Long dominant public broadcaster falls on hard times

Michael Hedges November 24, 2008

Caught between rising costs and falling ad revenues, broadcasters are cutting wherever they can. With this financial trap exacerbated by the wave of far broader economic woes, cutting services is next. If that isn’t enough to quell the mounting red ink, selling assets is all that’s left.

Broadcasters in the private sector know well that directors and shareholders tolerate loss making only so long. Public broadcasters are often insulated; license fee taxes are raised, other revenue streams encouraged, direct State aid easily approved. Austria’s public broadcaster ORF has found that insulation pulled back leaving a €100 million budget shortfall.   

ORF (Österreichischer Rundfunk) is Austria’s dominant media provider. With annual revenues of €900 million (2007) it’s one of Europe’s richest public broadcasters, well over €100 revenue per inhabitant, €250 per household. ORF operates four television channels; main channel ORF 1, regional channel ORF 2, sports channel Sport Plus and 3sat with German public broadcasters ARD and ZDF and Swiss German public broadcaster DRS. Radio channels include main channel Ö1, regional channels Ö2, youth channel Hitradio Ö3 and youth channel (partly in English) FM4. All radio channels are streamed on the Web.

ORF managers, under direction from the Trustees, are slashing almost everything they can think of to save almost €85 million next year. No longer – at least in the short-term – will ORF broadcast Champions League football. The next wage round will be “cost neutral,” about 250 jobs, out of 4,500, will be lost to attrition. In September ORF announced that it would not be participating in the 2009 Moscow Eurovision Song Contest.  The Alpine Ski World Championships and the Nordic Ski World Championships will be spared – this is Austria, after all – as will “Dancing with The Stars,” rights fees and production costs for which are more than €5 million.  

ORF has been a significant participant in European television film co-production. That budget is just over €30 million and may feel the accountants axe.

The radio and television license fee was raised 9.4% in June to €250 per year per household, a tiny part of which goes to support arts.

The European Commission investigated ORF’s funding and concluded in February that State aid rules had been violated. In September the Austrian Administrative Court ruled that the licensee fee tax supporting ORF is payable only if the radio and television signals are received. Both decisions impact the way ORF conducts business and its’ funding.

The possibility of ORF selling assets was raised by Raiffeisen Bank when chairman Christian Konrad said the bank had interest “in principle” in buying television channel ORF 1. “The ORF currently needs money so badly,” he told Der österreichische Journalist (November 3). Raiffeisen Bank has several Austrian media holdings, one is a 40% stake in ORS (Österreichische Rundfunksender Austrian Broadcasting Services), the transmitter and tower company controlled by ORF. Earlier in November Raiffeisen Bank acquired a minority stake in ORF Online and Teletext GmbH.

The ORF Trustees approved (November 21) the ORS bid for a digital television multiplex in Bulgaria. Alexander Wrabetz said funding would come entirely from ORS and not ORF. ORS is also bidding on two digital broadcasting multiplexes in Slovakia.

Austrian politicians have lined up to express themselves. The ruling Austrian Peoples Party (OVP) favors a “strategic partner” for ORF1. “A structural change is urgently needed,” said an OVP spokesperson. One suggestion floated among the politicians has ORF1 partially privatized and funded entirely by advertising and ORF2, the regional network, funded through the license fee and, likely, whatever advertising it can generate.

ORF enjoyed, until recently, a dominant position in broadcast advertising. But television from Germany is cutting into the Austrian ad market. ORF’s own estimates show its broadcast ad share dropping below 50%.

For private sector broadcasters ORF’s pain is not enough. And blame is placed on the politicians. “The whole private sector is outraged that this is political shortsightedness," said Federation of Austrian private broadcasters (Verbands Österreichischer Privatsender VÖP) chairman Christian Stögmüller. Austria legalized private sector broadcasting last in Europe. Politicians had promised a level playing field for private sector broadcasters, they say. "This promise has been repeatedly broken," said VÖP television chairman Martin Blank.