Customer revolt forces cuts at NHK

It's the second year co. has been forced to make cuts

Pubcaster NHK is cutting ¥50 billion ($435 million) from its budget and axing 1,200 jobs, 10% of its staffers, to stanch red ink as more and more viewers refused to pay their subscriptions in protest of a series of scandals.

By the end of November 1.28 million households had not paid, 728,000 more than projected. As a result 2005 revenues fell ¥50 billion short of last year’s $5.8 billion target.

It’s the second year that NHK has been forced to make cuts.

According to a three-year business plan for fiscal 2006 through 2008 announced Tuesday, the pubcaster forecasts a rebound in 2007.

One reason for the optimism: The rate of non-payments slowed in late 2005, leading NHK officials to believe that the worst may be over.

Potential deadbeats may have been discouraged by NHK’s widely reported plans to take non-payers to court.

The scandals that started the slide, beginning with reports in summer 2004 that a senior NHK producer had embezzled program funds, are now old news and nothing has occurred recently to stir fresh outrage.

To encourage viewers to pay for programming, NHK is planning to introduce an on-demand service in 2007. Viewers will be able to use a TiVo-like device to store programs and watch them at their convenience.

In addition to its own reforms, NHK is getting a push from a panel advising Communication Minister Heizo Takenaka, which Monday recommended that NHK cut its operations and revamp its business model.

The pubcaster operates two terrestrial channels, three satellite channels and three radio services — and the panel believes it should drop one or more so that it can cut subscription fees and lure back subscribers.

On the other hand, the panel is in favor of loosening restrictions on NHK’s ability to generate revenue, including Internet-related and programming sales businesses.

The panel will issue its recommendations in six months, which will be incorporated into regulatory legislation, to go into effect in June 2007.

A pubcaster operating under oversight from the government, NHK is in principle supposed to raise revenue through viewer subscription fees, which every TV household in Japan is obliged to pay. However, there are no legal penalties for non-payment, a loophole that has been exploited by a growing legion of fed-up viewers.

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