Time runs out for RTE's muddled finances

During the winter this year a trickle of students from UCD Belfield regularly wander over to RTE Montrose for their dinner on Sundays.

The RTE restaurant is comfortable and cheap, anybody can walk straight in without interference. A dinner costs just over a pound, and a cup of coffee is just 23p, it is the least expensive restaurant in Dublin 4.

The restaurant at Montrose is subbsidised to the tune of £250,000 a year. Letting people walk in and use the restaurant will not bring the station to its knees, but this is the sort of relaxed cost control that has the station spending £62 million a year.

RTE is an enormous centre that employs 2,200 people engaged in everything from acting to window-cleaning. There are 14 differen t unions within the station and approximately 200 managers of various descriptions.

The station is in deep financial trouble and in dire need of a thorough reeappraisal.

This is why on the sixth of May last, Jim Mitchell, Minister for Commmunications sent in a consultancy team from Stokes Kennedy Crowley, Accountants, to do a "fundamental review" of the national television and radio station.

The appointment of the consultants can only put fear into the 25 year-old station which has never had an assesssment of this kind before. Mitchell is capable of radical action when it comes to state-sponsored bodies which cannot make the grade.

In liquidating Irish Shipping, Jim Mitchell terminated the notion that a semi-state body could get away with almost anything. Again in the case of the B&I Line he went against the board's wishes and appointed Alex Spain, a former accountant from Stokes Kennedy Crowley, as Chairman and Chief Executive of the company.

Now he has drafted in the Stokes team again, this time in league with its international partner, Peat Marwick. A consultancy team have six months to put RTE under the microscope and detect the infections.

Mitchell expects the consultants' report in 18 weeks. The investigation will cost£200,000, and RTE will have to foot the bill. Briefly, the consulltants have been asked to examinerthe sta tion's structure, efficiency,· costs, staff ami RTE's ability to meet finanncial targets.

As it stands, RTE have lost money continually until this year. In 1981 it lost £2.2 million, in 1982 it lost £0.6 million and this year it reported a profit of £0.08 million. A glance at the annual reports will reveal these fairly modest figures but unfortunateely such tidy sums do not do justice to the station's critical financial situaation.

Three separate factors show that the £89,000 profit for 1983 is an innaccurate guide to the finances of RTE. Within the RTE establishment are two " quite profitable units, the RTE Guide and RTE Relays. Neither of the two organisations are an integral part of RTE Broadcasting but they playa very important role in the presentation of the accounts. The RTE Guide is one of the biggest selling magazines in the country and in 1983 it earned almost half a million pounds for RTE. RTE Relays did even better, it brought in a profit of £512,000, an increase of 33% on the previous year. Alone RTE Radio and Television lost £920,078.

Add to this the fact that the staation's pension fund is believed to be underbudgeted by £24 million, while the newspapers reported that the station has an overdraft of between £4 and £6.5 million, then the extent of RTE's financial difficulties becomes more obvious.

Moreover, these commercial probblems are only what the general public can see from the national press. Disscovering how RTE managed to get ittself so firmly knotted in financial difficulties, and how (if possible) the station can uncoil itself from its preesent troubles will be the job in hand for the "Stokes" team.

It would not be possible to diaggnose the exact problems within the station without a team of experts and access to the right information. Over the years there has been no attempt made at such a diagnosis.

Ba-ck in 1981, the Joint Oireachtas Committee on State-Sponsored Bodies reported its assessment of RTE. The report which ran to over 200 pages examined many of RTE's more presssing problems and grave concern was expressed at the growth of costs and staffing levels at the station.

At that time the committee feared "a tendency within the organisation to try and match the resources of the giant UK networks". The report noted that much of RTE's explanation of the financial problems was based on the allegedly low television licence fee although the committee had discovered that "the level of licence fee in relaation to the National Product per capita is still relatively high in Ireland". The committee recommended immediate attention be paid to "the costs within the organisation and the loss of inncome due to licence fee evasion".

The "unfavourable cost trends" identified by the committee in 1981, have in a large measure continued on. Labour costs, programme expenditure and travelling expenses were singled out as major items of concern in 1981. In the years following, additional sources pointed to bad management, poor industrial relations and ineffecctive department divisions as the other woes affecting the national broadcastting station.

Since 1981 labour costs have reemained enormous. They continue to represent about 50% of total expendiiture. These costs are partly due to the station's failure to reduce its staff to less than 2,200. There have been cuttbacks in programme expenditure but the hoped-for savings have been dissturbed by inflation, and weak manageement.

