Academic journal article Journal of Broadcasting & Electronic Media

Program Choices of Multichannel Broadcasters and Diversity of Program Supply in the Netherlands

Academic journal article Journal of Broadcasting & Electronic Media

Program Choices of Multichannel Broadcasters and Diversity of Program Supply in the Netherlands

Article excerpt

Since the liberalization of the television market in The Netherlands in the late 1980s, the number of general-interest channels in this market has increased from two to nine channels. Previously, we have shown that this increase in channel numbers was first accompanied by an increase and subsequently by a decline in (reflective) program type diversity (Van der Wurff & Van Cuilenburg, 2001). To explain these findings, we have proposed that limited increases in channel numbers stimulate broadcasters to differentiate their programs, while further increases force broadcasters to reduce costs and provide similar low cost programs. We referred to the former competitive situation as moderate competition, and to the latter as ruinous competition.

Following up on this previous study and using the same data set, this paper puts our tentative explanation to an empirical test. It uses program choice theory to elaborate our earlier argument in a number of testable hypotheses. It investigates whether the competitive behavior of broadcasters changed from "moderate" to "ruinous" when the number of channels increased. It adds two important market structural variables to this analysis, whose influence on competitive behavior should not be neglected--namely, concentration of channel ownership and the shifting balance between public and commercial channels. Finally, it assesses whether changes in competitive behavior explain the observed increase and subsequent decline of diversity in the Dutch market.

The Dutch Television Market

Like our previous study, this study focuses on the market for advertiser-supported, general-interest television channels in the Netherlands from January 1988 to June 1999. The Dutch television market is a mid-sized European television market with (in 1999) 15.7 million inhabitants, 6.7 million households, and 90% cable penetration (CBS, n.d.; OECD, 2001). At the end of the 1990s, it counted a relatively high number of channels (in comparison with its size and other European countries). These included 3 public and 6 commercial general-interest channels, approximately 10 (mostly foreign) theme channels (such as CNN), several regional and local channels, and a number of foreign (public) channels that do not target but nevertheless can be received in the Netherlands (e.g., BBC1).

Most commercial channels are funded by advertising revenues; pay-TV channels play a negligible role in the Dutch market. Public channels are primarily funded by public revenues (in 1996 for 69% of total revenues; European Audiovisual Observatory, 2000), (1) in exchange for the obligation to provide minimum proportions of cultural, educational, informative, and European programs. Regardless of these public funds, public channels compete head-on with commercial channels for audiences in order to maintain political legitimacy and to increase advertising revenues, which in 1996 made up 23% of public broadcasters' revenues (European Audiovisual Observatory, 2000). The Dutch market, therefore, offers a good case to investigate how competition influences diversity on advertiser-supported broadcasting markets.

Diversity

Program-type diversity is an important dimension of television market performance (McQuail, 1992; Owen & Wildman, 1992). To evaluate whether television markets perform well on this dimension, we use two indicators that express two complementary notions of what constitutes optimal diversity.

Reflective diversity measures the extent to which different program types are broadcasted in the same proportions, as they are demanded by audiences. It reflects the economic norm that supply should match demand. Open diversity measures the extent to which different program types are broadcasted in uniform proportions. It reflects the communication norm that media should be thought-provoking and objective. Since open and reflective diversity are equally important but not compatible indicators, we proposed that markets perform better when both open and reflective diversity are relatively high (Van der Wurff & Van Cuilenburg, 2001). …

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