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construction of a public television group : France Télévisions

construction of a public television group : France Télévisions. By Marc SCHWARTZ Deputy Director General. International Symposium “Media on the Move” Taipei – Sept 20-21 2004. Others. 10,9%. 31,5%. 12,6%. 1,8%. 4 y.o. and more. 3,7%. 39,5%. Source MEDIAMAT - 2003.

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construction of a public television group : France Télévisions

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  1. construction of a public television group : France Télévisions By Marc SCHWARTZ Deputy Director General International Symposium “Media on the Move” Taipei – Sept 20-21 2004

  2. . Others 10,9% 31,5% 12,6% 1,8% 4 y.o. and more 3,7% 39,5% Source MEDIAMAT - 2003 France’s leading broadcaster

  3. premium channels thematic TV channels multimedia production distribution international other advertising France TV Group

  4. Terrestrial networks with distinct identities the general public channel France 2, founded in 1964 is anational general-interest networkbroadcasting 24 hours a day. France 2 offers a broad range of quality programming and fulfils an ambitious, threefold mission :to inform, entertain and educate all audiences. With an audience share of 20,5 %, it isthe leading public broadcaster.

  5. Terrestrial networks with distinct identities the regional and local general-public network France 3, founded in 1973, is a national and regional general-interest network with 13 local stations and 24 local news desks. Its regional programming has made it France’s most acclaimed network (approval rating of 76%). France 3 broadcasts nearly 18,000 hours of programming yearly, including 11,000 hours of local programming. Its editorial guidelines are based on 3 directives :local communities, discovery, and innovation. With an audience share of 16,1 %, France 3has stabilised its audience.

  6. Terrestrial networks with distinct identities the resource channel France 5, the knowledge and educational channel, is a window open on the world and contemporary society. Decode...comprehend...and learn : these are the watchwords of a channel aiming to arouse the curiosity of its viewing audience. With an audience share of 2,9 % (6,3 % on its terrestrial broadcasting schedule between AM 6.45 and PM 7.00), France 5 has been progressing steadily, year by year.

  7. 1500 professionals, divided on three oceans and in 10 stations comb the colors of the world on the televisions and radios of RFO 17 TV channels with 2 TV channel brands Télé-paysandTempo,and 10 radio stations 24 hours a day Through its stations, RFO broadcasts programs which circulate and exchange thanks to a powerful satellite network, which makes this company the first audiovisual force of French overseas territories. Terrestrial networks with distinct identities the overseas network

  8. financial data

  9. breakdown by themes News Drama Magazines Sports 41 Games, entertainment 58 Cinema 81 110 441 140 Youth 174 Others 240 breakdown by channels 232 712,8 M€ 706,3 M€ 90,2 M€ 6,3 M€ theme channels financial data programming costs1515,6 M€ Documentaries, theatre, spectacles

  10. Others 22,2% 54,4% 2,2% 0,9% 8,6% 21,1% 11,7% Source : SECODIP 2003 financial data the French TV advertising market

  11. financial data key financial data 2003 2002 (M€) Growth % licence fee 1 499,5 1 470,5 2,0% advertising 710,5 677,4 4,9% total turnover 2 372,0 2 282,1 3,9% ebitda 158,8 165,0 -3,7% ebit 40,3 35,1 14,8% net income 14,2 53,2 -73,3% cash flow from operations 117,0 106 10,4% equity 345,8 331,5 4,3% net cash / (debt) 114,8 106,7 7,6%

  12. financial data programming costs 2003 2002 Consolidated data (M€) Growth % news 127,2 127,1 0,1% sports * 102,2 93,7 9,1% programs 483,3 463,8 4,2% France 2 - programming cost 712,8 684,6 4,1% national programs 286,7 279,2 2,7% national news 48,7 48,3 0,9% sports * 64,4 66,5 -3,2% local programs 306,5 294,6 4,0% France 3 - programming cost 706,3 688,7 2,6% magazines 45,1 46,2 -2,3% documentaries 31,4 27,2 15,2% others 13,7 11,9 15,1% France 5 - programming cost 90,2 85,3 5,7% * Including the variation of depreciation on sports rights CFI - programming cost 4,9 - - Other broadcasters - programming cost 1,5 4,9 -69,5% France Télévisions - programming cost 1 515,6 1 463,5 3,6%

