Untimely demise of ad-funded public service programming

So, farewell, TV advertising. For almost 50 years, the 30-second ad has funded a full range of high-quality public service broadcasting (PSB) in the UK. It was a remarkable achievement, harnessing ad revenue for public purposes – in stark contrast to the US model – and now its days are numbered.

So says Ofcom in its blueprint for PSB as we move into the digital age. The system that gave us advertising-funded news, current affairs, documentaries, drama, arts and religion – as a public good, in return for access to scarce analogue spectrum – can no longer be relied upon to provide such programmes.

Bob Iger believes the advertising model is under great strain too. The president and chief operating officer of The Walt Disney Company was in London last week to address the Royal Television Society. “The old world order of television is gone,” he said. “We have entered a brave new world, where the rules of yesterday no longer apply, and the future, though exciting, is uncertain. New technologies may result in changes to the business model of even the most well-established businesses. I am referring to personal video recorders and the potential threat these devices pose to the 30-second commercial.”

Some might say the threat is not merely potential and predates the arrival of PVRs. In millions of multichannel homes, viewers zap from channel to channel during the commercial break to find something better. But Iger believes the PVR could prove the final straw for traditional TV advertising.

“In the US, we believe penetration may reach as many as 50 million homes by 2008. When skipping through commercials becomes a habit that reaches critical mass, broadcasters will have to adapt. And although we’ve yet to develop an advertising alternative to the 30-second commercial, we expect sponsorship and product placement to increase over the next several years.”

He said he was no fan of product placement. “It’s not the silver bullet that will replace the commercial. But ABC has had 140 product placement deals this season and I don’t think it’s necessarily a pressure on programme-makers.” He said he’d be surprised if the regulations weren’t lifted in the UK at some point.

If Ofcom has anything to do with it – which of course it does – that relaxation could come sooner rather than later. For Ofcom, like Iger, believes the current advertising business model will not survive the move to the digital age. And sponsorship – once one of the great taboos of British broadcasting – is everywhere.

The Ofcom report welcomes the fierce competition in the TV market but says this creates challenges for PSB: “The value of ITV’s broadcasting licence is declining and, by digital switchover, revenues from analogue TV advertising will not cover the cost of its existing PSB obligations. Channel 4 will face pressure to substitute more commercial programmes for its current PSB programming in order to earn sufficient revenues to cover costs.”

Ofcom’s answer is to let them off the hook. That at least is the view of the National Union of Journalists.

“Plans to shake up public broadcasting are a device to let commercial broadcasters dodge their commitments to quality programming” the NUJ said in a statement. It would be an “absolute disaster” if ITV were allowed to cut its regional programming, as Ofcom proposed.

In fact, though Ofcom does recommend cutting ITV’s non-news regional output, it’s maintaining the news and current affairs quotas. And though it’s moving away from “hard quotas” on arts, children’s and religious programming, it says these are important programming areas for ITV1’s public service character and it will assess them closely. Whether that succeeds in keeping the output up to the mark remains to be seen.

Ofcom also has a dig at Channel 4, which has been criticised for its devotion to Big Brother and American dramas and comedies. “We expect Channel 4 to use its considerable financial resources to ensure it maintains a sharper focus on its public purposes, as set out in the Communications Act.” Yet the most open acknowledgment that an advertising-funded Channel 4 will be less able to fulfil its “public purposes” lies in Ofcom’s “big idea” – a new public service publisher (PSP) to challenge the BBC, possibly through a &£300m TV channel running for three hours a night. This would be publicly funded, either from tax revenues, or an “enhanced” licence fee, or a special tax on UK broadcasters.

Ofcom says the PSP should not supplement this income with advertising. Ruling out advertising “would enable the winning bidder to have revenue certainty and minimise the incentive to produce content that appeals to advertisers rather than to a broad audience. Without advertising, there would also be fewer concerns about the PSP competing against existing broadcasters for advertising.”

So make the most of it next year, when ITV celebrates the 50th anniversary of ad-funded public service broadcasting. It’s had its day.

Torin Douglas is media correspondent on BBC News