Thursday 8 December 2016

Cutbacks loom at RTE as Brexit ad hit pushes losses towards €20m

RTE is facing into a new financial crisis

Published 11/09/2016 | 02:30

Dee Forbes, the new director general of RTE
Dee Forbes, the new director general of RTE

RTE is facing mounting losses for the current year, with the impact of Brexit delivering a significant blow to its autumn revenue targets.

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The organisation is now projecting losses of up €20m in the current year, with advertising agency executives suggesting that TV advertising will be down 20pc in October due to Brexit uncertainty.

This week, new director general of Dee Forbes met with Minister for Communications Denis Naughten to impress upon him the seriousness of the financial difficulties facing the organisation.

And in the last few days, senior managers have been briefing staff about the broadcaster's worsening financial position.

Workers across RTE are now bracing themselves for a new round of cuts and cost-saving measures.

A recent agreement to restore pay cuts made during the recession could be reviewed, while a new round of voluntary redundancies is also on the table. Reductions in output are also under consideration.

In addition to the losses for 2016, RTE now expects it will not be able to deliver on an earlier commitment to break even in 2017.

At the start of the year, RTE had forecast a one-off deficit for the current year due to a large number of public service coverage commitments, including the general election, the 1916 celebrations, the Olympics and the Euros.

However, the commercial environment has been more challenging than expected. RTE Radio has found advertising to be weak throughout the year.

RTE television has enjoyed growth in the early months of 2016. However, in recent days staff have been told that there are serious concerns about advertising levels for the last quarter of the year, traditionally the busiest time for ad revenue.

Most of the larger advertisers manage their budgets from London. The fall in sterling, combined with caution about spending it, is squeezing spending.

A spokesman for RTE said the organisation had expected 2016 to be a difficult year due to the Olympics and other events. "These factors, coupled with growing licence fee evasion levels and declines in public funding over a five- year period, along with Brexit, mean that 2016 has been an extraordinarily challenging year for RTE. While RTE continues to maintain an acute focus on cost management, the funding of public service media, and in turn investment levels in the independent production sector, remain critical issues."

Bill Kinlay, chief executive of Group M, one of the country's largest media buying agencies, said: "With TV's buying system you get a lot more visibility about what is going to happen. I think it's going to be close to 20pc down in October, year on year."

"It's Brexit driven, it's become the norm for clients to become ultra-cautious about the autumn."

"It's not a particular sector, not a particular genre, it's right across the board. It affected September, and October will be worse than September on TV."

However, he said that TV advertising will be up overall for the year at around 4pc/5pc due to a good performance in the earlier months.

RTE broke even in 2013 after significantly reducing costs. Prior to that, RTE endured five years of losses, peaking in 2012 with a €65m deficit. Last year it delivered a small deficit.

RTE had been seeking the introduction of a new broadcasting charge to bolster its coffers. However, Minister Naughten has ruled that out. RTE's biggest hope for a funding boost now lies in licence fee collection. High evasion levels are costing around €30m a year, and RTE wants the contract, currently held by An Post, put out to tender.

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