When Public Broadcasting Fails: Further Thoughts on the Crisis Facing the CBC

© Wade Rowland 2012

In a continuing debate over public interest media that is fraught with misinformation and misunderstanding, this much is obvious: there is a fundamental distinction to be made between commercial media and public service media, and it has to do with their different goals and purposes.

The purpose of public service media is, by definition, to serve the public. Its goal is therefore to discover what public services are needed (or desirable), and provide them.

The purpose of commercial media is to make money for their owners and investors; the goal is therefore profit. A commercial media operation that does not make a profit is by definition a failure, and, by all the precepts of market capitalist economics, ought to be terminated. To allow it to continue to operate without making a profit—by, for example, some sort of subsidy—would be to distort the market by creating an unfair competitive landscape in which legitimately successful (i.e. profitable) operations would suffer.

Commercial media frequently claim to be concerned with serving the public as well as making a profit. By “serving the public” they mean they fill a demand for the kind of programming they provide, be it 24-hour news and information, sit-coms and police procedurals, or reality shows. But a closer look at the economic realities underpinning the industry shows that the market demand they fill comes not from the public at large, but from advertisers who want to tap into certain segments of the public in order to sell their products. When a prospective television producer considers establishing a new product—it could be a series, a single program, or even a network—the question that must be asked is which option will make the best use of investors’ money. If the producer is a rational agent (as, for example, for-profit corporations are required to be) this is a decision that can only be based on advertiser demand for audiences, and not on audience demand for programs. The simple reason is that advertisers are the producer’s source of revenue and, with luck, profit.

This creates a market dynamic in which media products of all kinds must be carefully designed to meet certain commercial criteria. First, the producer will seek to draw an audience that is as large as possible, one that includes as many representatives of the advertisers’ desired demographic as possible. And second, the producer will strive to do this at the lowest possible cost to the advertiser, for the simple reason that if they don’t offer value for money, a competitor will. This is the most basic rule of market competition and it applies in media markets just like it does in groceries or automobiles.

In a young market, such as radio and television were in the first half of the twentieth century, it is possible for a producer to out-compete rivals by serving up superior quality programming at a slightly higher price. There will be enough advertisers willing to pay a little extra to be associated with an aura of excellence to make this strategy pay. Such was the case, for example, with CBS, which at one time marketed itself to advertisers and the public as “the Tiffany network.” But this can only be a short-term strategy. In a mature market, competition will, over time, erase such non-monetary distinctions among products, in the relentless, rationalizing pursuit of lower costs and higher profits. In media industries, as elsewhere, these goals are reached through reducing the cost of inputs. But the media are highly labour-intensive compared to other enterprises, and the labour they employ is highly specialized and often scare. Cost-cutting inevitably involves settling for second-string talent, or worse. You can’t replace a leading actor with a robot, nor can you outsource a Canadian comedy writer’s job to Malaysia or the Philippines.

In other words, it is an axiom of the media industry that the production of high-quality drama, comedy, information, news and documentaries costs more money than producing a similar product of lower quality. The best, most skilled actors, interviewers, reporters, writers, directors, producers, cinematographers cost more money to hire than the B- or C-team.

The result is that in any mature commercial media market where competition for advertisers is active, content quality will experience a slow and steady decline, to a state of near-homogenous mediocrity. (There will always be creative anomalies, exceptions which prove the rule but are invariably short-lived.) In the end, it is not audience preference that determines the nature and quality of content in commercial media, but the requirements of advertisers. In commercial media markets, audiences select from a menu of content provided by advertisers and content producers in accordance with their needs. (Let me emphasize that by “commercial media market,” I mean one in which advertising provide the sole source of income. Newspapers and magazines sometimes escape mediocrity because they have a second, substantial source of revenue in subscriber fees. The same applies to subscriber-based television and radio.)

The reason why non-commercial, public service media are necessary in any nation that aspires to be civilized—that is, to promote citizenship in its fullest sense—is that commercial media markets fail when it comes to providing the best, most challenging, most satisfying and enlightening and inspiring content, the kind of content that helps to make good citizens and healthy individuals. Public service media financed through taxation (as in Canada), or license fees on appliances (as in Britain) or through charitable foundations and donations (as in the U.S.) have as their first priority public service, which can only mean providing what commercial media do not: excellence.

In Canada’s CBC (Canadian Broadcasting Corporation), we have a hybrid system, part public service and part commercial, a compromise made more than half a century ago and sustained by successive federal governments influenced by powerful commercial broadcasting lobbies. While CBC Radio, French and English, has been since 1979 a true public service broadcaster (no commercials), CBC television is financed on a roughly 50-50 basis by taxation and advertising. While radio has flourished and has a large and intensely loyal audience—it could scarcely be more distinctive from its commercial counterparts—television has floundered trying to please both advertisers and critical audiences, doing neither very well. And as it struggles to maintain a semblance of credibility and relevance, it bleeds radio of the funding it deserves.

