Why being commercial-free has not paid off for state broadcaster TVE

The end of advertising at the public television station TVE has apparently had positive effects on its audience ratings but disastrous ones on its bottom line.

When the government decided to eliminate commercials, from January 1, 2010, the broadcaster lost revenues of around 400 million euros. To make up for this lost income - which literally evaporated from one year to the next as a result of the new public television financing law - parent group RTVE was hoping to generate sufficient revenues through a special tax levied on private broadcasters: three percent of annual revenues for free-to-air stations and 1.5 percent for pay TV networks, with 0.9 percent coming from telecommunications operators.

But some faulty math, together with discrepancies in the payments received from these companies, has dragged RTVE into the red. The fiscal year 2010, the first that was ad-free, closed with a deficit of 47.1 million euros. RTVE President Alberto Oliart had a plan to avoid these losses: selling the rights to the World Motorcycling Championship to the private network Telecinco for ¤40 million. But the RTVE board turned that idea down.

After reviewing the numbers, RTVE says that it should have received 62.3 million eurosmore last year from the private networks and telecoms operators (19.2 million eurosand 43.1 million euros, respectively). Sources at the public broadcaster said that some private stations calculated their special levy based on their net revenues, rather than gross. Meanwhile, the telecoms operators apparently failed to properly factor in their income from cellphone services. The Telecommunications Market Commission, the industry watchdog, is reviewing the case, and has already told the networks to cough up an additional 4.9 million euros, corresponding to the fourth quarter of 2010.

Had it received that 62.3 million euros, RTVE's account balance would not have been negative. But even if the money finally comes in, it remains to be seen whether tax authorities will allow the public broadcaster to use it to balance out last year's losses.

Ultimately, however, the greatest discrepancy between the amount budgeted for 2010 and actual income is due to the radio-electricity tax. The law awarded RTVE rights to 80 percent of this tax, an amount estimated at 330 million eurosby the Industry Ministry, but which, in fact, was no more than 250.4 million euros.

RTVE's corporate director general, Jaime Gaiteiro, explained that in 2010 the public broadcaster saved on content purchase and increased product sales. "Where we had a real capacity to do so, we spent less and earned more," he said.