In preparing this report, PwC have relied primarily upon secondary data from RTÉ. In all cases, PwC has identified the sources of information relied upon, and makes no representation in relation to independently auditing or verifying the accuracy or completeness of this information. We understand that the report or sections of the report will be made publically available. In no event however, shall we assumed any responsibility to any third party to whom this document is disclosed or otherwise made available. Table of Contents Executive Summary.....................................................................................................5 Chapter 1. Introduction ...............................................................................................9 Chapter 2. RTÉ Economic and Social Impact.......................................................... 11 Chapter 3. RTÉ Competitive Landscape................................................................. 34 Chapter 4. RTÉ Effectiveness.................................................................................. 48 Chapter 5. RTÉ Cost Management ......................................................................... 64 Executive Summary Chapter 1. Introduction Chapter 1. Introduction This report was commissioned to PwC by RTÉ in December 2012. The purpose of the report is three-fold: to present an independent assessment of the contribution of RTÉ to the national economy in 2011; to evaluate the wider socio-economic benefits which stem from RTÉ expenditures in the Irish economy; to prepare a statistical compendium on the effectiveness of RTÉ as a public service broadcaster. The PwC research approach incorporated the following: review and analysis of RTÉ’s financial and operating data; review and analysis of RTÉ-commissioned research; review and analysis of third-party research materials; compilation of original research materials; selected case studies of RTÉ-supported firms and sectors. The remainder of this report comprises four additional chapters, the next of which describes the economic and wider socio-economic benefits which derived from RTÉ expenditures in the Irish economy in 2011. Chapters 3 through 5 present a compendium of statistics on RTÉ’s effectiveness and efficiency as a public service broadcaster (PSB). The PwC team would like to extend its sincere thanks to all individuals who contributed to the preparation of this study. 9 Chapter 2. RTÉ Economic and Social Impact 10 Chapter 2. RTÉ Economic and Social Impact 2.1 Introduction This chapter presents an overview of the economic and socio-economic benefits which resulted from RTÉ expenditures in the Irish economy in 2011. The benefits described in this chapter exclude the widely recognised benefits which derive from the existence of an effective Public Service Broadcaster (PSB). Rather, the focus here is on those socio-economic benefits which are incidental to those of RTÉ’s primary function. These are highlighted in red in Figure 2.1. Figure 2.1 RTÉ Socio-Economic Benefits The methodology used for estimating RTÉ economic impact is shown in Figure 2.2. 11 Figure 2.2 Overview of PwC Economic Impact Methodology Research steps are as follows: determine total RTÉ payroll and non-payroll spend in 2011; reduce the total payroll spend by all direct deductions (e.g. taxes, pension), estimated savings and foreign expenditures (e.g. holidays) to arrive at an estimate of resultant consumer spend in the Irish economy; reduce the non-payroll spend by the value of all payments made to international or non-indigenous suppliers; determine the sectoral allocation of all RTÉ-generated expenditures in the Irish economy, i.e. payroll and non-payroll; apply sector-based multipliers to arrive at an estimate of the full economic impact of RTÉ in 2011. This research approach is followed in Sections 2.2 through 2.4 of this chapter. The wider socio-economic benefits which derive from the pattern of RTÉ expenditures in the Irish economy are the subject of Section 2.5. 12 2.2 RTÉ Incomes & Expenditures, 2007 to 2011 Table 2.1 shows RTÉ funding levels and sources for the period 2007 to 2011. Table 2.1 RTÉ Funding Levels & Sources (€m), 2007 to 2011 Total RTÉ funding fell Funding Source 2007 2008 2009 2010 2011 by over 20% between 2007 and 2011. This Licence Fee €196 €201 €200 €196 €184 reflects a sharp decline Commercial (TV) €172 €163 €112 €114 €107 in the national advertising market. Commercial (Radio) €44 €45 €34 €32 €29 Other Commercial €30 €32 €29 €30 €31 Total €441 €441 €375 €372 €351 Source: RTÉ Annual Report and Group Financial Statements, 2007 – 2011 Key points of note are as follows: RTÉ is funded through a combination of commercial and licence fee incomes; total RTÉ funding in 2011 was €351m, down from €441m in 2007; this reflects a sharp decline in the national advertising market; RTÉ reliance on licence fee incomes has grown as a direct result. The RTÉ mixed-funding model is not unique in Europe (see Table 2.2). Table 2.2 RTÉ Funding (€m) in International PSB Perspective1 PSB RTÉ BBC ORF VRT RTBF Country RoI UK Austria Belgium Belgium Licence Fee Revenue €184 €3,978 €580 €0 €0 Government Funding €0 €0 €1 €303 €212 Advertising Revenue €124 €0 €216 €36 €64 Other Income €43 €1,676 €174 €114 €19 Total Income €351 €5,654 €971 €453 €295 Population Size (m) 4.7 62.6 8.4 11.0 PSB Funding per Capita €39 €64 €69 €47 Unit Licence Fee Costs €160 €165 €264 NA NA Source: RTÉ Annual Report & Group Financial Statement, 2011, EBU Report, CSO, World Bank 1 It should be noted that figures for ORF, VRT and RTBF are for 2010. 