Internet TV? Just buy a cable connector

From TV Debunked, Fortune Magazine, January 2011

The lead picture in this post – and nearly all the numbers -- come from a piece in January’s Fortune magazine. (Click on the caption for the link).

The writer, Jessi Hempel, has just received the brick-sized box enabling her to hook-up Google TV, and having played around with some of the cooler functions (like tweeting from her TV (@jessiwrites) she set out to watch some real stuff, namely of a recent episode of the sitcom Modern Family – but it’s not available. Or rather, she can get it from Amazon for $1.99 (if she is already a cable subscriber) or get old episodes from Netflix. Modern Family plays on ABC, and ABC like all the networks and major broadcasters, are teasing with the new media. At bottom, ABC still wants to keep you watching new episodes the way you always have, on their main channel. (You can see Modern Family on Sky1 in the UK).

In fact, the best new-tech option – if you live in the US – apart from watching it live on an HD TV, would be to catch up the latest episode on ABC.com. (From the UK, I could watch highlights of the next episode on ABC.com  but the latest full episode was blocked.)

All the devices in that picture, and the failures in their wake like Joost, add lots of convenience extras like search, and even more potential benefits like targeted advertising. But as Jessi puts it, “Netflix, Google and Apple can’t just swoop in and disrupt the $85 billion home entertainment industry. Their challenge lies in navigating the entrenched interests that make up the television business.”

So far they have not succeeded in doing that.

How Hollywood Did It (Part 2)

In my post on November 23rd, I wrote about the way Hollywood studios had coped with both the recession and a collapse in DVD sales in 2009. They did it by boosting international sales.

For the Westminster Media Forum on Monday Nov 23, I tried to think about what we could learn from this. It was especially useful to hear from David Moody, Head of Strategy at BBC Worldwide, before I spoke. BBC Worldwide is the nearest thing we have to a Hollywood studio. 

(Where the Hollywood studios are concerned, we are talking about the big-selling international genres of Drama and Comedy. We are very good, in the UK, at natural history and other high-end factual content. And of course we have been very successful at creating reality formats, but drama remains the most valuable item  in a distributor’s catalogue.)

What are the lessons?

Compared with the UK, the US has found more funding sources for valuable new content. In the UK most commissioning comes from the four traditional broadcasters, BBC, ITV, C4 and Five. In the US it is coming from the networks, ABC, CBS, NBC, Fox (Desperate Housewives, House), basic cable like AMC (Mad Men, Breaking Bad) and premium cable, like HBO or Starz (Spartacus, The Wire). We need more diversity in the commissioning base.

Second, in the US, subscription revenue is funding a lot of new content. In Europe, too, subscription is TV's fastest growing revenue stream. But in the UK  it is not, yet, driving very much content production -- though it is growing on Sky.

Again, more diversity needed. 

TV Viewing on the Internet: some real numbers at last

Source: BARB/comScore/Attentional

Anyone running a serious TV business will want to know precisely how much time people are spending watching traditional TV content on the Internet.

The figures in this chart are, we think, the first accurate figures for the viewing of TV on the Internet in the UK. I will explain why later.

They tell us that the average viewer spends just three minutes and twenty seconds a week watching BBC content on the Internet.

You may be surprised at this low number. The Internet is a world of large numbers. Streams, downloads, requests, hits measured in millions.


So what is going on?

We think the figures in the chart are reasonably accurate because they are based on a large panel of viewers and because they measure durations of viewing, not just hits on sites or pages. That means they can be aligned with traditional TV measurement systems like BARB in the UK.

Does this mean producers can now find out – objectively – how long people spend watching their shows on the Internet?

Not yet, but we are getting there.

