Wednesday 20 September 2017

Artistic licence: Broadcasting boss on pushing the boundaries to meet online media challenge

Broadcasting Authority of Ireland chief executive Michael O'Keeffe is mindful of the sector's financial difficulties

Broadcasting Authority of Ireland chief executive Michael O’Keeffe is mindful of the sector’s financial difficulties (INM)
Broadcasting Authority of Ireland chief executive Michael O’Keeffe is mindful of the sector’s financial difficulties (INM)
Samantha McCaughren

Samantha McCaughren

The past 12 months have been a testing time for broadcasting. Expectations of a robust recovery in 2016 failed to materialise, due in part to the shock impact of Brexit on UK-based advertisers. While the Broadcasting Authority of Ireland (BAI) is there to regulate the sector, chief executive Michael O'Keeffe clearly has the financial challenges facing radio and TV front and centre in his thinking.

"Things were picking up at the beginning of this year. Whether it was Brexit or other factors, the feedback is that the second half of 2016 was not good for most of the groups, particularly national advertising," he says.

Among the biggest pieces of work undertaken by the BAI in 2016 was the overhaul of the general commercial communications code, which governs advertising rules.

Radio stations in particular have been seeking some wiggle room in relation to sponsorship as growth in traditional advertising spots grinds to a halt. "We would be sympathetic in that the advertising market is more challenging," says O'Keeffe, a career civil servant who has played a key role in developing the commercial TV and radio sector for close to 30 years.

"Boundaries are being stretched and advertising is moving to other media, which is not as regulated, so radio would like boundaries to change."

The rules in Ireland are relatively strict, whereby presenters are not allowed to endorse products which O'Keeffe says is to protect the integrity of content. However, radio sponsorship, which is potentially a lucrative pot of alternative revenue, is seen as too restrictive and the sector has been seeking changes for some time.

O'Keeffe expects changes to be announced early in the New Year as part of the new code. "There are a couple of initiatives, one of which we need to test with the lawyers," he says.

"The radio sector is feeling that there are a lot of advantages for the television sector because of the visual nature of sponsorship. They are looking for some leeway and we have looked at a couple of proposals to see if they will run or not."

But the separation of commercial and editorial will remain. "If the sector had its way, it would maybe lessen the boundaries. We are not going that far and there will no doubt be more discussions about this over the next few years," he says.

This loosening of the rules will certainly be a positive for radio but other initiatives will get a more mixed response. Among the other issues on the agenda for 2017 are the broadcasting services strategy and the possibility of new stations.

Several small groups want new licences to be issued for niche services. For example, the TXFM licence is now available after Communicorp decided not to seek a licence renewal due to the continuing losses racked up by the station.

On the other side of the argument are existing licence holders, whose stations have struggled to break even since going on air several years ago.

O'Keeffe said that the BAI has not yet considered the licensing of new services but that he has some reservations.

"We have to look at the whole commercial market and in our strategy document we talk about sustainability and what can the marketplace can sustain and do we need to make changes to how we licence to make sure they are more secure."

He said the closure of TXFM, which had been allowed to reduce news and current affairs commitments and share services with a larger radio group, had prompted a rethink.

Under the current regime, stations have extensive commitments which have not changed since legislation to open up the radio market, once dominated solely by RTE radio, in 1988.

"Under the current regime, can you sustain services like that when the advertising market is so challenged?" says O'Keeffe of TXFM. He said that if the BAI felt a proposal was not going to be viable "then why would we license it? The counterpoint to that is that if I want to run a country station or a jazz station and you have a frequency available, let me at it and if I fail, so be it," he says.

Those issues will be teased out when the BAI comes to review the broadcasting services strategy during the year. "They are fundamental issues," he says.

The impact of the Brexit vote hasn't all been bad.

A number of television stations have approached the BAI about the possibility of a locating to Dublin from London over concerns about Brexit on licences to broadcast in the EU.

