I thank the Chairman and members for inviting me here today to discuss the issues outlined by the Chairman. The Chairman has already introduced the people with me - Mr. Brian Dalton, Ms Breda O'Keeffe and Mr. Kevin Bakhurst. I hope that between us, we can answer any questions that members may have.
In the past year, RTE has overcome considerable challenges, some of which have, understandably, been explored in detail at this committee. Recovering from and implementing important changes in response to the very significant editorial mistakes made in the "Mission to Prey" and "Frontline" presidential debate programmes in 2011 was a key priority for RTE throughout last year. Informed by the findings and recommendations from external investigations and reports, we completely restructured RTE television current affairs. The changes were made to ensure greater clarity in the editorial management chain and to allow for an increased focus on journalism and editorial decision making at the programme level.
As part of the restructuring, we announced we were changing our approach to investigative journalism through the establishment of a new RTE investigations unit. The new unit will now be responsible for managing and producing RTE's key investigative journalism output for television, radio and online. RTE also made key appointments to the most senior positions within the restructured RTE news and current affairs division at the levels of managing director, managing editor, programme editor and head of the new RTE investigations unit.
At a group wide level, we created a new role of head of editorial standards and set up an editorial standards board to support and challenge programme makers, particularly those involved in high-risk programming. In addition, we completely updated RTE's journalism guidelines during early 2012. We have also included new guidelines for social media and rolled out training for all editorial staff across the year. Many of the changes we have made have become apparent to our audience with a refreshed multi-format "Prime Time" running three nights a week and a new morning news programme, "Morning Edition", both beginning earlier this year.
The first long-form documentaries, "Riches from Rags" and "Bethany: the Home the State Forgot", produced by the new investigations unit, were broadcast in just the last few weeks. There are more investigative reports from the unit coming shortly.
There will always be risks and, as I have always said to this committee, we will, of course, make mistakes; such is the nature of journalism. Having learned difficult lessons, all of the actions we have taken were designed to minimise the risk of serious editorial mistakes happening again while at the same time supporting and nurturing challenging and important current affairs journalism in RTE. Over the course of time our audience will ultimately be the best judge of how we are doing. Mr. Kevin Bakhurst will be able to give more detail on the specific changes and initiatives. Of course we have more work to do. Nobody is getting complacent here. However, given where we were, I am pleased to say where we have now got to.
Over the past five years, like many organisations and businesses in Ireland, particularly in the media sector, RTE has had to adjust to a new financial reality. RTE’s commercial revenues first began to decline in 2008 as a direct result of the economic slowdown. Over the next four years our commercial revenues fell by €84 million, that is, 35%. In addition, public funding allocated to RTE from the licence fee was reduced by €20 million during that period. In total, RTE has experienced a decline of €104 million in revenues between 2008 and 2012.
RTE has responded decisively to this severe contraction in revenues. We implemented substantial cost reductions across all areas of our activities between 2008 and 2011. We reduced our operating cost base by €86 million. The cost reduction initiatives included a voluntary pay cut taken by staff, suspension of increments, cancellation of bonuses or performance pay, reductions in headcount levels, reductions in programme costs, renegotiation of supplier and service contracts and reduction in all overhead and discretionary costs.
In 2012, in response to further declines in both commercial income and licence fee revenues and a very difficult commercial market for all media companies, RTE undertook a major organisational restructuring. A key element of the restructuring programme was the voluntary exit schemes under which 350 people left RTE during 2011 and 2012. At the end of 2012, RTE's headcount had reduced by almost 500, a reduction of 21% compared with 2008 levels. The benefit of this restructuring began to take effect in 2012. RTE’s 2012 operating cost base was some €104 million less than 2008 levels. This helped generate a small but positive operating profit last year despite further declines in revenues.
As I have already publicly indicated, RTE will report a net deficit for 2012 in excess of €60 million, after a large once-off restructuring charge. The cost of restructuring is considerable but will deliver annual ongoing savings, which reduces RTE's 2013 operating cost base to almost 30% lower than 2008 levels. As reported in a recently published report from PricewaterhouseCoopers, PwC, the scale of the operating cost reduction that RTE has achieved is almost unique across the Irish semi-State sector and it underlines our strong commitment to our stated aim of returning to financial stability this year.
