1

ABOUT THIS PROJECT This presentation provides the main findings and a selection of charts and maps from the second edition of the EBU’s Media Intelligence Service Licence fee report, published in October 2016. It aims at providing a comprehensive and international perspective of licence fee, which remains the main source of funding for Public Service Media organizations and a crucial issue for most PSM in Europe in 2016.

SOURCES OF DATA The report has been drawn up mainly using data provided by public service media organizations that are Members of the European Broadcasting Union (EBU). The information was collected during 2016. When necessary, additional information was obtained and/or cross-checked from official sources, such as licence fee collection agencies and regulatory authorities.

COUNTRY SAMPLE The EBU is a professional association with 73 Members in 56 countries. This report focuses exclusively on the licence fee, which existed in 29 markets of the EBU area on 1 January 2016. There were some countries with a licence fee for which it was possible to obtain limited data only: Algeria, Egypt, Greece, Jordan and Tunisia. When data refer to complete years or when exchange rates are needed, 2015 was used as a reference year. In cases where 2016 already comparable, we provide the latest available data. Please note that the full report – for EBU Members only - is available at the Media Intelligence Portal: www.ebu.ch/mis

EBU Media Intelligence Service – Licence Fee 2016 (Public Version)

2

KEY ARGUMENTS FOR PRESERVING THE LICENCE FEE EXPENSIVE? FALSE

ANACHRONISTIC? FALSE IT IS THE MAIN SOURCE OF PSM FUNDING IN EUROPE Despite a trend towards dropping the licence fee that has accelerated over the last decade, it is still collected in 29 EBU countries (52%). When considering EU countries only, the proportion rises to 61%. Both at EU and EBU levels the licence fee remains, by far, the main source of funding for PSM.

RIGID? FALSE

IT IS CHEAPER THAN PAY TV On average, the annual licence fee in EBU countries was EUR 137 in 2015, or EUR 11 per month, which is far cheaper than most European pay TV subscriptions. Besides, licence fees are kept relatively stable over time, so that the cost for citizens remains constant. Discounting the impact of inflation, the licence fee has only increased 1.5% over the last six years in the EBU area, and has even decreased by 3.9% in EU countries.

IT IS STABLE, TRANSPARENT AND ADAPTABLE Opponents describe the licence fee as a rigid way of funding PSM that doesn’t allow any short-term adaptations to evolving media consumption and markets.

This is partly true, but only as far as the total amount collected is concerned. The licence fee mechanism is less flexible than State grants, which can be reviewed at almost any time and are therefore subject to political bargaining and arbitrary cuts. In that sense, the licence fee guarantees stable funding for PSM and allows medium-term planning. The setting of the licence fee can even be periodic. In that case, negotiations should involve experts and PSM themselves, and be based on well-defined criteria, including a preliminary assessment of PSM costs. Globally speaking, the licence fee is more transparent than other funding mechanisms for citizens, and this transparency should always be reinforced. As far as the collection mechanism is concerned, the licence fee cannot be called rigid: it is extremely adaptable to national contexts and changing audiovisual environments. There are many different ways to reform the system, from changing the collection body to fine-tuning the scope of collection on the basis of three main criteria – devices, households, businesses.

EBU Media Intelligence Service – Licence Fee 2016 (Public Version)

3

KEY ARGUMENTS FOR PRESERVING THE LICENCE FEE NOT EFFECTIVE? FALSE

UNFAIR? FALSE

COST OF COLLECTION AND EVASION CAN BE LOW The nature of collection of the fee is sometimes described as costly and encouraging evasion. There are many examples of efficient licence fee collections. Administrative collaboration must be encouraged between PSM and the various agencies involved in the collection. Besides, data suggest that PSM are quite efficient at keeping the cost of collection under control and at fighting evasion. This efficiency might be related to a major incentive in maximizing the revenue from the fee, as this directly improves their financial situation. External bodies might not have a similar incentive to maximize the revenues from the collection, except when they generate revenues according to the number of fees paid. In cases where their compensation is based solely on costs, the incentive disappears. On the other hand, if the remuneration is too high, the whole profitability of the collection might be damaged. In this sense, a balance has to be found in the financial incentives for external agencies without allowing them to take the profit of the collection and jeopardize its efficiency.

