit (Loss) of public television companies in the European Union (1997-2000) - In EUR thousand
Graph 2: Financial ratios of public television companies in the European Union (1997-2000) - In %

National public broadcasting systems are characterised by the great diversity of their legal status, organisation and sources of financing.

In the United Kingdom, the BBC and Channel Four are constituted as Corporations; in Germany, ZDF and the regional stations of the ARD have a public law (öffentlichrechtlich) status. In France, Italy and Spain the prevailing status is that of limited companies whose chief capital is mainly held by the State or by public financial bodies. In the Netherlands and Luxembourg an element of the public service remit is delegated to subsidised associations. Such statutory differences clearly translate themselves into significant differences in accounting structures and demand a great deal of prudence in establishing economic and financial comparisons.

Another important factor of diversity in Europe, and one which does not make comparison easy, is the difference between integrated bodies providing both radio and television services (notably in the cases of the BBC in the United Kingdom, the ARD in Germany and the RAI in Italy) and bodies specialising either in television (as is the case in France with France Televisions, the ZDF in Germany or, in Sweden, SVT), or in radio (Radio-France, Radiodiffusão Portugesa, Sveriges Radio). A comprehensive European comparison should therefore compare all the companies of one country with all those of another country, and not limit itself to comparing company with company. Regional public service broadcasters (like S4C in Wales or the broadcasting companies of the Spanish autonomous communities) have also to be taken into consideration. Finally it has been necessary to take account of companies created by the public broadcasters to commercialise pay-tv thematic channels, which do not necessarily have public service remits, but which nonetheless should be considered within a consolidated economic analysis of the public broadcasting sector. In total the analysis provided by the European Audiovisual Observatory covers 55 companies in the European Union.

Diversity of Financing Sources

The financing of the public sector demonstrates another form of diversity in the European public sector. The licence fee remains the most prevalent form of financing public service companies. But the licence fee does not exist in Luxembourg, in Greece (where instead there is a tax on electricity), nor in Spain. The television licence fee has also been abolished in Portugal, in the Netherlands, and, most recently, in the Flemish Community of Belgium. In these four latter cases direct subsidy is provided in the absence of the licence fee. Grants, or contracts with the public authorities, are sometimes given for specific services, particularly for international services.

Finland is the country where public income is proportionally the largest (some 94.5 % of YLE's income). Next come Greece (around 90 %), Sweden (88.4% in 2000), and Germany (79.7%). France (65.9%) and the United Kingdom (65.4%) have public financing percentages close to the European average, but with very different arrangements for allocating the resources between the various public sector companies.

Public income (licence fee, grants...) does not, however, necessarily constitute the main form of financing for the public service broadcasting companies. In the United Kingdom, Channel 4 draws all of its income from commercial activities (advertising, sales of programmes and pay-TV channel FilmFour). The proportion of commercial income is greater than that of public income for the Austrian ORF, the Spanish RTVE and the Irish RTE. It is also the case for RAI since 2000, notably as a result of the growth in the activity of its subsidiary RAISAT which operates theme channels.

Furthermore there has been, throughout Europe, a growth in commercial income (from 28.4% of all income in 1995 to 32.3% in 2000) to the detriment of public income (which fell from 69.1% in 1995 to 65.4% in 2000).

Very Different Levels of Contribution per Inhabitant

The levels of the licence fee between different European countries are often compared . Omitting the countries where there is no licence fee, there are some very significant divergencies (Table 1). The Icelanders pay most (338.3 EUR for a radio and television licence) and the licence is lowest in Romania (17.7 EUR).

Table 1: Radio and TV licence fee per household (2000) - In EUR

An estimate of the average income per inhabitant of each of the national public systems is perhaps a more pertinent measure of the effective contribution of each inhabitant (Table 2). The amounts vary from EUR 156.5 per inhabitant in Switzerland to EUR 6 per inhabitant in Turkey. The British pay on average EUR 103.8 for their public service radio and television system, the Germans EUR 97.2, the French EUR 55.8, the Italians EUR 49.2 and the Spanish EUR 33.9.

