I welcome the representatives from RTE, Mr. Cathal Goan, Ms Clare Duignan and Mr. Conor Hayes. Before we begin, I draw attention to the fact that while members of the committee have absolute privilege, this same privilege does not apply to witnesses appearing before the committee. The committee cannot guarantee any level of privilege to witnesses appearing before it. Under salient rulings of the Chair, members should not comment on, criticise or make charges against any person outside the House or an official, either by name or in such a way as to make him or her identifiable. I invite Mr. Goan to make his presentation.
Broadcasting Issues: Discussion with RTE.
Mr. Cathal Goan
Go raibh maith agat. Táimid buíoch as an deis seo a fháil labhairt faoin Bhille Craolacháin agus faoi na forálacha éagsúla chomh fada agus a bhaineann siad le RTE. We are grateful for the opportunity to talk to the committee again. When last we spoke in detail about the broadcasting legislation, it was during the process of the consultation, which was a novel engagement at the time and one that was worthwhile and allowed a fairly good exchange of views that have helped develop the Bill to its current state and its passage through the Oireachtas.
I am joined by Mr. Conor Hayes, chief financial officer, and by Ms Clare Duignan, who is the director of television programmes and responsible for all our home-produced programming in the television schedules. We would be happy to address issues in the Bill and to engage with the committee in any questions it may have about aspects of the Bill in so far as they relate to RTE.
We have been in a series of communications with the Department as the Bill has evolved and we continue with that. We are here having accepted an invitation to look specifically at RTE's commissioning of independent production and the building of a national digital terrestrial television transmission system. I will ask my colleague, Ms Clare Duignan, to speak specifically about our relationship with the independent production sector and how that funds a vital and ongoing part of RTE's competitive advantage in television.
Ms Clare Duignan
I am grateful for the opportunity to speak to the committee. While I am getting long in the tooth, I have been involved in the independent sector since the mid-1980s when I became head of features programmes in RTE television. From then through to today, working with the sector has been one of the key parts of my job. As a backdrop to getting into the details of the issues that arise regarding the sector in the Bill, I thought it would be useful to give the committee some background about how RTE's relationship with the independent production sector has evolved since the late 1980s. I have a small presentation for the committee which I hope will capture the essential aspects of the matter.
Before there was any relevant legislation, RTE used to engage with independent producers and commissioned programmes from them. It was due to the Broadcasting Authority (Amendment) Act 1993 that this engagement was moved onto a formal setting. That Act set out the core legislation under which we still operate as regards our obligation to commission from the sector. It requires us to commission programmes from the independent television production sector, support the development of programmes from the sector and procure the formulation and assist in the completion of programmes from the sector.
When that Act was introduced, it specified the sum of money we were to spend every year and allowed for it to increase in set-out stages. RTE operated under that legislation and continued to commission programmes, and the volume of programmes grew over time. The most significant change occurred in 2003. At that time the RTE organisation was struggling financially and looking to organise and become a more efficient organisation. There was an expectation it would do that and, in 2003, we took a strategic decision, as advised by Government-appointed consultants and consultants engaged by RTE, that we would reduce our overheads and become a more flexible organisation.
The philosophy behind this and the requirement was that RTE should be able to upsize and downsize its expenditure, output, costs and overheads in response to a changing economic environment. We can at present see the importance, given the current economic situation, of RTE having the ability to be flexible. As a result of that strategic decision, 400 staff left RTE under a severance scheme and we took the decision to move a big block of our programming out to the independent sector. Less programming was made by in-house staff and more was made by independent producers. This did not lead to a reduction in home produced programmes in our schedules but rather changed the production source.
The point has been made that the large increase in the amount of commissioned programmes since 2003 reflected a public taste and demand for those programmes. This is not to criticise the quality of those programmes. We are delighted to have a large number of independent productions in our schedule which serve our audience just as well as the programmes we make ourselves. However, it is important to make clear why we grew the volume of commissions and why we are spending more than our statutory spend on independent commissions. This came about in response to that important strategic decision to change the shape of the organisation and to outsource more of our programming. At the same time, we also outsourced our outside broadcast units. Members who are GAA or rugby fans may have noticed that all the technology and large units for the broadcast of games are no longer owned and operated by RTE but are now supplied by an independent contractor under an arrangement with RTE.
From 2003 onwards, because of the decision to which I referred, we have increased our spend with the independent sector. The statutory requirement is for RTE to spend €32.84 million in 2008, but we will spend much more than that. In 2007, our total expenditure on indigenous programming, that is, programming, excluding news and current affairs, made either by RTE staff or by independent producers, was more than €182 million. Between 2003 and 2007, our expenditure on independent productions has increased by 70%. However, reflecting the strategic decision we made in 2003, our spend on in-house programming has grown by only 40% in the same period. While our income from commercial revenue was good, we put our money where our mouth was by investing in the schedule and in programming, but significantly more of that growth went to the independent sector because that is the shape of the organisation in which we are now working. In 2003, we spent €46 million with the independent sector, increasing to €79.5 million in 2007, in which year we produced 1,000 hours of programming.
To illustrate how the schedules have improved and the way we have spent the increased programming budget, members can see from the document we have provided the type of growth we have been able to introduce in home production under the various headings — entertainment, young people's, factual, arts and education programming. I will not go through this in detail but I direct members to the appendix which sets out the prime time schedule on RTE 1 in 1982 and 1992 in comparison with what was on offer in 2007. Members may remember such programmes as "Wonder Woman" and "Rowan Atkinson Live". The amount of acquired programming in the schedule at that time contrasts noticeably with the amount of home produced programming in 2007 and 2008, a reflection of the increased expenditure on indigenous production.
Our recently launched autumn schedule included more than 70 new programmes and series. I am slightly bemused that it is seen as a negative development and that we should be criticised for spending more on production and bringing more programming to the schedule. There is almost a view that we are becoming too large because we are able to put all that money onto the television screen. This makes no sense to me. It is surely the function of a public service broadcaster to maximise the quality of the service it offers to the audience and to maximise its commercial revenue and licence fee income to provide strong home produced content. I say all this by way of background and to illustrate where the growth in commission expenditure has come from in recent years. It followed as a consequence of the decision that was made in 2003.
An argument has been made as part of the discussion of this Bill that more of the licence fee should be allocated to the Broadcasting Commission of Ireland, BCI, sound and vision scheme. In this context, I emphasise to members the importance of the licence fee to RTE. We are funded by a combination of licence fee income and commercial revenue. In the current year, 44% of total income is from the licence fee and 56% from commercial revenue. As with any other company, that commercial revenue is becoming increasingly volatile in the current economic climate. We are projecting a shortfall of €27 million in commercial income for 2008 across the entire organisation. The more uncertain that commercial income becomes, the more crucial it is that our public funding, via the licence fee, is secure. We must have certainty in terms of our access to that income and the amount thereof to underpin our core public service values.
The 5% of licence fee revenue allocated to the sound and vision scheme certainly has brought significant improvements for some sectors in broadcasting. However, it also means that television licence fee payers now effectively underwrite venture capitalists who have invested in private companies. I am not sure this is an appropriate use of public funding. In addition, licence fee revenue is also being given to support broadcasters outside the State. For example, the BBC, which receives the best licence fee funding in the world, has already accessed €1.5 million of funding from the sound and vision scheme. I do not see why Irish licence fee payers should subvent a broadcaster in another jurisdiction which is already extremely well funded by licence fee payers in that state. A move to increase expenditure on the sound and vision scheme is likely to lead to an increase in that type of funding.
Such a diversion of licence fee revenue would lead also to a reduction in support for RTE's activities. All of the core public services we provide to the Irish audience, including television stations, radio stations, orchestras, choirs, the hour of daily programming to TG4 and so on, rely strongly on licence fee income. It is interesting to hear so many members remark before this meeting that they watched RTE's coverage of the United States elections last night and listened to "Morning Ireland" this morning. We have a lean and mean team in the United States, comprising 13 staff who service all our election coverage. This is tiny in comparison with what other broadcasters are doing. The fact that so many people are watching and listening to our coverage shows that an Irish audience wants high quality news and current affairs programming delivered by Irish voices and with an Irish angle on world affairs. That is a key part of what we do.
