Old ways of seeing things cloud the future of television

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Every business tells you that its economics is unique, and it’s rarely true. But for television in the twentieth century, it was true. But today this is no longer the case and like in any other market, people pay for what they want and show great diversity in what they do want.

Every business tells you that its economics is unique and it is rarely true. But for television in the twentieth century, it was true. First, only a small number of products could be on sale simultaneously. The only way of delivering programmes to homes was to fill the airwaves and spectrum was scarce. Second, despite the product’s desirability, there was no way to make consumers pay for it.

One solution was to fund television by taxes and in most of the world state broadcasting was the norm. With intrusive state control, the result was the mind-numbing output East German bureaucrats thought would be uplifting for socialist workers. With arm’s length state control, programme makers, unfettered by the market, could produce programmes they wanted to make with little regard to whether they were programmes anyone wanted to see. This led to the pretentious piffle that is still part of French state broadcasting, but also the best television programmes ever made – timeless dramas, comedies and fine investigative journalism.

Another solution was to allow some broadcast time to be occupied by people who wanted to harangue large audiences on condition these people agreed to finance the whole output. So religious zealots, political ideologues, vain but rich men, and companies wanting to sell toothpaste all acquired a role in commercial television. The toothpaste sellers, so harmless, were the most popular.

If it costs £50,000 to produce an hour of programming, you can recover that expenditure by raising a penny from 5m people or a pound from 50,000. The trouble is that even a penny per household is a lot to pay for an opportunity to describe the merits of your toothpaste. The peculiar economics of twentieth century television, dependent on toothpaste advertising or tax finance, could exploit only that first option. Commercial programme makers were obliged to make programmes that large numbers of people wanted to watch. State programme makers needed to compete for ratings to justify tax funding of their activities.

The outcome seemed to demonstrate that competition reduces quality and the output of private producers is worse than that of state producers. But experience of other markets is the opposite. Fords were better than Ladas, Fedex more reliable than US Mail and the complaint about private education or health is not that it is inferior but that it is elitist. The converse was true in broadcasting only because the economics of broadcasting was unique.

But the economics of broadcasting is no longer unique. You can receive data from satellites, along cables and telephone lines, on discs and USB keys. These advances mean you can charge for signals on screens as you can for any other product. Cyberspace is filled with multiple messages and we are no longer dependent on the munificence of either governments or toothpaste manufacturers.

However, as Keynes observed, few people acquire new ideas after the age of 30 and public and business policy is dominated by those who were 30 some time ago, when the economics of broadcasting was very different. Programme makers still believe that successful television demands a mass audience rather than a high paying one. They cling to the concept of a channel, in which the nation sits down and collectively watches what a benevolent state, or a shrewd marketing man, has chosen for them. Policymakers continue to believe that regulation, not competition, is the guardian of quality.

But the future belongs to BSkyB chief executive James Murdoch, 30 in 2002, not incoming ITV executive chairman Michael Grade, 30 in 1973. In other markets, people pay for what they want and show great diversity in what they do want. The key insight is that £50,000 can be 5m pennies or 50,000 pounds. It now costs much the same to produce and disseminate a television series as to write, print and disseminate a book that takes the same time to read. Eventually, programme libraries will be as extensive and varied as book libraries.

However, old institutions and old ideas will continue to get in the way. In leaving the BBC for a commercial company, Michael Grade has dismounted the elephant in the room to climb on to the dead horse.

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