Measuring Success at the BBC
James Thickett Controller – Business Strategy, BBC 21st June 2004
Slide 1
Measuring Success at the BBC
Measuring the impact of broadcasting in the UK Why is the BBC different? Measuring success at the BBC
Slide 2
Measuring the impact of broadcasting in the UK
Slide 3
Broadcasting’s role in people’s lives is much bigger than it’s economic significance
35% 30% 25% 20% 15% 10% 5% 1.8% 0% % of time spent on broadcast media
Source: WWP Media imperatives
29%
% of money spent on broadcast media
Slide 4
Consumption of television, radio and online vastly outstrips other leisure activities
30 25 20 15 10 5 0 Television Radio Online Newspapers Magazines
Slide 5
Source: Screen Digest/ABN Ambro
28 23 Weekly hours consumed
3 0.5 0.3
… and revenues generated by broadcasting are modest by comparisons with other markets
60 50 50 40
£ billions
30 20 10 0
Telecoms
Source: Screen Digest/ABN Ambro/Zenith
8 2
Television Radio
Slide 6
Measuring the impact of commercial broadcasters is relatively straightforward
£3.2 bn
Subscriptions Advertising Other
£2.5 bn £1.66 bn
£1.46 bn £0.36 bn £0.2 bn
Sky
Source:Zenith/Broker Reports
£0.1 bn
ITV
Slide 7
Why is the BBC different?
Slide 8
Last year the BBC raised nearly £3 billion in revenue but this is not a useful indicator of value
The majority of BBC Revenues accrue from the licence fee – a compulsory tax levied on all households with television sets
The licence fee is set by government – not by consumer demand
The licence fee is non-discriminatory – bears no relation to consumption of services or ability to pay
Slide 9
Even if the BBC was funded differently, its unique remit would create significant measurement problems
Reithian purposes – to “inform, educate and entertain” Delivering value to citizens as well as individuals
Democratic value Cultural value Educational value Social value Global value
These deliver “externalities” which are hard to measure
Slide 10
ITV measures it’s public service remit by estimating forgone revenues
£2.0bn
ITV Public service programmes
£ 0.4bn
Foregone revenues for showing public service content
Regional news South Bank Show Tonight with Trevor McDonald Real Crime Jonathan Dimbleby Prince William at 21 My Favourite Hymns
ITV
Slide 11 £1.6bn
Actual Revenues
Measuring Success at the BBC
Slide 12
Two possible approaches to measuring success at the BBC
Revealed preference – how much people actually consume
Stated preference – what they actually value
Slide 13
Every week 93% of the UK population engage with BBC services
93% 88%
Weekly Reach (%) 2004
63% 43%
All BBC*
All BBC TV
BBC Radio
BBC Online^
Source: TV - BARB age 4+, 15 minute weekly reach, Radio - RAJAR age 15+. Data for 2003 unless otherwise stated. * Television and radio only. **In digital only homes. ^ In online homes (monthly reach).
Slide 14
…and the BBC accounts for 43% of all television and radio consumption
Every week the average person spends 11 hours watching BBC Television programmes and 12 hours listening to BBC radio
30 25
Weekly hours consumed
28 23 All BBC
20 15
38%
11
53%
12
10 5 0 Television
Source:BARB/RAJAR estimates
Radio
Slide 15
…but problems with revealed preference measures
Reach and share measures difficult to put a value on – there is no common currency in the industry Consumption does not tell us about the quality of experience people get Broadcasting is an imperfect market – what people consume is not necessarily an indicator of what is valuable How do we quantify market externalities?