I am concerned that some of these activities might have to be curtailed if there is a reduction in our access to the licence fee in the event that a greater allocation is made to the BCI sound and vision scheme. There are difficult questions to answer in this regard. Are any of those who have lobbied for the increase in the allocation to the sound and vision scheme of the view that RTE should cut back on any of its core activities to facilitate it? We are of the view, on the contrary, that we should seek to copperfasten all these activities. These are surely the proper functions of a public service broadcaster and a guaranteed licence fee income allows us to undertake them.
There has been much discussion in the course of the debate on this Bill about independent producers and growing the independent production sector. It is important also to bear in mind the contribution of RTE's staff who have worked with commitment, dedication and skill for many years in supporting the services we provide. They too are entitled to work on the type of programming we are now offering to the public. We should bear in mind the service these people have offered to Irish broadcasting over the years.
We have a very good and professional business relationship with the independent production sector. The value of the business we do with the sector will be more than €77 million this year. That business is conducted under agreed terms of trade which govern all aspects of our relationship with the sector and which are renegotiated every three to five years. RTE operates a fair and transparent commissioning process and, as a public organisation, we are fully accountable for our editorial decisions in respect of all aspects of expenditure. We produce an annual independent productions report which sets out the details of our expenditure of public and commercial money with the independent sector.
We provide 100% funding for almost all our commissioned programmes. There has been much discussion about the return to the producer from the moneys we spend on commissioned programmes. The budget a producer receives for a commissioned programme includes producer remuneration based on the number of weeks spent working on the production, a production fee of between 5% and 20% of the production budget, depending on the size of that budget, an overhead allowance which contributes to the cost of office, heating, lighting and so on, as well as the cost in the agreed budget of every aspect of the production. In addition, the producer receives 50% of net revenues from programme and DVD sales and from all other exploitation, and up to 30% of revenues from such items as telephone call-in competitions tied to the programme. Moreover, they receive an additional payment from us if we broadcast the programme more than five years beyond the date of the first transmission.
Nevertheless, the suggestion is that producers are doing this somehow as a labour of love and that it is a cottage industry in which it is difficult for people to make a living. It is certainly a large sector and those involved would probably agree that it may be oversupplied. However, in terms of RTE's business dealings with the sector, people are paid proper rates, budgets are fully covered, itemised and detailed, and we share the profits, if there are any, with the independent producer.
RTE disagrees with the independent sector, as we consider that we should retain the rights in these programmes. We take the financial risk and put up 100% of the budget up-front. Consequently, we consider that the ownership and copyright should follow that risk, but that the revenue should be shared as it is at present.
I understand "Riverdance" was cited to the joint committee as an example of how independent producers would be in a position to exploit a programme, were it left to them. I wish to correct this point because the show "Riverdance" had nothing to do with independent commissions. It originated from an eight-minute interval act devised by Moya Doherty, an in-house RTE producer, who was the producer of the Eurovision Song Contest at the time "Riverdance" went on stage. She subsequently left RTE and developed and devised the stage show with her husband. It had nothing to do with television rights and she was not an independent television producer at the time. She decided to leave, worked with that idea and developed the stage show. There may have been some confusion in respect of "Riverdance" at previous meetings of the joint committee.
The reason RTE feels so strongly about its wish to retain rights in commissioned programmes is because it is dual-funded, it must generate commercial income. Section 108 of the Broadcasting Bill calls on RTE to optimise its commercial income. The licence fee is not supposed to fund programmes to the subsequent benefit of independent producers. It exists to provide a quality service to listeners and viewers. Any moneys that RTE makes from the exploitation of programmes through its 50% share of revenues go back into more programmes for the listeners and viewers. This is a fundamental principle.
If we fully fund something, put up all the money up-front and take the risk, this argument about the producer retaining rights seems strange. For example, if RTE was in the business of building roads or hospitals and contracted with a builder and an architect to build and design a hospital, respectively, for which RTE paid all the associated costs, it would be strange were the builder or architect to express a desire to own part of it, because they built or designed it. It is a business relationship, the money is paid up-front and the rights should follow the risk.
In respect of this topic, there is much discussion about the BBC and its position regarding rights. In 2006, we commissioned ICM Analyticals, a consultancy company, to investigate further what was the position regarding programme rights for commissioned programmes with other dual-funded public service broadcasters across Europe. The position in the United Kingdom is highly unusual and is not typical of the position across Europe. In Austria, for example, the dual-funded broadcaster, ORF, retains all rights in 100%-funded programmes and, unlike RTE, does not profit-share with the independent producer. Similarly, in Switzerland, SRG retains all the rights and does not profit-share. In the Netherlands, NPB only takes a licence in the programme, which means it does not seek to own it but merely to broadcast it. However, it only provides 50% of the cost of the programme. While we have discussed such a proposition with the independent sector in the past, its view, which we share, is that the Irish economy is neither strong nor big enough do adopt a model whereby RTE would only fund part of the programme while expecting the producer to find the balance. It is not a feasible model. Belgium and Iceland use the same model of taking a licence to broadcast only but do not pay 100% of the programme budget.
Germany is a bigger country and is much more analogous to the United Kingdom in terms of size and scale. In Germany, ZDF, which is one of the two big public service broadcasters, retains all rights in commissioned programmes and has some profit-sharing with the producers. ARD, which is the other major public service broadcaster, retains all rights and has almost no profit-sharing. While the BBC may be a shining example for an independent production sector, it is not a shining example for public service broadcasters and is not indicative of general practice across Europe. When ICM Analyticals compared our terms of trade with other, similar broadcasters across Europe, it found they were at least as advantageous as those of many dual-funded public service broadcasters. They were considerably more advantageous than the current practices in Austria, Switzerland and Germany.
A view that often is expressed in respect of programme rights is that RTE does not exploit the rights in commissioned programmes. In our view, there is no evidence to show any other arrangement would be any different or better than the current arrangement. In the past, we have agreed with the independent sector to appoint sales agents. For example, at one stage a large company called ALL3MEDIA was appointed sales agent for RTE and the sector. Having reviewed the back catalogue of commissioned programmes, as well as our current commissions, its view was that most programmes we commission do not have international sales potential because such programmes largely are commissioned for a domestic audience. If we do a fashion show, it is about Irish fashion and Irish shops, a farming show will be about farming in Ireland, a talent show will be about Irish talent and so on. Very few such programmes have a market with other broadcasters.
The international market is absolutely dominated by the United States, which accounts for 70% of the market share of the sales of television programmes. While the United Kingdom is the second biggest exporter of television programmes, it is very important to understand the context in this regard. More than half the programme sales in the United Kingdom are made by BBC Worldwide, which is the market leader by some distance. It sources the programmes it sells from a programming budget of more than £2 billion per year. Our total expenditure last year on indigenous production, excluding news and current affairs, was €182 million. Clearly, if one draws from such a big pool with such a wide range, one will have more hits than with the kind of output we have. Even within the United Kingdom, fewer than 10% of domestic programmes are sold to overseas broadcasters.
I hope this backdrop has been of interest and has been informative to members in respect of our relationship with the sector and of our views on the licence fee. We strongly believe that any change to the public funding model as currently outlined in the Broadcasting Bill would have immediate negative direct effects on our output levels. In particular, the current economic climate makes this all the more acute and throws into sharp relief how crucial it is for RTE to have secure public funding through the licence fee if it is to continue to provide the service it wishes to the public and which the public expects. The consistency of such funding is every bit as important as the amount and we need to know it is available to us to enable us to plan.
The difficulty as more of our expenditure gets tied up in non-negotiable matters, such as the minimum expenditure on independent commissions, that it is the only part of RTE's activity that is inflation-proofed. However, as the economy gets tighter and as things become more difficult, we must cut back, scale and manage because in law we are not allowed to budget for a loss. We must budget to break even at least. Consequently, RTE must be highly adroit in its management of its expenditure and having increasingly large amounts of such spending tied up in non-negotiable expenditure will make it highly difficult for it to maintain its dexterity and manage the organisation through the current global economic difficulties.
