To inform, educate and entertain?

Few have tried to reformulate broadcasting policy from a free market position. I have already mentioned Mark Oliver’s paper, Changing the Channel, for the Policy Exchange. Another recent piece of work is To inform, educate and entertain (2009) by Martin LeJeune, for the Centre for Policy Studies. Anyone who is serious about broadcasting should read them. Both can be found from links besides this posting.


Martin makes his position clear from the outset. “The crisis in broadcasting is in reality confined to a tiny number of decaying organistations which were created in a different age”. He regards the “crisis” as a crisis of institutions rather than of broadcasting itself. He thinks broadcasting policy is designed to favour “political and cultural elites who wish to enjoy programming suited to their needs at the lowest possible direct cost.”

He sees Ofcom as party to all this, something that comes down to the inclusion of one word in its statutory duties: the word is “citizen”. In his view the incorporation of the citizen clause at a relatively late stage in the legislation that created it gave it wide scope to maintain “public sector intervention in broadcasting, far out of proportion to the real need to support minority content”. “The idea that, left to themselves, people would exercise choice and create a demand for a diverse range of content – arts, entertainment, soaps, documentaries and so on….is not an idea that has gained any traction”.

This takes him onto the core of his paper and his discussion of Public Service Broadcasting. Consistent with the above, he thinks the BBC should be “kept tightly focussed on delivering what the market cannot do, or does only to a limited extent”. He sees no need for “pluralism” in the production and distribution of such content.

As for popular content, he would “send large parts of the Corporation out into the world to make its own way. The power of a subscription-based BBC1, say, would be unwelcome to Sky but good for consumers”, and would result in an “immediate and rapid reduction in the licence fee”

The trouble then is an organisation with a “powerful culture”, a “strong sense of its mission and ethos”, and an “unflinching belief that it unselfishly serves the public”. This is an organisation that he been able to capture regulators and sponsoring departments, over-defining public service content and maintaining, in effect, a £3.5bn annual subsidy.

The question is: Does it matter? Organisations with strong cultures get on with things and often move with great energy and decision. That is a strength of the BBC. But, yes, I agree that in its present form it stands in the way of change and sits at the heart lf a system that is now too insular and inward-looking, an obstacle to what, in my view, UK Plc now needs.

But I have two basic reservations about Martin’ proposals. I do not think a reduced license fee is feasible for two reasons: first, the cost of collection will become disproportionate to the revenue raised and, second, resistance to paying the fee would still be likely to increase. Furthermore, as I suggest in a previous post, I do not yet see a mechanism (or justification) for compliance with a mandatory payment if a lot of TV viewing goes over to broadband video on demand.

I share Martin’s view that the citizen/consumer distinction is false. People think and act as both. Most people support legal backing for reliable News and Information programmes. A subscription model is very different from an advertising model. With subscription you belong to something. That’s important. I therefore support a subscription model for the BBC and do not see that it needs to broken up. Its range and the breadth of its current output is part of its identity, what makes the BBC what it is. That’s why people will want to be part of it. Let us see how much of its brief to inform, educate and entertain really has to be ditched.

Nevertheless Government would have powers and some money to fill necessary gaps by setting up a unit in a relevant department to determine what is needed and where.

Market Failure: A Neglected Concept.

Mark Thompson, Director General of the BBC, said in 2007: “The only economic justification for the BBC – indeed for any public intervention in broadcasting – is market failure”. Many of the benefits he itemised in that speech are things that reasonable people should want to be widely accessible.


But the trouble with the argument is that it makes an assumption of market failure and does not give the concept – potentially a useful one – a chance to do its job. It does not acknowledge that state intervention when it is not justified has a negative impact. It inhibits competition, and reduces the incentive for private players to take risks.

Since markets can be very efficient, the concept of Market Failure was invented to identify where public intervention was really justified – and where it was not.

