Keeping Baywatch at Bay

By Blake, Adrian D.; Lovegrove, Nicholas C. et al. | The McKinsey Quarterly, Autumn 1999 | Go to article overview

Keeping Baywatch at Bay

Blake, Adrian D., Lovegrove, Nicholas C., Pryde, Alexandra, Strauss, Toby, The McKinsey Quarterly

Can public-service broadcasters fulfill their mission in today's deregulated television environment? The answer, for the time being, is yes.

Most of today's public-service television broadcasters began life as state-owned monopolies. At the time, few viewers disputed their right to exist, though some lamented the lack of alternatives. But today, as governments deregulate broadcasting markets and commercial channels proliferate, one question demands to be asked: are public-service broadcasters (PSBs) an anachronism? The answer is no; PSBs can play a legitimate role in the contemporary market, both as competitors of their commercial counterparts and as programmers exercising influence well beyond their own market share.

Television broadcasting was originally placed in public hands because it has the power to shape the way people view the world. To constrain that power, governments developed mission statements committing broadcasters to use it in a socially constructive manner. This approach might seem outdated to many sophisticated people today. Nonetheless, most governments still want their broadcasters to maintain high standards.

The mission statement of the BBC (United Kingdom), for example, declares that its programs should "inform, educate, entertain, and enrich the lives of audiences in ways which the market alone will not; bring people together for moments of celebration, common experience, and in times of crisis; and help broaden people's horizons." Almost all PSBs have something similar, aiming to air a broad range of high-quality programs that are unbiased, meet accepted standards of taste and decency, educate and inform viewers, and promote national cohesion.

Can PSBs achieve such goals in the era of deregulation? Many people assume that popular demand for the sports and light-entertainment programs most commercial broadcasters serve up to the viewing public means that PSBs must either air worthy programming watched only by a small minority or abandon their values and chase market share instead. In either case, a PSB would no longer be able to fulfill its stated purpose. However, a McKinsey study of 20 state broadcasters around the world shows that this fate is not inevitable. [1] All PSBs have lost market share since deregulation, but several have stemmed those losses and remain market leaders, without abandoning high-quality, distinctive programs. [2] Examples include ARD and ZDF (Germany), SVT (Sweden), and the BBC.

Perhaps more important, some PSBs have maintained their influence on the overall development of television by inducing their commercial competitors to offer equally distinctive programs. In effect, PSBs can and do act as regulators of the television industry as a whole.

Two kinds of regulation

Governments have two ways of influencing a nation's television diet. The first is direct regulation: preventing broadcasters from showing programs that offend certain sections of the community or requiring broadcasters to air a broad range of material, including a certain number of news and educational programs.

Most markets have some kind of direct regulation. In the United States, the Federal Communications Commission (FCC) has issued rules banning profanity, nudity, and disrespectful images of minority groups on television. The FCC also requires each television station to broadcast a small percentage of educational programs and community affairs programs. Unfortunately, commercial broadcasters have no incentive to produce or acquire culturally enriching programs beyond that minimum or to air them at times when very large numbers of people are watching.

A government's second means of influence is the PSB itself. Consider the case of Sweden. Commercial terrestrial competition began in 1991, and, not surprisingly, new competitors such as TV3 and TV4 quickly gained market share. But SVT gets its funds from a license fee (a fixed fee charged to every home with a television), so this development did not immediately affect its budget or weaken its commitment to distinctive programming. …

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