Published:
19-Feb-08
The French government has promised to maintain the public broadcaster's income despite banning advertising on the France Televisions channels. French President Nicolas Sarkozy took everybody (including his own Government) by surprise in a January 2008 speech when he announced that advertising would stop on the public broadcaster, possibly as soon as January 2009.
The announcement has had multiple repercussions, throwing the channels' future funding into question. Recently, however, the President made a double promise that removed some of the uncertainty: on one hand the overall resources of public broadcaster group France Televisions (France 2, France 3, France 4, France 5) will not be cut and privatisation of some of the channels has been ruled out ; on the other hand, TV license fees will not be increased, despite the fact that French licence fee is currently among the least expensive in Europe at þ116 per home per year.
To compensate for the loss of advertising (around þ800m in 2007) and the cost of extra programmes the Government needs to find extra funding through new specific taxation. The idea is to fund the public TV sector through a new tax on the revenues of Internet service providers and/or consumer electronics product sales. The Government is also thinking of increasing existing taxes on commercial broadcasters' advertising revenues on the grounds that they would benefit from the termination of advertising on public channels. An ad hoc Parliamentary/industry commission has been charged with designing the new schemes.
Our take...
If France Televisions ceases to trade airtime the total French TV advertising 'pie' is expected to shrink because we believe only 60 to 80 per cent of France Televisions' revenues will be diverted towards other channels, while the rest would be spent by advertisers on other media. For major broadcasters (TF1, M6) the balance of extra revenues and increased taxes should be largely positive in terms of profitability, as shown by the increase in TF1's stock price since the announcement. But the real bonanza will be for digital free-to-air channels, that now have about one fifth of viewing share but hardly one per cent of advertising revenues.
We anticipate that the impact of the measure (if fully implemented from January 2009) will be a decrease of television advertising revenues of 2.5 per cent in 2009: 'national channels' total revenues will decrease by seven per cent (but TF1 and M6 revenues will grow two-digit) and digital channels revenues will grow by up to 50 per cent. In the meantime, the uncertainty introduced on the market and the recent strikes in the public broadcast sector that followed the President's decision, combined with a generally weak advertising spend, will also likely lead to negative trading in 2008 (-0.6 per cent for total TV, -2.5 per cent for national channels).
France,
