“There’s a seeker born every minute”

Michael Hedges October 13, 2008

A generation ago, in the pre-digital age, the comedy troupe Firesign Theater released an album titled “Everything You Know Is Wrong.” And here we are in what will be the digital century wondering what is next. Once governments bail out banks, airlines, auto makers and other billionaires, we’re next, right?

ITV CEO Michael Grade is fighting “the nostalgia of those who wish that commercial broadcasters still had the freedom – and the deep pockets – to cover the same canvas as they did 30 years ago.”  He made that comment at the RTS Patron Breakfast (October 8), reflecting on UK regulator OFCOM’s most recent review of public service broadcasting. There’s a lot of nostalgia going around these days, mostly for the time when newspapers sold for a penny and there was no TV.

Craving nostalgia knows no boundaries. The French President – M. Sarkozy – convened a high level consultation this month on the “crisis” in the French newspaper business.  It is a crisis when free sheets and the Web take all the eyeballs. Off with their heads! French taxpayers already subsidize the national newspapers to the tune of €280 million. Add to that the hundreds of millions supporting a public broadcasting system.

World Editors Forum director Bertrand Pecquerie, writing in Le Monde (October 6), warns of the State becoming “Zorro - savior of the press.” His honest appraisal could be as appropriate for the audiovisual sector as it is for newspapers. And it is fundamental, he says. “The very idea of a State that reshapes the newspaper industry is absurd.”

To the outrage of many, President Sarkozy set about 20 months ago to reshape French broadcasting. It’s a zero-sum plan in a world where sums are zeroing out. Eliminating advertising from public television – and restructuring all public broadcasting under one body – would, said some, boost the fortunes of commercial television. French public broadcasting would then become a permanent ward of the State and commercial TV would become richer. The simple plan gave little consideration to the viewers and listeners who have become quite agile at finding what they want from media, how they want it and when they want it. Ad spending continues to chase real people.

Pecquerie points to factors that hinder French newspapers, bleeding red ink as freesheets Metro and 20 Minutes pass them by. All would be better, he suggests, if TF1 could buy a newspaper or two and become big like, say, Bertelsmann/RTL. The screaming would never end if Bertelsmann or Ringier or Axel Springer bought up a few French national newspapers.

Digital media – particularly digital radio - provides a painful metaphor for post-convergence media. Born in the laboratory, digital media was a cure for which there were no known diseases. In the middle of the last decade of the last century this was common as lavish sums were invested in digital inventions. Symptomatic was the belief that consumers would pay, one way or another, for more of the same on a new platform that could be sold Procter & Gamble style as new and improved.

Digital media would, then, provide competitive advantage to content producers. A premium for advertising could be extracted or a premium fee. And, as added incentive, listeners and viewers would be forced to buy new reception devices. There it is: a 25 second elevator pitch. Venture funds, hedge funds, investment banks and others with significant borrowing capacities stumped up for the digital revolution, banking less on present or even future value and more on fees generated from placing money so highly leveraged it, too, had little basis in reality. The money to be made would come first from hypochondriac broadcasters.

It has been Gresham’s Ride; bad money driving out good, and with it all pretense of value. British economist Thomas Gresham, a mere 500 years ago, observed that the practice of shaving a bit off the coin of the realm devalued all currency. Et VOILA! The aforementioned financial institutions, safely deregulated, returned to those roots trading fast and furiously with derivative instruments that were, as we’ve seen in the last month, void of value.

Governments, too, were party to the party. Replacing analogue media with digital offered up an opportunity for governments to auction radio spectrum at stratospheric sums. Bidders had no idea if returns would ever be met. It didn’t matter because it was easy to finance.  

In the UK last week Channel 4 (C4), the government owned but commercially funded broadcaster, gave up part of its digital radio investment. It would not develop three national digital radio channels. C4 is the majority shareholder in the 4 Digital multiplex, what was to be the 2nd national DAB platform. It hasn’t been constructed. A week earlier (October 3) the 4 Digital shareholders met to find its fate. All parties walked away. 

Several broadcasters have deserted the other national DAB multiplex Digital One finding digital-only channels a failed gamble, the curse of the spreadsheet bleeding bright, annual access fees being around £1 million. The UK regulator OFCOM, one of the most aggressive spectrum auctioneers, said it recognizes the challenging economic environment. C4 itself is facing financial peril, one of the reasons it’s bailing from digital radio. OFCOM has suggested infusing it with cash from the BBC’s commercial arm, BBC Worldwide. OFCOM’s Chief Executive Ed Richards also floated the ‘public service publisher’ idea to inject money into the print sector. My late father had a term for this: infracaninelitis – the sickness of cheering for the underdog.

Several local digital-only radio channels have made a go of it, obviously not paying the same transmission fees. Mostly these are high niche-value stations, able to clear their way in territory outside traditional media buying. This is not work for the faint hearted, and that would not include most of the big-time UK broadcasters.

French regulator CSA published this week (October 6) the list of 358 applications for digital radio licenses. The CSA has spent two years reworking FM frequencies, allowing very few new channels. Digital radio would give French listeners more choice. There were 65 applications for frequencies in Paris alone. 

But more choice is a fleeting advantage. As the ‘long tail’ extends further and further, the attraction for media buyers approaches nil. Consumers may like it all, at least the early adopters willing to stump up for access. Advertisers still – and forever – want bulk…audience, that is. In the absence of bulk, cheap will suffice.

One of the reasons suggested by observers in France that the CSA finally moved on digital radio was pressure from broadcasters witnessing measurable growth of internet radio. Many in traditional media are nostalgic for the days before the Web and anything else enabling free access. But free access is exactly what the public wants. What we have here is a fundamental disconnect on value.

Choice is a concern of WEF’s Bernard Pecquerie, noting that French publishers have added no new titles this decade. “There are 350 newspapers in Germany against 80 in France, the same as Sweden, a country seven times smaller.” Actually, publishers have added new titles in France, free sheets Metro and 20 Minutes. He also noted that visits to the UK Guardian website exceed visits to the websites of all ten French national dailies combined.

Choice, obviously, falls to perceived value. Hence, Google – the internet, metaphorically – gets all the ad money. Government leaders over the last few days have overcome the gag reflex injecting funds directly into their financial systems. Traditional media is no less at risk, both the public and governments ascribing value to its survival, each on their own terms.

Mr. Grade’s threats to return ITV’s public service remit in return for the safety and security of the marketplace should be taken seriously. Rather than accept that fate, the UK government could – at terms similar to bank bailouts – stump up, say, £1 billion in direct aid to the sector. Bail ‘em out, Ed. Take some of that cash from a ‘white space’ auction. That might mean not taking phone calls from EU Competition Commissioner Neelie Kroes for two or three years but, well, these are extraordinary times.

“I was right about the comet.”

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