We thank the committee for giving us the opportunity to speak. I wish to set out a view on the future of broadcasting as the only independent television broadcaster as we move into a period when legislators will conduct a fundamental review.
I will give a brief history of TV3. During a long process of legal and commercial hurdles, the original TV consortium made up of Paul McGuinness, Ossie Kilkenny and myself kept going because we believed in TV3 and, as people who work in film, television and music, that RTE badly needed competition. TV3 went on air in September 1998, almost ten years after the original grant of the licence. The other investors involved, CanWest Global Communications and Granada, have been with us since 1998 and 2000 respectively. In them we have two broadcasters with proven track records in television that are committed to the long-term. As investors they understand the long-term nature of media operations compared with the more short-term outlook of venture capitalists.
What progress have we made? In the material provided we have listed some of our achievements. TV3 is the second most popular channel in the State despite having to compete with three State funded channels and a growing multitude of British channels according to Neilsen ratings. We created new employment, directly and indirectly, for hundreds of people and invested in infrastructural, equipment and costs to the tune of €45 million. We have triggered in completion financing more than €8 million of independent Irish production and we have a flagship morning programme, the only Irish programming on air at that time. It is number one across all channels. The evening news service is watched by half the population every week.
Most importantly, more people are now watching Irish based television than five years ago. This is the most significant achievement. We have repatriated audiences at a time when the choice from Britain has increased ten fold. We have repatriated €100 million in advertising revenue that is taxed and subject to VAT, rather than being drained off by UTV, which does not remit VAT in this state, and Sky, which does not pay taxes on subscriber revenue. That is a point Government agencies might look at, given the regular advertising on those foreign services. This leads us to the position we are now in relation to the licence fee and how it is regulated. The exact figures for RTE production are hard to come by, but we believe it to be in the region of €32,000 per hour. To put that in perspective, it is more than double the average advertising revenue for TV3 in peak hours. Yet TV3 is the second most viewed channel. The average revenue, therefore, is half the cost of production. This means that TV3 must be able to acquire quality programming from abroad that is popular and of a much lower cost than home-made programming in order to fund the making of home programming. This is because we do not have a licence fee to contribute to production.
Unfortunately, that option is now under severe threat because the Government has increased the public funding of RTE and TG4 to €200 million per annum without attaching any specific or measurable quotas for Irish and European content. TV3 is prescribed quotas for Irish and European content under the terms of its licence but RTE is not. The details of this are outlined on page 13 of the pack we have provided to the committee. The result is that there are no real restrictions on the use of public funds, and this causes grave concern for investment in TV3 and other independent services. The indiscriminate use of public funds can effectively stop TV3 from buying a programme at a normal market rate or can be used to subsidise advertising rates. We are currently preparing a Competition Authority case on this point, as the actions of RTE in the advertising market have artificially depressed the price of advertising.
This also means that in regard to programming, RTE is in a position to bid up the cost of foreign and sports programming rights beyond their economic value, be they movies, series, sports or otherwise. The Champions League matches are a good example. TV3 provided them for free to the public. Now the public must pay a higher licence fee to underwrite RTE's broadcasts of the same matches. We even have the absurd position where TG4 can and has outbid TV3 for Hollywood movies. Does that make sense? Not if one believes in a proper public interest test of the use of public funds, and if the independent sector is willing to provide the same programming for free. There are also European law considerations, as evidenced by the recently announced investigation into the use of state aid by the Danish public service broadcaster.
What are we asking for? We should start by saying what we are not asking for. TV3 has never asked for the licence fee. Neither are we opposed to the existence of the licence fee. We have supported the use of the licence fee for the production of Irish programming. We are against the use of public funds to distort competition against local competitors and against it being used to acquire rights for foreign programmes that are universally available on other channels. We want fair controls that allow TV3 to survive on advertising revenues, which, in other countries, is a sustainable business model. This, in turn, will allow TV3 to gain the revenues that allow us to increase our own Irish production and remain distinctive.
With a fair regulatory environment, we can continue, with RTE, to grow Irish audiences, make our contribution to choice and, most importantly, maintain the plurality of Irish television, which is so essential to the democratic process. Without proper controls, there is a danger of severely damaging any chance for the independent sector and, as a consequence, effectively handing over the advantage to the UK channels that are increasingly targeting the Irish market and deliberately by-passing all Irish regulation. Sky will broadcast 20 channels with specific Irish commercial breaks on air in the next six months that have previously never intervened in this marketplace.
These channels do not pay Irish tax or invest in Irish production. The Government and regulators have a responsibility because television is not an open market - it is highly regulated. The terms of regulation determine the conditions in which all broadcasters operate. We have suggested what is needed to address this. To provide the Irish public with real value for money, RTE should be required to produce and show Irish programming at peak hours. This is the only time that the vast majority of people are free to watch television and, therefore, the only time they can avail of the programming choice that should be the objective of the licence fee to provide.
To work in any way meaningful, this would entail a quota by channel of at least two to three hours in the evenings. That is less than 1,000 hours of production per annum. This approach is quite common in other countries where substantial public funding is in place. It recognises that the primary justification for charging every home in the country a licence fee is to create programmes that reflect Irish life and culture. It is the only long-term, sustainable justification in a world where all the other programmes are available on other channels, mostly for free.
This means that quotas should be introduced related to the benefit of the licence fee, just as TV3 has quotas in its contract related to the benefit of our exclusive licence. Pending the establishment of the broadcasting authority proposed in the new legislation, and in order to redress the impact of the recent unregulated licence fee increase, the BCI should have interim powers to put some form of regulation in place.
In relation to advertising generally, the current hourly limit on RTE's advertising should be strictly enforced so that it can no longer average out advertising during non-peak hours. There is a choice. Either the future of Irish-based TV is strictly publicly funded, with no indigenous private sector, or there can be a balance that will support both a successful state and independent sector, an environment of choice that would truly meet public expectations.
