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To the Shareholders,
In 2009, the Rai Group posted a loss
of 61.8 million euros (loss of 7.1
million euros in 2008), with a
negative net financial position of
151.5 million euros (positive by 21.1
million euros in 2008).
The Parent Company, Rai registered a
loss of 79.9 million euros (37 million
euros in 2008) and a positive net
financial position of 52.5 million euros
(196.8 million euros in 2008).
T he negative results of 2009 can be
attributed to the following significant
phenomena.
The difficult situation that characterized
the advertising market had a strong
influence on company decisions to
purchase advertising time and drastically
redimensioned the budget allocated to
expenditure for advertising.
In keeping with the general economic
trend, the decline by Rai showed a
tendency, quarter by quarter, towards
progressively lower rates, closing
nevertheless with a decline close to
17%.
The significant drop in revenues from
advertising at consolidated level was
approximately 200 million euros, which
must be added to the 2008 drop of
over 47 million euros.
The adaptation of the per-unit licence
fee, in line with the long-term trend, was
unable to do anything but marginally
contrast a phenomenon of such a vast
extent.
A positive contribution was assured by
the dynamics of the subscribers
portfolio: paying users, despite numbers
growing less than last year, have almost
reached the 16-million family mark.
In terms of operating costs, the tendency
towards a reduction in expenditure was confirmed � within a constant setting.
This was thanks to a cost correction
manoeuvre launched by the Company
when the first signs of the advertising
crisis began to show in the last quarter
of 2008. This manoeuvre made it
possible to significantly restrict the extent
of the loss.
Actions to increase efficiency and
rationalisation applied to all corporate
areas were strengthened in the second
half of the year and this had an
immediate positive effect, creating the
conditions to permanently consolidate
the relative benefits.
The Income Statement also benefited
from the stability of labour costs, thanks
to the full application of the effects of
the early retirement incentives
implemented during 2008 and
confirmed in 2009.
In greater detail, as regards revenues,
the cost of the licence fee for 2009
went up by 1.4% (from 106.00 to
107.5 euros). This is a percentage
which is substantially in line with the
planned rate of inflation.
The policy for the annual adaptation of
the per-unit licence fee has been
confirmed on the same basis again for
2010, with a rise of 1.5 euros (to
109.00 euros).
The licence fee continues to be the
lowest in Europe for public broadcasting
companies and also holds the negative
record for particularly high tax evasion,
with reference to both the special fee
and the ordinary licence fee, the latter
being estimated at nigh on 30%,
compared with the European average of
under 10%.
A gradual alignment with the European
standard, with a consequent recovery of
significant resources, would require arevision of the payment collection
methods, joined by a strengthening of
the regulatory instruments designed to
combat evasion, which are currently
blatantly inadequate.
More effective actions to considerably
expand the subscriber portfolio would
help Rai in the pursuit of its mission as a
Public Service in a rapidly changing
context which requires consist
investments in technology and
particularly in the products offered.
These actions would also have positive
effects on viewers, thanks to the
balanced distribution of the benefits
resulting from the reduction in tax
evasion, and also on the audiovisual
industry in general.
On the basis of the results of the
separate accounting for the 2008
financial year, certified by independent
auditors chosen by the Italian
Communications Authority, the
imbalance between public resources
and the costs sustained by the
concession holder for the fulfilment of
public-service responsibilities amounts
to almost 550 million euros.
This imbalance falls to 335 million
euros after the allocation of the specific
share of the advertising revenue from
the programming.
As regards the possible developments
of the macro economic framework,
since March last year, tension on the
financial markets has eased somewhat
and the quality ratios of the real
economy have begun to show signs of
a slowing down of the recession. In
the months that followed the rise in
unemployment figures continued, as
did the drop in income, accompanied
by continuing volatility of the financial
markets, with a negative effect on
consumption and investments. The
much-awaited inversion in this cycle finally began at the beginning of
2010.
In this context, the advertising market,
following the general decline of about
3% in 2008, fell by over 13% (Nielsen
figures).
Television advertising posted a loss of
about 10% in 2009 (Nielsen figure).
The only media that have succeeded in
maintaining a positive sign are the
Internet and, to a lesser extent, satellite
TV.
Moving on to the more specific setting
of the reference market, competition
entered a new phase. Traditional
competition between players operating
on the same broadcasting platform was
joined by competition between those
operating on different platforms, at an
unprecedented level of intensity.
