RTÉ has projected an improved surplus of €5.6 million by 2006 based on optimistic predictions for TV and radio advertising, an internal report indicates. Emmet Oliver reports.

The station, which recently reported a surplus of €2.2 million for 2003, expects TV and radio advertising to grow strongly, despite fierce competition from rivals such as TV3, Sky and the local radio sector.

The station's radio division has been under increasing pressure from Today FM and various local stations, but the report suggests that RTÉ television in particular will remain a healthy business unit.

Home-grown programmes on RTÉ, such as Fair City, the Late, Late Show and You're A Star, have managed to dominate the television viewing figures over the past year.

The report, which contains some commercially sensitive material, is upbeat about RTÉ's future financial prospects. It was prepared in an attempt to gauge financial trends from 2003 to 2006.

It found that, while costs were due to rise from €318 million in 2004 to more than €350 million in 2006, total revenue would easily exceed these figures.

According to figures included in the report for RTÉ's television division, advertising for RTÉ One should reach €66.9 million in 2004, €68.9 million in 2005 and €71 million in 2006. Growth predictions for Network 2 were a little more conservative, with advertising income of €30.9 million expected in 2004, €31.8 million in 2005 and €32.7 million in 2006.

Despite eroding market share, the report was not downcast about RTÉ Radio's ability to generate revenue.

It forecast increases at both RTÉ Radio One and 2 FM, although the increases were more modest than those of the television division.

The report pointed out that sponsorship of programmes should turn out to be a strong revenue generator for the stations. It estimated that RTÉ One and Network 2 would be capable of bringing in €6.8 million of sponsorship revenue by 2006.

According to advertising agencies, RTÉ is currently heavily promoting various sponsorship opportunities, as traditional display advertising shrinks in size around the world.

Dublin agency AFA O'Meara estimates that RTÉ currently has 23 programmes available for sponsorship.

The latest forecasts may prove controversial in some quarters as RTÉ's rivals remain unhappy with the Government's decision in December 2002 to increase the television licence fee to €150.

Last week, the Minister for Communications, Mr Ahern, invited applications from consulting firms to examine this decision and its potential impact on the advertising market.

The wide-ranging review will consider the following issues:

How public service broadcasting is funded in the Republic and compare this with the funding structure in other jurisdictions.

How the private broadcasting sector in the Republic is funded.

Describe the current advertising market, with particular reference to the broadcasting sector.

The evolution of competition, including international competition within the advertising market in the Republic.

Identify and explore areas where RTÉ's receipt of licence fee income might impact upon other broadcasters.

Evaluate the impact, if any, that RTÉ's receipt of licence fee income has on the advertising market in the State.

Explore whether receipt of licence fee income allows RTÉ to operate from a position of dominance or significant advantage in the advertising market.