"The licensing regime here is somewhat similar to the UK," says O'Keeffe. There would be a potential benefit to the BAI as any station licensed here would have to pay a fee.

"There is an attraction to here because we are close by, we are English language," said O'Keeffe.

However, he said other locations such a Luxembourg could end up being attractive also.

"We have had preliminary inquires," he says. "On the TV side we would look at the possibilities and the potential for something like that to occur, and what kind of regime that would be".

He said that current regime was aimed at Irish stations based here. Less onerous licences such as those given to UTV Ireland and Eirsport are available and do not have the extensive requirements of free-to-air channels such as TV3 and RTE.

Also on the agenda for 2017 is the matter of opt-outs - stations based in the UK which broadcast services here with ads tailored specifically for Irish viewers. Is is estimated that €40m-€50m of ad revenues now go to channels such as Sky and Channel 4.

Minister for Communications Denis Naughten recently initiated a consultation on the matter and there will be a report early in the New Year.

A review of the EU's Audiovisual Media Services Directive is under way and the Irish Government is seeking changes to how opt-outs are treated. The EU has already backed the idea of a levy on online services such as Netflix.

"Ireland is looking for a revision of the directive to allow levies to be placed on services which are targeting this jurisdiction," said O'Keeffe. "Ireland has legitimately asked the question, if you can do it for online services, why can't you do it for services that are targeting Ireland?"

He said that the BAI would support the Government. However, O'Keeffe cautioned against the industry's expectation that the levy could bring in significant funds. Some have suggested that a levy on opt-outs could net in excess of €10m a year which could be ring-fenced for the independent production sector.

"Let's say, for argument's sake, they are taking €50m out of the market place, realistically what percentage of a levy would you be talking about? It could probably bring in a million-and-a-half euro," says O'Keeffe.

He said that he could not see a basis for imposing a higher levy.

While additional funding would be useful, he says it would not address the underlying issue of the opt-outs selling a growing amount of advertising here.

He is also cautious about hopes that a crackdown on licence fee evasion will bring in significant funding for RTE.

The broadcaster has long sought a reduction in evasion levels from around 14pc to the UK level of 5pc. The fee is currently collected by An Post and evasion estimated to cost RTE up to €50m a year.

O'Keeffe thinks a fraction of that uncollected money may be captured. "I'm just not sure in Ireland, by our nature, we would get to 5pc. But there certainly is potential."

Extra money from the fee would help RTE, but not solve its many challenges.

The BAI has recommended licence fee increases in recent years, which were not adopted by the last government.

"It's very clear from any research we've done, how much the public values both the commercial and public sector broadcasters we have. But there are challenges for them," he says.

A year ago O'Keeffe was optimistic that ITV, which had just bought UTV, would be a supporter of UTV Ireland. Since then, TV3 has bought the station and the new owner is in consultation over job losses as a result of the merger.

"The big negative is that people are losing jobs and it is never nice to see that," says O'Keeffe. "

But he said that if TV3, which is owned by Virgin Media, had not bought the station, he doubted there would have been another buyer and was encouraged by TV3's plans for the station, which will be called be3.

Another development in the sector has been the acquisition of former UTV radio stations by News Corp, the owner of the Sun and Sunday Times in Ireland.

O'Keeffe expects consolidation to be a feature of broadcasting into the future. "Linked to the challenges of the broadcasting sector, we are not seeing new groups coming through," he says.

In the earlier days of independent TV and radio, diverse consortia were owners of stations with small business owners among the shareholders.

"People like that are not investing in media as the risk is high," he says. He also said the venture capital companies, such as former TV3 owner Doughty Hanson, were unlikely to enter the market now.

How will that affect the media landscape in years to some?

"It is a challenge because, from a diversity point of view, we want as many services as possible and yet the number of media groups around is lessening," he says.

"When you look at the way online media has taken out so much of the revenue, that's where you are posed with challenges."

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