Institute of Economic Affairs
By: Ryan Bourne
Date: 25 July 2014
‘Does good broadcasting require compulsion?’ The question the BBC won’t address
Don’t you miss Jeremy Paxman already? On
Newsnight he would ask persistently the question that politicians were
trying to obfuscate on, to try to obtain a straight answer. This clarity
helped the viewer decide whether politicians were being honest in their
reasoning or else just throwing out red herrings in order to hide the
true story.
I got to thinking about how helpful this interview style would be when I read the BBC’s own Director of Policy James Heath’s response to my response to his original blog post on why the licence fee is the right method of funding for the BBC. Rather than focusing on the arguments that I had made as to why a licence fee – a compulsory charge applied to everyone who wants to watch any live television – was indefensible and unnecessary, Heath instead used his article to outline why the BBC itself was of value to us.
To paraphrase his arguments: people want the BBC to produce a broad variety of content… The BBC produces high-quality content and helps crowd-in high-quality content in the commercial sector… People love watching things on the BBC for the ‘shared experiences’… And people trust the BBC to provide impartial news.
Great! Hooray for the BBC. But note: Heath has not once explained here why any of this necessitates a compulsory licence fee, which in effect makes the BBC a television gatekeeper. In fact, if James and his colleagues truly believe all of the things above, they would of course have absolutely nothing to fear from moving away from the licence fee method of funding and towards subscription.
If people value a service which produces a broad variety of content, they will presumably be willing to pay for it. If people value the investments in programming and the high-quality output, they presumably will be willing to pay for it. If people see the BBC as the home of shared experiences, they will be willing to pay for it and all tune in. And if people value the impartiality of a news source, well, they’ll be willing to pay for it. So what’s there to worry about from a BBC perspective? Allowing people the choice will surely confirm what the BBC says it knows.
I think the BBC realises it’s not as simple as that. James points to surveys as evidential support for his positions, but asking people their opinion in a survey is often an unreliable way of determining what they really want – not least because people tend not to consider the ‘opportunity cost’ of certain actions (i.e. what else could I do with the licence-fee money were it not compulsory). In other words, revealed preferences, i.e. people’s spending habits, may well be very different from their stated preferences. Observing people's decisions through how they are willing to spend their money allows organisations to shape themselves in order to provide the greatest value to those they are serving. That is why I believe that a subscription service would be much better for broadcast consumers than a compulsory licence fee.
Yet Heath does not engage in these arguments. His whole blog post is predicated on the idea that the BBC exists either as a universal coverage broadcaster funded through the compulsory licence fee, or it doesn’t exist at all. It would have been an effective rebuttal if my original article had called for the abolition of the BBC. But my article didn’t even offer an opinion on this – merely why the licence fee should not be the method of funding it.
In my article I stated that one genuine argument for the licence fee used to be that television signals were a public good. This therefore represented a market failure, necessitating government intervention and a funding arrangement which took account of these properties. Technological change means this is no longer the case – digital decoders and the ability to set log-ins make this argument invalid. Heath’s response is merely to say that the licence fee has survived this change, and therefore can ‘adapt’. But this misses the whole point, namely that the existence of the licence fee and the privileged position it provides the BBC has to be justified in some way given the changes in technology. That it happens to have survived the digital switchover and colour TV is about as useful an argument as saying it survived Brazil being humiliated by Germany in the World Cup. The question is not: could the licence fee operate? But: what on earth is the rationale for having a licence fee now?
Heath’s essential arguments instead boil down to a defence of the status quo. Yet there is no evident ‘market failure’ in broadcasting and hence all the arguments in favour of the licence fee from Heath are ‘soft’ arguments about ‘what people want’. But surely the best way of judging what people want is to see what they are willing to pay for. In opposing the solution of subscription, Heath and the BBC imply that what the BBC currently provides is not, in fact, what the British really want (which in the case of Directors being paid to write articles defending the funding mechanism, is almost certainly true!).
