It is essential that all countries should have well financed public service broadcasting. There are three core reasons for this. First, broadcasting as a medium suffers from “market failure”. Second, even if markets were to work perfectly in broadcasting, a democratic culture and equal rights require more than the market will deliver. These two arguments justify an activist public policy. The third part of the argument is that public service broadcasting is the right form for public policy to take.
My argument is a universal one argued from the point of view of economics. I believe that it holds true for all human societies, whether rich or under-developed. And I think it is important to ground the case in economic terms rather than cultural ones, because the strongest aspect of the case against public broadcasting is also an economic one, based on the proposition that the market always knows best.
Old monopoly, new monopoly
The failure of the market in broadcasting arises in two quite distinct ways – production and consumption. Take production first. A fundamental tenet of economic theory is that for markets to work well there must be real competition. Otherwise output will be restricted and prices higher than justified by costs. Admittedly a degree of monopoly may promote investment, but, even so, such near monopoly concentrations would only be justified in these terms for, at most, a few years.
Until recently, with only a few channels available, it was clearly the case that broadcasting had to be licensed and there could not be free competition. Now the digital revolution will remove scarcity of frequencies. Some are arguing, therefore, that this means that the concentration of broadcasting into the hands of only a few companies will be a thing of the past. Both theory and the evidence, however, suggest the opposite.
First, broadcasting, including digital broadcasting, has high fixed costs and near zero marginal costs. Especially in the digital age, the second copy costs nothing. Whenever this occurs the economies of scale are massive, entry to the market becomes difficult and firms tend to be concentrated.
Second, the digital revolution produces convergence – the coming together of previously separate industries. This dramatically increases the possibility for what economists call “economies of scope”. It describes the way activities in one area can decrease costs or increase revenues in a second area if the two are brought together. Indeed this is one of the main points of the digital revolution. Information can be endlessly edited, copied, stored, retrieved, redesigned and merged with other information to reappear in a multiplicity of formats. To exploit this there will be many channels, but only a few owners. Two recent examples of the process are the AOL/Time-Warner merger and the Bertelsmann deal with Napster.
A third factor leading to concentration in digital media is the economics of networks and standards. Betamax was probably a better technology than VHS, Apple software was better than Microsoft’s, but where are Betamax and Apple today? In networked industries firms that manage to gain control of the standard then tend to sweep the board and charge accordingly, as Microsoft have done.
Nor does the existence of the internet disprove this. At the start it was highly competitive, but today’s internet is very different. Alongside email and a multitude of low quality web-pages lies a world in which mass marketing, network economies, incumbency effects, and economies of scale and scope are creating concentration of ownership and a small number of highly promoted “nodal” sites. Let’s hope that openDemocracy sets a different standard and survives and flourishes, but its aim is to provide an antidote to the mass providers, not compete directly with them.
While the digital revolution has therefore removed one source of monopoly, spectrum scarcity, it has replaced it with another, the natural monopoly of economies of scale, of scope and of network industries. The extraordinary global rush to multimedia mergers in recent years confirms the point.
The market fails consumers
Now consider consumption. Here three further forms of market failure apply. First, as mentioned, in a digital age extra copies of a programme cost almost nothing. As a result the gains to consumers will almost always be greater if the fixed costs are covered by an initial payment, such as a licence fee, and thereafter the content is supplied free.
Second, broadcasting creates “externalities”. One person may want to watch violence or pornography, but another, who does not, and finds such programmes are being shown, is offended. Left to itself, the market will produce too much violence and pornography and too few programmes where the external effects are positive, such as programmes that raise knowledge.
Third, broadcasting includes “merit goods”. This is because parts of broadcasting are like education in the sense that, sometimes, we do not think we will like it – and, if left to ourselves, would not buy it – yet, we realise, later, that it has benefited us and are pleased in retrospect that we experienced it. Here the untrammelled market would produce too little.
The merit good and externalities arguments are extremely important when taken together. We take it for granted that good schools, football teams, orchestras and firms can raise everyone’s level. It is a question of the “company you keep”. We all gain when our environment is improved. Today the media is part of that company. But the market does not care whether it enriches or impoverishes our experience.
One key role for public policy is therefore to correct these failures of the market. However, even if the market could be made to work perfectly, it would still not meet the needs of democratic rights.