Table 2: Average revenue per capita of the public broadcasting systems (2000) - EUR / habitant

Growth Rates Sluggish and Divergent

The total resources of the public broadcasting systems in the European Union rose to EUR 26.3 billion in 2000, against 22.8 billion in 1997. Over the period 1997-2000 the annual average rate of growth was 4.9%. This was considerably less than that of private television over the same period (17.7%). The lowest annual average rates of growth were registered by Sweden (-0.6%), Finland (0.2%), Belgium (0.6%) and Austria (0.9%). The British public sector had the strongest average growth (9.65 %), due in particular to the strong growth of advertising income for Channel 4 (11.8%). Similarly in Denmark it was the increase in advertising income for the mixed-economy channel TV2, which contributed to the healthy growth of the public sector (6.6%). RAI also attained a growth rate above the average (6%), thanks to the growth of its advertising income. The growth rate of the German sector was below average (4.8%). The annual average growth rates were weak in Spain (1.9%) and France (1.8%).

Deteriorating Financial Results

An analysis of the annual accounts and balance sheets of the public service broadcasting companies also shows a deteriorating trend. Admittedly the classical indicators of financial analysis do not have the same relevance for companies for which profit is not the objective. Nevertheless the trend is disquieting: the losses registered by a total of 55 companies studied are continuing to grow: EUR 193 million in 1998, 220.7 million in 1999, 578.5 million in 2000. The profit margin, which was still positive in 1997 and 1998, became negative in 1999 and 2000.

Graph 1: Profit (Loss) of public television companies in the European Union (1997-2000) - In EUR thousand

Graph 2: Financial ratios of public television companies in the European Union (1997-2000) - In %

Source : European Audiovisual Observatory

Table 3: Financial results of the public television companies in the European Union (1997-2000)

Table 4: Profit margin of public television companies (1995-2000) - In %

This deterioration is basically explained by the worsening of the net losses of RTVE, which came to EUR 637 million in 2000, and also by that of the Portuguese RTP (EUR 172.7 million in 2000). In Spain, the General Directorate of the RTVE and the SEPI (Sociedad Estatal de Participaciones Industriales) has recently implemented an important restructuration plan ("Plan Marco"). The two German public service bodies, ARD and ZDF also made significant losses in 2000 (EUR 115 million and EUR 124.7 million respectively). A deterioration in the financial position can also be seen in Finland, where the YLE made losses of EUR 17 million in 1999 and 10.6 million in 2000, and in Ireland where RTE registered a net loss of EUR 14.3 million in 2000. As for the BBC, which had registered a loss of 19.8 million EUR in 1999/2000, it had a profitable year in 2000/2001, but its profit margin, which had been above 3% in 1996 and 1997, fell to -0.29%. While the French public service sector can be defined as having a balanced trend, it is finally the RAI which shows the best financial health, although its profit margin is also in decline (from 8.7% in 1997 to 4.53% in 2000).

A Multiplicity of Causes

An analysis of this negative trend in the public service must be made country by country, since the situations are so diverse. Nevertheless, it is clear that one of the common factors in this deterioration in financial position is the invest in the transition to digital in an increasingly competitive environment. This leads the public service companies to make investments in infrastructure and to establish new channels which do not necessarily generate significant income.

A comparative analysis of the changes in costs is unfortunately difficult because of the structural heterogeneity of the accounting systems: in particular programme costs and investment in production are practically impossible the measure in a comparative manner. Costs such as those for the collection of the licence fee, for advertising sales or for technical transmission are equally difficult to compare because these elements may or may not have externalised. Even a comparison of the level of personnel costs has to be interpreted with care, because it is the more personnel intensive functions which have been the most externalised. The "editorial" channels, which tend to commission productions rather than make them in-house clearly have the lowest percentages of personnel costs in relation to their total expenditure: 7.3% for Channel 4 in 2000, 10.8% for France 2, 18.1% for TV2 Denmark, 18.4% for ZDF. At the other extreme there are RTP in Portugal (77.4%), Denmark Radio (57.9%) and RTBF (54.5%) in the French Community of Belgium. (See ERRATUM)

The Need to Achieve Greater Transparency in the Countries of Central and Eastern Europe

The Observatory's Yearbook also provides financial information on matters of income structure for Central and Eastern European countries. But collecting the annual accounts and balance sheets of the public bodies in these countries generally continues to be much more difficult, which, in certain cases, seems to suggest and extremely disturbing financial situation.

Set up in December 1992, the European Audiovisual Observatory's goal is to gather and distribute information on the audiovisual industry in Europe. The Observatory is a European public service body comprised of 35 member states and the European Community. It operates within the legal framework of the Council of Europe and it works alongside a number of partner organisations, professional organisations from within the industry and a network of correspondents. In addition to its contribution in conferences other major activities are the publication of statistics and newsletters, compilation of databases and information readily available on the web portal.