Business Week: Uncertain vista facing State’s media
Also in the news were Project Eagle, mortgages, jobs, and economic forecasts
RTÉ’s announcement that it intends to outsource young people’s programming led to a series of “town hall” meetings at the Montrose headquarters
From the outsourcing of content at RTÉ, to the winding up of the Independent News & Media pension scheme and “unavoidable redundancies” at UTV Ireland, the uncertain vista facing the State’s media came into focus this week.
Print, radio and television advertising revenues for 2016 are expected to be sharply below what was forecast at the start of the year, with the Irish print market on track to suffer a double-digit decline.
Core Media, the largest buyer of advertising in the Republic, expects advertising revenues in the print market to be down 12 per cent in 2016 and a further 8 per cent in 2017, while radio revenues are predicted to be down 5 per cent.
Following RTÉ’s unexpected move to outsource its young people’s TV programming to the independent sector, a series of “town hall” meetings were held this week at the ailing broadcaster’s Montrose headquarters.
Although the outsourcing was temporarily halted after RTÉ admitted it broke a “guiding principles agreement” obliging it to consult with unions, director general Dee Forbes gave employees the dreaded “tough decisions ahead” speech.
There was bad news, too, at another of the State’s networks, UTV Ireland, following Virgin Media’s move to acquire and merge it with TV3, where losses deepened to almost €17 million in 2015.
Virgin Media said redundancies will be “unavoidable”. The broadcaster has advertised 40 open vacancies but there are already 61 permanent staff at UTV Ireland, meaning some job losses are inevitable.
The media scramble to stay relevant has also led to the slight rebranding of the JOE.ie family of websites, which are to drop the “ie” suffix.
Its owner Maximum Media is making moves to reposition itself as a broadcast company, and has constructed a small broadcast studio in its Dublin headquarters and hired experienced producers and designers under a new strategy.
Fire-fighting at INM
Over in Talbot Street in Dublin, significant fire-fighting is underway at Independent House. Plans by INM to wind up its pension scheme while at the same time reducing the capital structure of the business – yielding shareholders a pay-out – have incensed staff. They have pointed out that the move will yield shareholders an exceptional gain of €24.7 million.
In March, INM reported an operating profit for 2015 of €37.4 million on revenue of €321.2 million. Its pension scheme, however, contains a €23 million hole and has been struggling to meet statutory funding requirements.
Senior people at INM have also been at loggerheads over a move to buy radio station Newstalk, which is owned by Denis O’Brien’s Communicorp. The deal is believed to be off the table for now, at least.
It is understood there was a major row between INM chief executive Robert Pitt and O’Brien lieutenant Leslie Buckley, who is INM’s chairman, over the price tag of a proposed bid for Newstalk some months ago.
INM and Communicorp are understood to have had separate valuations of the radio station carried out, and Pitt is believed to have wanted to offer the lower INM-obtained price while Buckley favoured the higher valuation sourced by Communicorp.
The dispute is believed to have led Pitt to consider his position, while INM’s share price lost ground after the details emerged in The Irish Times.
Project Eagle tax break
As debate continues on what tax vulture funds who bought assets here after the crash should pay, it emerged this week that US fund Cerberus paid less than €1,900 tax on the €77 million profit it made from the Northern Ireland property portfolio it acquired from Nama.
A report by Comptroller & Auditor General Séamus McCarthy previously found the sale of the loans, dubbed Project Eagle, for €1.6 billion could have lost the taxpayer up to €200 million.
Accounts produced by Promontoria Eagle, the Irish-based subsidiary used to the buy the loans in June 2014, show it earned a profit of £65.8 million (€77 million) last year. The figures also show that it paid just over €1,870 to the Republic’s exchequer in 2015.
The company structured its business in such a way as to take advantage of a tax break introduced in the late 1990s to lure financial services firms to the Republic.
It also emerged that Cerberus cleared an €860 million loan from Japanese lender Nomura International to part-fund the Project Eagle deal. Documents filed by Promontoria Eagle with the Companies’ Registration Office show the debt was secured through six charges against assets acquired as part of the deal.
Ulster Bank says sorry
It was Ulster Bank’s turn in the dock this week as its chief executive faced questions from the Oireachtas finance committee. He revealed that about 14 or 15 customers lost their homes as a result of being denied a lower tracker mortgage interest rate.
Gerry Mallon, who is still relatively fresh in the job, apologised and said the bank would take “immediate steps” to rectify the interest rates of about 2,000 affected customers. “We can’t have this kind of issue in the future,” he said. “It’s not something we’re proud of.”
The bank’s review of its mortgage book forms part of an industry-wide investigation ordered by the Central Bank following revelations of overcharging and poor customer communication at Permanent TSB.
As part of the same review, Permanent TSB has been fined €4.5 million by the Central Bank after its former subprime unit, Springboard Mortgages, overcharged tracker mortgage customers.
The bank was also forced by the regulator to pay 222 customers €5.8 million in redress and compensation. The penalty is the highest to be paid by a company regulated by the Central Bank, and was the first enforcement action stemming from the review.
Separately, data published by the Banking and Payments Federation showed the number of mortgages being approved has stayed on an upward trend amid a softening of the Central Bank’s lending rules and the Government’s help-to-buy scheme.
There’s good news and bad news ...
The economy may be in recovery but there remains much cause for caution. The State’s fiscal watchdog this week pointed to growing evidence of a potential slowdown in the economy, and warned public sector pay increases will have to be funded by cuts.
The Irish Fiscal Advisory Council said that while the economy continues to grow at a solid rate, recent data on domestic demand, output and retail sales point to a gradual “loss of momentum”.
The Organisation for Economic Co-operation and Development, meanwhile, became the latest body to downgrade growth projections for the Republic in the wake of Britain’s vote to leave the EU. It anticipates GDP growth of 3.2 per cent next year.
That being said, Irish consumer sentiment in the latest KBC Bank Ireland/ESRI sentiment index was largely unchanged in November, although households remain cautious.
The Live Register recorded another large monthly drop in the number of people signing on for jobless benefit, with the number of claimants falling by 2,800 to its lowest level recorded in eight years. The CSO put the State’s headline rate of unemployment at a post-crash low of 7.3 per cent.
And there was more positive job news as LinkedIn, Voxpro, and West Pharmaceutical Services announced plans to create 700 new jobs in Dublin.
However, just how long the Republic will be able to keep attracting multinational investment remains unclear after US president-elect Donald Trump appointed former Bank of Ireland director Wilbur Ross as his commerce secretary and former Goldman Sachs executive Steve Mnuchin as his treasury secretary.
Speaking after his appointment, Mnuchin reiterated Trump’s pledge to reduce the US corporate tax rate from 35 per cent to 15 per cent, bringing it almost in line with the Republic’s rate of 12.5 per cent.