2011 figures are not yet published. The PSBs in the table above have been chosen for a number of reasons: BBC (UK) is one of the leading PSBs in the world and is in direct competition with RTÉ for television audience share. ORF (Austria), VRT (Belgium) and RBFT (Belgium) face similar challenges to RTÉ in respect of proximity to large same- language territories. 13 The recently published European Broadcasting Report stated that in 2010: EBU members were, in aggregate, reliant on licence fee income for 59% of their funding with direct Exchequer funding accounting for a further 10%; Ireland’s level of reliance on public funding is low by European standards. Romania and Portugal are the only countries where public broadcaster In 2011, RTÉ spent income is more reliant on commercial revenues to augment licence fee or €296m in the Irish other public revenue; economy. This equates to 84% of total RTÉ for the majority of countries where licence fee is the main source of income, expenditures. the licence fee as a % of total income is between 70% and 90%; the average licence fee per household across 12 Western European and Nordic/ Scandinavian markets that operate a licence fee system was €216; last year just 16% of EBU members’ funding was from advertising; the proportion of RTÉ’s income derived specifically from advertising was more than double the EBU average and almost four times that of Western Europe markets that also operate a licence fee system; there is a general trend towards greater dependency on direct Exchequer support and away from direct advertising income; comparing licence fee funding to similar sized populations (4-6m) in Western Europe and Nordic / Scandinavian markets, the licence fee amount per capita in Ireland is lowest at just €39 per head of population, while in other comparable markets this ranges from €53 to €118. 14 2.3 Analysis of RTÉ Expenditures, 2011 2.3.1 Overview Table 2.3 shows a breakdown of RTÉ operating expenditures in 2011. Table 2.3 High-Level Breakdown of RTÉ Operating Expenditure (€m), 2011 Total Expenditure (including VAT) 2011 RTÉ Payroll €153 Non-Payroll €200 Total €353 Source: RTÉ Annual Report and Group Financial Statements, 2011 RTÉ’s payroll accounted for 43% of total operating costs in 2011. Table 2.4 shows the proportion of RTÉ payroll and non-payroll spend in 2011 which accrued to Ireland-based individuals or suppliers. Table 2.4 Estimated RTÉ Spend in the Irish Economy, 2011 Total Spend Payroll Non-Payroll Total (including VAT) € million National €152 €144 €296 Non-National €1 €56 €57 Total €153 €200 €353 % of Total National 99% 72% 84% Non-National 1% 28% 16% Total 100% 100% 100% Source: RTÉ Annual Report and Group Financial Statements, 2011; RTÉ Supplier Listings 2011 In 2011, RTÉ spent €296m (inclusive of all taxes) in the Irish economy. This equates to 84% of total RTÉ expenditures in this year. This is a higher proportion than was spent in 2010 in the Irish economy (79%). The value of RTÉ’s spend in the Irish economy in 2011 equated to the full value of the RTÉ licence fee (€184m) plus close to 70% of all commercial incomes (€167m). The sectoral distribution of RTÉ-generated spend in the Irish economy is described in the remainder of this section. 15 2.3.2 National Economy Expenditures of RTÉ Employees Table 2.5 shows the assumed relationship between RTÉ’s payroll spend and the consumer expenditures of RTÉ personnel in the Irish economy. Table 2.5 Assumed Consumer Expenditures of RTÉ Employees, 2011 Total Spend €m % of Gross Payroll Source €1662 Gross Payroll Costs 100% RTÉ (€152+€14) All Payroll Deductions -€75 45% RTÉ Net Payroll €91 55% RTÉ Savings -€5 3% CSO, 2012 Available for Consumption €86 52% Derived Expenditure outside the State -€5 3% CSO, 2012 Available for Domestic Consumption €82 49% Derived Source: RTÉ Information, CSO, National Income & Expenditure Annual Results 2011 (Sep 2012) It should be noted that: payroll reductions include: o employer costs i.e. PRSI, pension and life assurance costs; and o employee costs i.e. PAYE, pension and universal social charge (USC). In 2011, it is estimated that the 1,934 full-time equivalent (FTE) employees of RTÉ, the independent contractors (whose taxes are organised by RTÉ) and employees who received redundancy packages spent €82m in the Irish economy. The assumed sectoral distribution of this spend, based on national averages for households in Ireland in 2011, is shown in Table 2.6.