Counting the cost of ‘free news’
The resource has grown to occupy an incredible position in the Irish internet space. During the summer it was confirmed as the dominant player in the online news market.
Last week it was announced that the site is to benefit from investment to improve and revamp it.
The website in question is rte.ie. Each month 4.4m different computers log on to 117m of its pages.
On Thursday the station’s new managing director of current affairs, Kevin Bakhurst, revealed that the RTÉ News Twitter feed had attracted its 90,000th follower.
@rtenews Twitter account hits 90000 followers. Underlines growing social media importance.
— Kevin Bakhurst (@kevinbakhurst) October 25, 2012
However, its competitors have found the website’s presence difficult to stomach because this growth has been made possible through the repackaging of products funded from the television licence.
Although the website has been losing money, this has been covered by income channelled from services such as premium rate quiz lines and sales of the RTÉ Guide.
When the impressive usage figures were confirmed by the ABC audit, RTÉ trumpeted its success in the face of traditional newspaper publishers.
The station’s commercial director, Conor Mullen, said not only was it the leading media website but its mobile phone service had enjoyed “phenomenal growth”.
“We are constantly enhancing our offerings, and further building out our strategy for users at home and abroad to access RTÉ anywhere and everywhere,” he said.
The publishers in the National Newspapers of Ireland cried foul. They have frequently claimed RTÉ is unfairly using licence income to undercut their survival.
They feel RTÉ’s decision to give away content makes it impossible to charge for the work of journalists who deliver material for their websites.
Earlier this year there had been a suggestion that the television licence could be recast to be available to all companies involved in public service news gathering rather than the national broadcaster.
At last week’s National Newspapers of Ireland’s awards ceremony its chairman, Matt Dempsey, criticised the lack of balance in how journalism is supported.
“Where is the consistency between funding of public service media versus private commercial media?
“Big questions that need answering, for the sake of all our futures. Perhaps it’s time there was a dedicated Minister for Media to bring some clarity to the sector,” he said.
However, a day earlier, after heralding the onset of universal digital transmission, Communications Minister Pat Rabbitte shot down the hopes of spreading the television licence pot.
“The print groups in Ireland are in difficulty. I met the newspaper publishers and the national umbrella organisation and they are in trouble, there is no doubt about that,” he told RTÉ radio.
“Spreading the television licence so thinly across the entire news media generators, I don’t think it would rescue what is happening in the print media.”
RTÉ maintains that no part of its internet package is paid for by licence fees.
Yet figures show the service cannot wash its own face.
It has incurred multimillion-euro losses for the cash-strapped company. Last year the online arm of RTÉ swallowed €3.4m.
On the back of this hit it attracted 415,000 unique visitors every day in May. About one quarter of these used smartphone apps.
This made it by far the most popular Irish-based news website and compared with 235,000 hits for the irishtimes.com in late 2010, 188,000 for independent.ie in March, and 38,600 for thejournal.ie.
But the private operators are not competing on the same terms.
If news sites produce reports they must be paid for through advertising or circulation income from their associated titles.
In RTÉ’s case the original reports are funded by the licence fee. This is evident in the accounts for the national broadcaster.
The online service operates as part of a distinct business division [IBD]. But this enjoys the lucrative benefits of other units’ effort.
For instance corporate papers define the various roles of its current affairs staff. These specify their work includes “provision of news and current affairs content to RTÉ’s free web-based public service online services”.
In its annual reports RTÉ justifies the delivery of its content for free because it can help grow audiences. This means the website is not charged for what it takes from the rest of the station.
Last year the company was asked to supply extensive details on the costs associated with the online service through the Freedom of Information Act. It turned down part of the request as the information was deemed to be commercially sensitive. Instead it provided a broad breakdown of the associated overheads.
These covered 2005 until 2009. They showed a significant increase in investment in its online product.
In 2005 the overall cost of rte.ie came to €2.7m. By 2009 this had hit €5.6m. Over the same period staff costs had grown by 89%, to €3m.
It had invested more than €170,000 in designing the website and €563,000 promoting it.
Other bills related to charges for software, the servers it uses, hosting the website and maintaining the product.
It paid freelance contractors €632,000 in 2008 and €159,000 in 2009. However, the nature of their services was not spelled out.
RTÉ’s annual report explains the relationship between the various division and what budgets get billed for which service.
The website gets to piggyback on the production decisions of the television, radio, and current affairs units.
“These costs are charged to the television, radio, and news and current affairs IBDs as appropriate,” the report said. “In order to fairly reflect the true cost of providing RTÉ’s free-to-air television and radio channels these costs are not apportioned to Publishing IBD where additional opportunities to access the material are provided via RTÉ’s free, web-based online services.”
Free content is its critical edge.
Within the organisation rte.ie is only billed for services when it has to adapt them for its own uses.
Newspapers have complained it is unfair that the spin-off is getting to siphon material from other divisions.
RTÉ said it would not be practical to attempt to break down the costs any further.
“RTÉ considers that to attempt, on some notional basis, to separate the cost of broadcast programmes between its public service broadcast services and its public service website would seriously understate the true cost of providing the broadcast services.