I remind members that we are transparent and are accountable to the Oireachtas and our key stakeholders, including the viewing public, for everything we do. It is important that members should know that the licence fee income that goes to RTE meets all those requirements and that it is fed back into indigenous programme making. In our view, the strategic approach taken by a public service broadcaster such as RTE to meet the needs of all the various niche audiences and not simply the big mainstream audiences, can be done best by delivering a mixed public service schedule, which is what RTE does. An erosion of the licence fee would mean that more of that money would go to other types of programming and simply would diminish the completeness and quality of a strong public service television and radio.
Mr. Cathal Goan
Do members wish to engage in discussion on this presentation or should we move on?
The witnesses should complete their full presentation, after which I will invite members to contribute.
Members are a little tied for time. Will this meeting continue during the Order of Business?
Yes.
Okay.
Mr. Cathal Goan
I simply wish to bring members back up to date. The Broadcasting (Amendment) Act 2007 provided for RTE to establish a national public service multiplex for digital terrestrial television, DTT.
To be fair to the witnesses from RTE, were DTT to be discussed now, members would come back with questions on both DTT and the Broadcasting Bill. My suggestion is that members first should deal with the issues raised regarding the Broadcasting Bill and should discuss DTT thereafter.
I am satisfied with that proposal.
This will prevent the two issues, which are entirely different, from being confused.
First, I was not aware the joint committee would focus on RTE's relationship with the independent sector this morning. I had thought this would be a more general discussion on the Broadcasting Bill. That said, there is no harm in so doing. Members have listened to a forthright and determined presentation from RTE this morning in terms of trying to protect its funding. I accept that in common with many sectors across Irish society, times will be difficult for RTE next year in respect of funding. However, I wish to make a number of points. I do not accept the contention that independent production companies should be treated in the same manner as architects on building projects. They are not just designers of a programme to be handed over to RTE. In many cases, they are artists. If one creates a song or a music video, one expects to keep some sort of secondary right to it. The comparison is slightly unfortunate.
The independent sector is expressing a fair concern, although it is not a criticism of RTE. Most of the independent production companies that have approached me have excellent relationships with RTE, but they want an opportunity to negotiate secondary rights. This way, they will be better driven than RTE to market their products outside Ireland after a five-year period or so, irrespective of whether the market is the Irish diaspora in Australia, the US or so on.
False examples have been provided, including "Riverdance", but there is a case to be made. Ireland has many talented and imaginative producers who will want their first break with RTE, TV3 or so on. They are not being unreasonable in wanting a system whereby they could keep significant control over their programmes' secondary rights.
The witnesses have used Austria, Switzerland, the Netherlands, Belgium and Germany as examples while dismissing events in the UK, but that last is the best model for independent production companies. Are we trying to encourage companies to invest in, expand and develop an independent production industry in broadcasting that can target markets outside Ireland after being given a break in RTE or TV3? Alternatively, are we just trying to facilitate production companies that can be used as an outsourcing mechanism for our public service broadcaster? The latter is not my preferred model.
I am in favour of RTE's outsourcing of an increasing portion of quality public service broadcasting programming to an independent sector because it will introduce more innovation and ideas. While these can be and are found within certain sectors of RTE, the 2003 strategic decision has led to RTE downsizing and becoming more reliant on outsourcing. This has worked well to date, but independent production companies are consequently telling me and others that, if they are expected to assume more responsibility, it is not unreasonable of them to seek improved access to secondary rights and to negotiate with RTE in this respect. Currently, they have no power to negotiate with RTE in any significant sense because, notwithstanding TV3, RTE is the only show in town in terms of the majority of the independent production sector. They are looking for a dispute resolution mechanism or a structure to allow for compromises between their concerns and those of the dominant player that is RTE.
It has been stated that, since RTE provides the funds, it should call the shots, but those funds are not RTE's. Rather, it is a public service broadcasting fund provided through RTE. While it is RTE's money to use wisely, our job is to analyse that use. There is an overlap between advertising revenue and the public service broadcasting element. Often, people ask us to try to separate the two elements, but it is not possible to do so because many of the programmes that demand the best advertising revenue returns are actually public service broadcasting programmes, such as the coverage of an election.
While I do not want to continue for too long, I will raise the sound and vision fund. Since it is at the nub of an issue of concern to RTE, I wish to explore it with our guests. Some people suggest that the fund be increased from 5% to 7% or so and I recognise that every 1% increase represents €2.1 million, but is it not the case that RTE already accesses or makes use of the majority of the fund, given that the programmes end up on RTE? Will our guests clarify the matter?
I have not decided what is the best course to take, but there is a school of thought to which I will refer. RTE spends approximately €77 million on independent production, a figure far in excess of its legislative requirement, but some suggest an increase in the pool of money for which everyone, including RTE, can make a pitch. This school of thought would ask RTE to compete for a slightly larger slice of public moneys to access public service broadcasting. In reality, however, RTE would continue to win most of the business because it is such a dominant player. Currently, a broadcaster makes an application for the sound and vision fund alongside the production company that approached it.
Ms Clare Duignan
The producer makes it. May I answer the Deputy's question?
I am about to conclude. It would be useful were our guests to explain why this model would not work in comparison with securing funds to RTE directly. I could ask about a series of other funding issues, but we should concentrate on the issues raised today.
We will take a number of questions before reverting to the witnesses.
I welcome our guests. We all recognise that we have been well served by RTE, the dominant provider, for generations. While we often discuss public service broadcasters and public service broadcasting, I have yet to find a definition of those terms in legislation. Since our guests are in the business, will they tell me what the terms mean? Legislation lacking a definition of a central term raises the issue of a lacuna in the Broadcasting Bill.
In terms of commercial revenue, RTE is in hard times that are likely to continue. Given this, what the television licence fee delivers should be examined afresh on two counts. Why are approximately 15% of television licence fees not being paid and how can the situation be addressed? The people who are acting legally are subsidising those who are not. If times are tough, RTE must be efficient in drawing on revenue.
A greater issue is that of new sources of accessing television, namely, the Internet and alternative media, that are not being captured by the traditional An Post system of collecting television licence fees. For example, a man who came to see me had put up his own satellite dish and paid his television licence but cannot receive RTE. RTE needs the money but what is it doing to collect it? How does it propose that these issues can be addressed?
I am curious about rights ownership. RTE has made a vehement defence of the status quo, saying that the independent sector has no evidence as to potential. There is no way people can show the potential because it cannot be realised due to the current structure. That is not a convincing argument. We should encourage potential that seems worth testing to enable people to retain rights to what they produce. Maybe there is none. Ms Duignan says the international market is limited. If that is so, what is the big deal about rights ownership? Is there a fear that a competitor will benefit? I would have thought that we have an independent sector that is proving itself, is eager to grow and that this is an area where RTE could offer choice and flexibility to independent producers so that they could decide whether to develop potential in terms of retaining rights. This is good business.
The delegation refers to RTE being fully transparent. There is a special relationship between RTE and the Oireachtas and when we ask questions we usually get answers but that is not always the case. I recall sessions dealing with pensions, salaries of senior executives, bonuses and issues that do not always bring absolute transparency to mind when we seek answers. This is a challenge for RTE, which needs to be robust when stating this.
Regarding the sound and vision fund, I appreciate that the producer must apply but there is a difficulty in Ireland because choice is limited due to the presence of the giant of RTE. RTE benefits from the sound and vision fund and, like Deputy Coveney, I would like to know the breakdown. Like Deputy Coveney I have an open mind but it seems there is a genuine issue. Where one does not have the obvious competition that might exist in larger countries, one must look to the source of funding such as this, which is relatively modest. One must assess where producers can benefit, along with RTE, in terms of dipping into the fund and accessing it.
The way Ms Duignan sees it, RTE must do it directly but if one can do it indirectly by commissioning independent people, RTE benefits.
Ms Clare Duignan
This amounts to revenue lost. If more goes, it is gone and we are benefiting to a lesser extent.
The programmes end up on RTE anyway.
There is a cost. The delegation is correct that there is a cost but there is also a benefit because the creative pool is so much larger.
