The Media Ecosystem (early prototype)

Saturday, September 24, 2005

TV Media Consumption (A pure reference model for pricing)

Following on from the price charged by ITN for their news programming (1p/min) to be delivered over the internet, my thoughts led me to wonder how much we actually pay for TV through non-internet distribution?

Well, for most TV we can't calculate how much we pay, because it is heavily subsidised by the advertisers, revenues from the distributors, plus there is the opportunity cost of being subjected to advertising on commercial channels which is difficult to calculate.

However, there is at least one (almost pure) reference available for pure TV media consumption, the BBC in the UK. The BBC is funded by the public and is non-profit making, in fact it made a small loss last year but we will ignore that for the moment. Every household in the UK with a TV has to pay a license fee to view television. This is in effect a subscription for the BBC's TV, radio and website output. There is no advertising on BBC channels in the UK so there are no heavy advertising subsidies and demand for viewer attention.

So from the £121 (2004) license fee, approximately £95.76 goes towards TV. Based on the published figures for the number of hours the public watches BBC channels, the following figures fall out,

subscription price per person - 11.29p/hour

The BBC also earns money from commercial ventures; reselling media globally and providing services to the community across the production, publishing and distribution domains. This is approximately 25% of the BBC's income, so in effect commercial ventures subsidise the public output. If we consider these figures in the calculation and assume that the same % taken from the license fee to fund TV output is taken from commercial income to fund TV output, the figures are,

true price per person - 15.22p/hour

Of course I wouldn't be comparing like with like if I compared these prices with ITN's 60p per hour/person. They are a commercial news business and have a different cost model to the BBC which covers all genres. But what is clear is that they are charging 4x what the BBC charges for media delivered over more expensive distribution mechanisms. With ITN distributing over the internet, the pricing seems excessive, although time will tell, demand for ITN content will drive the price eventually. With the BBC, Sky News, CNN and the fledgling world of bottom-up journalism offering free media over the internet, it is difficult to see how ITN will compete against them, let alone compete against 24/7 news sources already available on TV 1.0, including their own.

Notes:
BBC financials BBC 2004/05 Annual Report.

License fee breakdown. The license fee goes towards television, radio, web site and interactive TV. The price of subscription used in the calculations takes only the portions attributed to TV and also tranmission and subscriptions costs for TV and radio.

A rough calculation of the average viewing of BBC channels is 7 hours per week per person. Source is BARB.

Figures based on 55.4m households and 2.33 persons per household.

2 Comments:

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    By Anonymous Anonymous, at 12:40 pm  

  • As usual Gordon makes a valid point regarding the true cost of media.

    It should , however be noted that the BBC licence fee is only obligatory if the viewer owns a TV set.... the radio and internet services are not subject to a requirement for a licence fee.... therefore the cost of the tv service is lower than first appears

    By Anonymous Paul Hastings, at 1:41 am  

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