“Any costs incurred in generating content specifically for websites, repurposing content for websites, and maintaining the online infrastructure are charged to the online services,” it said.
The provision of free content to the RTÉ website has happened despite protests from the broadcaster that licence income has not been used to pay for its web-based platform.
“No element of licence fee revenue is attributed to RTÉ’s free, web-based, online public services, which are currently solely financed by surpluses generated from commercial activities,” it said in its annual report.
However, in response to questions RTÉ indicated that its decision not to fund the website directly from the licence was not simply a policy decision. There was just not enough coming in.
“RTÉ will continue to provide a public service website in connection with its public service television and radio services. As with other RTÉ public service activities it will be funded, to the extent that sufficient licence fee funding is not available, from contributions generated by RTÉ’s commercial activities,” it said.
At the Oireachtas committee in Dec 2010, RTÉ’s chief financial officer, Conor Hayes, said it was not the dominant player in the online advertising market.
He said it received less than €2.5m out of the €97m spent on internet advertising in 2009.
“RTÉ pursues commercial activities online and does so in a fair and transparent manner that complies with all relevant codes and practices.
“Rte.ie does not use TV licence fee money.
“It is essential for RTÉ to drive revenue from other sources and to act commercially so that it can fulfil its public service remit,” he said.
The figure Mr Hayes presented to the committee, coupled with the overview released under the Freedom of Information Act, gave a picture on the subvention the service is getting.
Mr Hayes’s figure for 2009, of a €2.5m income from online advertising, contrasts with an overall cost of sales for the same year of €5.6m.
This did not factor in the free content supplied by on-site reporters, cameramen, or the files available directly from radio stations and television channels.
Under the changes at the station this will be augmented with reporters getting equipment to feed content directly back to the station using smartphones and the establishment of a wireless network across Dublin.
For a private website of a newspaper to provide the same content, it has to pay for the services of a person to record an interview.
The performance of the RTÉ site is sheltered by the rest of the company.
According to RTÉ’s annual report its publishing division, which looks after the magazine and the internet, made a loss.
However this was not immediately obvious.
This was because of the wider activities of RTÉ Commercial Enterprises Ltd.
This subsidiary accounts for the publishing bodies as well as sales of television programmes and music copyright owned by the broadcaster.
It also takes in the money earned from premium rate competition lines. There were 14m interactions to these RTÉ services in 2011.
Pooling these activities into a single entity means that RTÉ can argue that licence fees do not directly fund its internet service.
But the business model of this subsidiary means the lucrative programmes, which are paid for through the licence, do underwrite rte.ie by proxy.
Covering the losses of Ireland’s most popular site happens in three layers.
RTÉ’s online service lost €3.4m last year, despite not paying for most of the content supplied by the rest of the station.
But rte.ie fell under the protectorate of RTÉ Publishing, which incorporates the RTÉ Guide and Aertel. This lost €2.07m last year after income of €17.2m.
This in turn falls under the protectorate of RTÉ Commercial Enterprises Ltd, which includes the sale of programmes and premium rate services.
This company made a €1.3m profit, on an income of €21.7m.
When the online service is filtered through the two sister operations a €3m loss becomes a €1.3m profit.
In addition the subsidiary accounts explain that RTÉ Commercial Enterprises Ltd books the revenue generated from selling content online, even if it is sourced from the rest of the station for free.
Last year rte.ie raised €4.2m from commercial activity, but the bulk of this would have been through advertising. While rte.ie did spend €405,000 on producing its own material, it also enjoyed other casual protection in the slipstream of RTÉ’s anchor units.
For the election it operated a 24-hour social media desk from 43 count centres. This helped attract more than 19m page views in one weekend. The product included content supplied by many staff employed by the other divisions.
The site has a smartphone news app and a player service to allow people catch up on television programmes available from the rest of RTÉ.
Being able to ship content it gets for free through its website gives rte.ie a unique advantage in the market.
The annual report for Commercial Enterprises said that “demand for advertising on RTÉ Player at times exceeded supply and outperformed the growth rates for display advertising in the market place during the year”.
RTÉ is clearly investing in the future, but at what cost?
* Each month 4.4m computers log on to rte.ie to view 117m pages.
* The costs associated with running rte.ie rose by €2.9m between 2005 and 2009 from a base of €2.7m.
* Last year rte.ie lost €3.4m.
* 1.3bn pages were viewed on rte.ie last year.
* There are 90,000 followers to the @rtenews Twitter feed.
* It costs €3m to pay the staff for rte.ie.
* During the election there were 19m pages viewed by 1.1m people.
* There were 14m entries to premium rate and text services run by RTÉ in 2011, up from 12.4m in 2010.
* The RTÉ News Now mobile phone app has been its most successful internet venture with more than 450,000 downloads by the end of 2011.
* More than 500,000 people use the RTÉ Player service to view programmes, there were 100,000 downloads in the first two weeks of its smartphone version.
* RTÉ’s commercial subsidiary made a profit of €1.3m last year despite its online losses.
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