The national broadcaster is under pressure in a changing advertising market

RTÉ’S SOON to be appointed group commercial director faces a challenging role as they guide the organisation through a rapidly evolving broadcasting landscape.

The new director will oversee the commercial operations of RTÉ’s television, radio and publishing activities, and this comes against the backdrop of a successful challenge by TV3 relating to RTÉ’s advertising practices.

The Competition Authority agreed with a TV3 complaint that RTÉ’s behaviour in granting discounts to advertisers depending on the volume of their overall advertising budget with the station raised serious competition concerns. In November 2009, the authority launched an investigation and it recently reached agreement with RTÉ that the market share incentive would be discontinued from July 2012.

The RTÉ case was the first Competition Authority enforcement decision in more than two years and the first since 2004 to require the party under investigation to provide undertakings. The case was also the first enforcement decision in Ireland involving a settlement in respect of abuse of dominance allegations.

RTÉ says it was going to scrap the share deal anyway. But Alan Cox, chief executive of media buyer Core Media, believes that the result of the investigation will be a significant impediment to RTÉ maintaining its current share of advertising spend in the future.

According to Cox: “For almost 10 years, RTÉ has used share as a key tool to secure above average sales revenue from advertisers. The higher the share of budget, the less expensive the airtime became. All media agencies were audited by RTÉ on an annual basis to ensure that share commitments were met.”

David Harland, chief executive of advertising agency OMD, notes that, because of RTÉ’s strong position across various media, the scrapping of the share arrangement may not be too damaging. “We see RTÉ as a cross media channel provider and I think RTÉ will start to package advertising across its different mediums,” says Harland. “If they can get that cross selling right and take a bigger share of the online market, then RTÉ would be in a very strong position.

“But the organisation needs a more co-ordinated advertising selling system across its television, radio, online and print divisions. The new group commercial director appointment is indicative of a more cohesive approach.”

David Hayes managing director of media buyer Mediaedge: CIA, observes: “The RTÉ share arrangement worked well in a rising market, but x per cent of a declining budget is not much help to an organisation. They are moving to volume dealing which is where you should be in a recession.”

Geraldine O’Leary, head of RTÉ’s television sales, believes that integrating the organisation’s sales effort will reap benefits.

“We have clients that are very strong supporters of television [but] who don’t have a relationship with our radio division. Clients get fed up if they spend a few million on TV and then they go to our radio sales department with a €300,000 spend and radio tells them the fact they have spent all that money on RTÉ television is nothing to do with them.

“Share discounts served us well in terms of knowing exactly the commitments we were getting from a client relative to the market.

There is a lot of uncertainty in the market at the moment and the last quarter of 2011 is turning into the worst quarter for two years.”

Noel Curran, RTÉ’s director general, struck a rather downbeat note about the broadcaster’s financial position when making a keynote speech in DCU this week. However, he signalled that the State-owned organisation will continue to compete aggressively with private sector rivals for advertising. “We are dependent on commercial income to provide the range of output we offer,” said Curran. “We are also legally constituted to pursue that income and we will continue to do so.”

What interests big brands after the TV3/RTÉ spat is whether the cost of advertising airtime will reduce even further. Harland observes: “RTÉ will still need the same amount of commercial income to run its operations each year, if not more. Where is that money going to come from? RTÉ is very good at producing programmes that appeal to an older demographic. “Perhaps they could produce more of those programmes on the basis that advertisers will pay a premium.”

siobhan@businessplus.ie