Annual Review of Performance and Public Funding of Public Service Broadcasters, 2018 A report for the Broadcasting Authority of Ireland FINAL REPORT – REDACTED VERSION November 2019 Mediatique Limited 65 Chandos Place London WC2N 4HG UNITED KINGDOM www.mediatique.co.uk BAI – Annual Review of Performance and Public Funding for PSBs, 2018 Executive Summary Overview of scope ▪ As part of its duties under Section 124 of the Broadcasting Act, the Broadcasting Authority of Ireland (‘BAI’) is required every year to undertake a review of Public Service Broadcasters (‘PSBs’). ▪ To inform that review, Mediatique was asked to provide an analysis of the Annual Statement of Performance Commitments (‘ASPC’) of RTÉ and TG4 for 2018, to assess the adequacy of the commitments and targets set by each PSB and to recommend to the BAI any changes to these. In our work, we considered the 2018 performance against each broadcaster’s own five-year strategy. ▪ We were also asked to provide a view on the adequacy of public funding and sustainability of their current operating models. ▪ As part of our approach, we refined and applied the BAI’s previously developed audience yield methodology, which permits a standardised evaluation of the efficiency of audience delivery against relevant costs for key services and genres.1 Among other benefits, relative ‘under’ and ‘over’ serving of certain audiences can be identified. ▪ Our report is structured as follows: a description of key trends in the broad economy and in Irish broadcasting; a review of TG4’s ASPC (and audience yield); a review of RTÉ’s ASPC (and audience yield); Mediatique’s evaluation of these commitments for future purpose; an analysis of each PSB on the grounds of efficiency, adequacy of funding and sustainability of its current operating model; and our conclusions and recommendations. Trends in the Irish economy ▪ Overall the Irish economy in 2018 was relatively stable when compared against 2017, with steady growth in GDP and GNP, falling rates of unemployment and continued growth in employee compensation. ▪ However, there has been a disconnect between underlying economic growth and advertising spend in broadcasting and associated media, which are now experiencing challenges that are likely to be more structural than cyclical. Trends in the Irish broadcasting sector ▪ As is true for all mature media markets in 2018, there are structural threats in the Irish broadcast media landscape, linked to technological innovation and concomitant changes in consumer behaviour. ▪ Greater connectivity continued to widen the scope of networks, devices and services available to Irish consumers (influenced by bundling strategies and displacement of traditional pay TV by internet providers). These dynamics, in turn, enabled changes in consumer behaviour (disfavouring broadcast TV). ▪ As a result, Ireland experienced a further significant shift in 2018 toward non-linear consumption (e.g., of Subscription Video on Demand, catch-up services and box sets), on TVs, PCs and portable devices. This was supplemented by an increase in use of online video sites (e.g., YouTube) and social media more broadly. 1 See A Note on Audience Yield Methodology in the main report, which includes a definition of efficiency in this regard. 2 BAI – Annual Review of Performance and Public Funding for PSBs, 2018 ▪ The activities of ‘new’ entrants was again evident in both platform and service categories, with further growth in the penetration enjoyed by global SVOD players Netflix and Amazon. Partly as a result of the activities of these new entrants, pressures also built upstream, evidenced by content cost inflation for TV programmes. ▪ Younger demographics in particular have reduced their TV viewing in favour of SVOD, short-form video, and social media. Declines in broadcast viewing among younger people are, moreover, accelerating. However, within this challenging market for broadcasters, Irish PSBs’ share of daily viewing has remained relatively stable. ▪ Meanwhile, radio remains popular in Ireland, with 83% of adults (15+) listening every day. Even here, demographic variations are marked, with younger users less likely to use radio in favour of music streaming and other forms of audio. ▪ Reflecting this intense competition for consumer attention, spend in advertising across traditional media (TV, radio, newspapers) dipped sharply for another a year, with print most adversely affected (the outcome was amplified by Brexit uncertainties). ▪ These structural challenges have resulted in flat commercial income for both RTÉ and TG4, in line with broader market trends. This has coincided with only modest increases in public funding. Review of TG4’s ASPC 2018 ▪ TG4’s Annual Statement of Performance Commitments is extensive, with 17 commitments under five strategic headings (Audiences, Content, Irish Language, Transparency & Efficiency and Trust & Good Governance). These are tracked year-on-year through a network of qualitative and quantitative targets under each commitment. ▪ In 2018, TG4 logged over 247 