Government should step back to allow the creative industries to flourish

The independent think tank Reform today publishes a collection of essays on the future of the creative industries. The book, "A creative recovery", features contributions from leading experts on media policy and a foreword by the Culture Secretary, Jeremy Hunt. An extended version of this essay appears in the book, which is available at www.reform.co.uk.

The UK is in a unique and strong position as the world of media and the creative industries continue to flourish, develop and morph into forms we can barely imagine today. The pace of change is dizzying: Facebook was established only seven years ago and Google a decade ago; indeed, the world wide web itself has been in existence barely 20 years. The creative industries in the UK will become even more important as Government seeks to rebalance the economy away from financial services, globalisation provides the threat of competition but the opportunity of new markets, and technology reduces costs for existing companies but also barriers to entry for competitors.

There are a number of threats that could jeopardise the UK’s position as the world moves on. Technology could entrench existing competitive advantages at the expense of innovation. Piracy continues to threaten investment in content. The movement of revenues away from the creation of content to its aggregation (think of Google) could endanger the supply of content, as could the fragmentation of revenue and the market as a whole as more content providers, TV channels and publishers fight for advertisers’ and consumers’ money.

Yet the UK has got this far, punching above its weight, and leading the world in quality of output and innovation in technology, content and revenue generation. How can the sector enshrine this competitive advantage in this brave new world, in the face of challenges domestic and foreign?

The economics have changed

Undoubtedly, the economics of the new media world require a big adjustment on the part of “old” media companies. Content distributed digitally will earn less than on traditional analogue platforms. Advertising revenues are split amongst more TV stations and indeed more platforms, fragmenting the money available for the creation of new content. Pay TV has rapidly increased in popularity but users are not inclined to pay for “commodity content” such as general news. The licence fee may be under threat from the Coalition Government.

At the same time, the world of content creation has been thrown open. Just a few short years ago this was the monopoly of an elite of companies in the media world; no more. Open sourcing, YouTube and the blogosphere mean that anyone can now create content and distribute it to a mass audience. Media companies must develop new business models to accommodate the new, open, competitive, cross-platform market, realising that this can in fact increase the consumption of media – and therefore, potentially, revenues.

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Adam Smith Institute paper argues for BBC to become a Pay-TV service

A new report from the Adam Smith Institute calls for the BBC to move to a voluntary subscription system for its income and give up its licence fee model.

Within the executive summary of the report, written by former BBC producer David Graham, the case against the existing licence fee model is summarised:

1. "It criminalises poor people.
2. It forces people to pay for genuinely “free” services funded by advertising.
3. It obliges the BBC to replicate a crude commercial model based on mass-audience advertising.
4. Universal broadband and the Internet make a “licence” to broadcast obsolete. On the other hand, they enable direct delivery of services outside the UK. The current funding model denies access to Britons and others resident overseas."

• "Subscription or Pay-TV is the medium’s largest and fastest growing revenue stream, and has the greatest ability to meet and “monetise” diverse tastes and preferences. Subscription services in the US have been responsible for some of the contemporary content most admired by professionals.
• Voluntary subscription (with some subsidy for core public service content) affords the opportunity to enhance ownership, involvement and participation. Nearly everyone in Britain watches or listens to BBC services every week. A large majority would be likely to subscribe."

Tom Clougherty, Executive Director of the Adam Smith Institute adds:

“The status quo will not be an option for the BBC for much longer. The licence fee is already an anachronism, and opposition will grow as technological advances and changing viewing preferences make it even more outdated. But most of the reforms on the agenda at the moment – like scaling back the BBC or sharing licence fee revenues with other broadcasters – risk stifling the potential of the British media. Our proposals, as well as addressing the unfairness of the current system, would set British broadcasters free to make a significant contribution to economic growth.“

A PDF of the full paper.

Abolish the Arts Council and allow consumers to decide which theatres and museums get funding

The Adam Smith Institute has today published a report that calls for the abolition of the Arts Council and, if taxpayer-funded arts spending is to be retained, voucherisation of the money it currently disburses.

The author of the report, David Rawcliffe, notes that the Arts Council apparatus costs £50m each year. He further notes that the Council tends to support projects that don't enjoy the support of average consumers. The Council's disbursements are also hugely unequal. For example, London receives £24/capita but East England only £2/capita.

Mr Rawcliffe makes the case for vouchers:

"A voucher system would focus subsidies on producing the sorts of arts with the greatest positive externalities. Those artists selected by a consumer-driven system are likely also those that would generate the most national pride, that would be enjoyed the most by the next generation, and that would attract the most tourists. As already argued, consumer-side subsidies encourage innovation."

Read a full PDF of his report.

Policy Exchange recommends privatisation of Channel 4 and a higher quality BBC

A new report from Policy Exchange recommends that the BBC focuses new and existing services on "quality and differentiation rather than reach". The author Mark Oliver urges the BBC to reduce spending on sports rights and programmes for the 16 to 35 year old market, in particular.

The report also calls for the privatisation of Channel 4 but that the proceeds largely stay with Channel 4 in order for it to sustain public service broadcasting (PSB).

There is also a suggestion that ITV be relieved of its PSB responsibilities from 2012 as it struggles to survive against more competition from the internet, satellite and cable.

More here.