Slide 16
Stated preference research shows that people hugely value the BBC
100%
% agreeing with the statements
86%
80%
75% 68%
74%
60%
40%
20%
0%
I would stand up for the BBC
The BBC is important to British Culture
The BBC sets the standard for Broadcasting
The BBC has at least quite a bit to offer me
Source:TNS
Slide 17
…and they clearly rate BBC services highly
The BBC is judged to have the best quality of programmes in 18 out of 22 genres • • • • • • • • • • • • • • • • • • News Soaps Wildlife British Comedy Drama Sport History Home and DIY Current Affairs Gardening Science Food Period Drama Education Arts Religion Business Chatshows The BBC is judged to have the best range of programmes in 17 out of 22 genres • • • • • • • • • • • • • • • • • News Wildlife British Comedy Drama Sport History Home and DIY Current Affairs Gardening Science Food Period Drama Education Arts Religion Business Chatshows
Source: TNS
Slide 18
We can get some clues around value
100%
% agreeing with the statements
80%
76% 66%
60%
40%
20%
15%
0%
I'm glad the BBC doesn't carry advertising
Source:TNS
The TV licence is affordable
If I had my way, I would change the BBC significantly
Slide 19
The missing link: understanding the real value people place on the BBC
Previous research on “Willingness to Pay”
Home office study 1987 Ehrenberg – Mills (LBS, 1990) Radio-communications Agency/DTI (2000)
Other studies into Broadcaster Value
RTE (Ireland, 2003) CBC (Canada, 2000) Australian Bureau of Statistics (2000)
Slide 20
BBC value research
Commissioned by the BBC with Human Capital and Martin Hamblin GFK: Dec 2003 – May 2004 2,200 face to face interviews and 1,000 by telephone 1,000 telephone interviews 19 pilots! Mix of methodologies, including Gabor-Granger, Conjoint Analysis, Ranking Tests and Personal Preference Allocation Study drew on significant consultations with Ofcom and LBS
Slide 21
BBC value research – key questions
How much would people be prepared to pay for the BBC?
As a subscription service? To avoid it closing down?
If the BBC were a subscription service, how much would we need to charge? How much do people value different BBC services? Which types of programme do people value most?
Slide 22
How much would people pay for the BBC?
70
How much would you pay for the BBC if it was only available as a subscription service?
490,000
60
Consumers
735,000
Equivalent monthly fee:
Consumers £18.35 £10.00
50
Current Licence Fee: Monthly Price (£)
1,470,000 40
30
3,920,000
20
7,840,000 12,985,000
10
18,620,000 22,540,000
5
0 0
Current Licence Fee: £10 per month
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
Number of UK households
Slide 23
As a subscription service, over 8m people would lose out
Income (£)
3,000,000,000
Income Against Price
Current BBC licence fee Income (£2.9 billion)
2,500,000,000
2,000,000,000
Equivalent monthly fee:
Revenue Maximising Price: Income: Number of HHs at £13: Drop in Income at Maximising Price £13.00 £2.37 billion 15.2 million £600 million
1,500,000,000
1,000,000,000
500,000,000
Monthly Price (£)
0 0
10 £13
20
30
£10.00
40
50
60
70
Current Licence Fee:
Slide 24
How much would people pay for the BBC?
In a national vote on the BBC, how much would you pay to avoid the BBC closing down?
980,000
70 490,000 60
Citizens Consumers
1,470,000
Equivalent monthly fee:
Citizens: Consumers Current Licence Fee: £20.70 £18.35 £10.00
735,000 50
Monthly Price (£)
1,470,000 40
2,205,000
4,655,000 30 3,920,000 10,290,000 14,700,000 20 7,840,000 12,985,000 10 18,620,000 22,540,000 22,540,000 19,845,000 Current Licence Fee: £10 per month
5
0 0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
Number of UK households
Slide 25
Over 80% would be happy to pay the current licence fee to keep the BBC
% willing to pay
100%
How much would people be willing to pay for the BBC to avoid it closing down? Those agreeing at different prices
81%
80%
60%
60%
42%
40%
20%
19% 9%
0%
£10 per month (current Licence fee)
Source: Martin Hamblin – GFK 2004
£15 per month
£20 per month
£30 per month
£40 per month
Slide 26
The BBC generates a net consumer surplus of over £3 billion
Calculating the BBC’s net consumer surplus (Consumer surplus minus consumer deficit)
£ Millions
8,000
£5,880
6,000
4,000
£2,900
2,000
Net consumer surplus 3,080
2,800
0
Current amount generated by the licence fee
Source: Martin Hamblin – GFK 2004
Aggregate amount consumers would be willing to pay for the BBC to avoid it closing down
Slide 27
Scotland and Northern Ireland show lower willingness to pay
How m uch would you pay to avoid the BBC being taken away from you?
