he European Audiovisual Observatory has just published the first volume of the 2005 edition of its Yearbook - Cinema, television, video and multimedia in Europe. This volume presents a detailed economic analysis of television companies throughout Europe.

After the 2001-2002 period, when huge losses were recorded, the overall situation of television companies in the 25 European Union member states improved in 2003 and 2004. TV company revenue rose by EUR 10 billion between 1999 and 2003, reaching EUR 64.5 billion in 2003, an average annual increase of 4.4 per cent.

The sector as a whole achieved a small but positive profit margin in 2003 (0.4 per cent compared to -5.7 per cent in 2001 and -3.7 per cent in 2002), although the net deficit remains considerable: EUR 2.4 billion compared to EUR 4.7 billion in 2001 and EUR 3.1 billion in 2002.

The European Audiovisual Observatory analysed the annual accounts and balance sheets of around 550 television companies for the years 1999-2003. There are not yet enough figures available for 2004 to carry out a similar analysis for that year, although all the indications are that the financial recovery of this sector continued.

Growth rates vary from country to country

The United Kingdom is by far the country with the largest TV company revenue: EUR 17.3 billion in 2003, compared to EUR 13.6 billion in Germany, EUR 10.5 billion in France and EUR 7.6 billion in Italy. This is due to the high level of funding of public service television, the advanced development of digital television and the number of channels available, but also to the fact that many pan-European broadcasting companies are based in Great Britain.

The yearly average growth of 4.4 per cent is fairly disappointing compared to the two-figure growth rates enjoyed by the sector in the 1980s and 1990s (it was still 10 per cent in 2000). The poorest growth figure was recorded in 2002 (0.4 per cent), although it rose to 3.2 per cent in 2003. Of the larger countries, only France achieved average growth higher than the European average (5.7 per cent), although the growth stimulated at the start of the decade by the increasing importance of thematic packages and channels is, in France as elsewhere, beginning to tail off. Germany suffered a 1.6 per cent drop in 2003, mainly due to a recession in the advertising market. The apparent slump in the British and Polish markets is actually due to the conversion of figures into euros. The revenue of British companies rose from GBP 10.8 billion in 2001 to GBP 12.2 billion in 2003. In the national currency, the Polish market remained quite stable at around PLN 4.1 billion between 2001 and 2003.

Table 1: Operating revenue of European Union television companies (1999-2003) - EUR thousand

Graph 1: Yearly average growth of television companies in the European Union (EUR 25 - 1999-2003) - In %.

Table 2: Operating revenue of the different categories of television company in the European Union (1999-2003) - EUR thousand

Table 3: Rate of growth of the different categories of television company in the European Union (EUR 25 - 1999-2003)

A clear improvement in the financial situation as a whole, but very varied results according to country

On the whole, the financial situation of the television sector in the European Union improved markedly in 2003 and the first figures available for 2004 tend to confirm this pattern. There are three main reasons for this:

Following the general recession of the European economy in 2001, which was particularly evident in a drop in advertising investment, the economy began to grow again and advertising revenue increased in most countries (with the notable exception of Germany). Furthermore, digital television packagers (following the spectacular bankruptcies of ITV Digital in the United Kingdom and Quiero in Spain and the mergers between satellite platforms in Germany, Spain, Italy and Poland) are gradually reaching break-even point;

Operating costs have fallen, leading to a considerable improvement in operating margins, which rose from -3.8 per cent in 2001 to 0.5 per cent in 2003. The Observatory does not have sufficient information to analyse this reduction in operating costs in any detail. However, it can be assumed that the merger of digital platforms in several countries has reduced programme acquisition costs. Moreover, despite a few gaps, the Observatory has been able to analyse in detail permanent employment in European Union television companies: the total number of
employees rose from 189,800 in 1999 to 196,600 in 2003 (+3.6 per cent), reaching a peak of 198,400 in 2001 before dropping by 1,800 in the space of two following years;

The financial operations deficit was cut from EUR 1.4 billion in 1999 to EUR 120 million in 2003.

Table 4: Profit margins of national television systems in the European Union (1999-2003) - In %

Digital packagers lead the way

The digital television packagers category, with an average annual growth rate of 18.8 per cent, has contributed most to the growth of the market. This growth was particularly strong at the start of the period under consideration (30.5 per cent), fell away in 2002 (7.5 per cent) and increased again in 2003 (25 per cent). However, it is expected to drop again in 2004 (between 3 per cent and 4 per cent), now that the impact of the launch of Sky Italia has worn off.

According to available data on the results of four companies in 2004, this group of operators should nevertheless, for the first time, achieve a profit margin of around 6 per cent compared to -4.5 per cent in 2003. However, the development of a free multi-channel service via digital terrestrial television could curb the growth of digital pay-TV platforms in the coming years.

Table 5: Profit margins of the different categories of television company in the European Union (1999-2003) - In %