The theory identifies two main causes of failure. Market Imperfections due to lack of competition, and Externalities. Externalities occur where something causes ill effects without having to bear the cost. You could argue, for instance, that if accurate News was expensive and hard to get, fewer people would be well-informed at election times and make ill-informed choices with negative effects for other electors.

Those who think the concept is relevant to broadcasting – and I accept that some people don’t – would argue that the scale of the intervention should equal the scale of the failure? From Ofcom’s figures we can put the scale of intervention at somewhere short of £4bn – made up of the BBC Licence fee plus lesser benefits to other broadcasters in the form of reduced-price spectrum, favoured positions on guides, etc.

What are the consequences if the “solution”, £4bn of public money, exceeds the “problem”? For a start, if there is Market Failure today, and there probably is, we have no idea what and how much – for most of the £4bn of public subsidy goes on genres that the market could perfectly well provide. Most of it is spent on Entertainment.

In fact, no Government department or regulator has been willing to address either the fact or the consequences of excessive intervention in broadcasting. However, I am not alone in thinking the basis of broadcasting regulation and policy that has prevailed for the last few decades should be overhauled. Inevitably, the BBC, the UK’s prime media asset, must be at the heart of that review.

So how would a Government address this if it wished to remedy the problem of excessive intervention? It should start by acknowledging that it doesn’t know the scale of Market Failure and spell out some must-have items, available to all in the public interest, leaving the entertainment industry to get on with the entertaining.

Some items for the wish-list are obvious: accurate news, childrens’ content from the UK, etc. My guess is £300 to £400m would cover the basics. The body set up to administer this would develop the techniques to monitor what other public wishes or were not being met and decide where intervention was justified.

Such a reversal of policy would have massive consequences and need careful thought. In the remaining posts in this series I will argue that change is inevitable anyway – some of the reasons for which I have given in earlier postings – and that getting future solutions right will require smart thinking and energetic debate.

(On reflection, I have taken down an earlier posting on Market Failure. It tried to cover too much ground and the attempt to inject some humour into a complex issue didn’t work.)

Are UK Broadcasters Being Googled?

Visiting Virgin Media in London recently, I found the guys at reception watching the Indian Premier League on You Tube. You Tube has its own “IPL channel” – with subscription (no fee), a count-down clock to the next game, tabs for News, Team, Photos etc., banner advertising (Brylcreem, no less), and a library of games and interviews. It’s very, as they say, “immersive”. IPL is also available on ITV 4 and on ITV.com at www.itv.com/sport/indianpremierleague/: recent ITV4 match audiences are around 200,000. That got me thinking: how many people are now watching TV on You Tube? It’s a more material issue now since the deals with C4 and Five at the close of 2009 that licensed You Tube to offer full-length programmes.
So we now have two models for viewing TV content on the internet – the iPlayer (and other broadcaster sites) and You Tube (and other non-broadcaster sites).

Figures are hard to get, but what is clear is You Tube’s dominance in the video space, though the story on Hulu (see the first table) is interesting and gives us some further perspective. The data on the left comes from comScore who actually use “Google Sites” as the Property category, but since this is 99% You Tube I have changed it. 
Unfortunately comScore has not released comparable figures for UK since last April (below). But, at that time, You Tube was even more dominant than in the US. Though the broadcaster sites were advancing quickly between ’08 and ’09, the shares barely change if you project similar rates of growth to 2010.

OK, so You Tube, you may say, is mostly user-generated clips. The US data, usefully, gives the average numbers of videos viewed for each site. Hulu with (mainly) traditional broadcaster content is probably more like the I-Player in the UK. The average Hulu viewer watches 23 videos per month against You Tube’s 94, spends 2.3 hours a month watching them, and its audience is growing fast.