UNIVERSAL AND COMPATIBLE WITH SOCIAL CRITERIA As it is compulsory, the fee is sometimes described as unfair by those households that do not watch public service media. However, the universality and public service remit of PSM ensure benefits for all citizens and require collective funding. Another related criticism is the regressive nature of the licence fee. The counterargument is the existence of exemptions, which should consequently be justified for social reasons. Exemption regimes should include clear and justifiable criteria, mainly based on social circumstances. Otherwise, the flat rate system could be seen as unfair by taxpayers and increase dissatisfaction with the system. However, it should not be up to the PSM to bear the cost of such exemption schemes, as such social responsibility goes beyond the PSM remit.

TECHNOLOGICALLY OBSOLETE? FALSE IT MAY BE DETACHED FROM TRADITIONAL DEVICES A more recent argument supporting the abolition of the fee is the technological obsolescence of a system based on the ownership of devices that are no longer indispensable for consuming radio and/or TV. But, as already the case in several European countries, such as Denmark or Germany, the licence fee can be adapted to new ways of consuming radio and TV. New devices used for consuming TV and radio should be charged as traditional TV and radio sets, as they fulfil the same purpose. Reducing TV and radio to broadcast-only nowadays is neither fair nor realistic, especially when PSM are encouraged to fully embrace the new distribution channels. However, when expanding the scope of the fee to new devices, the regulations need to be updated in order to avoid unclear situations and potential regulatory conflicts. Another way to avoid legitimacy conflicts and regulatory disputes is to disconnect the fee from any device ownership, as in the household-based broadcasting fee model.

EBU Media Intelligence Service – Licence Fee 2016 (Public Version)

4

KEY ARGUMENTS FOR PRESERVING THE LICENCE FEE UNPOPULAR? NOT NECESSARILY LICENCE FEE IS GOOD VALUE FOR MONEY More worrying than technological obsolescence is the social obsolescence* of the licence fee.

Behind the fee, it is PSM legitimacy which is at stake Social obsolescence of the fee relates to its public acceptance, in other words, the support for the system among the population. This is an area that goes beyond the licence fee itself and relates to the wider issue of the delegitimization of PSM, which are increasingly perceived as oversized, opaque and obsolete organizations in highly competitive evolving media markets. The fee as a unique vector of accountability

PSM should therefore actively communicate the overall value that citizens get when they pay their licence fee: the content provided by the PSM, its reach, its impact and its perception by the public; in a word, its contribution to society**. In this regard, increasing pressure towards top-slicing licence fee revenues may be particularly damaging. In practical terms, top-slicing ends up reducing PSM revenues for the purposes of financing other activities which, in most cases, would be or were previously funded by the government. Top-slicing for activities far from those originally envisioned for the licence fee undermines PSM legitimacy and public acceptance of the fee.

In such a challenging context, licence fee should be envisaged as a great opportunity for PSM to address the criticisms and renew their legitimacy. Licence fee indeed establishes a direct link between broadcasters and the public, by making the broadcaster more accountable to its audience. This link is unique to this funding system, though only one of the many benefits it has when considering public funding principles. PSM should not hesitate to embrace the greater accountability this link creates. PSM create value; therefore the fee is good value for money Data actually show that licence fees are higher and evasion rates lower in countries where PSM are stronger. Although many different factors influence this, it seems quite clear that public acceptance of the licence fee is linked to the acceptance and the performance of PSM.

•

ALA-FOSSI Marko (2012). Social obsolescence of the TV fee and the financial crisis of Finnish public service media. Journal of Media Business Studies, 9(1), 33-54. ** Visit EBU Contribution to Society project page. EBU Media Intelligence Service – Licence Fee 2016 (Public Version)

5

WHERE IS THE LICENCE FEE COLLECTED?

29 OUT OF 56 EBU COUNTRIES COLLECT A LICENCE FEE This represents 52% of all EBU countries. As licence fee is more widespread in western Europe, the share grows to 61% when considering EU countries only (17 out of the 28 EU countries). Most western and central European countries have a licence fee, some of the most notable exceptions being Spain (where collection was stopped in 1966), the Netherlands (2000) and Finland (2013).

