In the first of our new ESRC-sponsored Ask the Expert seminars, Professor Diane Coyle - of the University of Manchester and Enlightenment Economics, and a former vice-chair and acting chair of the BBC Trust - presented evidence and arguments on the government’s BBC Charter Review.
Given a number of new entrants from the US into the broadcasting market, the BBC Charter Review should focus on an expanded rather than a reduced BBC.
The Royal Charter is the constitutional basis for the BBC. It sets out the public purposes of the BBC, guarantees its independence, and outlines the duties of both the Trust and the Executive Board. The current Charter expires at the end of 2016 and on 16 July the government published a consultation document as part of a process to consider what should be in the next Charter. In today’s seminar, Professor Coyle discussed the form the new Royal Charter could – and should – take.
There are two contrasting views on the scope of the BBC’s Charter. One is that the BBC’s role is to correct market failures, for instance by providing educational or children’s programmes that would otherwise not appear. Where market failures are not apparent, however, the BBC should leave private companies to do the job of broadcasting.
A second view of the BBC’s role is that it should provide broadcasts in a wide range of areas, including where private providers are present. Professor Coyle put forward a firm argument in favour of this view: the fact that broadcasting is a public good provides a compelling reason for the BBC to offer broadcasts in a wide range of areas, not just where market failures are apparent. This can provide additional competition to private providers, and can set the terms of competition, for instance by creating global standards.
Another potential benefit of having a national broadcaster is the advantages that scale can bring. A large broadcaster can produce broadcasts and media that a number of smaller companies would be unable to. This last advantage, however, also gives rise to a potential problem. Having a large national broadcaster may inhibit competition and stifle innovation from other providers, by creating an incumbent that is hard to challenge.
This concern is an important one, but is not a new worry: the debate has been going since the BBC’s inception, when concerns were first voiced of its dominance in the radio broadcasting market. However, the idea that the BBC is the dominant player in the market seems increasingly to be out of date. Evidence on the transformation of the market over recent years is revealing: the BBC is no longer a particularly large player compared to its private competitors.
Between 2004 and 2011 the BBC’s global revenue grew from £4bn to £5bn. Its major domestic competitors also grew: Sky from £4bn to £7bn; Virgin media from £2bn to £4bn; and BT from £19bn to £20bn. Each of these domestic competitors is reasonably well-equipped to compete with the BBC on scale; and particularly so in BT’s case.
But the market is transforming in a much bigger way than this: the revenue of new US entrants dwarfs the size of the BBC. Between 2004 and 2011 Amazon’s revenue rose from £1.3bn to £11bn; Google’s from £0.8bn to £17bn; and Apple’s from £4bn to £69bn.
Rather than worry about an overly dominant BBC, perhaps the question we should be asking is how we can spend BBC money better to ensure British providers are able to compete with the new US entrants to the market. Can we strengthen the way the BBC helps UK-based independent companies to cope with these much bigger new entrants? And given the benefits a public broadcaster can bring, there may be an argument for creating a larger BBC that can, to some extent, compete with the much larger scale of the new US entrants. This may, however, be an unpopular view to express during the BBC Charter Review process.
Technology hasn’t changed the fact that broadcasting is a public good; and this creates a strong case for public intervention in the market. Having conversations about how to get this intervention to work best – in terms of both its civic impact and economic impact – would be the best direction for discussions on the BBC’s new Charter to take.
—
You can listen to a recording of Professor Coyle’s session below and you can download slides from the presentation here.
Ask the Expert is the SMF’s new lunchtime seminar series, run in partnership with the Economic & Social Research Council (ESRC).
Building on from the success of Chalk + Talk, the SMF Ask the Expert series brings the best policy output from the world of academia into the heart of Westminster.
This new series of events is aligned with current government consultations and parliamentary inquiries, giving policymakers the opportunity to engage with experts in those policy areas.
To suggest a subject for a future Ask The Expert event, please contact the SMF’s events officer Ellie Groves via ellie@smf.co.uk.