Up till now there has been a surprising lack of hard data about Internet video viewing in the UK. Published figures almost invariably relate to the BBC iPlayer. For example, a BBC press release from February this year read: “This month BBC iPlayer has doubled its requests from 61.5 million in January 2009 to 120.3 million in January 2010.” Other than telling us that the iPlayer is doing much better in Jan-2010 than it did in Jan-2009, it does not allow us to gauge the iPlayer’s overall contribution to the viewing of BBC content. How, for example, did 120.3 million iPlayer requests compare with viewing to BBC! in January 2010?

Research by BARB in the UK, using a relatively small sample, estimated that the average person spends about 14 minutes per week watching TV programmes on the Internet via a PC or laptop. Since average adult viewing via standard TV sets in the UK is 27 hours per week, this suggests that only about 1% of TV content viewing takes place online. Naturally, the figures were higher for 15-34s, who spent, on average, 26 minutes watching TV programmes on the Internet. Nevertheless, since they too spend more than 20 hours a week watching TV on standard sets, this still only represents 2% of their TV viewing.

Now comScore, the Internet measurement company, has taken things a step forward. ComScore has large Internet panels in a number of key territories that can provide demographic level information. Where broadcasters have allowed their content to be tagged, comScore can even add title level viewing data.

We may be seeing the beginnings of a systematic attempt to capture viewing on the Internet. What everyone is waiting for, though, is a way of measuring the viewing of particular titles. But unfortunately here in the UK we are not able to touch the real motherlode of title level data yet, though we have been told by comScore that they’re working on it.

Here’s what we can tell you. Let’s start with all Internet video consumption (both streamed and downloaded) via PCs and Laptops, not just the viewing of TV content. That means everything from music videos to user generated content to pornography. Using the comScore figures we can work out that the average person in the UK spent 2 hours and 17 minutes a week watching video content on the Internet in September 2010. (That compares with 26 hours and 13 minutes of watching a TV set. So the total Internet video audience is still quite small relative to TV, only 8.7% the total TV audience.)

YouTube is by far the biggest player here, accounting for 34 minutes of weekly Internet viewing, 25% of the total. The BBC sites, which come next, account for 3 minutes and 20 seconds of weekly Internet viewing, which, as shown in our chart, is just 2.4% of the total. Clearly the bulk of the Internet video content watched in the UK is still a mix of music videos, user-generated content, pornography and, no doubt, pirated stuff. It’s certainly not traditional TV.

The BBC’s 3 minutes and 20 seconds of Internet viewing per week in fact makes only 1% of the 5 hours and 2 minutes a week the average person in the UK spends watching BBC1.

Connected TV’s may one day change everything. But right now what we are watching on the Internet is only – occasionally -- traditional TV.

A year or so ago one couldn’t attend a new media conference without speakers and delegates talking about how we were nearly at the tipping point when traditional television viewing would collapse. The evidence to date suggests something different: it seems that many of the traditional TV broadcasters are simply seeing the Internet as another useful way of distributing their content and tying people in to their brands, just another platform through which content can be distributed for the benefit and convenience of the viewers.

(Thanks to Farid el-Husseini who did the calculations and corrected my draft)

How Did Hollywood Do It?

I have written posts about the way the Hollywood studios countered the recessions before (October 24). 


The chart on your left tells the story in more specific terms. It is an interesting story, one that I hope has lessons for others.

In 2009 the sales of DVD’s by the Hollywood studios collapsed. The collapse was dramatic and quite sudden,  dropping by nearly two thirds between 2007 and 2009.

But, amazingly, their total revenues did not collapse. Revenues dropped, but not by nearly the same mount. Why?

Because the studios raised their international sales, from below $7bn to nearly $9bn, which helped to close the gap left by the collapse of the studio’s DVD revenues.

The front runners in this turnaround were Fox and Sony.

Next week the Westminster Media Forum, on Monday 29^th November in London, is holding a workshop event called  The UK creative industries in the international market. Guest Speaker is David Moody from BBC Worldwide’s Director of Strategy.

At that event, I hope to be able to say more about how and why they did this, and how they achieved this turnaround.

I will also be asking what lessons there might be for the UK and other European countries.