Can such a system be made to work? In about two years, CBC is likely to lose rights to National Hockey League broadcasts on television to one of the private networks. This would reduce television advertising revenues by half, precipitating a crisis. A Conservative government, amenable to the commercial broadcasting industry’s objections to having to compete with a subsidized “public” broadcaster in CBC television, could very well relegate the service to the realm of digital specialty cable outlets, alongside the food channels, the home renovation channels, the pseudo news channels like Sun TV and Fox News, the shopping channels, BBC Canada, Al Jazeera, Cosmo, Pride TV, Newscorp’s National Geographic channel and hundreds of others. In other words, consign CBC television to oblivion.

Whether commercial and public service media are truly in competition with one another is an interesting question. In one sense they are: if we consider audience numbers to be strictly limited, or “inelastic” as economists put it, then of course people watching public service outlets cannot at the same time be watching commercial offerings. Commercial audience numbers will necessarily drop. But research suggests that audience numbers are not inelastic. There is always a large pool of people who choose to watch or listen to nothing, because nothing on offer interests them. Public service media draw at least some of their audience from that more discriminating pool, and have little or no impact on commercial media audience numbers. Backing that up, research in Europe has shown that boosting budgets for public service broadcasting has no discernible impact on commercial broadcasting’s audiences or revenues.

But even if it were the case that public service media drain audiences and revenue from commercial outlets, would it be reasonable to eliminate them? No doubt the auto and road building industries would benefit from the elimination of public transport in our cities, but who in their right mind would suggest that this would be the right thing to do? Unfortunately, political choices are often made on the basis of ideology rather than reason, and the threat to the CBC remains very real.

If it were to lose NHL hockey and with it half its advertising revenue, as seems likely, the CBC would find it impossible to resist demands that the radio service tap into the windfall of revenue that awaits it by opening up to commercial sponsorship. That would seal the fate of public broadcasting in Canada, once and for all. Our media landscape would quickly degenerate into something resembling what the Americans suffer.

There are two obvious responses to the crisis facing our public broadcaster, and both involve eliminating advertising on CBC television. Both the theory and practice of public service media demand this. CBC radio’s distinctive and frequently brilliant programming, from drama and music to current affairs to information services, in complete contrast with commercial providers, demonstrates what television could be if it were not required to serve two conflicting masters.

The first option, then, is to eliminate advertising on television and replace the lost revenue with an increase to the Corporation’s federal funding. Among other things, this would involve the CBC’s voluntarily relinquishing Hockey Night in Canada to one of the country’s commercial broadcasters. The CBC would then be able to focus not on ratings, but on excellence: how to define it, and how to produce it. This is the core mission of a true public broadcaster. The extra annual cost would be about $30 per capita.

Canada’s current per capita support for our pubic broadcaster is dramatically lower than that of other industrialized nations. The average subsidy paid to public broadcasters by eighteen Western countries surveyed by Nordicity in 2009 is about $87 per head: Norwegians pay about $164 a year; Danes pay $142; in the U.K. it’s about $111 per capita; Australia $44 and Canada $34. Only the New Zealanders and Americans pay less: $27 and $4 respectively. Adding an extra $30 per capita to the current level of funding in Canada would still place us well below the average level of government funding for Western public broadcasters. (As a percentage of GDP, funding for CBC amounts to roughly 0.075%, while in Germany it’s 0.31% and in Britain it’s 0.28%.)

A second response might be to eliminate advertising and, in the absence of additional funding from an unsympathetic federal government, withdraw to a core of essential services on television—news and current affairs, Canadian drama, comedy, children’s programming, and the arts— while maintaining funding for radio. This could mean cutting back the daily TV broadcast schedule, and greatly increasing repeats. (Fewer and fewer of us watch television according to scheduled air-times anyway; we time-shift with our PVRs or watch on mobile devices.) But it should emphatically not mean retreating into the swamplands of digital specialty channels: as the nation’s agora, its primary public space, the CBC must at all costs maintain its position on the dial along with the major commercial networks, where it can be easily found and enjoyed. And where it can provide a benchmark for quality; like that other great public service broadcaster, the BBC, an object lesson in what is possible in the medium. The strategy would be to make a tactical withdrawal, regroup around the standard of a strong public service mandate, and await reinforcements in the form of a friendlier regime in Ottawa.