The last time RTE was in, we were stuck in an argument across the table. This was a superb presentation and dealt with many points. An issue has been raised by the colleagues who have spoken. We spent months establishing copyright legislation seven or eight years ago. I do not know the answer to these issues. I support the point made by Deputy Coveney about artistic rights. I am sensitive about that but I do not know the answers. RTE has answered the points well. The point about the BBC selling only 10% onwards is important. We have a job to do. We must examine copyright legislation. This should not be left as free as it is. Legislation should make it clear what we expect of RTE or any other body in this situation. If RTE was to tell us that a certain amount of taxpayers' money was supporting creative artists in other jurisdictions, we would not be happy. We would bury the delegation and I would be the first to do so. RTE is looking after our interests very well.
The witnesses have outlined again the support for the two orchestras, the choirs, Lyric FM and other matters in terms of the public service aspect. It is important that RTE sees it as part of its remit to develop artistic creativity and endeavour outside its own gig. RTE argues vehemently that it is doing so and I do not know enough to contradict the witnesses but I agree with the members who suggested RTE should go the extra mile on that. There should be a legislative base to do that.
I agree strongly with the point made by Deputy McManus about free-to-air access via satellite. I have written to RTE many times and Mr. Goan will be pleased to hear that I have a letter ready to go to the Chairman of the committee. It says that the amount of VAT that Irish people are paying to Sky for satellite is €100 million, all of which is going to the UK and only because RTE has done a deal with Sky preventing any other provider——
Mr. Cathal Goan
That is absolutely wrong.
I would be happy to be contradicted. The fact that Sky is the only company that can provide RTE on satellite is depriving this jurisdiction of €100 million in VAT. Many people receive satellite because of the better reception and would like to receive RTE in this way. Money that would go to the State is being lost. RTE is at the end of its contract with the providers, Sky, and there should be an open market in providing free-to-air satellite access to RTE, TV3 and TG4.
I will confine myself to brief questions. The delegation painted a picture of decreasing revenue, which is a continuum for the next few years. RTE is down €27 million. What percentage of overall budget does that represent? What projections does RTE make for 2009 and 2010?
RTE predicates the argument for no further topslicing on the need for funding but I am not sure that stacks up. From the RTE point of view it may stack up financially but I am not sure it does from a broadcasting point of view. We need competition within the broadcasting sector and the delegation accepts that local radio has been a major success. It should improve standards but we need to have more of that. We do not have enough indigenous television, we have far too many foreign channels coming in. I would like to see more indigenous television broadcasting. Digital may provide the potential for that. There has been talk about regional broadcasting for some time. I would like that to be done on an independent basis.
I appreciate the fact that RTE is taking steps on outsourcing, which controls some of the fixed costs of RTE and transfers them to variable costs. At a time of economic stress this is good from RTE's point of view. It also means these are the sources RTE is likely to cut in the first instance rather than its fixed costs.
What other issues is RTE dealing with? It comes across that some of this is being done because small independent broadcasters are able to be more efficient than RTE. As a dominant public service player I presume there are a number of restrictive practices within the RTE organisation. What steps are being taken to remove them? What flexibility and productivity is RTE examining within the system? These are the areas where businesses must hone in, particularly at a time of falling revenues.
RTE has many high profile and highly paid contract broadcasters. Often, the amounts being paid to them are justified on the basis of the advertising revenue they attract. In a scenario where they will attract less advertising revenue because of the general economic climate do their contracts have clauses to enable RTE to reduce these payments or are they fixed in stone?
I watched with interest when the previous Minister, Deputy Dermot Ahern, increased the licence fee, which had not been increased for some years. I have a strong perception that the foreign travel budget in RTE has seen a major increase since then. I appreciate Mr. Goan does not have information on this with him. Will he furnish the committee with comparisons between foreign travel in the three years prior to the increase and the years since the increase? I want to see what is the trend. I accept that a national broadcaster needs to send people abroad, to cover elections and other such events, so we have an insight into what is happening worldwide. We are living in a global economy.
I am conscious of having seen situations where it was not necessary for people to have gone abroad. Documentaries have been made on interesting parts of the world and shown some amazing sights. However, they seemed to concentrate on the gastrointestinal difficulties people had when they were away rather than on the quality and value of the area in which they were. Will Mr. Goan comment on this?
Mr. Cathal Goan
It was an independent production.
I want to discuss rights ownership and I concur with my colleagues that the creator of any successful venture must be entitled to participate in the benefits and rewards. I understand what was stated about RTE taking the risk by putting all of the money up-front.
Ms Clare Duignan
There could be a 50-50 split in the returns.
They are seeking subsequent rights in the event of further revenues being received. What risk is involved? I find it difficult to identify the risk. Poor quality production is one risk and I presume if the programme is bad enough it is not broadcast. In such a case, does RTE lose its money or is it possible to recoup the amount? How often has this happened? I would have thought that if one deals with independent producers one would concentrate on those with a good track record and which have already produced good quality programmes. Therefore, I do not see a major element of risk attached.
Last night, the Seanad debated broadcasting and I took the opportunity to give Mr. Goan an advance warning of the matters I was likely to raise here. The debate was about good taste and Senator O'Reilly, who is not here, discussed decency and not causing offence. I know this is subjective and it is not easy to set an absolute guide or threshold as to where it is breached. I will give an instance but I will not discuss the high-profile issues that were raised in the newspapers during recent weeks.
The other night my wife was watching a programme and when it finished I flicked channels to look for football. I ended up watching Podge and Rodge on RTE and Lee Sharpe, the former Manchester United footballer, was a guest. I thought it might be interesting to hear what he had to say. I heard the most crass sexually explicit points put to him that would have offended any reasonable person. My reaction was to wonder whether I pay my licence fee for this. I am reluctant to pay a licence fee to the broadcaster of this programme. I do not think Mr. Goan has seen the programme but I ask him to watch it and state whether he stands over it. Is this the standard we are setting for ourselves? If not, what can we do to ensure these programmes adhere to a certain standard?
One can argue that they are puppets but they are not. A puppet is operated by somebody's arm and the person speaking behind it. There is no need to go to the bottom of the barrel for some of this stuff, which is not funny and is put forward more to shock people than create comedy. I have a strong view on this. It leaves me as a member of this committee to state that if this is what the national broadcaster is doing the licence fee revenue should be spread as much as possible throughout the entire broadcasting sector to see whether we can improve standards.
I suggest to Senator Walsh that he turn off the programme. I am not being flippant but their comedy plays on the edge. I must admit I think they are funny guys. It is subjective as to what a person thinks as an individual. I do not know how relevant it is to today's debate.
Young people in their twenties discussed it with me and made the same comments as I have made here.
They must be as conservative as the Senator.
Perhaps they are but there is nothing wrong with being conservative.
The programme is on at 11 p.m. If adults are watching television at 11 p.m. they can turn it off if they are offended.
The issue of the archive was raised with us on a visit to TG4. I realise we must accept commercial realities in today's economic climate but the archive is a real treasure. I appreciate charges are involved but what other bodies have done with RTE's archive, such as making programmes like "All Ireland Gold", could be extended without fees or charges. RTE should examine this. Other media outlets may have airtime which RTE does not and we should consider this.
With regard to the rights issue, Ms Duignan's analogy with architects was unfortunate. While architects do not own the buildings it is clear that they own the intellectual property of the design. I assure Ms Duignan that if one tries to copy something from an architect one will be met with immediate vigorous opposition. While the creators do not fund it up-front, and the funding might come from RTE, they have the abilities to sit down with a blank canvas and create something.
When we were on another visit we were told the goalposts have changed with regard to how RTE treats independent producers. The programme in question was "Ear to the Ground" and perhaps other committee members can remember what was stated. The company which produces the programme has different rights with regard to the earlier programmes they made for RTE than they have for the programmes made today. I could be wrong and I could have interpreted what was stated to me incorrectly but this is what I understood was said. If this is the case, I question why the circumstances have changed.
I apologise because I must leave the meeting in advance of Mr. Goan's presentation. What are RTE's plans for the digital switchover? Will it be on a phased basis? How many digital channels will be available? The perception in Donegal is that RTE is Dublin-centric. There is a cultural and historical vacuum in terms of what RTE could be tapping into. I do not simply refer to Sligo, Leitrim and Donegal but the entire north west of the country.
