Digital on the edge; public broadcasting hustles for money

Michael Hedges December 5, 2007

The difference between public and private sector broadcasting can be reduced to one thought, according to the ‘publics.’ The ‘privates’ need programs to make money, they say, and the ‘publics’ need money to make programs. ‘Content’ has replaced the very last century concept of ‘program’ and hustling money has changed, too.

In the two decades since Europe’s State broadcasters started calling themselves public service broadcasters (PSB) every change in the media world has shocked their foundations.  The first was the rise – and popularity – of the ‘privates.’ PSBs refer to non-State broadcasters as ‘privates’ rather than ‘commercials’ because many PSB gladly take money from the world of commerce.

Some public sector broadcasters have withstood the onslaught of private sector broadcasting by investing in highly competitive content and distribution. Think of the BBC. Others have kept privately owned broadcasting at bay the old fashioned way; using the political advantages of incumbency to ‘influence’ regulators much as State owned telecoms kept their markets secure, until quite recently. And some public sector broadcasters, nearly, faded into the radio and television shadows.

The second major shock to PSBs was the rise of digital technologies. Unlike the wholly unpleasant shock of private sector broadcasters gaining audience and, worse, attention, the digital zap was really quite pleasant. What better opportunity to ask for more money. And many PSBs invested the new found francs, euros and pounds well; the opportunity to jump ahead of the ‘privates’ was just too good to pass up.

It was a short-lived thrill. Far from being the ultimate competitive advantage – with the aim of securing endless and boundless financing – new digital broadcasting technologies proved endlessly and boundlessly expensive. The third, and most recent, shock to PSBs – struck like a tazer – is the end of money. Or, at least, the days of constantly increasing PSB budgets have come to a close.

PSBs balance their budgets on three basic sources – the license fee, advertising and government subsidy. The precise mix varies widely. The European Commission (EC), in a document called the Amsterdam Protocol, cordially requires each EU Member State to establish and maintain a public service broadcaster. The EC does not proscribe a funding plan, nor does the EC contribute substantial cash. Attacks by private sector broadcasters on the PSB establishment always fail. The end result is an uneasy but reasonably effective dual-sector broadcasting structure in Europe. Consumers, largely, benefit.

The license fee, a regressive tax on households for possessing receiving devices, is the most widely used means of PSB funding. Governments, typically, control a legal mechanism that matches PSB wants and desires with the political reality of raising the license fee tax rate. In ordinary times casual increases were almost automatic. Things have changed. Last week the French Senate decided a simple €4 increase in the ‘redevance’ – license fee – far below the inflation rate. A year ago the Swiss government not only didn’t raise the license fee as much as public broadcaster SSR-SRG wanted but decided that a bigger slice would go to broadcasters other than the PSB. It also happened to the BBC, receiving a less than inflation rate increase in funding, only slightly increasing the tax on consumers. Head-room on taxes is limited.

Revenue from advertising has always been a mixed blessing for PSBs. Advertisers can, it’s feared, exert influence and they reward channels with the biggest audience ratings. Some, like the BBC, avoid the problem altogether and stay out of the ad business. Most, however, dive into the money pot. But, in case you haven’t noticed, ad spending isn’t what it used to be.

The European Commission frowns upon direct government subsidy to PSBs. Too much opportunity to exert influence, they say, understanding both human and political behavior. PSBs, generally, shy away from the annual shuffle over to the Parliament chambers, hat in hand, making whatever deals they can make. The license fee funding system is supposed to fix that problem.

All this has led to a major funding dilemma for the PSBs. Agencies and boards in control are mandating popular initiatives like digital TV for all, football for free, improved services for children, minorities, handicapped. The BBC was told to move a substantial part of its operations to a different city. All of this cost money. But there’s less money. And competitors are streaming – literally and figuratively – in. And there are shows to get on the air tonight.

Some PSBs rattle the saber of cutting output. Several weeks ago the (Irish) Sunday Independent got hold of a letter from Irish PSB RTE chief financial officer Connor Hayes to the European Commission begging for mercy. Analogue shut-off and more digital competitors will, he said, have a substantial impact on RTE’s revenue, specifically in ad land. He might be required to cut public service programming if digital TV competition negatively affects commercial revenue. EC Info Society and Media Commissioner Viviane Reding threw broadcasters a bone by loosening ad rules and opening the door to product placement cash.

Unlike days of old when PSBs could threaten program cuts to force bigger pay-days and governments and managing boards would acquess, more often they’re being told to do more with less. It’s the power of the purse. Or, as Mr Fairbanks often said, it’s the Golden Rule. He who has the gold makes the rules. 

Some PSBs face little digital funding dilemma. Austrian public broadcasting (ORF) is funded through license fee and advertising, split roughly 50-50, similar to RTE, said spokesperson Georg Koder. Analogue terrestrial TV is all but shut-down in Austria, only 20% of households remain. But, said Koder, 85% of Austrian households receive TV from satellite or cable. “The effect of DTT to ORF’s market shares is only marginal and, from ORF’s point of view, no substantial threat to the financial base of ORF,” he added.

Budget week couldn’t be more different at Hungarian public television MTV. Capriciously under-funded for a decade MTV has faced crisis after crisis with re-organization after re-organization. With nudging, less than subtle, from the European Broadcasting Union (EBU) the Hungarian Parliament is moving on a new financing system. Only 10% of MTV’s revenue comes from advertising, the rest flowing directly from the State budget. A household license fee, allowed under the current media law, has never been collected.

Things digital, however, are top of mind at MTV. 

“MTV is the market leader in new media platforms,” said spokesperson Katalin Kovács, “such as in teletext services, web TV content supplying, and certain contents can also be followed by mobile phones. MTV’s aim is to develop these services in the future, and this way to generate further incomes, mostly from advertising.”

While the ‘privates’ drag their feet getting to the digital football pitch, the public broadcasters are there. Some are absorbing more pain than others. Europe’s PSB are not, contrary to conventional wisdom, a homogeneous group of former State broadcasters resistant to change. They are, however, asked to do some very heavy lifting.

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