MAP 1. Countries with a licence fee (1 January 2016)

Apart from these, and smaller countries (Iceland, Luxembourg, Malta) and micro-States, the licence fee remains the preferred way of funding PSM in western and central Europe. A licence fee is also collected in most southern Mediterranean EBU countries, such as Algeria, Egypt, Morocco, Jordan and Tunisia. However, the amounts collected are generally not substantial and PSM organizations mostly rely on complementary state funding.

The main source for PSM funding in Europe The licence fee contributes two thirds of all EBU PSM income and remains the bedrock of European PSM funding. In particular, licence fee proved to be not only stable and resilient to adverse economic circumstances, but also less subject to political upheaval than other public income schemes.

Licence fee

Licence fee abolished between 2010-2016

Sources : EBU based on Members’ data EBU Media Intelligence Service – Licence Fee 2016 (Public Version)

n.a.

No licence fee

6

HOW MUCH IS THE LICENCE FEE?

DIFFERENT SYSTEMS, DIFFERENT AMOUNTS The licence fee was on average EUR 11 per month and per household in the EBU area in 2015.

CHART 1. Annual licence fee (EUR, 2015) 433.00

EBU Average

EUR 136.32

Amount to PSM

EUR 136.32

8.59

5.39 Algeria

31.80 Portugal

Albania

36.00 Greece

17.55

37.07 FYR Macedonia

Romania

46.01 Bosnia-Herzegovina

55.68 Slovakia

79.18

61.66

100.00 Belgium French

Croatia

France

United Kingdom

In 2015, households based in EBU countries with a licence fee on average paid EUR 137.19 (EUR 136.32 in EU countries).

Poland

113.50 Italy

126.09

153.00 Slovenia

136.00

160.00 Ireland

215.76 Germany

200.46

221.95 Sweden

Austria

Norway

Denmark

Switzerland

To end, the VAT charged, or not, on licence fees creates another methodological caveat, since the 2016 VAT rates ranged from 0% to 25% depending on the country.

Chart 1 displays the amount of the fee in EUR as at 1 January 2015, as it is the last year for which yearly exchange rates to euros were available.

EU Average ( 17 )

282.15

307.96

326.60

A similar phenomenon occurs when PSM do not rely heavily on the licence fee income but have additional sources of funding, typically State grants or advertising. In these cases, the amount of the licence fee can be mechanically set at a lower level than in markets where PSM rely almost entirely on licence fee income.

EUR 137 per year on AVERAGE in Europe

EUR 137.19

EU Average (17)

PSM do not necessarily receive the full amount of the fee In several countries the total amount collected from the licence fee is shared between many beneficiaries. The fee may therefore be set at a higher level than in comparable countries where it exclusively funds the activities of the PSM. This is for instance the case in Austria, where ORF only receives 68.8% of the total fee.

EUR 137.19

EBU Average

Czech Republic

Owing to the differences between countries and the diversity of licence fee systems, an international benchmark of licence fees in EBU countries must be defined very carefully.

Total amount

Sources : EBU based on Members’ data and data from official websites and collection agencies. EBU Media Intelligence Service – Licence Fee 2016 (Public Version)

7

WHO BENEFITS?

TOP SLICING OF THE LICENCE FEE The licence fee was originally created as a way to fund broadcasters and, more specifically, public broadcasters. However, in the last few years some licence fee revenues have been used for purposes other than originally planned.

Redistribution or top-slicing of the licence fee is one of the most worrying issues for PSM organizations. As the licence fee remains linked to the funding of public broadcasters in the minds of many citizens, the use of these funds for other purposes can give the impression that less value for money is delivered.

MAP 2. Proportion of licence fee received by PSM organizations (2015)

When removing fees for collecting agencies, in roughly one-third of the markets (8 out of 22), the PSM organizations were the only recipients of licence fee revenue. This includes non members such as the cultural channel Arte in France and Germany and the regional broadcasters in BosniaHerzegovina and Poland.

In some cases, this is done indirectly. This is the case of the United Kingdom, where the BBC uses around 2% of the revenue of the licence fee to fund the Welsh S4C. In 9 other countries, more than 90% of the amount collected went to PSM.

