Cordelia

The BBC: use it or lose it

Reflections on the BBC’s case for Charter renewal

A Cordelia report, 04.07.04

Summary

  • The BBC's Building Public Value document recognises that the BBC has to show that it provides social benefits that justify the compulsion of the licence fee.
  • The BBC is an act of societal will, thus it depends not on traditional economics, but on enough of us liking it sufficiently that we are prepared to tolerate the BBC as a tax.
  • The BBC is not under threat, but like any institution that depends on goodwill there is a desire for comfort measurement to justify why we should remain fond of it. The trouble is, goodwill is hard to measure.
  • This paper believes the BBC will be a desirable national entity for as long as we all want it and use it, but the BBC is facing forces of fragmentation that make it hard to maintain the ‘use’ that guarantees survival.
  • If Channel Four and ITV relinquish their public service broadcasting (PSB) commitments this will leave the BBC as sole provider of public service broadcasting. If it has to be serious when all others can just chase ratings, can it maintain sufficient usage to guarantee survival?

1. Introduction

The BBC is riddled with the doubt of a benign and caring slave owner, who wonders whether the slaves smile because they want to or because they have to. It believes it is a ‘good thing’ but is nagged by the knowledge that it is a ‘compulsory thing’ and we can never show appreciation through a voluntary act of purchase or ballot.

The BBC is not like other tax created benefits, such as education or defence, which are headline election issues where there is a clear societal need for them. The BBC is more a societal desire, and consequently is stuck between being a good thing that deserves appreciation, and the illegitimacy of being a consumer item that is inflicted on us. It is this fear that in a free world the BBC may not get chosen that drives the BBC to look for rhetoric and market research to justify compulsion.

The simple truth is that the BBC exists because we want it, but anxiety remains. If the audience for the BBC declines, how long can you justify a universal television licence fee?

In other words, for how long will non-watchers be prepared to subsidise watchers?

The answer is probably for a long time, at least while the BBC offers excellent programming, strong local and educational broadcasting and supports UK talent.

2. The Manifesto

The BBC’s power and importance is not in doubt. What is in doubt is the form a monolithic public service broadcaster should take in a pluralistic digital world. Digital is a synonym for more, and more means audience fragmentation, and that, in the long term, means less utilisation of the BBC.

In Building Public Value, rewewing the BBC for a digital world (the manifesto), the BBC makes it clear that it will help overcome the digital divide, provide a public good, and act in the public interest. It then offers detail on how it will become more responsive and will alter its governance structure to respond to modern challenges.

Instead of second-guessing the governance debate this report will focus on the threat of the digital divide, the challenge of measuring ‘public good’ and ‘public interest’, and finally consider the wider future of the licence fee and the BBC in the file-sharing digital content world.

3. The Digital Divide

Building Public Value cites the digital divide as a reason to keep the BBC strong, arguing that “this new wave of technologies will serve the same people in society who have been able to take advantage of the first digital decade – the digital ‘haves’ – with a group of increasingly isolated digital ‘have nots’ left further and further behind.” Worse still this divide could lead to broadcasting becoming “a well spring of division in our society instead of a source of cohesion…”

Unfortunately the digital divide is a myth.

It is true that some have digital televisions, access to the Internet and mobile phones, and that some don’t. However technology is a constantly falling cost line, things get cheaper and eventually become commoditized. As the price of objects tends to zero everyone who wants one has one.

Once you needed a special and expensive box to watch the BBC and ITV. It was called a television. Now you need another box to watch digital television, and the price of that digital box has halved in 18 months, and will halve again, ultimately becoming integrated in ever-cheaper sets.

We didn’t speak of the ‘television’ divide, when some had televisions and some didn’t, not least as the cost of TVs fell and all those who wanted them got them. Likewise the television divide is as facile as the ‘fridge divide’. The refrigerator was also a product that was once owned by the privileged few. The fridge improved food storage, which enabled the rise of the supermarket and the cost of food to fall, which benefited the poor far more than mere TV, but nobody published pamphlets addressing the fridge divide.