  13. financial data terrestrial TV channels : individual accounts (M€) 2003 2002 2003 2002 2003 2002 turnover 1 049,4 1 019,8 1 096,2 1 077,4 163,3 148,7 licence fee 608,0 596,3 756,2 741,9 132,8 126,3 advertising 396,0 378,2 277,0 268,7 28,1 20,3 programming cost 712,8 684,6 705,8 688,6 90,2 85,1 ebit 23,7 39,4 5,0 5,1 5,1 3,1 financial income 2,5 0,1 -1,6 -4,6 -0,5 1,9 exceptional income 6,0 -9,5 6,7 19,5 1,7 -3,8 net income 28,8 27,1 8,4 20,5 4,4 1,0 consolidated EBIT 23,4 28,7 9,7 11,9 4,8 5,5 consolidated net income 14,0 17,2 6,5 -1,0 4,6 3,1

  14. 400 120,1% 346 332 350 277 300 242 250 70,1% 68,9% 204 200 150 37,9% 31,7% 245 100 191 170 126 110 50 0 1999 2000 2001 2002 2003 equity (M€) net financial debt (M€) Gearing ratio (net debt / equity) financial data a strong financial position • - reinforcement of equity : 345,8 M€ at year-end 2003, + 66% in 4 years • - net financial debt : - 67% in 4 years

  15. constitution of the group

  16. Historical highlights from ORTF to France Télévisions... (1/2) 1964 Act :creation of the French Radio-Television Office (ORTF) state monopoly on radio and television broadcasting 1974 Act : dissolution of ORTF- setting up of seven public industrial and commercial organizations, including : • 4 national program companies (Radio France, TF1, Antenne 2, France Régions 3) • 1 organization in charge of broadcasting (Télé Diffusion de France) • 1 production company (Société Française de Production) • 1 audiovisual archive center (Institut National de l’Audiovisuel) 1984 : end of state monopoly- launch of 2 commercial TV channels : • La 5 (free-of-air TV channel) • Canal + (pay TV channel) 1986 Communication Act : • setting up of CNCL (regulator for audiovisual sector) • privatisation of TF1 • end of SFP and TDF monopoly (now both privatized)

  17. Historical highlights from ORTF to France Télévisions... (2/2) 1989 : « common presidency » for Antenne 2 and FR3 - creation of the Audiovisual Superior Council (CSA) 1992: Antenne 2 and FR3 become France 2 and France 3– creation of France Télévision brand name 1994: La 5, the commercial TV channel goes bankrupt and is replaced by La Cinquième, a public information and educational channel 2000 Act : reinforces the audiovisual public sector establishment of France Télévisions holding company which owns France 2, France 3 and La Cinquième, and 30 subsidiaries 2001: Groupfinancial management first consolidated accounts, tax integration, cash pooling, reinforcement of the information management tools January 2002 : - 5-year contract with the government on « Goals and Means of France TV 2001-2005 » - new visual identity - France Télévsion => France Télévisions - La Cinquième becomes France 5 2004 : RFO’s integration to France Télévisions

  18. three principles • the autonomy of subsidiaries • a strong coherence through common planning and reinforced harmonization • a collegial structure in the management of the group (Executive Committee) a large scope of competences delegated to channels directors • the channel directors are responsible for the editorial policy and programming choices and the the day-to-day management of their company (eg. Human resource & Budget) • the Chief Executive Officerdefine the scope of delegation in fixing limits of intervention. In case of divergence, especially about programs, he makes the final choice a collegial decision-making in order to maintain the coherence the channel directors : • take part in the boards of the holding’subsidiaries when those are in relation direct with them • participate toFrance Télévisions’ Board of Directors and take part in debates on the strategy of the group • are responsible for transverse missions aiming at controlling joint projects The holding company the « organisation charter » of France Télévisions

