Market Insight

Romanian public broadcaster TVR's accounts frozen

May 31, 2012

This product is included in:

Want to learn more?
Have an expert contact you.

Debt-burdened Romanian public broadcaster TVR has had its accounts frozen by the National Agency for Fiscal Administration (NAFA) due to accumulated debts of 273m lei (€61m). TVR has already implemented cost cuts but warned this week that unless its accounts are unblocked it may have to cut services, including coverage of the summer's Euro 2012 football competition. TVR has asked NAFA to agree to an arrangement for paying off its debts, without freezing its accounts.

TVR broadcasts seven national channels and primarily generates revenues from the TV licence fee, government grants and advertising. In 2011, 56 per cent of the company's revenues came from the TV licence fee, 33 per cent from government grants, and just over five per cent from advertising. TVR's total 2011 revenues of 583m lei were 23m lei higher than 2010, with losses of 160m lei. TVR has not made a profit since 2005. The broadcaster, which has already stopped paying freelance journalists, is also planning to reduce its staff by 10 per cent (it has over 3,300 employees), and may also shut two channels, TVR3 and TVR Info. Practically all production will be temporarily stopped and during the summer the station will mostly broadcast repeats. TVR management hopes to save up to €14m this year.

TVR's audience shares have been decreased dramatically as it faces intense competition from private broadcasters. Audience share for TVR1 was 17 per cent in 2006 and were five per cent in 2011. Advertising revenues have slipped from 78m lei in 2006 30m in 2011. The loss in advertising revenues was, however, covered by government subsidies so that, with TV licence fee revenues increasing, TVR's total revenues in 2011 were 15 per cent higher than in 2006.

TVR's expenses, however went up by over 40 per cent between 2006 and 2011. The launch of two new channels in 2008, including one in HD, increased the company's expenses, which were then amplified by the economic crisis of 2009. Buying broadcasting rights for UEFA Champions League in 2009 (costing €38m over the three seasons to 2011/12), combined with purchase of rights for the football World Cup in 2010 (for which TVR had to take a loan of €20.5m) took TVR further into the red, without the effect of increasing ad revenues. In spite of that, TVR continued to purchase sports rights, taking in 2011 another loan to buy rights for Euro 2012 (€18.9m, much more than in 2008 when it paid €7.5m). Since 2009, TVR also had to take loans (growing from €5m to €7m per year) to ensure its cash-flow.

The impasse with the tax authorities is seen by some observers to have a political dimension. Eight out of the 13 members of TVR's board are appointed by Parliament, while the chairman is chosen by the President. Currently, five members of the board, including the chairman, are affiliated with the PL-D party. After turbulence on the Romanian political scene in the first months of 2012, which started with resignation of the PL-D government in January, the government was last month formed by factions of the PSD and PNL, which are also planning to run together in the coming elections in November. The prime minister Victor Ponta, a PSD politician, has recently said he would not do anything to prevent TVR going bankrupt, primary due to the political links at the public broadcaster.

On 12 June Parliament will be presented with TVR's 2011 annual report. If the report is not accepted, TVR's board will be dismissed and a new one appointed. The financial situation of TVR helps the government to put additional pressure on TVR and also to influence voting on the report. Most important, however, is the result of the November elections. According to recent polls, PSD-PNL can look forward to a good win (60 per cent of seats); so the ideal scenario for PSD-PNL would be for the report to be rejected and a new board appointed by the new Parliament, reflecting the new balance of power. It is hard to say whether five months would be enough to appoint a new board.

Share facebook Twitter Google Plus Linked In Add This Contact Us