The License Fee Lives. Long Live the License Fee.

Michael Hedges - April 27, 2007

Europe’s public broadcasters breathed a sigh of relief this week as the final challenge to the radio and TV license fee has, possibly, been closed. European Commission competition commissioner Neelie Kroes ended an investigation into German public broadcasters ARD and ZDF and the use of public money. Commissioner Kroes accepted the German governments plan to revise PBS finance rules.

Belying the question of public broadcasters independence from governments, it was the German government that negotiated the settlement with the European Commission. Limits will be set on how ARD and ZDF can use license fee money; spending on sports limited to 10% of the license fee money, transparency “improved,” expansion into new media unfettered. A special committee within the German government will insure compliance within two years.

“I am pleased that the cooperation between Germany and the Commission has finally resulted in an agreement on a future financing regime which ensures compliance with EU state aid rules,” said Commissioner Kroes in a public statement. “The new regime will allow broadcasters to fulfill their public service mission in the new media environment, while at the same time limiting public funding to what is really necessary and avoiding adverse effects on competition.”

The European Commission has never mandated specific funding regimes for public sector broadcasters in Member States, only that some sort of funding system for public service broadcasting is in place. Most European PSBs are funded through a mix of advertising and license fee tax on households. Public TV broadcasters ARD and ZDF receive €7.1 billion from the license fee. Under EC DG Competition rules State aid (i.e. tax money) must not be used for commercial purposes.

The European Commission’s general trend toward market liberalization includes hard rules making State funding that distorts or interferes with competition with the private sector illegal. This keeps most countries out of the coal mining business. But not out of the public services. Private broadcasters argue that they are essentially in the mining business, audience mining, and the State should get out. Any State sponsored and funded broadcast activity – outside the cultural and educational sphere – distorts and interferes with competition, they say.

Well, the argument had never worked.

Sports broadcasts and acquiring the requisite rights keep broadcasters, public and private, awake night after night. Public broadcasters must bid on sports rights along with private, commercial competitors. Broadcasting events and programs of “national interest” – free-to-air - is clearly within the PSB mandate. Events of “national interest” include, logically, major sports.

ARD was charged with buying new media sports rights then not offering the sports content through their new media channels, effectively keeping any other broadcaster from making a similar offer. That practice will likely end; a token gesture, at best.

Private, commercial broadcasters have always challenged this on grounds of competitive interference. Ad spending for sports is astronomical. For the recent World Cup in Germany, advertisers spent upwards of €750 million. Moreover, sports programming is a branding device beyond comparison.

Moreover, PSB ad revenue falls outside the rather porous EC rules on State aid and commercial activities. So when German PSBs rushed into advertising-enabled internet and mobile telephone services for the 2006 World Cup, private sector broadcasters went ballistic, saying the PSBs were unfairly spending on services that could be offered by private sector ventures. Private sector broadcasters have argued, unsuccessfully in most cases, that new media should be outside the PSBs remit as it is, technically, not “radio” or “television.”

What the private sector broadcasters failed to recognize is that everybody else recognized that the pubic sector was doing all the investing in new media. The private sector dragged its feet, against the continuing myth that it champions innovation. Recent history shows the consistent failure of the private sector to invest in digital and new media until an instant revenue stream becomes clear, DAB resistance the most obvious example. 

German private sector broadcasters through their trade body VPRT appealed to the European Commission in 2005 for a ruling to prohibit ARD and ZDF from using license fee funds, considered public money, for commercial, therefore competitive, purposes. Private sector broadcasters in France, Spain and Italy have gone the same route with the same effect.

“It’s a blank cheque,” remised German private broadcasters association (VPRT) president Jürgen Doetz, admitting the obvious. And he suggested the next step would be an appeal to the European Court of Justice. As the European Commission closes this investigation, albeit with demands placed on the German PSBs, any fight between public and private broadcasters over mandates and funding will now be local and based on local issues.

The European Commission has solidified unwavering support for public broadcasting. European politicians – en masse – will never be entirely comfortable with uncontrollable private sector media. Rupert Murdoch, eternal poster-boy for private media, makes their case every day. (see Murdoch's recent pronouncements here).

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