UK Media Policy.What Next?

Those in or near to Government who read this blog have hinted that the department responsible for broadcasting is now ready to move on to thinking about how to grow the UK content industries. After all, we are told– frequently – that one of our national assets is “creativity”. 

That is certainly the mantra of the person reported to be the Government’s economics guru, Richard Florida.

A Conservative is not going to be dirigiste, of course. Anyway, the Florida message is work with what you have got. He pushes three T’s: talent, technology and tolerance and his definition of creative extends to anyone with new ideas.

While the Prime Minister was in China recently, promoting British trade, commentators like the Economist noted we are not the country that mainly has the kinds of traditional exports that China wants to buy right now. Germany sells China $55.8bn worth of goods, against our $9.5bn, which is exceeded by both France and Italy.

While anyone would want to boost traditional trade (a $1.2bn deal for Rolls Royce engines emerged from the trip), we will have to recognise and boost our softer assets, like our universities and private schools, which attract large numbers from India and China.

There is, of course, another way to raise money to pay off its deficit: that is by privatising of Government-owned assets. And many Conservatives would regard privatisation as a way energising an industry and freeing it to raise capital for investment.

So one of my guesses is that the privatisation of BBC Worldwide will shortly go on to the sort of informal agenda that follows when a Government wants to prepare opinion -- rather than move quickly as it did with the recent BBC Licence fee negotiation.

A recent paper by Nigel Hawkins for the Adam Smith Institute suggests that a sale of BBC Worldwide could raise £2.0 bn.

And how would the BBC respond to this? My guess, again only a guess, is that the BBC management would not be strongly opposed. However it would probably push for something intermediate like a part-privatisation.

And what of Channel 4? That’s a trickier issue – and the estimated benefits, perhaps £500m, not so great. I guess that there would be opposition to BSkyB or ITV buying C4. If the Government pushed for privatisation, Chief Executive, David Abraham, free from conventional shareholder pressure, would probably go for the stock market and a sale to private shareholders.

TV on Laptops or PCs: The Knowledge Gap



Viewing via PC or Laptop: Source BARB

 In the UK our staff are always being asked if we can measure the viewing of content on PC’s and laptops.

The answer is No, or rather Not Yet, at least not in the way conventional TV is measured. (There are some other options which I will mention later).

Traditional audience measurement needs credible, common standards that provide the basis for advertising trading currencies.

Audience measurement companies are very aware of the challenges of digital viewing. In the UK BARB is field-testing a device that will capture TV viewing on laptops.

The chart in this blog tells you about the take-up of viewing to TV content on computers. The test panel of 75 people set up by BARB uses a new meter from TNS/Kantar called the "Virtual Meter". Albeit based on a very small panel, we can see that the use of laptops and PC’s for watching TV is growing fast.

BARB is also trialling a system for monitoring on-demand viewing. This requires much larger data sets than  for conventional “linear” TV. For the system needs to recognize a digital "signature" on every piece of content monitored.

You may ask: if they have the technology, why don’t they use it? But the technology is in fact the least of the problems.

Measurement systems like BARB are based on sampling, on panels of people who represent a population. But statistics based on sampling need adequate samples, otherwise the errors can be very large and the findings very unreliable. (My colleague, Farid el-Husseini, has given examples of small channels in the BARB system where the errors on some audiences can be plus or minus 200%).

Those who actually watch content via PC's or laptops do so, apparently, for nearly two hours a week on average. But across the population, that is, taking account of all the people who do not watch on the Internet, their viewing amounts to only a small proportion of total viewing, between 10 and 20 minutes per week -- whereas the average person watches conventional TV for three or four hours every day.

Panels are expensive to run and expensive to recruit – and if they are not large enough to give a reasonable degree of accuracy for every item viewed they are not much use. The BARB panel covers nearly 6000 UK homes. In a perfect world, BARB would wait till enough of those panel homes were watching TV on laptops or PC’s to give a reliable rating.