Furthermore, the transformation and
hybridisation of the consolidated
business model of the main and
traditional market leaders increasingly
proposes free television as an
alternative to the pay model.
The aspect that best highlights the
structural change of the market is the
progressive decline in 2009 of the
advertising contacts issued by the
general interest channels.
Consequently, while the prophecies
which proclaimed the imminent demise
of traditional television will not come
true for a long time to come, the radical
change in the market structure, which
those with greater awareness perceive
even in single operations, has entered
forcefully into our daily viewing.
Until just a few years ago, the
multiplication of the multimedia
offering, which was almost customised
and made for non-linear fruition,
seemed to be an exclusive prerogativeof generations which have grown up in
already digitalised contexts, this
transformation is now involving
traditional television, which is
undergoing an important rethinking and
repositioning phase.
The stakes are high for the entire
system. For the Public Service in
particular, it has become essential to
make a decisive contribution to build up
the elective platform of users in general,
the doorway to access to the digital
offering for everyone.
This process of breaking down and
rebuilding the market and the offering
was accelerated by the decision to make
the switchover to digital terrestrial
television not a purely technological issue
left to the free enterprise of the single
operators, but a project of the nation.
A project characterized by strictly pre-set
timing with brief intervals between
interventions, which initially seemed risky
but is now proving to be within the
system's reach, with a regulatory
arrangement which intends to facilitate
the admission of new players without
unfairly penalising those already in
operation.
Rai has chosen digital terrestrial TV as
its prioritised platform, around which, in
observance of the orders regarding
technological neutrality and
competitiveness, it is building the
mission of the Public Service of the
future, already with some significant and
important editorial success.
The strategy of the new multi-channel
digital environment is already
operational and consists in flanking the
regenerated and refreshed traditional
offering with new specialised channels
that require shared distinctive signs and
languages that arouse in users a sense
of belonging to a tradition and to a
single editorial project.
At the end of 2009, the all digital
population was about 17 million
people, accounting for almost 30% of
the whole population. The switchover to
digital will involve five more areas of the
country in 2010, taking the percentage
to 70%. Consequently 2010 will be a
year characterized by massive
development of the platform.
Competition between the terrestrial
platform and the other platforms will
increase in intensity in 2010, inasmuch
as the delicate switchover phases will
represent the best way of intercepting
"terrestrial" users who might be feeling
a little disoriented, using aggressive
promotional campaigns.
Rai's decision not to renew the
agreement for the channels produced
for the Sky pay bouquet is consistent
with this context.
While, on one hand, Sky expected to
link the supply of the Rai channels
(RaiSat) to the free availability of the
whole free offering, also in the future,
of the Public Service on the pay
satellite platform, on the other, the first
viewing figures for the all digital areas
show Rai as the clear market leader.
This is partly thanks to the contribution
of the former RaiSat channels, which
previously represented the most
important Italian editor within the Sky
offering.
Both with a view to complementary
broadcasting in relation to
dissemination through the digital
networks for territorially marginal areas
or areas penalised by possible
difficulties in reception, and to fulfilling
the obligations imposed by the
institutions with regard to technological
and competitive neutrality, the Public
Service concession holder is present with
its entire offering also on the free
satellite platform, launched in 2009 by Tivù, a company partly owned by Rai
together with other national
broadcasters.
Rai has made significant innovations
to its free editorial offering of the DTT
platform, flanking the simulcast of the
three general-interest channels with
three specially created channels: Rai
Gulp, Rai Sport Più and, more
recently, in July 2008, and with
immense success, Rai4. Lastly, there
are the simulcasts of two satellite
channels, RaiNews 24 and, more
recently Rai Storia, also with national
coverage.
These are new channels aimed at
audiences and issues considered priority
by Rai. They will allow the strengthening
of the tendencies towards change which
are also affecting the general-interest
channels, which will continue to be
central in the digital world.
As already mentioned, these are joined,
in the all digital areas only, by four
more specialised channels (former
RaiSat): Cinema, Premium, YoYo, Extra,
and Rai Scuola, as well as an
experimental broadcast in HD.
The development of DTT requires a
consistent financial commitment,
starting with that for the construction of
the network infrastructure: a technical
investment which will absorb resources
of about 300 million euros by 2012,
much of this being concentrated in
2010, as well as significant
commitments and investments in the
area of contents to expand the
offering.