individual targets. Of these, 167 were fully achieved, an additional two were almost achieved, 20 had been started in 2018 but were ongoing in 2019 and data was unavailable for 13. This means 45 targets (or 17%) were not met. ▪ Overall, TG4 fully achieved 58% the targets under its audience-related performance commitments, while a further 10% (seven targets) were either almost achieved or ongoing. ▪ The main Content performance commitments were split between the PSB’s two audience poles, in line with its new twin-pole strategy of targeting both a wider audience across Ireland and its core audience of habitual Irish speakers. The wider national audience pole achieved the vast majority of its targets (26 of 34 targets for broadcast hours and programming development targets were achieved). This same was not true of core audience targets, where only 14% of targets for broadcast hours were achieved and only three of 16 programming development targets (19%) were met. ▪ Irish Language Promotion and Development was the best-performing category and fully achieved 88% of its targets for 2018. In particular, audience perception that TG4 supports and promotes the Irish language is very high (92%). For the Transparency and Efficiency section, we analysed TG4’s commitment on best use of public funding, efficiency and value for money holistically, rather than as individual targets. We found that TG4 operated within its means for the year and, consequently hit most of its targets for efficiency and spending public money solely on public purposes. TG4 audience yield ▪ Year on year, TG4’s national programming delivered slightly better yield, with [] user hours delivered per euro of content expenditure, compared to [] hours in 2017. However, core audience yield fell 3 BAI – Annual Review of Performance and Public Funding for PSBs, 2018 from [] in that period, meaning TG4’s total audience yield across its content portfolio dropped year- on-year []. ▪ Through audience yield analysis, we see that older audiences, male audiences and C2DE audiences were served slightly better by TG4 than their counterparts. Among the core audience, the best-performing genres were Documentaries, Music and Children’s. Among the national audiences, the best-performing genres were Entertainment, Film/International Drama and Documentaries. These trends held across demographic categories with a few exceptions; among the wider national audience, Sport was best- performing genre among 15-34 year olds, and for 4-14s and 15-34s of the core audience, Children’s content was best-performing and second-best-performing respectively. Review of RTÉ’s ASPC 2018 ▪ For 2018, RTÉ significantly reduced both the number of commitments in its Annual Statement of Performance Commitments (to six) and the number of targets relating to each one. Across the 34 targets, RTÉ fully achieved 22 and largely achieved seven more, meaning a remainder of five targets were not achieved in 2018. ▪ RTÉ’s performance commitments were split across audience, content and sustainability. In these three categories, RTÉ performed well on audience and content and less well on sustainability. ▪ In 2018, RTÉ narrowly missed both the targets dedicated to “put[ting] the audience at the centre of decision-making”. However, they were both close; only one or two percentage points off in each case. Equally, both targets were high for audience perception targets (75% and 80%). ▪ For the most part, RTÉ performed well against its content-related commitments, fully achieving 11 of 17 and almost achieving three more. There were, however, a few exceptions that may cause some concern: in particular, RTÉjr reach among the 4-7s has continued to decrease (to 13.2% in 2018 from 15% in 2016), and RTÉ Raidió na Gaeltachta has similarly struggled to maintain reach. ▪ In terms of sustainability, performance in the year was mixed. Budgeted operating cost targets were met; however, the budget had been premised on higher commercial and public revenues and these were not forthcoming. As a consequence, the deficit at operating level was higher than originally planned. RTÉ audience yield ▪ From the audience analysis, we see similar patterns in RTÉ’s TV yield to those of TG4, with viewing by older audiences and C2DE audiences costing less than other demographics (for RTÉ, there is very little yield discrepancy between male and female viewing). ▪ Compared to last year, the gap in audience yield between RTÉ One and RTÉ2/jr closed, following an increase in yield for RTÉ2/jr. This was most likely due to a decrease in RTÉ2’s budget year-on-year (and a less than like-for-like decline in viewing, although there are probably multiple factors at work here). We see a similar boost in content efficiency in radio content (particularly for 2fm and Radio 1). ▪ Altogether, RTÉ serves most audiences reasonably well, although it is inescapably the case that RTÉ’s audiences skew older (in line with broader TV trends). Younger audiences are served slightly better by RTÉ2 than RTÉ One on TV and very well on 2fm compared to Radio 1.