If Paxman were around to interview Heath, he’d surely ask this question: ‘Are you suggesting that the BBC cannot function properly unless those who do not want to watch its content are forced to pay for it anyway? Is that correct?’ I’d like to know the answer.
I got to thinking about how helpful this interview style would be when I read the BBC’s own Director of Policy James Heath’s response to my response to his original blog post on why the licence fee is the right method of funding for the BBC. Rather than focusing on the arguments that I had made as to why a licence fee – a compulsory charge applied to everyone who wants to watch any live television – was indefensible and unnecessary, Heath instead used his article to outline why the BBC itself was of value to us.
To paraphrase his arguments: people want the BBC to produce a broad variety of content… The BBC produces high-quality content and helps crowd-in high-quality content in the commercial sector… People love watching things on the BBC for the ‘shared experiences’… And people trust the BBC to provide impartial news.
Great! Hooray for the BBC. But note: Heath has not once explained here why any of this necessitates a compulsory licence fee, which in effect makes the BBC a television gatekeeper. In fact, if James and his colleagues truly believe all of the things above, they would of course have absolutely nothing to fear from moving away from the licence fee method of funding and towards subscription.
If people value a service which produces a broad variety of content, they will presumably be willing to pay for it. If people value the investments in programming and the high-quality output, they presumably will be willing to pay for it. If people see the BBC as the home of shared experiences, they will be willing to pay for it and all tune in. And if people value the impartiality of a news source, well, they’ll be willing to pay for it. So what’s there to worry about from a BBC perspective? Allowing people the choice will surely confirm what the BBC says it knows.
I think the BBC realises it’s not as simple as that. James points to surveys as evidential support for his positions, but asking people their opinion in a survey is often an unreliable way of determining what they really want – not least because people tend not to consider the ‘opportunity cost’ of certain actions (i.e. what else could I do with the licence-fee money were it not compulsory). In other words, revealed preferences, i.e. people’s spending habits, may well be very different from their stated preferences. Observing people's decisions through how they are willing to spend their money allows organisations to shape themselves in order to provide the greatest value to those they are serving. That is why I believe that a subscription service would be much better for broadcast consumers than a compulsory licence fee.
Yet Heath does not engage in these arguments. His whole blog post is predicated on the idea that the BBC exists either as a universal coverage broadcaster funded through the compulsory licence fee, or it doesn’t exist at all. It would have been an effective rebuttal if my original article had called for the abolition of the BBC. But my article didn’t even offer an opinion on this – merely why the licence fee should not be the method of funding it.
In my article I stated that one genuine argument for the licence fee used to be that television signals were a public good. This therefore represented a market failure, necessitating government intervention and a funding arrangement which took account of these properties. Technological change means this is no longer the case – digital decoders and the ability to set log-ins make this argument invalid. Heath’s response is merely to say that the licence fee has survived this change, and therefore can ‘adapt’. But this misses the whole point, namely that the existence of the licence fee and the privileged position it provides the BBC has to be justified in some way given the changes in technology. That it happens to have survived the digital switchover and colour TV is about as useful an argument as saying it survived Brazil being humiliated by Germany in the World Cup. The question is not: could the licence fee operate? But: what on earth is the rationale for having a licence fee now?
Heath’s essential arguments instead boil down to a defence of the status quo. Yet there is no evident ‘market failure’ in broadcasting and hence all the arguments in favour of the licence fee from Heath are ‘soft’ arguments about ‘what people want’. But surely the best way of judging what people want is to see what they are willing to pay for. In opposing the solution of subscription, Heath and the BBC imply that what the BBC currently provides is not, in fact, what the British really want (which in the case of Directors being paid to write articles defending the funding mechanism, is almost certainly true!).
If Paxman were around to interview Heath, he’d surely ask this question: ‘Are you suggesting that the BBC cannot function properly unless those who do not want to watch its content are forced to pay for it anyway? Is that correct?’ I’d like to know the answer.
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