Buried in the new review of Britain’s commercial public broadcasting services was a harsh and very unpalatable truth: Britain’s much admired public service broadcasting regime, with a strong public and commercial presence in the likes of the BBC, ITV, Channels Four and Five is broke and can’t be fixed without more government aid.

The policy of giving viewers choice and the best of both public and private worlds, by Government diktat, costs a lot of money already and will cost more in the future, but this desire to be all things to everyone is being overtaken and shattered by technology.

Perhaps it’s the model; itself described in the phrase “commercial public broadcasting”, which is something of an oxymoron.

The review, from the industry regulator, Ofcom, failed to come up with any answers to the looming problem of too little money, a fracturing of the audience by technology, changing work patterns and cultural matters. Costs are, without it being said directly, too high and there’s no way out except the old standby of spending more government money. Ofcom ruled out using the UK TV licence fee to help broadcasters other than the BBC.

Ofcom said additional public funding could be needed anyway, so bad is the prospective economic climate for commercial PSBs.

Decisions on many of these matters are needed within the next year, as the current model of commercial public service broadcasting is clearly no longer sustainable.

We recognise that difficult choices will need to be made about the use of scarce resources.

These priorities will need to be considered alongside other potential requirements to fulfill the interests of citizens and consumers in the digital age. These include promoting the availability and take-up of broadband.

By acting now, government and Parliament have the opportunity to secure a future that can be at least as strong for the next decade as it has been for the last.

Direct Government spending may be the only choice if Britain is to maintain its present approach to public broadcasting, but given the bleak state of the UK economy, that’s sure to generate a lot of heat and light.

Still, at a time when the Government is spending billions of dollars bailing out imprudent bankers and other businesses (and worse), why should a hundred million pounds here and there be begrudged to a sector that is creative and one of the better things about the UK.

But that would be to acknowledge there is no solution; there is and to the UK it would seem unpalatable: get rid of government involvement which is distorting the market and allow people who want to make TV and service the public in both public service and commercial terms, have a go.

The 130 page report on the future of public broadcasting in Britain, released overnight was good for the embattled ITV commercial TV network, with Britain’s media regulator recommending a softening of regulation and requirements to allow it more flexibility, while maintaining some public service programming.

But the restrictions on ITV and radio were always subsidiary points to the main question for the review: what to do with the growing black hole at Channel Four which has been battered by the economic and advertising slump, hit by technology and the splintering of the UK TV audience.

The Channel claims that by 2012 it will have a deficit of 150 million pounds a year; Ofcom and some of those it talked to disputed that, saying it would be around 100 million pounds, which is still a sizeable headache.

A statement is expected from the Government shortly.

The Ofcom report did recommend that the government should urgently explore “blending the struggling broadcaster Channel 4 with another organisation” (a wonderful euphemism for a merger).

The review suggested that a combination of some kind between the state-owned, commercially funded Channel 4 and the BBC’s commercial arm, BBC Worldwide, would be the most effective way of ensuring that in future there is “plurality” in public-service broadcasting (PSB). While it looked at the other main alternative proposal for C4, a merger with RTL’s Five, Ofcom said while it may work, but could be challenged on competition grounds and would be dependent on a regulatory framework that balanced commercial and public service broadcasting needs in the single body.

The often heated discussion obsessing the UK broadcasting industry has been prompted by the increasing struggle that the country’s three commercial PSBs, ITV, C4 and Five, are having to make ends meet in the face of a fragmenting audience and severe cyclical decline in advertising revenue as the economic downturn bites.

Channel 4’s CEO, Andy Duncan summed up the dilemma in a think piece in the Financial Times this week:

When an entire environment changes, unsurprisingly the industry structure and its economic model also must change. It is no longer possible in the UK to cover quality content costs by linear television advertising revenues alone. Earlier this decade those peaked at £3.5bn a year; today they are £3bn and falling. In the same period, UK internet advertising grew from zero to 3 billion pounds. But, while most television revenues are reinvested in UK content — Channel 4 aims to spend £5bn over the next decade, including £1.5bn outside the M25 — internet advertising revenues mostly go to the Googles and Yahoos, which invest little in British content.

Four’s problems are a warning for our free to air TV industry as it embarks on its version of Freeview, which is a UK idea and part of Four’s cost burden. Four has its main free to air channel, then a handful of digital channels offered on Freeview. It looks wonderful, but has meant their audience is being split and Four can’t fully recover the cost of the extra channels through advertising, which is falling as the economy tanks.

That’s the danger here when Freeview starts locally later this year. Despite what the likes of the Ten Network might think about the strength of its sports channel, Ten and the other four broadcasters will find it very tough to recover the costs of programming and broadcasting the two extra digital channels as ad volumes and rates decline amid the slow down.

You only have to look at Foxtel: it makes money clipping the subscriber ticket and organising the platform, not selling air time, which is a small but growing revenue stream for its channels and those carried on the network.

The likes of Google spends little money in Australia: at least Yahoo is in a joint venture with the Seven Network and Nine has its uneasy alliance with Microsoft.

The ABC will get money for one of its new channels to carry kids programs and it and SBS has asked form more to help financial the main channels and the new digital services. The hand out masquerades as broadcasting resourcing policy in this country.

But Ten, Nine and Seven are on their own; or will they try and keep their collective hands on the spectrum used to broadcast their main channels now when the digital switchover happens?

A bit of loss leading now that passes for an advance into the digital world, in exchange for a quiet bit corporate welfare, dressed up as “policy”?

Peter Fray

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