It is true that BBC services make digital more appealing, and might encourage people to move to it earlier, but technology always makes things ever cheaper, and neither the BBC, nor government, can respond with the same speed as the force of commoditization. So the whole digital divide argument really applies to the next three to four years, by which time it will be over, and that is too short a time to let it be fuel in the debate.

Today 50% of UK households have access to multi channel television, so that leaves a recalcitrant 25% who will eventually get it; and 25% who won’t get it though the conservatism of age; they will die off. So what divide? For the poor, if they have a television they will be able to afford digital reception, what they won’t be able to afford is subscription, but doesn’t that applies to the licence fee as well?1

4. Public Goods, Public Interest

The core of the Manifesto’s argument is that broadcasting is a ‘public good’, and the BBC acts to provide this ‘public good’ in the ‘public interest’.

The questions are then ‘is broadcasting a public good?’ and ‘can the public interest be measured?’

4.1 Public Good

Building Public Value claims that television is a public good because it “can be supplied to many people at the same cost as a few people”2. It argues that The Blue Planet, at £6m, would cost no more to broadcast to 250m homes than it would to 25m. From this the argument develops that the most efficient way to price a public good is zero, as it offers social benefits that would otherwise be missed if it were charged for and people chose not to watch it.

Is television really a public good?

A public good is something that provides a benefit to everyone without exclusion. They are therefore best charged to society as a whole, because otherwise individuals who choose not to pay still reap the benefits; i.e. as with military defence, if one person doesn’t pay, but everyone else does, then society is unfairly subsidising the non-payer.

There are certain services that provide common good - roads, health, defence, education - that society buys on a co-operative basis, as it is believed to be the best way to pay for them. Do broadcasting and the BBC fit into this? In other words, is the only way to ensure broadcasting through the collective purchase of it by a universal tax, as applies to other government services?

I have not paid directly for an item of military defence, but I do buy items of information either with money, such as books, magazines, movies, DVDs, Sky Sports et al, or with time such as watching the commercials on advertising supported channel. The BBC is stuck as it claims to exist through the common good argument of defence, health, and education but it is consumed in a free market of information. Whilst there is private education and health, both rely on the scale economics provided by the umbrella of the state system, can one really say that the same applies to television? In other words do non BBC TV channels only exist because of the umbrella scale of the BBC?

4.2 Television and the Public Interest

The Manifesto also claims that broadcasting is in the public interest as it creates individual value and citizen value. Individual value comes to those who watch it, they enjoy the program, and citizen value is public benefit, for example, “building trust and tolerance between the UK’s different cultures through comedies like Goodness Gracious Me... and documentaries about racial issues.”3

4.2.1 Individual Value

The BBC’s television is enjoyed by many, and they derive great individual value from it. Individual value is easily measured – commercial channels can measure it with subscription or through time viewed - as the consumer does not choose to pay for the BBC it is hard to ascertain its value, but you can attempt judgements on the value of the BBC through the time it is watched or by market research.

As we know from opinion polls and elections, market research can indicate, but cannot always deliver a true judgement. US cable executives used to say that if all those who claimed to watch Discovery actually watched Discovery it would be the most watched service in the US. Claiming to watch Discovery was a form of social caché and likewise the BBC will always have the inexactidudes of false claims haunting its market research.

These challenges aside, the BBC's real issue is whether the television that it offers is something that creates benefits for all, and that all television owners should pay for, regardless of whether they watch the BBC.

4.2.2 Citizen Value

To answer that question the wider externalities of the BBC’s broadcasting need to be considered. In the BBC’s terms, does its broadcasting create citizen value?

This is a more difficult and emotive question. The manifesto rightly recognises that citizen value is “the most difficult element of the BBC’s public value to measure.”4 It then suggests that it can determine citizen value by considering how much it would have cost to create a different public institution to provide the same effect, such as increased tolerance.

This is analogous to the argument that if you pay teachers more you will get better teachers, better teachers mean more satisfied pupils, more satisfied pupils mean less vandalism, and less vandalism releases funds for the better teachers. How do you measure this assumed link between vandalism and teaching? At best all you can assume is a correlation, you can never really know.

Measuring such things is extremely difficult and only time will tell if the BBC is right in its belief that it alone can measure them. But in the absence of a clear mandate to ‘do as they think fit’ the BBC needs some kind of test in order to justify its existence as a spender of public money. The tests that the manifesto proposes are intended to mix economic and social judgements.

