Brand BBC’s Billion Pound Bonus

Michael Hedges July 24, 2008

Timidity was long ago erased from the BBC stylebook. No universal brand reaches that pinnacle without occasionally reminding lesser mortals of the scale of things. Competitors scoff at their peril.

Onto the scared and bleeding UK commercial media, not to forget neo-Thatcherite politicians, the BBC Trust poured the course salt of a big time consultants report with the less than subtle conclusion that wounding the BBC would have enormous economic consequences on the UK’s creative sector. Pricewaterhouse Coopers (PwC) determined that the BBC effectively doubles UK license fee payer’s investment. The PwC review provides a textbook example of brand leadership in action. 

Enumerated in the 196 page “Economic impact of the BBC on the UK creative economy” are four primary points consistent with those found in the brand development and marketing literature. The BBC’s “significant and stable” investment in creative and content production industries makes it the driver of those industries. The BBC is the de facto training and proving ground for the broadcast sector. The BBC has taken a leadership position in “stimulating consumer demand for new technologies and platforms.” To top it off, BBC investment stimulates regional development outside London; through employment and creating a “critical mass to attract other firms.”

But the bottom line is an economic impact exceeding investment. Says the PwC report; “BBC’s spending on creative activities contributes a gross value add (GVA) of around £5 billion (€6.33 billion) per year to the UK economy. If we add in the BBC’s expenditure on overheads and infrastructure, the total GVA of the BBC increases to around £6.5 billion (€8.2 billion). Owing to the BBC’s funding mechanism, much of this GVA is additive to the creative sector rather than at the expense of other broadcasters operating in the sector.”

The intention, also not so subtle, is to fortify the BBC’s position that the “stable” funding regime must not be tampered with. The license fee must last forever and sharing it with other broadcasters will only diminish the BBC’s ability to contribute to the UK creative sector. Sending a “top slice” to commercial broadcasters will only aid the whinging shareholders.

PwC did find a couple of negative economic consequences. It seems that TV and radio audience is a rather zero-sum affair. BBC programs and channels do take listeners and viewers from commercial outlets limiting, perhaps, their ad sales. Technical innovations – from Freeview to DAB – may cause commercial competitors to stumble.

Any brand approaching or exceeding the BBC’s strength will cause a potential competitor to think long and hard before investing in comparable products or services. Is this a problem? If it is, who is it a problem for? Certainly not the BBC license fee payers.

The BBC has done an excellent job at framing the UK debate on PSB funding and mission. The PwC report was a mortar round intended to encourage the fleeing miscreants to keep running. The reality is that commercial broadcasters in the UK have become cornered rats. If the BBC were a lesser competitor the game might be different. So the game is to be very, very small. This week GCap Media, soon to be consolidated into Global Media, shed 200 employees…probably to pay the last OFCOM fine.

Unfortunately for public broadcasting supporters the BBC’s operating and funding model, not to forget independence and transparency, is unique in Europe… and the rest of the world. For all of those reasons the BBC over three generations has become a universal brand. It’s global brand strength rivals Disney. As such it has freely entered the new media world.

At a Strasbourg conference last week on public service broadcasting EC Competition Commissioner Neelie Kroes held up the BBC as the best-case example of a public broadcaster succeeding in its public service mission. The Commission is resolutely neutral on public broadcast financing. Commissioner Kroes is rather steely on State aid.

The European Commission is in the process of modernizing the Broadcasting Communication, its guidelines for public broadcasters. New media services are the flash point.  Commercial broadcasters as well as publishers are very concerned that websites and mobile content from the PSBs provides a barrier to market entry, unfair competition. “Is, for example, public funding of chat rooms and online dating clubs going too far?” asked Commissioner Kroes.

None of that deters UK commercial broadcasters from the deeply held desire to bring the BBC to heel. Politicians, universally determined to bring all media to heel, want nothing more than to control the flow of political spoils, typically tax money. None of the critics seem to grasp the task.

The PwC audit looked solely at economic impact within the UK. Not considered was the BBC World Service nor commercial arm BBC Worldwide. These two adjuncts are either self-financed (BBC Worldwide) or financed through direct funding from the Foreign and Commonwealth Office. But both are undeniable contributors to the BBC’s global brand strength.

Ultimately the winging about the BBC – from mission to funding – must end on the realization that it’s not simply TV and radio channels any more than Google is simply a search engine. The giant question is whether or not UK taxpayers want to continue paying for it. Indications are that they do…the alternative being out of the question.

For the rest of Europe’s public broadcasters the challenge is even more formidable. Holding out brand BBC as a guide is a bit difficult to indulge.   They cannot now indulge the belief that brand BBC can be held out as a guide. Scale differentiates.

The BBC has long brandished the argument that the UK license fee payer holds it in a high level of trust. Survey after survey has documented this to pitying detail. Trust is, among students of the brand phenomenon, the single most important indicator of strength. Next most important is attachment. One flows to and from the other.

Public broadcasting’s future is hardly threatened. European Union treaties obligate Member States to organize and fund a public service broadcaster. Paying for it, subject to the caveat of State aid rules, is up to the Member States. A mission for public service broadcasting has, until recently, been left at “we’ll know it when we see it.” Such is the power of incumbency. In name at least public broadcasters were State agencies and remain considered such by the public. The EC has also enshrined, conceptually, the notion of independence in public broadcasting. Such concepts are words easily mouthed. The BBC – almost uniquely – has made independence its hallmark. The BBC Trust is, in its organizational structure, an edifying institution.

In a decision this week (July 22) the BBC Trust ruled that the BBC will “no longer accept sponsorship from commercial bodies for any on-air BBC event.” Commercial broadcasters complained that a 2007 sponsorship ventured over the line into advertising and the BBC Trust concurred. Independence from advertising influence, or the appearance thereof, is as important as independence from political influence.

“The Trust has concluded that several of the editorial guidelines were breached and the editorial integrity of the BBC compromised by giving the impression to license fee payers via Sports Personality of the Year that part of a BBC service had been sponsored,” said a BBC Trust statement. “UK audiences expect to receive BBC programmes that are free of advertising and wholly impartial. Anything that creates an impression that a programme may be sponsored is wrong and contrary to the BBC’s editorial guidelines.”

Most other PSBs “accept” advertising, sponsorships and almost anything else to augment funding. Many have elaborate sales and marketing operations. Again, the EC takes no position on a PSBs funding model. Commissioner Kroes, however, demands “proportionality” and a clear separation between public service and commercial activities. Revision of the Broadcasting Communication is meant to clarify that separation.

Most commercial media have given up screaming for an end to public broadcasting, although many continue to harp for “ghettoizing” PSBs into culture, education and – where not commercially viable – news and public affairs programming. New media activities are a particular target, not that commercial media has made much money there. The PSBs give it all away (or most of it) for free, making commercial media people crazy.  

The BBC’s UK critics seem to see only a rational benefit accruing from simple zero-sum thinking. Hobbling the BBC – cutting it down in size - would not benefit UK listeners and viewers. Less is, of course, less. The UK’s commercial broadcasters would only be inclined to do less, give less, produce less. If any benefit is to flow from the counterfactual argument it’s further empowering the regulator, OFCOM. A commercial media sector unencumbered by the presence of its nemesis would require far more inspectors.