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Is Subscriber-TV a Solution for Beleaguered CBC?

As the CBC and its supporters search with growing urgency for solutions to the public broadcaster’s critical funding problems, an idea gaining some traction is that CBC television be dismantled, and spun off into a clutch of subscription-based cable specialty channels.

That way viewers could select what they want to subscribe to, rather than paying for the public broadcaster as a monolithic institution. And there would be no need for advertising, which most advocates agree is antithetical to the goals of public service broadcasting.

It’s an idea that has strong initial appeal. For one thing, it would mean that those who weren’t interested in watching the public broadcaster’s programming wouldn’t have to pay for it. Right now, every Canadian taxpayer contributes to the CBC/Radio-Canada’s federal subsidy.

And economists like to point out that subscriber-based TV has the advantage of providing an indicator of consumers’ preferences, through pricing signals. People will pay more for content they like a lot; programmers can use this feedback to tailor their offerings. Furthermore, where producers of any product are isolated from market signals such as pricing (or audience ratings) they’re apt to lose touch with consumers and fail to satisfy their preferences.

That’s all standard-issue market dogma. Unfortunately it doesn’t make much sense when applied to a commodity like public service broadcasting.

To understand why, one need only think of public education, another so-called ‘public good.’ What would happen if we let the market decide what our universities placed on offer? Business and engineering schools might do alright because there’s a high probability of an immediate payback to the investment in tuition, but English, philosophy, political science, psychology, sociology, astronomy, experimental physics—the pure sciences, the social sciences, and the humanities—would wither away for lack of support.

Society supports the arts and humanities and the pure sciences—rectifies the market failure to do so—because there’s an obvious benefit to doing so.
In television, there are many areas of worthwhile programming where the potential audience is too small, too specialized in its interests to be attractive to for-profit producers. Successful subscription-based services like HBO restrict their offerings to a few popular genres, in the interests of maximizing their subscriber base and the revenue it produces. On HBO, Vice passes for news, and programming like the BBC’s Blue Planet is nowhere to be found.

Any public broadcaster forced to rely exclusively, or even in part, on subscriber fees would quickly find itself in a dilemma: whether to produce exclusively mainstream, revenue-generating programming and thus ensure the organization’s survival, or risk viability by also producing more challenging programs that serve wider, deeper, more diverse, interests. In other words, whether to look to the bottom line, or serve the public. (This is essentially the identical problem CBC television has had to wrestle with, in its current, hybrid public/commercial form.)

Looked at in strict financial terms, the model simply doesn’t fly. There are about 12 million cable-subscribing households in Canada, so for the CBC/Radio-Canada to be funded to a level close to the OECD average, it would need to raise about $2.5 billion from that subscriber base each year—a monthly bill per subscriber of about $17, assuming everybody signed up for all the CBC offerings. If half of cabled households chose to subscribe to the full range of channels—an optimistic forecast—each of those subscribers would have to be charged more than $34 to keep the service afloat. That would be in addition to the average Canadian household cable/wireless bill of between $165 and $185 a month (depending on the range of services).

The only reliable research into whether Canadians would be willing to pay more on their cable bills for better quality programming has been conducted by Canadian Media Research Inc. (CMRI) over the past 10 years. It shows consistently that only about 40% would be willing to pay even an extra $5 a month.

And, remember, non-subscribers would be shut out of the public broadcaster’s offerings, even on the rare occasions when they might want to watch, such as in cases of national emergency, or celebration.

Some CBC advocates have argued that the public broadcaster could be financed by corporate and private philanthropy, but that, too, is a badly flawed model. American public broadcasting, which relies heavily on charitable donations, has found itself seriously compromised in recent years when important donors have threatened to withdraw their funding over objections to programming decisions.

For the CBC/Radio-Canada to continue to exist as a true public broadcaster, it must be funded by what accountants call actuarial means: everybody pays the same, small contribution into the pot, regardless of how much they take out in terms of the amount of programming consumed. That way, the service is there for everybody, whenever they need or want it, just like an insurance policy, and just like the public school system and medicare. (In the U.K. this is achieved through a license fee on every television set sold.)

The actuarial system recognizes that all Canadians benefit from the existence of a public service broadcaster providing high-quality information, education, and entertainment programming—whether or not they use those services themselves—in the same way as they benefit from a good public school system, whether or not they have children. It makes the country a better place to live and work.

The current funding model for the CBC accepts this premise, to a degree, providing an annual appropriation to the pubic broadcaster of just under $1 billion, taken from general revenues. (That’s about $29 a year for each of us.) The problem is that this money is doled out at the discretion of the government of the day, and funding cuts have been frequent and seemingly arbitrary. In order to fill the gap between its mandated obligations and its funding, the CBC has for much of its history had to supplement its annual appropriation with advertising revenue, a source of money that for many reasons has all but evaporated in the past decade.

A better solution, and one that has widespread support among public broadcasting’s advocates in this country, is a small levy on the profits of the handful of enormously profitable companies that supply our commercial television, cable and broadband services in a regulated, near-monopoly market environment. An impost of 5 to 7% on the revenues of the likes of Bell, Rogers, Shaw, and Quebecor would amply fund the CBC at levels that would allow it to join the ranks of the world’s successful public broadcasters on television. And radio could be properly funded once again.

If half that levy were passed along to consumers by monopolistic service providers, it would amount to about $5 a month, which, according to CMRI, would be okay with about 40% of customers. The other 60% would have to grit their teeth and pay anyway, consoling themselves, perhaps, with the thought that they’re contributing to a better nation for everyone.

© 2014 Wade Rowland

Published inArticles-Blog