Unfortunately, it is still too early to say whether or when Internet viewing to TV content will be reliably covered by systems like BARB or Nielsen in the US.

As for the other options, lots of companies carry heaps of information about the people using their own services because they own the servers on which subscriber viewing is captured. But they have been quite reluctant to publish detailed data or organize it in a way that makes it comparable to BARB statistics.

BSkyB in Britain, for example, uses its server data on household behaviour to create statistics comparable with BARB data but they are not in the public domain. (This kind of data is called “server side”, whereas data gathered from people with devices in their homes is called “client side”.)

Google Analytics, which many companies use to monitor hits on their websites, is a “client side” system because it relies on peoples’ willingness to carry a code that monitors where the hits come from. I expect some the traditional audience measurement companies are concerned that someone like Google may jump in ahead of them.

All this is frustrating for rights owners and producers and advertisers. Though they may be getting accurate information about the hits or downloads of their own content – because that is how they earn their living – they are not learning nearly as much about these new viewers as they would like and they have no way of monitoring competitors.

Naturally, we are very aware of this knowledge gap since our clients keep reminding us it matters.

We may have more to say on this before too long. Please watch this slot.

Dynamic? Entrepreneurial? Or What?



US Studios: International Sales: 2007-2009

  Yesterday David Cameron, speaking to the CBI, said: “I want to create a new economic dynamism in our country. I want the years ahead to be the most entrepreneurial and dynamic in our history.”

He mentioned some items, an Innovation fund, infrastructure investment – but as some commentators said, it would be good to hear more about the plans for our export led recovery.

A year has passed and, once again, there are new figures for UK TV exports.

It may be unfair to compare us with the US studios but it is always worth noting what they are doing. What they have done in the last two years is striking indeed.

The six studios are the main sources of new US comedy and drama, which they both produce and distribute. In the face of declining licensing revenues in the US and a drop of nearly two thirds in DVD sales, they managed to grow International by nearly 37% in recession-hit 2009. (We are studying how they did this in a detailed report which will be out shortly).

The UK TV export figures from PACT show some encouraging signs: 9% growth in format licensing and a very big increase (from a smallish base) in revenues from overseas production. Two positive messages.

But the big item in international sales, half the total, £550m, remains TV series. 10% growth is not to be sniffed at. But what we have to recognise is that Drama is the big seller around the world, the biggest internationally-traded genre. UK drama sales are not broken out in the UK report but I estimate that our drama sales, perhaps £350 or £400m, are only about 7% of the total US sales in the same category. The six studio’s international TV sales reached nearly $9bn in 2009!

Every year we get a similar message in these reports. “International sales were hindered by the low number of episodes per run produced for the UK market and a shortage of returning series.”

Mark Thompson in his MacTaggart lecture in Edinburgh in August admitted that the UK was a “minnow” in international terms. Perhaps we would not need to worry if we did not have competitive advantages in this area, but PACT tells us that overseas buyers affirm that we actually do have significant advantages in perceived quality, innovation and language. The main problem is we just don’t give our potential customers what they want. They want long-running shows, good enough to play in prime time.

It seems that some new driver or incentive is needed. As of now, our TV “culture” is not behind a bigger global presence. One senior executive said in Edinburgh that short runs and variety were a positive benefit and that he saw no reason to change anything just to be able to “take it to MIP”, the twice yearly “market” where made programmes are sold.

But are we so unique? Everyone else likes long-running series. They work And can't we have both?

Now that it has dealt with the BBC License Fee, perhaps the new administration should do some serious thinking about how to motivate UK producers and broadcasters to think harder about international sales. What about Europe, well-used to English language (dubbed or subtitled) drama in prime time? Adam Crozier of ITV seems to have got the message (“We need to focus on more long-running renewable series”), and Paul Abbott spoke passionately about the benefits of creative collaboration on long-running series at Edinburgh.