By the end of this year, staff costs in RTE will have reduced by more than €42 million since 2008. In July 2009, RTE was the first public body to agree and implement reductions in basic salary for all staff. The pay reductions were fair, ranging from 2.35% to 12.5%, with those staff members on higher incomes taking the largest reductions. Salary increments in RTE were suspended for a period of time by agreement. They have been reintroduced but on condition that their reintroduction was offset by other personnel related cuts. In respect of management and all other grades, no bonuses have been paid and managers are no longer placed on incremental salary scales.
Average basic pay for RTE staff serving at December 2012 was €55,500. This places RTE’s salaries, compared with both public and private sector organisations, in the median or mid-range for comparable organisations and companies. Alongside our staff, RTE has always contracted a wide range of personnel and companies to deliver services, including on-air presenting talent. For many years, the earnings of RTE’s top presenting talent has been a subject of considerable public debate and criticism. It is the issue more than any other that I am asked about, not just by the media and politicians but also by the public, for whom it is an area of concern.
RTE, like the public, values enormously the work of all our on-air talent and those working behind the scenes. However during the boom, the remuneration of RTE's top presenters became over-inflated and we paid our presenters too much. In 2011, I publicly committed to reducing substantially the amounts we pay to our top presenters by a minimum of 30% on average, both to make very necessary savings but also to correct levels of remuneration that were clearly out of step with the economic times. Our latest figures show that substantial reductions have been achieved as contracts have been renewed. These range from 21% to 68%. The average across the top ten is well in excess of the 30% reduction we committed to achieving. When we have concluded the negotiations, I am confident we will have achieved an average aggregate reduction of closer to 40%.
This process is not over. As contracts expire, we will, of course, review the fee levels and make the best assessment we can at the time. I do not pretend to say that we make perfect judgments on every occasion. However, it is fair to say we realise this is, and has been, an area of concern, we have made very important strides in the right direction in the last 18 months, and the process is ongoing.
Notwithstanding these difficult issues and the very tough market that still continues for Irish media companies and which we have faced particularly over recent years, as director general I am very proud of the service RTE continues to deliver for our audience every day. Last year, RTE television broadcast close to 5,000 hours of high quality, home produced programming, and 19 of the top 20 programmes broadcast on any channel available to Irish viewers in 2012 were on RTE television. RTE television drama has registered its highest ratings and critical success in years, with the third series of "Love/Hate" proving to be the television talking point of last year. From Katie Taylor’s extraordinary gold medal fight in London, to Kilkenny and Donegal in the Gaelic football and hurling championships, to Ireland’s difficult European football championships and to the most recent rugby Six Nations, RTE continues to deliver comprehensive coverage of all the key Irish sporting moments across all our services.
RTE radio continues to be recognised as providing an exceptional service winning awards both at home and abroad, competing against the best resourced public service and commercial broadcasters in the world. These are an important recognition of the breadth and variety of programming produced every day for multiple audiences, big and small, across RTE’s radio services. RTE’s digital services have also continued to grow. RTE digital has been restructured and is very focused on keeping the national broadcaster relevant to and in touch with all its audiences.
Analogue switch off last October was an important moment in the evolution of Irish television. In addition to RTENL building the necessary infrastructure, RTE successfully launched the Saorview service and led and funded a comprehensive public information campaign informing people about the new service and how to access it. The two year campaign ensured that Ireland experienced one of the smoothest digital switchover transitions of any European country.
The success of digital has yielded more than €874 million to the Exchequer while, at the same time, for now, ensuring open and free access to Ireland’s public service and commercial television channels. By the end of 2012, 36% of Irish households were accessing the Saorview service.
As I have said previously, RTE is far from perfect but it is an organisation that makes a unique contribution to Irish life in a period of profound change. At a time when so much is changing, public service broadcasting ensures we have somewhere to go that reflects those changes, explains them, discusses them and gives us a platform on which to find the collective way forward. Like all organisations during this recession, RTE has had to adapt to a new commercial reality. Like all organisations, we face the challenge of new technologies, changing audience consumption patterns and market shifts. We have downsized and reinvented ourselves to meet these challenges.
This year is an important one for public service broadcasting as a whole. The Broadcasting Authority of Ireland will shortly conclude its review of the adequacy or otherwise of public funding to enable RTE and TG4 meet their public service obligations. The authority will present its conclusions and recommendations to the Minister and the Department of Communications, Energy and Natural Resources. Clearly, this review is happening at a time of extraordinary change and challenge for the media sector in Ireland. The temptation during such a difficult and complex set of challenges is to try to solve today’s problems while ignoring tomorrow. RTE is looking to the future. We have set out a clear plan as to what we would like to achieve in the next five years, how we would like to improve our services and invest to best meet the changing needs of our audience.