Rai will have to face this considerable
investment programme during a
particularly difficult market phase, with
a very negative impact for the
concession holder due to the difficulties
regarding the drop in advertising
revenues and to the insufficiency of
resources from the licence fee, which
provide the main form of funding for
the Public Service.
In this context, partly due to the
presence of big sporting events (the
World Cup), the outlook for 2010
remains negative, despite the
important ongoing contribution which
will ensure the pursuit of cost
reduction policies which will be further
strengthened, the medium-term aim of
which is to structurally reduce the
company deficit.
Rai is dedicating as much energy as
possible to this commitment, with all
the pride and responsibility of a history
which assigns it the role of the
country's leading cultural industry.
However, the undeniable
transformation of the communication
system and the speed at which
innovation is taking place impose a
flexibility and capacity for reaction
which are just as swift.
They also require financial resources
which can support growth strategies if a
possible slow decline or marginalisation
is to be avoided.
The Public Service concession holder
belongs to the country and is obliged to
offer the country the best possible
service, interpreting its needs and
hopes, translating them into an
adequate proposal. It will continue to
do so with its increasingly rich and
articulated free editorial offering,
present on the different leading
technological platforms.
The substantial belonging to the
Institutions of our country, as an entity
which performs a fundamental public
mission on behalf of the country,
subjects Rai to a series of addresses,
directives and restrictions, many of
which are extremely severe and which
establish the details of the area of
activity and, at least partially, the
methods used to accomplish it.
Every three years, Rai and the Ministry of
Economic Development draw up the
Service Agreement, an "operating
charter" which, on the basis of EU and
national legislation, established the
details of the single tasks that the
concession holder has to perform. An
Agreement which must comply with the
preliminary guidelines established by the
Italian Communications Authority in
accordance with the Ministry of
Economic Development.
The Consolidated Law on Finance
makes express provision for a
mechanism to guarantee the economic
equilibrium of the concession holder,
acknowledging that public resources
must equate to the costs sustained for
the performance of the activities
delegated to it.
This legal order has not been
respected up to now, causing
enormous damage to Rai, year after
year. If the principle of proportionality
between costs and resources had
been respected, Rai could have had
income for over 1 billion euros in
2005-2008.
Even without the results of separate
accounting, the instrument that certifies
the deficit of public resources, Rai
endures a deduction of resources which
is unequalled in other European
countries, due to the aforementioned
anomalous extent of licence fee
evasion.
The reduced annual income for Rai can
be quantified at about 500/600 million
euros.
The acknowledgement of public
resources to Rai in an appropriate
amount would have generated positive
effects: on the comprehensive
prospective balance of market
resources, on the audiovisual industry,
on the concession holder's capacity to
improve its focus on the pursuit of the
Public Service mission with a further
advantage for the overall quality of
programming.
Rai therefore believes that the recovery
of the accounts and of a sustainable
economic balance, as well as the
restoration of a solid financial situation,
require a decisive intervention on public
resources.
Indeed, the aid guaranteed so often in the
past by advertising in relation to the
modest income from licence fees is
unlikely to be able to make up for
insufficient public resources in the future.
In addition to this, during recessions or
weak market situations, the more restrictive
conditions to which Rai is subject have
always amplified market difficulties.
The maintenance of the structure of
the layouts and area of activity, in
relation to which the independence of
Rai is bound to the decisions made by
the Institutions, poses an obvious limit
to the extent of the benefits that can
be obtained with recovery policies
concentrated solely on rationalising
costs, which do however continue.
The prospective economic situation,
even in consideration of the extent of
expected losses in relation to the
turnover and actions implanted by Rai,
could still be managed with structural
measures, but not necessarily of
exceptional nature.
Vice versa, the latter, in observance of
the indications which should
hypothetically come from the Institutions,
would become unavoidable unless there
is an intention to tackle the economicfinancial
deterioration with the
rebalancing (even partially) of public
resources.
Despite the difficulties, Rai has proven,
also with the switchover to DTT, that it is
in a position to win important industrial
battles. In the new digital context,
audiences have renewed their trust in
Rai, a brand name which is synonymous
with informative authority, narrative
power, quality entertainment and
attention to disability.
The transformation of the market, with
the strong impulse towards pay TV also
on DTT, will convey even more visibility
to Rai and to its free offering of
extensive and widespread quality, aimed
at users in general, accentuating its role
as and the contents expected of a Public
Service.
Characteristics which jointly converge in
one direction: to make the licence fee,
the public resource, the main and
adequate source of funding of Rai.
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