On the issue of the Good Friday Agreement, does RTE have an integrated broadcasting strategy in terms of what is happening in Northern Ireland and in the Republic or is that being worked on at present? BBC and UTV are providing a very good service to County Donegal, making cultural and historical television programmes which are of interest to people in the north west. I believe we have an obligation under the Good Friday Agreement to develop an integrated broadcasting strategy and I hope Mr. Goan will be able to allude to some level of ongoing co-operation in that regard. I do not mean to be dismissive of the type of programmes that are being made because certainly from a current affairs point of view, RTE makes a big effort. However, the perception persists that the only time RTE comes to County Donegal is when there are car crashes or job losses. There is a vacuum there and a need for a greater focus on special interest topics.
Mr. Cathal Goan
I thank everyone for their comments. RTE is privileged in that it enjoys licence fee funding and has a reasonably distinguished history of service to the Irish people. However, this creates high expectations which, when not met for individuals, invariably translate into questions about why one pays a licence fee. The range of opinions to which that applies is as large as the population of Ireland. I do not say that dismissively. It is a fact that we are faced with quite a number of challenges in what we do.
We have been referred to as the dominant broadcaster, which we could take as a compliment. The focus today has been on television and it is worth remembering that Ireland has a 50% plus penetration by digital channels. The concept that RTE stands alone, unchallenged, must be questioned. In homes with digital television, RTE commands a very significant share of audience, at 32% at peak time, which compares very favourably with any broadcaster in Europe. The reason for that is the kinds of schedules offered by RTE. We make decisions on those schedules because we are charged to do so. We have an editorial structure in place whereby we place responsibility on certain people to commission, choose or produce certain kinds of programmes which deliver for RTE the kinds of schedules that continue to command high levels of audience loyalty and respect. It is important to say this because it is vested in a structure.
I do not have any difficulty with people saying that the model might not be correct and that we should start again. However, it is important to ensure that everyone who is involved in the debate is fully cognisant of the implications of tinkering around the edges because of a specific requirement at a certain time, albeit legitimate. The ecology of broadcasting in Ireland is sufficiently delicately balanced for me to urge caution with regard to tinkering further with the way we offer the services that we do. That does not mean that members do not have the absolute right to do so and to fundamentally re-examine the structures of broadcasting in Ireland. However, moving money from here to there, in the fashion suggested in the current debate will potentially diminish the sense of responsibility we have for the decisions we make, based on the funding we receive. Decisions on what gets commissioned or produced will be made by bodies which have no separate, distinct responsibility for how programmes fit into a schedule and how they are viewed and accepted by the public. The process becomes disembodied. Therefore, while I absolutely accept the Oireachtas' obligation to legislate, I ask that if Members are going to further change the draft broadcasting legislation before us, they are fully cognisant of the potential impact. That is not a threat but simply a statement of fact. In the current economic climate, I urge Members to either fundamentally re-examine the Bill or leave it largely intact.
A number of very specific questions were asked by members of the committee. I will respond to some issues and would like Ms Duignan to respond to points made by Deputy Coveney and the metaphor he used concerning architects and architects' fees, as well as to the point made by Deputy D'Arcy.
Deputy McManus raised the question of the definition of public service broadcasting. Over the years there have been various attempts to codify what public broadcasting represents. RTE does not claim that everything it does is exclusively public service broadcasting and that everything done by those in the commercial sector is not public service broadcasting. However, we argue that the combination of choices we make around the kinds of programmes we commission and the activities undertaken in radio and television, together, constitute a public service. We are obliged, under law, to do that in a certain way and to report it in a certain way. There is no similar obligation placed on commercial broadcasters. We are not complaining about that but are simply saying that is the way it is. The obligations on RTE, as currently expressed in this Bill, are quite onerous. Again, we are not complaining but those obligations are fundamentally different from those of our competitors.
As stated in this Bill, there is a clear set of responsibilities on RTE to accomplish certain public service objectives, including upholding our democratic values, making people aware of the culture of all of the people of this island, broadcasting in two languages, bringing the affairs of this and the European Parliament to the notice of the public and so forth. A range of activities are referred to, including orchestras, on-line broadcasting and so forth, which together constitute what is viewed as a public service broadcasting enterprise.
The European Union has decided, through the Television without Frontiers Directive, that broadcasting is a very special activity and not simply an economic one. It is recognised that broadcasting has other contributions to make to societal welfare. We take that very seriously. If there are parts of that which Deputies and Senators think can be amended in constructing the objectives of RTE, I would be happy to contribute to that debate. In as much as the definition of public service broadcasting is laid out through these objectives in the Bill, however, it is a welcome initiative.
I wish to firmly nail on the head what Senator O'Toole said about RTE doing a deal with Sky. The incontrovertible and unavoidable reality is that RTE cannot go into the sky unencrypted. We cannot do that because over 50% of our schedule is acquired from external sources and we can only buy the rights for Ireland. If we go, unencrypted, into the air and people outside the island of Ireland acquire that programming, we will be breaking the terms of the acquisition of those rights. That situation is not going to change. The only way that we could distribute on satellite in Ireland is in some form of encryption. Whether that is through Sky or another provider is a secondary point. The Senator is correct that we are in an exclusive arrangement with Sky in terms of satellite distribution although that may change. While I imagine that competition will increase, it will always be based on encrypted distribution of the service. Where DTT differs fundamentally is in our determination to continue offering free-to-air television in the digital era.
Other stations are on Sky but their transmission to Ireland is blocked because they are under UK jurisdiction. Has RTE explored the option of maintaining exclusive rights to RTE programming broadcast on satellite? It is an option that should be considered.
Mr. Cathal Goan
To be clear, RTE has significantly progressed its proposals to the Department in that regard as part of our service to the diaspora. We had planned to commence broadcasting this month and have made arrangements with Freesat and several other providers in that regard but, as we have informed the Department and the Minister, we have postponed the service for one year because it would not be wise to proceed under the current economic circumstances.
Perhaps it would be helpful if Mr. Goan could provide the committee with further details on the matter. This is the first occasion we have heard about the postponement.
Was the decision made on the basis of the costs involved?
Mr. Cathal Goan
Yes.
What is the cost?
Mr. Cathal Goan
At present, it is approximately €2 million per year.
Although this is an unfortunate development, it is important to put it in the context of the other savings being made. A strategic decision was taken by the Government that RTE should reach out to the diaspora. To be fair to RTE, it has been making adequate preparations for that and it will do a good job when the service commences. However, I am concerned that the diaspora is the easy target when funding becomes difficult and that RTE is slicing off the €2 million for this service rather than examining its entire structure for savings. Perhaps Mr. Goan can address my concerns and assure the committee that RTE is not taking the easy decision to neglect the diaspora because it is not on our doorstep.
Mr. Cathal Goan
I would be very happy to do so. RTE continues to provide a widely accessed on-line service to Irish people living abroad. We have taken more than €50 million out of our planned budget for next year. This is just one part of our proposals for arriving at our legal obligation to avoid being in deficit at the end of next year. Many painful decisions have already been made, some of which are in the public arena. We are happy to answer more detailed questions regarding the decisions made thus far and which may have to be revisited depending on next year's economic climate.
There is a political dimension to this matter given that it was extensively debated in the Oireachtas. It would be appropriate if this committee wrote to the Minister to express our concerns. The Government has also made commitments and it would not be proper for us to simply accept RTE's decision. We acknowledge that the broadcaster has financial commitments to meet but we should pursue the political aspect with the Minister.
This matter is relevant because we will probably complete Second Stage of the Broadcasting Bill 2008 by tomorrow and may hold further detailed discussions on the Bill in the following two weeks. The Bill proposes Oireachtas and film channels, yet our public service broadcaster states it cannot even afford €2 million to reach out to the diaspora. Merely broadcasting an Oireachtas channel, without taking account of staffing costs, will cost up to €750,000.
So many issues are competing for our attention today that it is difficult to know where to start. I happen to have a particular interest in the diaspora issue but serious interaction is needed between this committee, the Minister and RTE in regard to setting priorities for public service broadcasting over the next three years. This needs to be addressed in the context of the Broadcasting Bill. Is an Oireachtas channel a higher priority or should we be reaching out to the Irish diaspora? If we have to make that decision, why are we considering a Bill which establishes an Oireachtas channel and a film channel? We will not get to the bottom of these interlinked funding issues today but I wish to raise them for the record.
There is no question about RTE's priorities. The decision should be reconsidered.
