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How a Strong CBC Can Help Our Private Broadcasters

New research on the impact of national public broadcasters has the potential to inject a fresh theme into the ongoing discussions in this country around what to do about the struggling CBC/Radio-Canada.

The first of two recent studies draws on a wide range of data from 14 countries world-wide, and was pulled together for the BBC by U.K.-based Inflection Point research group. It was designed to test competing theories about public service broadcasting frequently heard in debates over the relevance of these services, here in Canada, and around the world.

One is that public broadcasters, whatever virtues they may have, damage commercial broadcasters operating in the same markets by ‘crowding out’ private investment and innovation.

The second hypothesis is that public broadcasters have just the opposite effect, creating a market environment in which commercial broadcasters tend to thrive, both financially and terms of their program quality.

Canada was not included in the study, because the CBC’s hybrid public/commercial television system could not accurately be compared with the true public broadcasters like those in the Nordic countries, the U.K., Australia, Germany, France and other European and South American nations, which have no commercial sponsorship and operate on state subsidies of one kind or another.

The results were conclusive: in assessing the health of both public and private broadcasters based on several criteria including revenues and program quality the health of the private sector was found to be directly correlated with the health of the public broadcaster. The larger and stronger the PSBs, the healthier the private sector broadcasters were.

This was true in all countries examined, with the single exception of the U.S., where public service broadcasting has little government support and holds a tiny share of the enormous broadcasting market, the world’s richest.

“On each assessment criteria,” the report found, “strong public broadcasting correlates positively with a strong commercial market.”

• in countries where funding for public broadcasting is strong, commercial revenues invariably are also strong;
• in countries where the PSB invests heavily in original programming, so does the commercial sector, which strengthens the production market;
• in countries where the PSB offers a wide diversity of program genres, so does the commercial sector, which enhances public service across the board;
• where audience perceptions of quality in PSB television offerings were high they were also high for commercial broadcasting, indicating higher quality.

In the words of the report, “this research supports the theory that public broadcasters drive a virtuous circle by raising audience expectations of all broadcasters, requiring commercial broadcasters to invest in diverse, high-quality output and thereby further challenging PSBs to raise their game.”

Conversely, the data show that in countries like Italy and Portugal, where public broadcasting is weak financially, so are the private broadcasters. It is also clear from the current data, and from historical evidence, that it is the public, and not the private sector that drives the success-creating dynamic.

The results give strong support to the idea being proposed in this country that commercial broadcasting be released from much of the existing regulation surrounding programming (e.g. Canadian content regulations and related subsidies) and that strong, predictable financial support be provided to the CBC. The evidence shows clearly that in this kind of environment, a virtuous circle emerges in which there is a “race to the top” in both quality and diversity.

Quality and diversity are defined in the Inflection Point report in terms of the prevalence of a set of key public service genres including: arts, humanities and science programs; childrens’ programs; education; religion; music, news and information. (Entertainment, fiction and sport were not included because, while they contribute to public service, the researchers found it impossible to separate out sub-genres with high public service values such as high-quality drama from the plethora of other sub-genres such as reality programming and purchased U.S. films.)

The report shows that in all countries where higher proportions of these key public service genres are found on PSB channels they are also found on the main commercial channels. In other words, quality and diversity in PSB programming helps to ensure quality and diversity in commercial networks.

The audience perception data showed that in each of the fourteen countries, audiences judged programming on their public broadcasters to be of higher quality than that of commercial broadcasters. But it also showed that the higher the approval ratings were for the PSBs, the higher they were for the commercial broadcasters’ output, another indicator of a virtuous circle at work, in which commercial broadcasters strive to meet benchmarks established by the PSBs.

Far from crowding out the privates, the healthy PSBs help to generate a strong market ecology in which both the PSBs and the commercial broadcasters are rewarded in audience numbers and appreciation and, for the commercial operators, in strong revenues.

In a second recent study, this one produced by the BBC Trust and the Reuters Institute for the Study of Journalism at Oxford University, economist Mariana Mazzucato challenged the ‘crowding out’ argument from another perspective. In examining historical industry data she concludes that “there are many parts of the risk landscape where private business fears to tread, so that public investment does not crowd out but crowds in private sector investment through its ‘de-risking’ activity.”

This is especially true, she states, in areas of rapid technological change, like broadcasting. “The BBC is the dynamic element of the UK’s creative industry—the catalyst that directly or indirectly generates the chemical reaction that makes private companies (incumbents and indies) invest in risky innovative enterprises.”

Mazzucato reports that this is true in terms of both programming and technology. Much of the BBC’s technical innovation is open-sourced, so that others in the industry can contribute to development of untried, leading-edge innovations. But the BBC also holds a portfolio of 134 patents on technologies such as it’s Radioplayer and Stagebox internet-based multicamera HD production software, which generate revenue from third party licenses.

In terms of program production, the BBC like most other true public broadcasters, invests in developing small enterprises and promising individuals, often playing the role of ‘business angel.’

As an example, Mazzucato reports that in 2008 the BBC acquired a 25% stake in the UK independent producer Big Talk Productions, funding it with further ₤1,125,000 in loans. The company went on to generate revenues of ₤11 million in 2011, and received the UK’s highest industry award for its situation comedy series Rev (aired on BBC2).

BBC international co-productions for television also generated ₤32 million in foreign direct investment in the UK in 2011. Overall, it is estimated that the public’s return on its investment in the BBC is about 2 to 1 in terms of economic value including stable, well-paying jobs.

From the early days of radio in the 1920s the CBC has played a similar role in Canadian broadcasting, leading technological development, sharing it with private broadcasters, and blazing a trail in program innovation. Historically, the Canadian public has invested billions of dollars in this kind of production support and technology transfer to the private industry, in the name of building a viable continental broadcasting system.

But those kinds of initiatives have been virtually eliminated in recent decades through successive funding cuts and short-sighted management. Governments today prefer to support the private industry more directly through subsidies in the form of program development funds, tax breaks and cross-border advertising restrictions. These amount to about $1 billion a year, on a par with the CBC’s ever-diminishing federal appropriation.

The gradual shift in the public broadcaster’s role is directly related to persistent claims from within government and from the private broadcasting industry that the CBC is damaging private enterprise by ‘crowding out,’ or unfairly competing with commercial outlets, thereby weakening the industry.

This new research shows, definitively, that this is, and always has been, a groundless argument. The evidence shows just the opposite: that a strong, well-funded, advertising-free, public service broadcaster benefits the entire industry—not to mention the public it serves.

In other words, the handful of giant commercial television producer/distributors in this country—Bell, Shaw, Rogers and one or two others—owe part of their success to the existence of the CBC, certainly throughout the era of the public broadcaster’s strength and dominance—but even today.

A small public service levy (5 to 7%) on their enormous profits could fund the CBC/Radio-Canada to OECD averages, allowing it to flourish once again. And in flourishing, as the research shows, it would contribute to the health of private broadcasting. The levy would, in reality, amount to a productive investment in creating a virtuous circle, in which everybody wins.

This ought to be the ground-floor premise for the current inquiries into salvaging the CBC that are being undertaken by the Senate committee on Transport and Communication, and the broadcast regulator, the CRTC. And it’s a sound basis for a strong, public-spirited policy on the CBC that any of the major parties could take into the next election.

© 2014 Wade Rowland

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