  19. The holding company France Télévisions’ organisation France Télévisions’ Board of Directors : • - appoints the premium channels’ Director Generals • - deasl with all the questions linked with the 5-year contract with the Government • approves the TV channels’ budgets • distribute the licence fee between the channels Board of directors FRANCE TELEVISIONS + all the traditional missions of a holding’s Board of Directors TV channels’ Board of Directors : Board of Directors FRANCE 5 Board of Directors FRANCE 2 - all the traditionnal competences of a Board of Directors, except those assumed by the holding’s one - especially deal with all the questions linked with editorial content (audience shares, strategy of programming, acquisition of programs…) Board of Directors FRANCE 3 Board of Directors RFO

  20. the holding France Télévisions SA missions • setting the group’s strategic orientations • coordinating and promoting the programs and services offer • carrying the development policy (domestic & international) • managing France 2, France 3 and France 5 common affairs the holding financial competences • elaborate and conduct the group financial policy • exert all the shareholder’s competences (appoves budget, financial reports…) • receive and distribute the public funds between the TV channels organisation of France Télévisions’ holding • 7 specific divisions : programs strategy, diversification, communication, public relations, finance, human resources and internal audit • 5 common divisions for the group and the channels : research, international, legal affairs, program acquisition and sports The holding company what does the holding company do ?

  21. monthly quarterly half-yearly yearly budget reporting board of directors actualised forecasts on year-end financial results consolidated accounts Group yearly accounts consolidated management charts corporate income tax return Organisation de la fonction financière financial calendar

  22. audit committee of the board, created in 2001 • four to five meetings per year • main topics : (1) consolidated accounts, (2) acquisition of programs, (3) news programming costs, (4) advertising and merchandise exchanges, (5) cash management, (6) internal control, (7) human resources procedures Creation of an internal audit direction • annual audit plan validated by the audit committee on september 2003 • accomplishedmissions : acquisition of programs, non-core purchasing, advertising and merchandise exchanges, audit of several subsidairies…. application of the French Financial Security Act (equivalent of the Sarbanes Oxley Act) • process lead by the internal audit department • process: (1) risk analysis, (2) creation of a working group, (3) settlement of an auto-evaluation questionnaire for sociétés anonymes (SA) of the group, (4) delivery of reports (for each SA) and of letters on the evaluation of the internal control on risk management (for each entity) reinforcement of the management tools and settlement of new procedures • production of a wide scope of financial information, through monthly, quarterly and half-year reports • settlement of actualised forecasts on year-end financial results, within the year • settlement of new procedures • harmonization of the information management tools : ERP project with a group dimension (Oracle e-business suite) Constitution of the group corporate governance

  23. creating value through cost reductions program derived from the size of the group and/or derived from mutualization of means) • creating value within the channels (cost killing programs) • no net increase of staff during the 5-Year contract • cost-reduction and cost-cutting objectives of 170 M€ between 2001 and 2005, through : • operational subdivisions : • non-core business purchasing • diffusion costs • non-core business departments • sports • news • acquisition of programs • co-productions & management of the stocks of programs • production department • Growing cost-reduction and cost-cuttingresults : • 15,2 M€ in 2001 • 24,0 M€ in 2002 • 48,3 M€ in 2003 • A few examples : • 30% decrease on mobile phone prices, • decrease of almost all the recently renegotiated sport rights • launch of information tool group projects on financials and human resources The holding company a better use of our resources : the Synergia plan

  24. France Télévisions 7 esplanade Henri de France, 75907 Paris cedex 15 www.francetelevisions.fr Marc SCHWARTZ +33 (0)1 56 22 60 12 m.schwartz@francetv.fr

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