‘Public Interests and Competition in Broadcasting’
May 14, 2015 Leave a comment
The CCP seminar series continues on Friday 15th May when we are delighted to welcome our distinguished guest, Paul de Bijl (Radicand Economics & WHU Otto Beisheim School of Management), presenting his paper entitled ‘Public Interests and Competition in Broadcasting‘. The seminar takes place from 13:00-14:00 in the Thomas Paine Study Centre, Room 0.1. An abstract for Paul’s paper can be found below.
In many countries, the government intervenes in the provision of broadcasting services. For instance, the government may subsidize a provider of public service broadcasting. By doing so, it aims at addressing certain societal needs, or targets specific groups of listeners and viewers. The typical reason why the government steps in is that “the market fails” (although paternalism may also play a role). In some countries in Europe, such as Germany and the Netherlands, the government subsidy is not sufficient to cover the cost of public broadcasting. In order to generate revenues of its own, the public channel may then be allowed to sell advertising space. To make this work, the public channel’s programming typically has to include content that attracts a significant mass of viewers — otherwise the advertising revenues would not have enough substance. A direct consequence of watering down the public programming is that it undermines the public task, which was the reason for public intervention in the first place. In addition, the public channel starts behaving more like a commercial broadcaster. Thus, an indirect consequence of a mixed way of financing may be that it distorts competition in the market for commercial programming.
The paper (which is work in progress) analyzes a model of a mixed broadcasting market. I construct a simple model with one public broadcaster and two commercial broadcasters. The government maximizes social welfare by choosing the level of the subsidy for the public broadcaster. In response, the public broadcaster chooses the fraction of airtime devoted to commercial content. To the extent that the public broadcaster dilutes its public programming, it competes with the commercial broadcasters in the market for “regular” content. In a situation where there is a shadow cost of raising public funds through taxation, I look for the optimal subsidy level to finance public interest content, and will explore how this affects competition. In addition, I will incorporate “political economy” considerations that help to explain why the government may have strong incentives to avoid subsidizing public interest content.