The market fails democracy
At the core of democratic theory is the belief, subscribed to by all democratic societies, that two wholly different methods of allocating resources are justified. In the marketplace one person’s pound, euro, dollar or yen is as good as another, while in the public arena one person’s vote is as good as another.
Moreover, it is generally acknowledged in liberal societies that citizenship entails a range of rights beyond the mere casting of votes. In the case of the media three such rights are especially important. First, there is the right to basic information about how society is governed, what are the laws of the land, who represents you. For these rights to have meaning, such information should be free, not sold for profit via the television or the PC.
Second, there is the right to equality of respect. Today, broadcasting is the dominant way in which different parts of society present themselves, or are presented, to each other. In today’s multicultural world, each group, as well as each individual, has the right to be portrayed on equal terms and in terms that they would recognise. Whether one comes from Cornwall, the countryside, Serbia or England, or whether one is Black, a gypsy, a Peer or an asylum seeker, one has the right not to be misrepresented or seen only as a member of a stereotypical group. Such an assumption cannot be made automatically of commercial television. An ABC producer stated that advertisers are aware that “hate sells their products”.
Third, there is the right to participate in society. Such participation includes not just having employment and somewhere to live, but the right to political engagement. Here again the media plays a critical role as today’s politics takes place more on the radio and television than on the floor of the House of Commons or in formal sessions of Congress or in the Bundestag. The right to have one’s opinions heard is a right of all citizens. It is not something that should depend on income or wealth.
Regulation vs public service
The right to information, the right to respect and to have one’s opinions represented are not the concerns of the market nor are they those of the commercial broadcasters. If you accept this, there are two possible courses of action. One is regulation, the other a direct component of public service broadcasting. Of the two, public service broadcasting is much the best.
First, because neither market failures, nor the democratic requirements I have sketched out in such a summary form, are genre specific. Game shows, comedies and soaps are just as much ways in which society empowers or impoverishes itself and tells its own story as news, documentaries and current affairs. Nor should public service broadcasters stand aside from developments in the internet. The provision of in-depth background information in a form that ought to be trusted adds to rather than detracts from their ability to inform and educate as well as to entertain. There is therefore no specific part of broadcasting that could be successfully hived off into “the public service bit”.
Second, and most fundamental, regulation can stop things, but it cannot promote them. What society requires is a set of broadcasters with purposes different from those of the market. It makes no more sense to regulate a broadcaster to produce programmes that “extend people’s imagination”, than to regulate an artist to paint a good picture.
The argument about genre reinforces this conclusion. What matters is the goals of the programmes, not what genre of programme is being made. The key people to look after this are the producers and the commissioning editors. They make the real, creative decisions. As a result, for public service broadcasting to flourish, these people must work in an institution that has the goal of public service as its ethos.
At least three important points remain. First, lest there be any doubt, a public service broadcasting organisation is not a state broadcasting organisation. It must, if it is to serve citizens, stand independent of both state and market.
Second, far from hindering the market or restricting choice, public service broadcasting helps both. It is often forgotten that the theory of choice, on which the economic claim in favour of a free market in broadcasting rests, presupposes consumers who are already both fully formed – they know their own preferences – and fully informed. In reality, neither is likely. As a result, and given that the media is one of the main sources of information as well as one of the ways in which people come to understand themselves, the existence of a set of broadcasters committed to empowering citizens and providing impartial information increases the autonomy of the individual – and, without this autonomy, where is the real choice?
The next point is so often misunderstood that it must be emphasised. Over the next twenty years, the market in all forms of broadcasting will undoubtedly grow considerably and, as channels increase, audiences will fragment. In this context the case for public service broadcasters providing information about their society in an unloaded way will become more rather then less important. There is a vital difference between having organisations that are committed to impartiality and one that wants to tell you what you ought to think. Not having an axe to grind should not be confused, as it so often is, with paternalism.
Public service broadcasting is crucial. It acts as a counterweight to possible monopolisation of ownership and fragmentation of audiences in the private sector. Because its purposes are different, it widens the choice for consumers, both individually and in common. And it has an especially important part to play in today’s multicultural world in promoting democratic rights. Public service broadcasting is not an optional add-on. Every society should have one or more – independent – public service broadcasters.