Mr. Cathal Goan
I would be happy to reconsider the decision but we face a range of significant financial challenges. Under these circumstances, it would be reckless for us to take on a new activity which offers no possibility for recouping costs other than through public funding.
I accept Mr. Goan's argument. However, it is not for RTE to make political decisions. This commitment was made to the Oireachtas by the Government and it needs to be addressed at that level. At the same time, however, we need to debate the decisions being made by RTE which will impact on the broader broadcasting environment. Mr. Goan referred to €50 million in cuts. Can we be given information on the full extent of these cuts? The €2 million in the plans for the diaspora leaves a lot of money which presumably will affect other areas.
I ask that Mr. Goan be allowed to finish his reply.
Mr. Cathal Goan
Deputy D'Arcy is absolutely correct in regard to the issues he raised on archives. RTE's archives are an extraordinary national resource. We bear all the costs associated with maintenance and transfer to digital of the archives, as well making them as accessible as possible through our very successful library and archives website. However, we do not own all the rights to the material and we often contend with restrictive clauses in terms of what we can make available not only to the general public but also to those who might wish to exploit programmes.
I ask Mr. Conor Hayes to speak about the collection of the licence fee. In regard to the issues raised by Deputy McHugh on digital switch-over and DTT, I am sorry he feels that County Donegal has been cut off by RTE. We operate a full-time radio service in Donegal. Radió na Gaeltachta in Gweedore serves the people of the county very well. We also bring other programmes to the county on a frequent basis and big television shows visit it as regularly as they do other counties. Letterkenny has seen Ryan Tubridy strut his stuff in the recent past, to great local satisfaction. The Deputy will understand that I have a personal interest in this.
I asked about the cultural and historical aspects. I was merely relaying perceptions on the issue. I have a duty as a politician to relay these perceptions, just has Mr. Goan must defend RTE.
In regard to the Good Friday Agreement, are negotiations being held on an integrated broadcasting strategy? Under the Good Friday agreement we have an obligation to integrate various strands of strategy on issues from the marine to tourism.
Mr. Cathal Goan
To the extent that it impacts on broadcasters, what the Deputy is talking about relates to the physical broadcasting infrastructure and that has a complex set of relationships around analogue switch-off that will be worked out in the next couple of years. All the broadcasters on the island meet regularly through a group called the Television Broadcasters in Ireland. We meet to see if we can advance areas of mutual interest. RTE has made a significant investment in its new offices in Belfast. We want to use that to the maximum to ensure we increase our audience in the North. People in the Republic have had access to Northern Ireland-based British services for very many years and that is part of the digital future. Co-operation will be about ensuring each other is available, but after that we are in competition with each other, which is good. Mr. Hayes will talk about licence fees and then we can discuss some of the other issues.
Mr. Conor Hayes
Members probably remember that RTE has no direct responsibility for license fee collection. The contract is with An Post, which does all the collections other than the free television licences which are administered exclusively between our department and the Department of Social and Family Affairs. Other than a persuasive influence we have no influence or role. We participate in——
I do not want to interrupt, but RTE certainly has an interest and an influence.
Mr. Conor Hayes
We have a clear interest.
If I raise issues in the House on the television licence, RTE comes up almost immediately. Who should address this issue if RTE is unable to address it?
Mr. Conor Hayes
We have made no secret of it. It is five or six years since I first came before this committee and from that time, the 2002-2003 restructuring, the then chairman of the RTE Authority, Mr. Paddy Wright, Lord have mercy on him, very strongly advocated that the collection of the television licence fee be put out to tender. This was not because we would necessarily take it away from An Post but because in the process of exposing it and making it transparent, many of these issues would be discussed and we would have a better process. In 2004 the process for the collection of the free television licences was changed and there are issues with that process, but we are in constant dialogue with our Department about those. Apart from a decision to change the process I am not sure what we can do other than what we already do.
RTE will see a debate on that in the next few weeks because a number of people think linking television ownership with the funding of public service broadcasting is an outdated process.
Mr. Conor Hayes
That is a separate issue.
It is related.
Mr. Conor Hayes
We are trying to deal with the structure as currently established. We will have to wait for the debate on the rest.
Mr. Cathal Goan
There were some issues around costs in RTE.
Mr. Conor Hayes
Senator Walsh mentioned travel costs. Our total travel cost in 2004 was 1.9% of our operating costs. In 2008 it will be 1.8%. Total expenditure on travel for 2008 is approximately €8 million.
Was it €6 million in 2004?
Mr. Conor Hayes
Yes. It is also worth mentioning that inflation in that period as measured by the consumer price index, CPI, was 22%.
Ms Clare Duignan
Senator Walsh talked about his perception of an increase in travel and wondered why people were where they were. We all picked up on the reference to the programme——
I did not intend to identify it.
Ms Clare Duignan
Programmes travel to generate stories and bring good things to the audience. Senator Walsh's point was about RTE going mad and travelling all over the place. Many of those programmes are commissioned. We take responsibility for the decision to commission a programme. For example we are doing one soon that has travelled to many countries looking at Ireland's genetic history and asking what it means to be Irish and where we come from. We end up in the Rift Valley in Kenya, but it is a BCI funded programme and that kind of story is important. Mr. Goan alluded to the very competitive broadcasting environment. People see this kind of programme on all the other channels that come into the country and they like to see the Irish person travelling the world.
In that regard, the recent RTE productions were better than those on the foreign channels.
Ms Clare Duignan
I will address Deputy Simon Coveney's issue on the architects because everybody seems to take issue with me on that. A producer who comes up with an original format for a programme will own that format. Format rights are separate to the ownership of the programme. Sometimes RTE will own a share in that format and sometimes the producers will acknowledge that. There is a very creative partnership between the RTE commissioning editor who works with the producer. He or she will look at what comes in originally and fund development, there will be an exchange, it might be piloted and piloted again. Sometimes at the end of that, when the programme is contracted, there will be an agreement that rather than the format being 100% owned by the producer, he or she will accept that there is a validity in RTE owning, perhaps, 10% of the format. If somebody here had come up with the format for "Who Wants to be a Millionaire", for example — if only — and RTE had worked with him or her on developing that format, the producer would own that format but we would get a share of the revenue from that. The debate is on the rights to the programme rather than the format.
Does RTE take a different approach to an independent production company that approaches it with funding in place from the sound and vision fund than to somebody with an idea seeking RTE funding?
Ms Clare Duignan
They cannot come with funding in place because a broadcaster is required to commit to broadcast the programme before the sound and vision scheme will agree to fund it.
That is why I said earlier that RTE plays a strong role in accessing sound and vision funds, so there is a role for the broadcaster.
Ms Clare Duignan
We have benefited from it. RTE's average access across all the rounds of the BCI sound and vision fund has been approximately 30%. For every €100 that fund has paid approximately €30 comes back to RTE. My point to Deputy McManus is that if we top-slice the licence fee further and took another €5 million, €7 million or €10 million of licence fee funding and put it to the fund, that is income lost to RTE, of which an average of 30% will come back.
I will put the following information to the members for their consideration without interpreting it in any way. The percentage of a programme budget the BCI sound and vision scheme funds is very different depending on the broadcaster. Last night I examined the different rounds and the percentage of the programme budget. Suppose RTE supports a programme and we say we will fund it to a certain amount of money, because the broadcaster must indicate the level of funding it will bring to the project, and TV3 says it will support a different programme and indicates the level of funding it will bring to that, the BCI does not necessarily accept that. It makes its own call on how much of the total cost it will offer to the producer for that programme. RTE is consistently expected to carry a far greater percentage of the cost of the programme that is receiving BCI funding than other broadcasters. For example in round four of the scheme a broadcaster called DCP5 got an average of 45% of its programme budgets, Setanta got 63% and RTE got 23 % on that round. In round 5 we got an average of 20% of the budgets of the programmes we supported, while another broadcaster got 51%. Deputy McManus says we access the fund but we forgo the income and maybe get 20% or 30% of the budget back, but we have to find the balance of that budget. The sort of programmes that have been supported by RTE at the sound and vision scheme are very different to the kinds of programmes other broadcasters get funded.
Once RTE has agreed to commission an independent production, must it accept that decision?