The most worrying situation is that of Austria, Denmark, and FYR Macedonia, where the PSM share of the licence fee was below 90%. In Austria, ORF share of the licence fee revenues amounted to only 68.8% in 2015. In the case of the French Community of Belgium, the money collected is transferred to the general budget of the public administration, which then funds the public broadcaster RTBF regardless of the amount collected. This model was also applied in the past by Malta, before the abolition of the licence fee in 2013.

Full amount

Less than 90%

n.a.

90-99%

None

No licence fee

Note: fee for collection agencies excluded from calculations. German data 2014. Sources : EBU based on Members’ data EBU Media Intelligence Service – Licence Fee 2016 (Public Version)

8

WHAT LINK WITH PSM PERFORMANCE? PSM PERFORMANCE IS LINKED TO THE LEVEL OF THE FEE The higher the licence fee, the larger the market share the PSM organizations achieve in their domestic markets.

This clearly speaks against reducing licence fees at any price, but in favour of guaranteeing sustainable and stable levels of funding for PSM organizations.

CHART 2. Annual licence fee vs. PSM TV and Radio market share (%, 2015)

The amounts of the licence fee turned out to be closely correlated with the annual PSM TV market shares as well as with the annual PSM radio shares. The correlation should not be considered as directly and solely showing the link between public funding and performance, as PSM may only receive a limited share of the total licence fee and as they may also receive complementary funding.

The fact that the level of the licence fee is correlated with PSM performance raises several questions on the causes of the correlation. Are well-funded institutions more inclined to develop appealing innovative programming, allowing them to perform better on the market? Or, on the contrary, are the best-positioned organizations on the markets also better armed to negotiate with the political sphere for an appropriate licence fee? Finally, are the more popular PSM organizations rallying massive public support, explaining the higher public acceptance of paying the licence fee and the possibility to charge higher amounts?

70% 60% PSM market share, %

Interpreting the correlations

80%

50% 40% 30% 20% 10% 0% 0

Radio

100

200

300

400

500

TV

Note: trend line in Chart 4 stands for both correlations with TV and radio shares. Sources : EBU based on Members’ data EBU Media Intelligence Service – Licence Fee 2016 (Public Version)

9

WHO COLLECTS? A HUGE VARIETY OF COLLECTION METHODS There are almost as many collection methods as countries charging a licence fee in the EBU area.

In EBU countries, three main types of collection bodies may be distinguished at 1 January 2016 : the PSM itself, the tax authority or a network operator.

MAP 3. Type of collection body (2016)

In nine EBU countries, the collection is directly or indirectly enforced by the PSM itself. More precisely, in six cases (Croatia, Denmark, Norway, Slovakia, Slovenia and the United Kingdom), the fee is collected by specific departments of the PSM. Examples of such internal units in 2016 are DR Licens og Programservice (Denmark) or HRT RJ Pristojba Service (Croatia). However, the work involved in collecting the fee might be so burdensome that the PSM organization decides to externalize it, while maintaining the ultimate responsibility. In the United Kingdom, the BBC Licence Fee Unit has delegated the licence fee collection to private operators. The PSM organizations may also set up a licence fee collection subsidiary. This is the case in Austria with the GIS Gebühren Info Service GmbH, Germany with ARD ZDF Deutschlandradio Beitragsservice, and Sweden with the Radiotjänst i Kiruna (Rikab AB). In three other countries the national tax authority collects the licence fee: the French Community of Belgium, FYR Macedonia, and France, where the licence fee has been collected together with the housing tax since 2005. The third and most widespread type of collection agencies comprises various external network operators, being electricity suppliers the most frequent, They collect the licence fee in 11 EBU countries: Albania, Algeria, Egypt, Greece, Italy (since 2016), Jordan, Morocco, Portugal, Romania, Tunisia and Turkey. However, there are other kinds of external network operators, such as telecoms (in Bosnia-Herzegovina) and postal operators (in the Czech Republic, Ireland and Poland). In Switzerland, the agency Billag, whose sole purpose is to collect the fee, is a particular case, being a private company, wholly owned subsidiary of Swisscom, the 51% State-owned Swiss telecommunications operator. PSM

Tax authority

Network operators

Note: Network operators are electricity, telecoms or postal operators. Sources : EBU based on Members’ data EBU Media Intelligence Service – Licence Fee 2016 (Public Version)

Other

n.a.