Some thoughts: the Terms of Trade for independent producers profoundly influence behaviour. Should they be redesigned to stimulate export-led growth? I raised the Terms of Trade in a recent blog.

The BBC is looking more and more like a public body with its new burden of “duties”. Should BBC Worldwide, probably the largest distributor outside the US studios, be privatised? Could this raise capital for investment and liberate energies?

Any other ideas?

What Do Kids Need?

In my paper on the future funding of the BBC (see http://www.attentional.com/), I argued that the Government needs to be more specific about Public Service Content. Most of what the BBC broadcasts is not public service content, unless you define it very broadly. But a broad definition means that we end up subsidising a large amount of entertainment, which people would be happy to pay for.

A working definition of core public service content might be: “content that most reasonable people would like to see available to everyone”. Most surveys suggest that News falls into that category. That does not mean all news should be publicly funded:  merely that Government should ensure that accurate news is widely available.

I argued that Government should set up clearer criteria for public service content and develop expertise in “public value”. Broadcasting is about communications. There are many ways of communicating and broadcasting may not be the best carrier for all of messages. Expertise in choosing the best way to deliver a message would be one part of the package.

Beyond news, children’s programming is another item that must be on the agenda. In fact, it’s a good example around which to rehearse what tools Government might need.

For a start, Government needs to know as much as possible about the role of TV in teaching children about the world, helping their development, “socialising” them. I do not know how much work has been done on this and I am going to start looking into it. My guess is: not enough. What kids need really is the issue here.

The Government must also know popular opinion, whether people – and particularly parents – are happy with what they are getting, whether they see gaps in the supply, etc.

If there were gaps, and even if the perceived gaps did not concern pure public service content, Government might seek evidence of “market failure” and address it.

This would help Government to get involved in the kinds of issues that now concern makers and broadcasters of children’s content in the UK. The first and most important is how much original content – and what kinds of content – should be made specifically for children in the UK? A second question is: how should broadcasters act to give children maximum access to this content?

A lot of children’s content is co-produced. This is because the BBC – and others – do not “fully fund” most children content but send producers off to find parts of their budgets from other countries. Should broadcasters in receipt of public funds be told to pay more?

And because children’s content may reach most children at times of the day when most adults would also be watching, the BBC and other broadcasters have an incentive to move children’s content away from such popular slots. A policy based on a clear view of childrens' needs would help Government to take a line on this issue too.

(When I use the term “Government”, I am speaking about the regulatory structure that government puts in place. If it delegates to another body, a government needs to be sure that the delegated body knows government policy and is equipped to enforce it).

PUBLICATION: Report for the Adam Smith Institute on the Funding of the BBC

As I said in my second last post, I took time out to write the report that was published this week. It is out there now, and can be found at http://www.adamsmith.org/publications/. It has had quite extensive publicity. I will resume the Powerhouse blog when I have digested it all.
Here is a link to BBC News.
http://www.bbc.co.uk/news/entertainment-arts-10815162

And here is the Guardian poll:  http://www.guardian.co.uk/commentisfree/poll/2010/aug/02/bbc-tv-licence-fee-adam-smith-institute.

An Open Letter to Mark Thompson

Dear Mark


The BBC is the UK’s most important national entertainment asset, our biggest global media brand, with a great sense of purpose and formidable scale.

But here’s the thing: you and billions of others will soon be able to get a quality TV signal from anywhere on the planet.

Doesn’t this pose a question for the BBC? You can either remain a purely national institution, with a global news service and some channels around the world. Or you can go further and stream BBC content across the globe?

According to BBC research there are over 5m Britons living abroad, many others with British ancestry, and many, many others who admire British TV and its values. (OK there those channels outside the UK already, but this would be a different sort of presence, like listening to Five Live in America on my TuneIn Radio app).

How would they pay? Pay-TV is now television’s fastest growing revenue stream.

If the BBC is to reach those Brits abroad, they cannot be License payers – they will have to be subscribers. (Yes, I know, a lot of content is licensed by territory. That’s one of many legacy problems that needs  to be addressed.)