Ms Clare Duignan
We could walk away from it. People keep saying we are a dominant broadcaster but we operate within the environment we have inherited. We could walk away from that project as we were willing to put up 40% of the budget because it is a very big project and we hoped the BCI would offer 60%, but it has only offered 30%. The accusation would be that we are the dominant broadcaster collapsing the project and the poor independent producer does not get to make the programme.
Sometimes we will work with the producers and see if we can help them access funding from another broadcaster, go to the film board or do a pre-sale with an overseas agent. In general we tend to increase the level of funding brought to the project but there is not an even hand. Editorial decisions are made, which is their entitlement, but if somebody analysed the figures, the percentages coming to us of the total budget of the programme are much lower than that going to other broadcasters.
Mr. Cathal Goan
Deputy McManus raised some issues around the budget level. RTE plans a rolling budget on a five-year basis and our plans for next year were predicated on assumptions made at the beginning of the year in terms of our competitive strength and what we know of our income. We have been engaged over the past three months in very significantly revisiting those issues. Mr. Hayes will fill the committee in on the range we have cut back.
Mr. Conor Hayes
On a point of clarification on travel costs, the committee should bear in mind we have a couple of hundred vehicles and over 200 sites, so that level includes a very wide range of activity. It is not a bunch of people swanning around on aircraft around the world.
There may be an opening for Mr. Hayes on the Houses of the Oireachtas Commission.
Mr. Conor Hayes
This year we have budgeted to have a surplus in the order of €11 million but from early this year we would have started to have concerns. By the middle of this year we were on high alert. As Ms Duignan has referenced, we expect our revenues to be down by approximately €27 million, with all the change coming in the second half and virtually all coming from the last four months of the year. It is particularly difficult and as with everywhere else, it has happened at a very speedy rate.
Is the witness saying the organisation is down €27 million from €11 million, which would mean——
Mr. Conor Hayes
We must adjust our costs, which is the second part.
Has the organisation made a loss of €27 million or €16 million?
Mr. Conor Hayes
No, but we will have €27 million less in revenue than we expected. We must try to make that up in some fashion. We have already identified a range of belt-trimming cost reductions of approximately €18 million, and these are being implemented as we speak across just about every single area of activity. For example, our personnel-related costs this year will be 2% lower but our overall operating costs are targeted for an approximate 4.5% reduction between now and year's end.
Is that a deficit of more than €50 million next year?
Mr. Conor Hayes
Our concern is precisely that type of scenario. We could do nothing and let that happen so in preparing the budget for the next year, we have been working to avoid that. We have identified a range of cost reductions against budgets for next year of the order of approximately €50 million. They are made up of approximately €21 million in personnel-related costs — I will explain in a moment what I mean — and the balance is €29 million, for all other costs.
Of the personnel-related costs, approximately half will come from items currently being discussed with our trade unions and managers' association. We have asked them to implement the national pay agreement at a later date and we have suggested there should be no increments. All the senior managers have already agreed to significant reductions in the remuneration of management across the board but we need the agreement of the wider management pool.
What percentage is being looked at in that regard?
Mr. Conor Hayes
It will be up to 17.5% for the most senior people.
What specifically is meant by "most senior"?
Mr. Conor Hayes
I will not speak about particular individuals.
Are we talking about those on over €50,000 or €100,000?
Mr. Conor Hayes
I do not——
That is somewhat unfair.
I am just trying to get a feel for it.
Mr. Conor Hayes
There are 360-odd people in RTE of management grade and the pay reductions for them will range between 5% and 17.5%. We have tried to do this in a way that will protect lower-paid people and in our proposal to unions we have also suggested that people earning less than €50,000 would see some level of increase.
This in itself will not be enough. The phrase "gain sharing" was very common a number of years ago and now we have "pain sharing". We have had to identify a very wide range of reductions and there are positions we would have liked to recruit people to that we will not because we cannot. That is the context in which we are trying to make decisions about what we can or cannot do.
What about the high-profile people I asked about and their contracts?
Mr. Conor Hayes
I do not want to speak about specific contractual positions.
Is there scope within such contracts for reductions if advertising falls off?
Mr. Conor Hayes
We will make every effort to reduce all costs.
That is important from a headline perspective——
Mr. Conor Hayes
It is very important.
——if people working on much lower salaries are being asked to take a cut.
Mr. Conor Hayes
It is for everybody. All the people before the committee have agreed on issues they do not like. There is no reason everybody else should not be asked.
I am sorry to introduce a political element but a pay agreement has been provisionally agreed and is now being voted on by certain unions and so on. The Fine Gael view is that the country cannot afford it but that is a different issue. Is RTE taking the view the organisation cannot afford it either?
Mr. Cathal Goan
We have met with representatives of unions, had discussions and made proposals. We do not want to get down to saying there is an inability to pay. As Mr. Hayes said, there is an element of pain sharing in this and we have asked for a deferment of the agreement's introduction.
To defer a pay——
We are getting into an aspect we should not involve ourselves in. We should move on.
Mr. Conor Hayes
There is a deliberative process and it is part of a discussion that will take place. It must be in the context of many other issues. We might not achieve what we desire and all we can do is propose it and seek to emerge with the best solution in everybody's interest.
What sort of figures are being looked at in the 5% to 17.5% reduction for the 360 in management?
Mr. Conor Hayes
The total cost reductions we are seeking to achieve by not implementing increments or having cuts is of the order of €10 million.
That is across everybody.
Mr. Conor Hayes
Yes, but off the top of my head I could not break down the exact number.
Will there be a reduction in numbers?
Mr. Conor Hayes
We are trying to avoid that. People have accused us of cosseting but at the same time we have put much effort into building resources. We have many challenges, including digital production. We are trying to protect, as much as possible, many of the resources we have spent the past four or five years trying to build. We are trying to protect both in-house and commissioned programmes to the greatest extent possible so we can protect the integrity of the organisation. It would be wrong of us not to indicate we are facing a really difficult financial position.
Is that down to the position with advertising revenue?
Mr Conor Hayes
It is not totally down to it but it is in the main factor. The biggest revenue reduction is in television advertising and radio advertising is not as badly affected currently. Some other forms of commercial revenue are also affected. In terms of dramatic impact, television advertising has had the largest hit. There is some impact on licensing, as one would expect, as there has been a reduction in housing growth. People are being made redundant and all sorts of difficulties will arise. It will not be an easy number by any stretch of the imagination. We are envisaging it will be difficult.
At this stage I would like to move to DTT.
I do not wish to interrupt but will the witnesses detail other ways the organisation is trying to save money?
Mr. Conor Hayes
There will be broad headline personnel-related costs of the order of €21 million and non personnel-related costs of the order of €29 million, cutting across just about every kind of activity we have. There is no area to be left untouched.
Including programming.
Mr. Conor Hayes
Everything is being squeezed. Even at that we are not certain we will not have to come back. The level of volatility is such that we could have a much worse position. In that case we would have to come back to the matter in the middle of the year. We have approached the issue in such a way that if there is a certain scenario and we must act in a certain way to survive, we will try to achieve it in the most constructive possible way. It is not an easy task.
Ms Duignan used the word "trimmed" which is more polite than "cut".
Ms Clare Duignan
I used it because the question was about programmes and we are trying not to cut programmes. We are interrogating costs. The Deputy raised the question of travel, for example. We ask producers if they can make something that is not Dublin-centric without travelling outside Dublin. We ask that fewer people go here and there so that costs can be driven down. In order that a progamme not be dropped we ask if it can be made with less editing, or with three days filming instead of four. From November onwards, for example, our big entertainment shows will have fewer studio crews. We hope viewers will not notice this. "The Late Late Show" will have fewer sound people and there will be one camera less on "Tubridy Tonight". We are going through every budget line in programmes, the area for which I am responsible.
In fairness, we have done this in partnership with our colleagues in the independent sector. We seek to hold the costs of our commissioned programmes as well as those of our in-house programmes at this year's costs as we go into next year. This is not a question of not paying national wage agreements where they are due in the independent sector. It is about trimming the other discretionary costs in commissioned programme budgets.
Before we get onto DTT matters I wish to thank Mr. Goan and RTE for the wonderful night we had at the opening of the Wexford Opera House.