No licence fee

10

WHAT SCOPE FOR THE COLLECTION? THE FEE ALREADY COVERS NEW DEVICES IN 12 COUNTRIES The definition of the devices requiring a licence has become more and more complex due to changes in the equipment used by European consumers.

There is a growing trend to include new connected devices in the licence. At 1 January 2016, 12 EBU countries no longer limited the scope of their licence to traditional TV sets.

xxxx 4. Licence fee for new connected devices MAP xxxx (1 January 2016)

However, the question is more complex than the sole issue of the type of device covered. In some instances the scope of the collection also involves defining the type of reception or the exact use of the device. In reaction to the increasing complexity of defining what devices are subject to the licence fee, Germany revised its system in 2013, abandoning the criterion of device ownership.

The German household charge The new German licence fee, called the Rundfunkbeitrag, was introduced on 1 January 2013. The charge used to be linked to ownership of a reception device but is now due regardless of the existence, type and number of reception devices. In other words, the fee has been turned into a household charge – or more precisely a domicile charge. The general public has to pay one fee per residence. The reform has so far been considered successful. In particular, it has halted the downward trend of German PSM revenues

Yes

No

n.a.

Sources : EBU based on Members’ data EBU Media Intelligence Service – Licence Fee 2016 (Public Version)

No licence fee

11

WHAT SCOPE FOR THE COLLECTION? BUSINESSES MUST ALSO PAY THE FEE IN MOST COUNTRIES Only in Albania and Denmark are private businesses exempt from the fee. In all other countries, they are liable.

The payment system for private businesses is less regular than for households and there are hardly any countries using the same system.

xxxx 5. Licence fee for businesses MAP xxxx (1 January 2016)

Fixed fees Fixed fees may be set per company, per business premises or per receiving device. In the first case, companies pay the same as a household, i.e. the price of just one licence per company. This is the case for Austria, Norway, Sweden and the United Kingdom for most businesses. Meanwhile, in Ireland, Portugal, and Switzerland, the fee is paid according to the number of premises. Finally, in three other cases, the fee depends on the number of devices, since each one requires a licence. This is the procedure in Croatia, the Czech Republic and Poland.

Variable fees In the case of variable prices, the basis on which the fee is calculated also varies from one country to another according to many criteria such as the number of employees in the company, the nature of their business (hotels, businesses selling alcoholic drink, etc.), or the public or private use of their receiving devices. .

Yes

No

n.a.

Sources : EBU based on Members’ data EBU Media Intelligence Service – Licence Fee 2016 (Public Version)

No licence fee

12

This page intentionally left blank

EBU Media Intelligence Service – Licence Fee 2016 (Public Version) 13

This page intentionally left blank

EBU Media Intelligence Service – Licence Fee 2016 (Public Version) 14

This page intentionally left blank

EBU Media Intelligence Service – Licence Fee 2016 (Public Version) 15

MEDIA INTELLIGENCE SERVICE This report has been produced by the Media Intelligence Service (MIS) at the European Broadcasting Union. The EBU’s Media Intelligence Service provides Member broadcasting organizations with the latest market data, research and analysis needed to plan their future strategies and stay ahead of the game.

Our experts cover a broad range of topics, including TV and radio trends, new media developments, market structure and concentration, funding and public policy issues. Contact www.ebu.ch/mis [email protected] This publication is available to download at: www.ebu.ch/publications

PUBLICATION: November 2016 DISTRIBUTION: This publication is intended for public distribution. The information may be freely quoted if the source is clearly stated. For detailed guidelines about how you may use this document and the data contained in it, please refer to our EBU-MIS Data Use Policy (available at www.ebu.ch/mis). If you have any doubt about how to use this information, please contact the Media Intelligence Service ([email protected]) DISCLAIMER: Please note that the EBU is not liable for any errors or inaccuracies in data provided by third parties.

EBU Media Intelligence Service – Licence Fee 2016 (Public Version)

Ver.1