Can the market bear the weight of the BBC?

Advertisers and broadcasters have toned down their rhetoric over BBC funding. Ads on the network would create a glut of airtime -Âbad news for the commercial TV ecology. By Amanda Wilkinson

Historically, the Incorporated Society of British Advertisers has taken an extreme position when it comes to the BBC, having lobbied hard against the &£116 licence fee and for the introduction of advertising.

But with a review of the BBC Royal Charter under way, the advertisers’ body is taking a more pragmatic approach than the one it adopted when renewal was last debated, ten years ago.

Outlining ISBA’s current approach at the body’s annual conference last week, Procter & Gamble director of external relations for the UK and Ireland Gary Cunningham said: “We are not calling for the BBC to become a broadcaster on the same lines as ITV and Sky. Nor are we calling for the BBC to throw away its public service remit and open its entire network to the market. However, we do believe change is needed and is overdue.”

The BBC gets &£2.7bn (or 94 per cent) of its income from the licence fee, a figure equivalent to just under four-fifths of the total UK advertising spend on commercial channels, which stands at &£3.5bn.

Cunningham points out: “If the licence fee disappeared completely in the near future, there would be meltdown in British broadcasting – there is not enough short-term elasticity of demand in the advertising market alone to fill the gap that removing the licence fee would leave.”

But he added: “ISBA believes that the licence fee is an anachronism. The way it is distributed wholly to the BBC seems rather unfair, when other broadcasters are also subject to public service requirements.”

ISBA is calling for fairer competition in British broadcasting and a clearer remit for the BBC. It believes that this can be achieved in one of two ways. Either the BBC can be forced to become more commercial, by being weaned off the licence fee and allowed to take other forms of revenue such as advertising and sponsorship; or the BBC can be given a clearer, less commercial, public service remit, possibly by removing the current need to entertain and leaving just the requirements to educate and inform in the Charter.

Mark Trinder, head of brand communications at Woolworths and vice-chairman of ISBA’s TV Action group, says: “We are taking quite a different stance. Rather than coming up with a specific solution, it is about evaluating the options and working with the different parties to achieve a solution, just as we did with the ITV merger last year.”

If the first route were to be adopted, ISBA suggests that to ensure the continuation of public service broadcasting the licence fee or any other future alternative should be paid into a special fund to which all broadcasters can apply for finance for commissioning and airing programming that meets set public interest criteria.

This is a similar proposal to that put forward by the David Elstein-led Broadcasting Policy Group, commissioned by the Conservative Party to assess what should be done when the BBC Charter expires in 2006.

Speaking at the ISBA conference, Elstein outlined the group’s proposals, which have yet to be adopted by the Conservatives, and described the BBC’s structure, which dates back to the Twenties, as “out of date” in a multi-channel environment where more than 50 per cent of UK homes have access to digital TV.

“It was inconceivable to us that after the analogue switch-off we would still have a compulsory licence fee system,” said Elstein, who advocates the phasing-out of the licence fee, a BBC funded primarily through subscription with some advertising, and a Treasury-funded public broadcasting fund.

Zenith Optimedia chief executive Antony Young says limited advertising on the BBC will lead to lower advertising costs, owing to the increased amount of airtime in the market. He adds: ” Reducing advertising costs would lower prices to consumers. It would also lower the cost of entry for new brands and increase competition, which again would have a positive impact for consumers.”

Alternative forms of funding for the BBC could gain backing from the public. An ICM poll conducted for the BBC’s Panorama programme on Sunday revealed that 31 per cent of those surveyed said the corporation should be funded by advertising, while a further 36 per cent were in favour of subscription. Just 31 per cent said the licence fee was the best way to pay for the BBC.

But some alternative revenue streams for the BBC have only limited potential. The institution is already free to exploit its programme and licensing rights, but commercial operations account for just under six per cent of the BBC’s total income – &£147m for the year ending 31 March, 2003. And there is little scope to fund the BBC through advertising without potentially destabilising existing commercial channels, including ITV.

Trinder himself admits: “Woolworths is a big advertiser, but unfortunately my board would be unlikely to give me more money if commercial airtime opened up on the BBC.”

And Viacom Brand Solutions managing director Paul Curtis warns: “I can’t see advertising on the BBC during the next charter period. It’s not practical and I don’t think the UK broadcasting environment can afford the BBC to take advertising.”

ITV Broadcasting chief executive Mick Desmond is in favour of the licence fee and points out that while the BBC’s income increased from &£2.2bn in 1999 to the &£2.5bn in 2002, ITV’s declined from &£1.9bn to &£1.7bn over the same period.

He says: “I would like to see the licence fee continuing, certainly for the next charter period, but it has to be a redefined BBC. It cannot ape what already exists in the commercial sector. Under the regime of the past two to three years, the measure of the BBC’s success has been ratings, when it should be range, quality and diversity.”

Royal Mail head of brand and advertising Tom Hings agrees: “There is a need to restore a clear tight definition of what the public service remit is, to remove the market distortion that currently exists within broadcasting.”

He believes that, following the Hutton Inquiry, the BBC should be placed under the regulation of Ofcom, as are other broadcasters.

Curtis, too, would like the BBC to be put on “a level playing field” with other broadcasters as regards regulation; and for its commercial tendencies to be curtailed following the departure of Greg Dyke as director-general. Curtis cannot see why the BBC was allowed to launch digital children’s channels CBeebies and CBBC when the commercial market, through the likes of Nickelodeon, already serves this sector. Other examples of overt commercial behaviour, he says, include the BBC’s production and scheduling of Fame Academy against ITV’s Pop Idol and the cross-promotional support for its commercial products, such as magazines, on its channels.

Most advertisers and media agencies are agreed that the BBC’s remit, rather than its funding mechanism, is likely to change as a result of charter review. As Jerry Hill, Initiative group chief executive for the UK and Ireland, says: “The debate is not about how we fund the BBC, but about what the BBC is. Funding is a secondary issue.”

But with the next General Election set to take place around the time of charter renewal in 2006, the Government may decide not to touch the BBC at all, taking heed of the warning issued at the ISBA conference last week by the corporation’s former chairman and current BT chairman Sir Christopher Bland – you change the BBC “at your peril”.

Advertisers and media owners will have to wait until the turn of the year, however, to discover whether they – or Bland – have been listened to. That is when the Department for Culture, Media and Sport is expected to publish a Green Paper on charter renewal.

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