Mr. Cathal Goan
I thank the Deputy.
Everybody who was there, including some of my colleagues from Wexford, will agree that it was an outstanding success.
We will move to digital terrestrial television, DTT.
Mr. Cathal Goan
There are specific provisions in current legislation but there are also provisions for the establishment of DTT under the Broadcasting (Amendment) Act 2007. This Act requires RTE to establish a national public service multiplex and it provided for the competition which the BCI ran for the award of three commercial multiplexes, or MUXes. Six MUXes are envisaged for digital terrestrial broadcasting of which four are in play at present. Our approach to the project in terms of construction is to provide for an infrastructure that will accommodate all six MUXes. Mr. Hayes will provide the detail on that.
Mr. Conor Hayes
RTNL, the network division of RTE, plans to spend €111 million putting together the entire transmission infrastructure which will eventually cover 170 sites. The bulk of the coverage is based across 53 sites. Within seven months, by next May, we will have 69% of the population covered. By the end of September, we will have approximately 86% coverage. To put that in context, TV3 has now achieved national coverage after ten years at 84%. Good progress will be made.
That is a good dig there.
Mr. Conor Hayes
No, it is just a fact.
An engineering fact.
Mr. Conor Hayes
By comparison, RTE has 98% coverage. In June 2010 we expect to have 89% national population coverage. It will then slow down because we are subject to restrictions in respect of the UK switchover and to do with Northern Ireland. Until there is actual digital switchover which we do not anticipate will happen until the end of 2012 or the first quarter of 2013 we will not be in a position to advance. We will make some increases but they will not be dramatic. Our expectation is that by June 2013 we will have 98% coverage, which is exactly what we have today.
That relates to the public service MUX. The BCI held a competition for the commercial multiplexes which was awarded to a consortium of Boxer, a Swedish company and Communicor. They are now in discussion with the BCI about their licence and are having separate discussions with us about utilising our network. We are not sure yet what their precise launch date is though we believe they are interested in launching as early as is feasible.
In the meantime we have a separate issue because we must spend €111 million and by the end of this year we will have spent approximately €27 million. That figure will be heading towards €60 million by next June which puts us under considerable financial pressure. If one adds that to the matter discussed previously it is clear we are very concerned about next year because we are going into the year with reasonable cash resources but aware that we have massive capital expenditure commitments that must be honoured because there is a legislative imperative to put this in place. We are also seeking to put relevant funding in place. RTE must borrow for the first time in 20 years and it is not the most propitious time to do such a thing. Those are the circumstances in which we find ourselves.
Do the members have specific questions on DTT? I am not sure if we can say much more about it.
I do not wish to go into the exact costing of the roll-out because I do not have the requisite knowledge. Perhaps Mr. Hayes might provide us with a note on it. It would be useful in the context of discussions on funding that we will have in the next few weeks in respect of RTE and its difficulties. Alhough the guests might find us questioning and critical at times, I believe that everybody on this committee recognises the importance of RTE in terms of public service broadcasting and the role it plays.
I wish to get an understanding as to how the transition period is planned to work from an RTE point of view. By May 2009, Mr. Hayes is talking about 65% coverage, moving to 89% with four or five years to come before there is 98% coverage. In the meantime Boxer is coming in seeking to set up service early. We will have a transition period where DTT will be available in tandem with the existing analogue service. How does RTE envisage the switch-off happening and when will it happen? What will be the cost for people who are happy enough now with the four or five channels they receive free to air depending on where they live? What will they pay for a box? Will their television sets be able to take the technology proposed? We all accept that we must get into the new age but the reality is that many people are not prepared for that and have absolutely no idea how it will work. RTE is the only body that can lead and guide people through this.
I compliment Mr. Hayes and RTE. He describes a tight timeframe which I imagine puts great demands on the organisation. I still have concerns about the east coast. How many people who now benefit from the overspill from Britain will lose that? There appears to be a danger that there will be a period during which these people will be in limbo. Perhaps Mr. Hayes might clarify that.
Concerning public awareness, I recall that the Department stated it would carry a campaign in March 2009 which does not sound early enough to me. Generally speaking people are not aware of this movement at all. We talk about it but I do not know how many people out in the community are actually aware of it, or are aware that there is a cost involved. Public awareness must be addressed. Mr. Hayes might talk about the actual buying of the boxes and the cost. At the BCI conference a proposal was made concerning having a champion of DTT in order to drive this project. It is a short-term thing but quite major. Is there or should there be such a person?
Mr. Conor Hayes
I will deal with the questions in reverse order. On the east coast, we have deliberately structured the roll-out of particular sites in order to ensure we address the people who would be most affected by switch-off. Looking at the sites, the swathe down through Arklow, Gorey, Wexford and Waterford, for example, is among the earliest. Eleven core sites must go up first. Then one must stabilise these and create infill sites. There is an issue with the infill sites which we have prioritised and it will be dealt with to the best of our ability. RTE expects this will be done by next June. The next key issue is when and where Boxer launches. That is a matter for Boxer to decide and RTE cannot instruct what it should or should not do. However, we can provide the facility and we have made every effort to ensure that can happen.
I refer to the wider switchover issue. We can simulcast until the end of 2012, but it will depend on when the Minister decides on the exact switchover date. The committee should bear in mind that under current restrictions and the agreement with the UK there cannot be a digital switchover in Ireland before 31 December 2012. We are affected by the transmission restrictions from Northern Ireland until then, which causes a difficulty for us. Deputy Coveney asked about the length of time it would take and this difficulty is elongating the process. If we could switch over earlier we would be much happier. Even if we could build the sites, we could not switch them on, because we are subject to international agreements and we cannot transmit at existing power ratios.
I refer to set top boxes. The technical standards set as part of the Broadcasting Commission of Ireland process were largely agreed and we were consulted as part of the process. MPEG-4 compression will be used. We have no difficulties with these standards. Although RTE is not buying set top boxes per se, it is an issue of fundamental importance to us and we have had many people research the issue. We have sourced a box that can be purchased for less than €50. It can be bought in the Far East and transported to Dublin without a dealer’s margin. It is fully compliant with all the necessary technical standards. Given advance notice of one year, technical developments and the ability to make a sizable order, there is reason to be optimistic that set top boxes will be available.
Who makes the decision on this? Is it the Department, the Minister, RTE, or the broadcasting authority?
Mr. Conor Hayes
There are two issues. There is the matter of how Boxer wishes to proceed as a commercial operator, its business proposition and whether it wishes effectively to subsidise set top boxes and cede them to the marketplace to get subscriptions. There is also the question of how to deal with some 335,000 households which receive a free television licence. One assumes the reason the licence is free is that those householders cannot afford to pay for it. A way to help those people which is platform neutral must be found. The Department is wrestling with that issue, but I am not certain that RTE can deal with this matter directly.
Is there a unit in the Department dealing with this project?
Mr. Cathal Goan
Yes.
Who is at the head of it?
Mr. Cathal Goan
It is not appropriate for us to name individuals but we have an ongoing relationship with the Department on this matter. There are regular meetings to review progress to date which is proceeding apace.
I suggest the committee should invite the relevant people to appear before it.
Mr. Conor Hayes
It is important to note that the Minister has taken a keen interest in this project and has put much time and effort into moving it along. I am not trying to be clever, but some of the questions asked may be more appropriate for the Minister.
Mr. Cathal Goan
RTE's specific role is the provision of digital terrestrial television, DTT, which is just one platform. However, digital distribution includes other platforms such as cable, fibre to the home and satellite. The challenge for Ireland and society is to promote analogue switch off and ensure this is done in a way that does not champion one platform over another. RTE's specific concern relates to DTT. There must be a marrying of those complementary but different priorities for Ireland and RTE as its transmission system operator.
I thank Mr. Goan and his colleagues for a full interaction concerning RTE. I hope we have gleaned clarity on several issues.
Mr. Cathal Goan
I thank the committee and all Deputies. There have been visits in the past to RTE and I extend an invitation to the committee to visit RTE again to examine the ongoing work there. The committee could perhaps familiarise itself with some of the developments in the area of digital production and post production.
I think we will take Mr. Goan up on that offer.
The joint committee adjourned at 11.36 a.m until 9.30 a.m. on Wednesday, 12 November 2008.