Restrictions should also have led to decreasing the production of own programmes by approximately 1,000 hours. In terms of costs, it was to bring Sk 223.8m of savings by the end of 2003 (30% of total annual own production direct and indirect costs). In 2003 the STV broadcast 10,372 hours. Own production made up 9,000 programmes totalling 2,533 hours, of which the company outsourced 3%. The Recovery Programme led to production cuts by 2,453 programmes amounting to 986 hours. The CEO hence planned to save about Sk 181m. Despite all the restrictions, the STV managed to retain its character of a public institution. It increased the number of reruns and the use of archive materials and primarily focused on news casting, reporting, entertainment and sports.
By the end of 2003, the new CEO had also planned to move out of the 28-story building in Mlynská dolina, which was expected to be left nearly empty, and to begin using the premises next to the high-rise. The only offices to be left in the original building were dubbing and broadcasting studios. At present the first stage of the move has been completed, which has, as stated by the STV spokesman, made the use of the high-rise more efficient. The STV currently uses only the lower 13 floors, hence rendering the rest of the building empty, being heated to only minimum necessary levels and being cut from the supply of all other energies. The final solution regarding the premises and redundant fixed assets should be taken by the STV Council this year.
After learning new facts in the first days of the new CEO in the office, the STV Council unanimously supported Mr Rybníček’s radical project. The Recovery Programme was also seconded by Mr Ivan Mikloš, Minister of Finance. In May 2003 the STV was granted the already mentioned one-off subsidy of Sk 250m for severance payments to 1,200 employees and for debts. In mid December 2003 the Cabinet consented to further means (from the state financial assets) of Sk 400m for settling the most pressing debts from previous periods (the second stage of writing off of the debt). The remaining liabilities were supposed to have been paid by the STV from its own resources and from savings achieved when paying off old debts (e.g. by negotiating penalty exemptions or the decrease of principal) or from operational profit. In 2003 the STV asked for a subsidy from the state budget of Sk 987m for a final one-off write off of the STV's debt (including severance payments) provided that the STV would not require any further operational subsidies in future, nor would it generate any new debts.
Critics, however, expressed concerns about a potential influence of one of the private television companies, where some of the members of the Crisis Management had worked before, as well as about a conflict of interest.
The CEO asserted that as from 2004 the STV was to be able to produce and broadcast new programmes and to finance its activities solely from its own resources (including advertising) and from subscribers' fees. This aim has been achieved. The fees have been raised by the amendment to the law drawn up by the Ministry of Culture of the Slovak Republic (see HESO 2/2003), increasing it by 33%, from Sk 75 to Sk 100 (in the case of radio fee, from Sk 30 to Sk 40). The amendment also restricted the number of people entitled to the exemption. Pensioners comprised the largest group of people who has not had to pay the fee, who, as from 1 July 2003, were to pay the fee at a half rate. The new CEO has also decided to cut off the STV financing from the state budget, however, admitting to the possibility that some selected programmes may be subsidised, e.g. broadcasting from the Parliament sessions. Mr Rybníček’s intention in all his measures was to make the STV stop producing losses as from 2004.
In the beginning of 2003, Slovak Television found itself in a critical financial position. In 2002 it had produced a loss of Sk 380m, the sum of its losses for previous periods as of 31 December 2002 totalled Sk 689m (trade liabilities amounted to Sk 584m). Together with new liabilities, the debt was nearing Sk 1bn. Moreover, the STV was sued for approximately Sk 625m, including penalties. The annual company’s budget was about Sk 1.5bn, Sk 635m of which was consumed by wages and salaries, including social security payments. At the beginning of 2003 the company was short of Sk 20m per month of working capital. If the new management had wanted to pay off the company’s old debts by the end of 2003, it would have had to expend Sk 76m a month throughout the year.
Evaluation of the Experts’ Committee:
The experts assessed the new CEO’s Recovery Programme very positively. Likewise, they appreciated his pioneering attempt to carry out changes in the STV, which were regarded as revolutionary. Prior to the changes, the STV was a company on the verge of loosing its ability to compete, suffered from great redundancies in terms of employees, and had low quality TV programmes and blamefully inefficient use of its resources. The action taken by the new STV boss was inevitable and the harshness of his measures directly related to the length of the period when the adoption of the recovery programme had been put off. The STV had long been neglected, its indebtedness disregarded. Hence, the debt had been growing as the Government constantly paid for it (see, e.g., HESO 2/2001, 2/2002). The management of a public institution must reflect financial criteria and evaluate its achievements. A success of the STV restructuring to an efficiently operating institution would give a lesson to the whole state administration and serve as an
example of transformation for all inefficient state companies (e.g., the Slovak Rail). A high accumulation of changes in the STV requires a high quality and resilient crisis management. The support provided by politicians and the STV Council was welcomed. It showed that many were aware of the catastrophic situation in the STV, however, few knew how to deal with it, or had enough strength and will to do so. The experts hope that the previous STV managements will be held accountable for the situation they caused in the company. It will also be important to begin lawsuits against those who are responsible for inconvenient contracts. Terminating the contracts is not enough. A positive aspect was the cancellation of the extraordinarily high severance payments to the STV management. However, it is deemed necessary to also curb unsubstantiated advantages to all STV employees approved by the previous company management and included in the Collective Agreement, as it is immoral to make severance payments from taxpayers’ money, prolong vacation or shorten working time in excess to what is stipulated by law. In the experts’
opinion, the new CEO has not yet presented his vision of the STV as a public institution in new economic circumstances. Some experts are therefore sceptical in terms of whether such a vision exists and whether there is a concept defining to what degree “the new STV” is to be a public institution and to what degree it is to undertake commercial activities. A new concept of the STV’s public character, and a new method of financing arising therefrom, will have to be set.
Several experts expressed a negative opinion on two issues: rise in subscribers' fees (regarded as an additional tax burden laid on households), which was a part of the recovery package, and provision of funds for severance payments to employees from the state budget. The STV restructuring should, in their opinion, be funded from the company’s internal resources. The only systemic solution would be the transformation of the STV from a public institution to a business enterprise, privatising it and removing compulsory subscribers' fees.
After long years of generating losses, in 2003 for the first time the STV produced a profit of Sk 84.3m (in 2002 its loss reached Sk 410m). The revenues soared by 30%, reaching Sk 472m on the previous year. This substantial increase was mainly achieved through increasing subscribers' fees, as from 1 August 2003, by about 33% and through curbing the number of people exempt from the fees (the number of payers has risen by 210,000 people). The main sources of revenues were: subscribers' fees of Sk 1.179bn, operational subsidies of Sk 367.7m and the sale of advertising time of Sk 199.2m. Compared to 2002, the total expenses dropped by Sk 22.5m, with major savings in wages and salaries, in 2003 down by Sk 122m. Thanks to restrictions regarding overhead and production of programmes during the crisis regime, savings were also achieved in purchases consumed and services.
As the first Slovakia’s electronic media company, CRA Rating Agency included the STV in its ratings. The agency appreciated the changes adopted by the new management and gave the company a positive rating in terms of its prospects, which is very high in terms of local circumstances and is at the level of Slovakia internationally.