European Public Broadcasters' Crisis: Tax and Ad Ban Hit French Channels

France Televisions.
Cuts at France Televisions have led to the cancellation of popular shows, including weekly music showcase "Taratata."

In THR's ongoing series on the challenges facing European public broadcasters, we look at the cash crunch at France Televisions.

PARIS -- The one-two punch of budget cuts and a primetime advertising ban has French public television reeling.

A new austerity-driven budget by French President Francois Hollande and the loss of revenue stemming from a 2009 ad ban on pubwebs passed by his predecessor Nicolas Sarkozy has forced state-owned broadcaster France Televisions into crisis mode.

This year saw $250 million (€196 million) in funding cuts for the public broadcaster, a shortfall only partially covered by an increase in television license fees -- the tax all French households with TVs pay to support their public broadcasters. The new tax brought in just $142 million (€109 million), leaving France Televisions with a $112 million (€86 million) budget hole to fill. Even with cuts, the group expects to operate $55 million (€42 million) in the red this year.

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In an agreement between the government and France Televisions that was presented to the networks board of directors Thursday, the government will cut its grant a further 2 percent and France Televisions will aim for a balanced budget by 2015 with significant cuts to both operating costs and programming.

In his new budget, unveiled in March, France Televisions president Remy Pflimlin presented a savings plans that would see “re-negotiation or termination of several contracts on programs and other spending.” The belt-tightening has already resulted in axing some popular shows, including Taratata, a Top-of-the-Pops-style music showcase of French and international acts, which first debuted in 1993.

None of France Televisions five free-to-air networks have been spared the pain. France 2 and France 3 are planning to merge their news desks in cut costs, and France 4 is planning to narrow its focus to target a youth audience, a move that will likely mean cuts to primetime programming, which now include more older-skewing reruns of U.S. series such as E.R.

"The savings plan will affect everyone and impact programs," said Bruno Patino, chief operating officer of programs at France Televisions. In a press conference Thursday teasing the fall lineup, Patino admitted that France 2 has "been a bit lost" and said that France 4 will "assume the role of a laboratory for testing new forms of narration."

"For France Televisions, the point is real risk-taking," he said. "The approach of the network will be even more inclined to innovation."

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Even before the budget cuts, France Televisions was hurting. Sarkozy's ban on primetime advertising on public channels has meant an annual loss of around $70 million in revenues. For 2013, French public channels estimate they will miss out on some $77 million (€60 million) in potential primetime ad revenue as a result of the ban, which the government has tried to compensate for with direct grants.

U.S. producers won't feel much of the pain as French public TV downsizes. The only current U.S. series on France Televisions' networks are Castle and Rizzoli & Isles. A smattering of other U.S. shows are limited to daytime and access primetime slots, and mostly feature low-cost library product. The bulk of the big U.S. series -- including The Mentalist, Criminal Minds, NCIS, and Two and a Half Men -- air on commercial networks such as TF1 and M6 or on pay-TV channel Canal Plus.

But they too could be affected by the French pubweb crisis. Things have gotten so bad, France Televisions is pushing the government to reverse its ad ban.

Pflimlin wants "just a few" spots, including some in the 8-9 p.m. hour after popular programs like long-running nighttime soap Plus Belle La Vie. "A few powerful spots would allow us to go back to major advertisers who have now deserted us," he said.

French culture minister Aurelie Filippetti has said she is open to the idea.

"I think bringing back advertising is not a panacea. But that's not an ideological position; I'm open," she said in an interview on BFMTV last month. "We can consider other ideas, perhaps single-sponsor advertising."

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But commercial networks are steadfast against that. When the conservative Sarkozy brought in the ban, it was widely seen as him writing a blank check to his corporate friends at the private channels, which would now have no competition in the TV ad market. To allay those fears, the ad ban came with a new 3 percent tax on commercial networks, with the money going to the pubwebs to compensate their loss in advertising revenue.

France's private TV channels paid the tax, but the economic crisis meant they didn't enjoy the ad boom promised by the ban. Now commercial TV execs are lobbying President Hollande hard to keep commercials off the public airwaves.

In a joint letter to the Elysees Palace, the heads of networks TF1, M6, TNT, RTL, NRJ, Lagardere, NextRadio TV and sports channel L'Equipe argued that letting pubwebs back into the ad market will further erode their bottom lines.

France Televisions remains a powerful force here. The year-on-year ratings for June show France 2's ratings share up to 15.1 percent over 14.6 last year and France 3 up slightly to 9.3 percent. Commercial net TF1, with its steady diet of U.S. dramas, remains the market leader, but its share of the French audience fell to 21.9 percent from 22.2 last June.

In typical French style, Hollande's government is hoping to solve all its public broadcast woes with more taxes. The TV license fee may be extended to homes that view public programming solely on computers or other digital devices, and a new 0.9 percent levy on Internet and mobile service providers has just passed after a long legal battle with the European Union, which rejected it as anti-competitive.

Proceeds from the so-called Internet tax are intended to support French culture in general, film and music as well as public TV. It remains to be seen if it is the medicine that can cure Paris' pubweb ills.