If the BBC has falling market share, all the tests in the world can’t get over the problem of diminishing impact. Right now we accept that it’s fair for those with TVs to subsidise people who listen to BBC radio, but don’t own a TV. It works because radio-only households are so few. Is there a point where we cross the percentage threshold where we don’t believe it’s fair for a channel to charge everyone for something which only benefits a proportion of society?

For the sake of argument if the BBC has 10 channels and we only watch one why do we have to pay for the other 9? Or if we as an individual are only consuming 10% of the BBC’s output why do we have to pay for the other 90%? In a digital world this becomes an increasingly real question as audiences fragment, not just to other channels but also across the BBC’s own digital output. Most of us happily pay for the BBC because most of us see more than 10% of its output. But is 10% the right number or 20% or 35%? There lies the problem. If viewing falls, social good falls, and we can not be socially cohesed if we are all fragmented across the output. In other words, more channels means offices will need lots of smaller watercoolers.

5. What happens next?

Content is moving to the digital world where the only limit on what can be seen is bandwidth and digital rights management. The BBC is taking an important step towards this future by opening its archive. It acknowledges that viewers will move to systems where they download or stream their content.

The Internet has transformed radio choice, not just what you want but also when. The arrival of ITunes takes this a stage further and lets one start to think about subscription radio. The same will be true for television.

We are moving, albeit slowly, from instant mass audience to accumulated audience. Digital broadcasting means more channels and less shared watching of them. Digital storage means it’s easier to see programmes as individual items that you watch when you want to.

In a way this helps the BBC as while it can provide programming for all paid for by all, the new storage technology (PVR and VOD) means that one has a greater chance to use the BBC’s output.

Inevitably this provision of ‘free’ paid for all programming dictates the rest of the UK broadcasting market. In this burgeoning market the BBC has got its multi channel strategy right and sees that to survive and maintain use, it needs to be a ground cover plant that stop other plants from growing. That will work so long as we like the plant.5

The other issue the BBC faces is demographics, as the children raised in multi channel homes do not have the loyalty of the older generation to the BBC. In other words, can the BBC survive a generation that can’t hum the Archers theme?

6. It’s not just about the BBC

If the only measure of the BBC is how much it is used, then the BBC is purely about ratings, and in that case there is no reason why it should not be a commercial entity.

However if the argument for the BBC is that it is a ‘social good’, then the BBC works because it is brilliant at balancing its commercial need to get audiences with the need to redeem them. The BBC will last as long as it can keep balancing.

The balance becomes more difficult if PSB principles no longer apply to commercial broadcasters in a digital world, and they lure audience away from the BBC. It will be hard for the BBC to maintain its balance under this pressure to match the commercial broadcaster for audiences. But if the BBC does not have to get large commercial audiences, then at some point diminished use will raise questions about a tax based on universality. This is BBC’s ‘Catch 22’.

Charter renewal should not really be about social good arguments, but on the service we experience. The BBC works because the majority of us (and that includes the authors of this document) like most of what it does. You can reduce the BBC’s argument to ‘the BBC is social good while we all like it and watch it.’

The interesting question for regulators is can one change the ecology so that commercial broadcasters are encouraged to keep a few PSB principles, which in turn would stop the BBC being isolated in its remit of social good? Nothing will kill the BBC quicker than being unique. It has survived because it was the most PSB in a PSB ecology. Its very existence meant that its competitors had to be as good, but they now run free, and a fragmenting audience automatically means the BBC has less ability to set agenda. So this next charter period may well be the last period in which the BBC can maintain sufficient audience mass to justify a universal licence fee. The challenge may be not so much how do we keep the BBC, but can we keep a PSB ecology?

That’s a tough thing to do when one can no longer corral the audience.


1 For more see Cordelia’s ‘No Widget No Wave’ article and ‘Freesat’ report

2 Building public value, renewing the BBC for a digital world, pg 43

3 Building public value, renewing the BBC for a digital world, pg 45

4 Building public value, renewing the BBC for a digital world, pg 45

5 See Cordelia’s Freesat Report for more on multi-channel strategy

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