Hard times at RTE must be a licence for change

According to the Irish Times, the State broadcaster lost €20m last year, on turnover of roughly €340m. These numbers are guesses, since accounts for 2016 will not be available for a few months yet. RTE lost about €3m the previous year, hardly a catastrophe for a company of its size. But losing €20m a year is not sustainable.

More than half of the company's revenue comes from the licence fee. There are plans to realise up to €75m from the sale of surplus lands at RTE's extensive Dublin 4 headquarters, which should fix the finances for a while.

Trouble is, you can only flog off surplus assets once, but operating losses can be forever. RTE is not the only State company in trouble - there are serious losses also at An Post and at Bus Eireann, where strike action has commenced in response to management plans to cut costs. In all three cases, the losses are not cyclical and will not reverse should the broader economy prosper. Postal volumes are in long-term decline, and the bus company has been unable to meet competition from private operators, the heavily subsidised railway and the willingness of a largely car-owning population to take to the motorways. RTE's losses are also here to stay unless action is taken.

The State broadcaster's problem is the weakness in both main revenue sources: advertising income and the licence fee. In line with all other traditional print and broadcast media, the squeeze from internet advertising is inexorable. Google, Facebook and others can offer targeted advertising - ads crafted to match the profile of each consumer - and the share going to the traditional 'dumb billboard' outlets is headed south. To make a bad job worse, the licence fee is becoming harder to collect. Once the van has appeared in a housing estate and the first innocent has opened the door, the remainder get rapid text messages and emails and the lights go down. The licence fee has been steady at €160 since 2008, the population (and household numbers) have risen, but RTE's licence-fee income has fallen by more than 10pc. The uncollected tax on TV sets exceeds RTE's annual losses.

The company's combined revenue from both sources, advertising and the licence fee, has dropped by €100m since 2008. Cost reductions have not been enough to offset the revenue decline, and neither of the revenue sources looks particularly promising. Newspapers are familiar with RTE's financial troubles. Circulation declines have been dramatic, and advertising revenue has weakened in step. Some of the main Irish titles are selling only about 60pc of the figures they achieved 15 years ago, when the population of the country was lower. Circulation per adult has almost halved.

Continuous cost-cutting in editorial budgets can only go so far without compromising product quality, risking a further leg in the downward spiral. Very few newspapers have managed to make money from digital editions and they complain about competition from free news websites provided by tax-financed public service broadcasters. Some of the UK broadsheets have elaborate websites (increasingly with partial paywalls) but none match the range and quality of what the BBC can offer for free.

There is a deeper and long-standing problem with Irish broadcasting policy. Private radio and TV stations in Ireland have access to a small portion of the licence-fee money, through a fund administered by the Broadcasting Authority of Ireland, but nearly all of it goes to RTE.

In the United Kingdom the BBC gets the licence fee money but does not carry advertisements. Its private-sector competitors can generate enough from advertising to be able to match the BBC's income, since they have the advertising pot to themselves. So there is some degree of competitive equality in the battle for viewers. In Ireland, RTE gets the lion's share of both licence fee money and advertising revenue - it is dual-funded, to use the jargon. Not surprisingly, it has managed to retain leading market shares in both radio and television. The total annual revenue of private Irish radio and TV stations is not a publicly available figure, but industry sources put it at around €100m, less than one-third of RTE's income.

When the decision was taken back in the 1980s to offer licences to private radio stations, RTE had been dual-funded for decades and the new entrants were expected to compete through reliance on advertising revenue alone. This put the licensed stations in a weaker position than their pirate predecessors, which had no public service obligations - they were illegal. But the new licensed stations, including the TV stations established subsequently, have public service obligations - they cannot play records all day as the pirates did, which is the cheapest form of broadcasting.

RTE has serious public service obligations too, including its subsidy to the Irish language channel TG4, and the expectation that it will broadcast numerous programmes with low audience appeal. The result is a very messy broadcasting market, a mixture of State and private ownership, State subvention through the licence fee and all sorts of cost-inducing obligations on broadcasters, both public and private. It is not easy to see what exactly is going on and the playing-field is not just uneven, it is shrouded in regulatory fog.

All domestic media companies, not only the broadcasters, face intense digital competition for eyeballs and advertising. UK television channels are able to offer so-called 'opt-out' advertising slots for the Irish market at bargain prices and private broadcasters allege that RTE sells advertising on both radio and television too cheaply. There is hardly a single media company in Ireland that can expect consistent profitability in the years ahead.

At the heart of the mess in the finances of broadcasting is the annual television-licence fee, fondly regarded by apologists as a subscription for RTE's channels. It is nothing of the kind. It is an annual tax on the ownership of a consumer durable, regardless of use, and makes as much economic sense as a tax on washing machines or cookers.

The advent of laptops and smartphones, equally capable of accessing television broadcasts, has finally brought it home to policymakers that this antiquated and cumbersome method of raising revenue has no place in a modern fiscal system.

RTE's director general suggested last week that the TV licence fee should be doubled. It would be better to have it abolished altogether and the revenue replaced through conventional taxes on consumption and income. The TV licence fee, aside from the collection problems, is akin to a poll tax and highly regressive in its incidence.

In its absence, government would have to face the difficult question of subvention to public service media. A functioning democracy needs serious radio and TV stations, and broadsheet newspapers, the pitch on which the political game is played.

RTE's financial crisis is an opportunity to revisit the issues ducked 30 years ago when the broadcasting monopoly was abandoned.