What the committee described as RTE's "cavalier" attitude to travelling expenses does not appear to have changed either. In 1983 travelling expenses amounted to £2,800,000 at the studios. How many people travel within R TE? If the statistic is applied regardless of RTE's excuses (guest artists claims, etc) it means that every single person in Montrose averaged £1,217 in travelling expenses in 1983. Travelling expenses exceeded the figure for depreciation within the station in 1983.

The "Contingency Fund" is another controversial expense at the studios. This year it amounts to £296,000. Theoretically the fund is for unforeeseen expenses during the year, like last year's coverage of the Reagan visit. However, it has been noticed that a large contingency fund helps to preevent "really tight controls", and upsets what may have been achieved in budget reviews.

Not until the consultants' report' is released will the real crisis at RTE become evident. The core of the problem involves both management and the structure of the organisation. Departments are badly divided, manaagers are not clear on the extent of their own responsibility. Staff are working under one manager, but responsible to another. At times RTE appears like a badly built bee-hive.

In essence there is a severe lack of flexibility in the structure. 'Interrdepartmental relations are uneasy when department limits are not clearly defined. For example, the Director of News will want technical staff to cover a news story, but the staff may not be under his control.

All these day-to-day problems waste time and money, reflected in huge costs at the end of the year. The staation has two options for dealing with its increasing costs - reducing the costs, or increasing the revenues. At the moment RTE is unable to do one or the other effectively.

RTE's revenue comes mostly from two separate sources, licence fees and the sale of advertisements. During the Joint Oireachtas Committee hearings in 1981 it was stressed that the station would have to tackle the problem of licence fee evasion. The income from licence fees should amount to around 40% of the station's annual income. At present the cost of a colour licence is £57, a licence for a black and white set is £37.

In 1981 licence fee evasion cost RTE £8 million. It still costs the station several million pounds a year. At 22% the scale of evasion in Ireland is the highest in Europe. Italy comes second with a rate of 18%. The European evasion rate average is only around 3%. RTE spend £500,000 each year in what have become known as the "TV sponger" campaigns.

In this instance RTE are not enntirely to blame for the total cost. The licence fee is collected by An Post. RTE applied for permission to collect the licence fee itself but was refused by the government. RTE attributes this rejection to the strength of the unions within An Post, who would undoubtedly object to the work of fee collection being taken away from them.

At the time of the Joint Oireachtas Committee it was recommended that RTE have an input into the collection of the licence fees. There is now a sixxperson committee for this purpose between the organisations, but the campaigns have been unsuccessful for the most part. An Post have increased the rate of evasion detection by 15%, but there is no sign of a decrease in the number of licence evasions. One posssible reason for the abnormally high rate of evasion could be due to the fact that while a colour licence is £57, a first fine for "sponging" is £50. The fines will have to be increased.

Advertising is the second and largest source of income for the station. Because of the relatively high licence fee, newspapers commplain that R TE give artificially low rates, thereby undercutting newsspaper advertising. It is easier many feel, for RTE to get a licence inncrease, than work throughout the year trying to build up advertising income. In 1984 RTE was the cheappest out of eight Irish and UK stations for a 30-second prime time advertiseement.

In defence RTE offers the "finanncial straightjacket" theory. RTE's addvertising time is limited legally to 10% of total air-time. Its advertising rates must be submitted to the National Prices Commission. Therefore, they say, they are limited from maximising potential advertising revenue.

RTE'S Financial Controller Gerard O'Brien says that the consultants' investigation is welcome and that "RTE have nothing to hide. We are treated with neither predictability nor logic by government. We don't know if we are going up or down or sideways."

To define which way a television station is "going" is popular work for Peat Marwick as they have done two full reports on the BBC, along with an investigation of Welsh Television and other minor British stations. The second part of a major report on the BBC was issued by the firm' only last January. Though the remedies which were suggested for the BBC will not correspond exactly with their plans for RTE, there are bound to be many similarities.

RTE can expect a host of modern day business practices to be laid upon it by Christmas. As in the BBC report it is safe to assume Peat Marwick will suggest activity reviews in every deepartment, new departments, and reeallocation of resources. They will suggest increased accountability, bettter use of management information, and performance targets for everyone in every corner of Montrose.

The television department will probbably receive the most attention. In 1984 RTE had a television staff of 1,600. It had a viewership of 3.4 million. In the UK Anglia Television had a similar audience in the region of 3.9 million. It had a staff of 811. Scottish Televison had 5.1 million viewers and a staff of 779, which is less than half of the R TE staff total.

It is obvious from the ratio of staff to viewers in British television that RTE is overstaffed. In addition the management of this staff is less than satisfactory .

The consultants were called in to see how RTE can face the future challlenges of broadcasting with particular reference to direct satellite television. It is clear without any consultants' report that R TE will have to learn how to walk before it can run. •