Ireland’s Colorful, Homegrown Misery

Michael Hedges June 8, 2009 Follow on Twitter

Ireland’s fall from economic grace is taking a toll. The tide may be turning but it’s a screw too tight to keep the country’s media sector from pain. Things add up and there’s no bail out in sight.

Public broadcaster RTE is in for some ‘belt tightening’. It’s said to be losing €1 million per week. A letter sent by RTE Director General Cathal Goan to employees (June 2), obtained by Bloomberg, said salary cuts, “a radical action,” would reduce the €68 million 2009 budget deficit by €10 million. Those earning the most will be topped off by 12.5%. “The current drain on the organization’s cash cannot be allowed to continue,” wrote Goan.

RTE currently employs about 2,000, representing 50% of the broadcasters’ costs. The pay cuts would be effective in 2011. Bonuses for this year won’t be paid.

It unions don’t agree to the pay cuts, said a memo from the RTE HR department, as many as 200 jobs would be axed. "Successfully achieving these savings is a direct alternative to cutting such a number of posts across the organization," said the memo. Union members, representing about 15% of RTE’s employees, began balloting May 29th.

Staff costs, in reality, figure less in RTE’s budget dilemma than spending imposed by recent legislation. Digital TV roll-out will cost €100 million. The new Broadcasting Bill also requires RTE to buy more Irish independently produced programming.

Goan is in the final year of his seven-year term. He took over in 2003 to turn-around RTE’s finances, get set for digital and generally improve things. A license fee increase was secured and ad spending in Ireland exploded with the economy. RTE was, then, awash with cash and all things seemed possible.

Like most public broadcasters, RTE looks for the most cost effective programming possible for its two television channels. That means, as it does across Europe, American produced content. RTE has long-term contracts for CSI, Desperate Housewives and Lost, always ratings grabbers, important for advertisers. Last year RTE broadcast 156 hours of drama produced in Ireland, reported the Times (UK) (June 7), compared to 108 hours, the legal minimum, this year. Home-grown productions tend to be more expensive than imports.

“Advertising revenues are more than 30% below figures for the first quarter of last year,” said media buyer Mediaworks Paul Moran to (sorry) Insolvency Journal (February 20). “Obviously, this puts a strain on the domestic channels who are investing in home-produced programming.”

In April RTE changed its ad pricing scheme, moving from monthly rates floating with audience delivery to a six month fixed rate. TV spot rates in Ireland tend to follow RTE’s rates, which had been falling monthly since last June. “Doing nothing was not an option,” said sales director Geraldine O’Leary. “This market needs stability.”

Digital broadcasting, transition thereto, is also suffering in Ireland. In early April the joint venture of Sweden’s Boxer and Ireland’s Communicorp fled from a digital TV multiplex project. A few weeks later Setanta, TV3 and telco Eircom joined together as One Vision to pick up the pieces and were awarded the contract. Setanta is “restructuring.” TV3’s revenue is off 35%. Eircom has €4 billion in debt.

Perhaps coincidentally, the Broadcasting Commission of Ireland (BCI) launched an investigation of Communicorp’s principal owner Denis O’Brien over questions about his financial stake in Independent News & Media (INM), publisher of the Irish Independent, the UK Independent and much, much more. Communicorp owns several radio stations in Ireland, including national stations Today FM and Newstalk. The company also owns broadcast stations in Central and Eastern Europe. A separate tribunal is investigating O’Brien’s 1995 acquisition of the Esat Digifone mobile phone license.

O’Brien is Ireland’s richest man, according to Forbes (March 12), unseating insurance magnate Sean Quinn. IN&M principal owner Tony O’Reilly was unceremoniously dropped from the Forbes list. O’Brien got there by riding the Celtic Tiger with the mobile phone business.

His stalking of IN&M has caused considerable consternation among media watchers in Ireland and the UK. He’s called for the UK Independent to be sold off (“It’s never made any money.”), demanded O’Reilly’s head as IN&M Chairman and made peace after he got it. More recently O’Brien has taken on IN&M’s bondholders with restructuring of that company imminent. "If they think Denis O'Brien is going to write a check to the bondholders,” he said, “then they are smoking dope."

Ireland – along with Latvia and Hungary – have been the European Union’s most seriously affected Members in the global financial melt-down. Iceland isn’t an EU Member. The Irish are tired of hearing the jokes comparing their country with Iceland. Irish Prime Minister Brian Cowen recently predicted a “rapid” recovery of the Irish economy in 2010. KBC Ireland/ESRI reported (June 2) consumer confidence continuing to fall but “may be in the process of bottoming out.”Recovery notwithstanding, this past weekends’ European Parliament elections are tilting speculation that PM Cowen will very soon be facing a general election.