Subscription has to be the right choice, doesn't it?.

The BBC currently faces charges from other UK companies that it is too big, too dominant, that it has a “chilling” effect on all other endeavours. The BBC itself has acknowledged that it should focus more on excellent content. Many want to go further, freeze or take part of the license fee, detach BBC Worldwide, etc. These arguments have weight because the BBC is largely paid for by what amounts to a public subsidy.

Isn't the right solution for the BBC to start to consider a switch to voluntary subscription, at home and abroad?

Voluntary payment would open the BBC up to the world and offer new opportunities. In Europe we are part of a market of over of 400m people who are used to English language programmes in prime time, dubbed or subtitled. Millions more around the world speak or want to speak English. Would trying harder to reach these markets and offering the chance to watch the same content as we see in Britain mean short-changing the British public?

I can't see any evidence for that. The English content that plays in non-Anglophone territories is, invariably, the best of its kind. And the biggest audience will surely remain the home audience. They will always come first.

Of course there will be arguments about other welfare issues. Many of them I probably support. I am confident that they can be dealt with, like free access to basic services.

And of course there will be arguments about Public Service Television. In your heart of hearts you must know that many of those arguments are hot air. True public service TV – that which a market cannot provide, that which is so important to social welfare that it must be widely available -- is a very small proportion of all that the BBC offers.

And you must also be aware that the License fee is, for many, both unjust and unfair. (And how is it going to be enforced when the country has univeral broadband?)


I am looking forward to hearing you speak at the Edinburgh Television Festival in August. I hope you will inspire us with an ambitious future for the BBC.
With best wishes, David.

My Second-Last Post

My penultimate post in this series.


Next week I will offer some final thoughts, then write a paper on the future of the BBC for one of our leading think tanks – sorry, policy institutes – to be published in the summer. (Please let me know via Comments if you want to be alerted on publication).

What I will say next week flies in the face of current wisdom. So this week I review a growing consensus about the BBC. It’s a consensus I disagree with. It goes like this.

The BBC is too “commercial”. It thinks it must be watched – regularly – by nearly everyone in the UK. Otherwise people would resist paying their License fees.

As part of the same objective, it aims to be “free” on a growing number of platforms – not just on cable and satellite but on the Internet and wherever else people can receive it. In other words, to remain highly accessible.

Most of this “free” content is entertainment. Because the BBC is so well-funded – via an exclusive subsidy, the License fee – it has a crippling effect on commercial competitors, for whom times are hard.

The BBC must therefore scale back, concentrate on “distinctive” and “quality” content, share some of its License fee with others. A parallel argument about platforms still rages – with the so-called Canvas proposal under review. (Canvas would bring Internet content to a domestic TV set).
However, no political party has spelled out how it would deal with the growing resistance to the License fee which would be likely to follow if the BBC becomes more “niche”. (Conservatives have simply said they would freeze it).

There is a second set of opinions, firmly held but less visible, which explains why we have seen no movement on a funding system that has many flaws. This mindset also explains the grip of the concept of Public Service Broadcasting (PSB). It can be summarised like this: consumers don’t know what is good for them. They choose fast food and cheap entertainment. If it was not for PSB (and its associated subsidy system) there would be no drama and smart comedy. Moreover, if there was not a mechanism that subsidised UK production, our schedules would be swamped by imports.

Not only are there many unexamined assumptions here – I am tempted top say “prejudices” – but PSB sets objectives that are virtually impossible to meet. The BBC has to meet a whole range of them. Its “public purposes” include “sustaining citizenship and civil society”, “stimulating creativity and cultural excellence”, “bringing the world to the UK and UK to the world”. This is heavyweight stuff. These are key social policy objectives. The BBC may be tasked to “inform, educate and entertain”. But is the BBC really up to all this?

