From time to time it is suggested that taking advertising might be the answer to the ABC’s problems.  While it is possible that it might help the ABC financially, there is evidence is that advertising brings compromises with it.

And of course advertising is not free.  We all pay for the ABC through our taxes, and we all pay for commercial broadcasting when we buy a packet of OMO.

It is by no means certain that advertising would benefit the ABC financially.  The government might well decide to reduce funding to the ABC in line with advertising income, leaving the ABC with the same budget problems. Gordon Harcourt has described how in New Zealand the government, after it commericalised TVNZ, actually used it as a way of raising revenue for the government.  TVNZ ended up subsidising the government, but in the process abandoned its public service charter.[1]

Then there is the potential for advertisers to influence ABC programs.  This has been documented in the Australian Broadcasting Authority’s “Cash for Comment” investigation[2], and in the Australian Broadcasting Tribunal’s “Soap Suds Inquiry”.

However perhaps the strongest argument against running advertisements on the ABC is the need to ensure media diversity.  Media ownership is becoming increasingly concentrated in Australia, and the trend may continue if the cross media ownership rules are relaxed.  While the commercial mass media are controlled by a handful of companies a degree of diversity is guaranteed by the fact that Australia has three distinct broadcasting sectors, each with its own special characteristics, and its own funding model

The commercial sector exists by creating audiences, which it then sells to advertisers.  All other things being equal, larger audiences can be sold for more money than smaller audiences. 

In a situation where there are a limited number of channels this can bring into play the economic behavior known as The Principle of Minimum Differentiation. Professor Glenn Withers explains:

The reason for this is that stations based on advertising revenue will seek to maximize their audience (and thereby their revenue). Stations will therefore duplicate program types as long as the audience share obtained is greater than that from other programs. Hence a number of stations may compete by sharing a market for one type of program (such as crime dramas) and still do better in audience numbers than by providing programs of other types (such as arts and culture). In economics this point is an application of the Principle of Minimum Differentiation, a principle also capable of explaining such associated phenomenon as why bank branches may cluster together, why airline schedules may be parallel, and why political parties may have convergent policy platforms.[4]

However the two other broadcasting sectors, community broadcasting and public service broadcasting, are less likely to behave in this way.  By behaving differently, the different sectors provide competition and contribute to diversity.  But if they were all funded in the same way, by advertising, then all of them would be under pressure from the Principle of Minimum Differentiation.

The ABC is governed by its charter which requires it to provide specialist programs as well as programs of broad appeal.  It has to foster the arts, provide educational programs and broadcast parliament.

Community broadcasting serves small geographic communities, or specialist communities of interest including classical music and jazz listeners, migrant communities and religious organisations.  All of this looks like an excellent model for diversity.

But advertising has now intruded into both community and public service broadcasting.  Community TV is allowed seven minutes per hour, and community radio five minutes per hour. Now advertising revenue is addictive – once started, the broadcasters can’t stop.

 The community broadcasters want to run more advertising, and are campaigning to ease the existing restrictions. A detailed case study by Dr Kitty van Vuuren [5] concluded that those stations which received a large proportion of their income from advertising (like 2TEN, Tenterfield, which received 80% of its income from advertising) tended to take commercial radio as their model.

Meanwhile the SBS Board, which used to run advertising only at the head and tail of programs, is now interrupting programs with advertisements in order to increase advertising revenue.

A comparative study carried out by McKinsey and Company in 1999 concluded that those public service broadcasters  (like RAI in Italy) which relied on advertising for a  significant part of their funding have little to differentiate them from commercial channels, and offer little effective competition.  McKinsey and Co found:

Our survey shows clearly the potential dangers of this approach.  We have found evidence that the higher the advertising figures is as a proportion of total revenues, the less distinctive a public broadcasters is likely to be.[6]