 So is You Tube heading to become a global platform for TV like Amazon for books? That could start the media war of the decade! Right now – and here in the UK -- C4 and Five are very visible on You Tube and they seem to think the ad model is working for them. The more immediate question for me concerns the BBC Licence fee. The BBC Licence fee is payable, according to my sources, when someone is receiving a television programme at the same time (or virtually the same time) as it is received by members of the public. As I understand it, you do not need a licence to watch the iPlayer if the content is not live. The majority of You Tube content and a lot of iPlayer content is not watched live. Sure, the vast majority of viewing to TV still takes place both on a conventional TV and in the home, but things are changing. A lot depends on how fast internet TV gets to the domestic set. But some people may soon start to feel that they should not be paying £140 a year if nothing they watch is live. As watching Embarrassing Bodies at your convenience via the internet becomes more common, as it surely will, what happens? As one of my colleagues said: “Will everyone with fast broadband end up having to pay a licence fee?” It would be a good to hear the BBC's views on this, for that would need a change in the legislation.

When It's Over....

Like “cuts”, broadcasting policy will not be very openly explored during the coming UK election campaign. But like “cuts” – though less obvious now – the realities of life In The Deficit will quickly come home.  What’s more, technology change will be moving the tectonics of the industry. We think that will mean a new drive for media exports, a radical rethink of the meaning of Public Service, and big changes in media regulation –  with lots of other major challenges for existing players. We hope this blog will, in its own way, help our industry prepare for the storm.

Differences on the Right

Changing the Channel, commissioned by the Policy Exchange and written by Mark Oliver, presents the case for “radical” reform of Public Service Broadcasting in the UK. I heard Mark describe this as a “centre right” policy initiative. You can see or download the report via the link beside this page. (Among other objectives, Policy Exchange promotes “national self-confidence and an enterprise culture”.)

I know Mark and respect him, but in my view the project is flawed. Why? For a start, because it fails to address (1) the potential weakness of the BBC licence fee as a long-term funding source and (2) the scope for the expansion of competing niche Pay-TV services. The objective of reform, according to Changing the Channel, must be to put more emphasis on “quality”, less on “reach” (defined as the number of people who watch TV – or listen to the radio -- for more than a given time over a given period, like a week or month.)

The report doesn’t really acknowledge the reason the BBC must strive to reach every part of the population at least some of the time. Mark says this means putting reach before “quality/distinctiveness”. A key policy aim, for him, is to stem this trend, a trend that means the BBC pays stars like Jonathan Ross loads of money, competes for expensive sports that would play on “commercial” channels, and puts up £400k an episode for Heroes to target young people (who, as Oliver says, would actually be more comfortable on C4). All this content would indeed play well on commercial channels and the BBC probably is inflating prices. More important, Mark feels the “public value” of this content is limited. (I will come back to the issue of “public value” in a second post on this document).

The chart on the left (using BARB audience data)shows why the BBC channel portfolio is already under severe pressure, drifting down by just under 1% a year. Would that decline not accelerate if the “reach” objective was abandoned? Mark suggests additionally that some of the licence fee be “bottom sliced” – that is allocated to “Public Service” content elsewhere. Won’t that confuse people even more, make them even more resistant to a fee that already only has minority support from public opinion?


To handle this he proposes a Public Service Content Trust (PSC) which will monitor the BBC spend on Public Service Content. It will introduce tougher monitoring of “public value”, building in a degree of “contestability”. But how is it going to resist the drive to defend reach as BBC share declines and pressure on the licence fee grows? Why will it not share the same pressure? We’re missing an answer to that question. (OK, PSC has some new money from other sources like retransmission fees, but that hardly addresses the issue).

In spite of this unanswered question, there are a lot of things here to be supported and discussed further. There is a lack of “contestability” in the way the BBC spends it money and in the so-called “public value” tests that are now applied. Single-body regulators do get captured (or “end up at loggerheads”) -- either way they tend to be ineffectual. The Market Impact tests are a mess. And Mark is surely right to argue that we must have an external body (a PSC?) not just to monitor how public money is spent on broadcasting (and avoid capture!) but also to secure access for public value content. (What that could have done for American public television!).