In fact, there is relatively little confidence in the bodies that have currently been given the job of monitoring this “public value”, as it is called . Some of the thinking is highly questionable anyway. What evidence is there that we would be swamped by imports? Experience suggests the opposite: people hugely prefer home-made fare. As for concern about our “culture” (a word with far too many meanings to different people),”culture” in the broadest sense simply happens. We have an instinct for making it, and it explains why one country’s culture remains resolutely different from the others. Do we really need protection? And isn't this whole body of thought looking, well, just too crude a basis for public policy?

The BBC is one of the UK’s most important institutions and national flag carriers. It – and its masters in Government – need to decide what it is there for. It can no longer, credibly, be part of the welfare state and part of the entertainment industry at the same time.

In next Friday’s post I will try to explain why and what could be done about it.

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.

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!).

The BBC License Fee: the public isn't so sure

I have been waiting for the transcript of a Westminster Media Forum which took place on March 10 where  I was taken to task by Prof Steven Barnett. I was referring to work commissioned by Ofcom for their Second Review of Public Service Broadcasting in 2008: some 2000 people were asked to rate the programme types they considered important “for the good of society as a whole” (Q1) as against the types that were “most valuable to you” (Q2).

So people recognise that News, especially, and Current Affairs are social priorities whereas entertainment genres are personal priorities.  (For parents, Childrens programmes fall into the right-hand quadrants too). This suggests to me that many people would support, at least in principle, public funding for social-priority genres and private payment for personal priority genres.

Steven disagreed.

Sorry David, you are completely misinterpreting those Ofcom surveys, that is not what the public is saying. The public is saying it actually wants to see the BBC funded across the board in all the genres that they are at the moment.

I may have pushed that data a little too far, but I am not aware of any recent poll that has shown majority support for the BBC License Fee.

2004: an ICM poll for Panorama found that 31% were in favour of the existing licence fee, 36% said the BBC should be paid for by a subscription, and 31% wanted advertising to pay for the programmes.

2008: an Ipsos MORI poll commissioned by the Guardian found that 41% agreed that the licence fee was an "appropriate funding mechanism". 37% disagreed.

2009: In the Guardian/ICM Poll licence fee support also rose slightly to 43% amid doubt over commercial viability during a recession.

These are the polls I am aware of. There maybe others.

A European Pay-TV platform?

The US has some 125m TV households as against about 25m in the UK. In my last post I looked at HBO. Where could we find a Pay-TV market large enough to create a subscription base for, say, quality drama and comedy? What about the European Union of which we are a part? After all, every country in the Union (except UK and Eire) watches subtitled or dubbed English-language content in primetime. That should give the UK a huge competitive advantage –but the dubbed and subtitled content is currently usually American.

It is instructive to look at the revenues of the six US studios. (This focuses us on fiction, that is drama and comedy series, the most important type of traded film and TV content.) We have figures for 2008, which tell us that total revenues from licensing content and DVD sales was over $21bn, with $9.2bn – that is, 44% of total sales -- coming from content sales outside the US.

There is no equivalent figure for the UK, but the TV Export survey conducted annually by Pact, the trade association for independent producers, indicates total sales of finished TV programmes (including DVDs) at £610m. (This survey does not include films so it is not directly comparable with the US figures in the chart). In addition the UK report does not break out the UK figures by genre. Assuming a large proportion of the £610m, say £400m, is probably fiction, it is nevertheless immediately obvious that the relationship between home and overseas sales in the US and UK are totally different. OK, so you have heard this before. What is the point of repeating it?

Because it raises this question. Should the UK not be setting its bar higher? Should we not be aiming to become the entertainment capital of Europe? We have significant competitive advantages, as outlined above. We are Europeans. And we have a strong production industry. Moreover aren't some of our basic genres – like the crime series – beginning to look provincial against the reality that so much crime is international – as in the case of little Sahil Saeed, kidnapped in Pakistan, ransom collected in Europe, criminals of various nationality foiled through the co-operation of many national police forces?