25.00
21.30
20.00
20.20 15.40 15.00 10.00
Monthly price
15.00
10.00
5.00
0.00 England Wales Scotland NI Current Licence Fee
% of individuals to pay
Slide 28
How much do people value the BBC’s services?
£ per month
25
Total = £23.50
1.80 2.70 1.80
20
Total = £18.70
1.00 1.70
BBC website/interactive BBC Local Radio BBC Digital Radio BBC National Radio
15
3.60
1.20 2.70
3.90 10 4.00 3.20
BBC Digital TV Channels
3.50
BBC Two
5 5.70 5.40
BBC One
0
Citizens (value for whole country)
Consumers (value to individual)
Slide 29
Willingness to pay for BBC services compared with licence fee cost of providing them
£ Per month, per household
BBC ONE BBC TWO
£1.45 £5.70 £3.36 £4.00
BBC Digital TV
£0.90
£3.90
BBC Analogue Radio BBC Local Radio BBC Online/interactive
£3.60 £0.99 £2.70 £0.61 £1.80 £0.40
Willingness to pay as consumers Uplift for value to society Licence fee cost of service
For comparison: average Sky subscription package costs £25 per month
Source:Human capital/Martin Hamblin – GFK 2004.
Slide 30
People place high value on BBC digital services
The willingness to pay for BBC digital services vs licence fee cost of providing them
Per month, per household
£0.61
BBC THREE
£0.32
BBC FOUR
£0.17
£0.55
CBBC/CBeebies
£0.18
£1.57
Willingness to pay as consumers
News 24
£0.11
£0.77
Citizen uplift Cost of delivering service
Source: A study measuring the value of the BBC: Human Capital/Martin Hamblin – GFK 2004
Slide 31
Which type of programmes do people value most?
‘Please rank programmes in order of those you most prefer to watch’ 1. News 2. Regional News 3. Soaps 4. Blockbuster Movies 5. British Comedy 6. Wildlife 7. British Drama 8. Sport 9. Home & DIY 10. Chat Shows
Source: Martin Hamblin – GFK 2004
Score 64
58 51 48 45 45 38 37 36 33
Slide 32
Which type of programmes are most important for the country as a whole?
Ranking based on ‘citizens’ preferences Score 1. News 2. Regional News 3. Wildlife 4. Current Affairs 5. Soaps 6. Consumer Programmes 7. Education 8. British Comedy 9. Blockbuster Movies 10. Sport
Source: Martin Hamblin – GFK 2004
79 70 48 44 43 42 41 40 37 37
Slide 33
Which type of programmes do people value least?
Ranking based on ‘consumer’ preferences Score 1. US Drama 2. Fly-on-Wall 3. Education 4. Classical Music 5. Cartoons 6. Politics 7. Art House Films 8. Arts 9. Business 10. Religion
Source: Martin Hamblin – GFK 2004
20 19 16 14 14 13 13 11 10 8
Slide 34
Which type of programmes are least important for the country as a whole?
Ranking based on ‘citizens’ preferences Score 1. Popular Music 2. Classical Music 3. Arts 4. Reality TV 5. Business 6. Cartoons 7. US Drama 8. Fly-on-Wall 9. Religion 10. Art House Films
Source: Martin Hamblin – GFK 2004
23 17 17 16 16 15 15 14 14 12
Slide 35
Scatter plot of Citizens vs Consumers
Citizens vs Consumers of Ranking Scores
Citizen Ranking Score of Most Important
30
News
25
Regional News
20
Public Service
Essential to citizens & consumers
15
Education
Current affairs
Wildlife Soaps
10
5
0 0
Consumer programmes British Comedy Football History British Films Sport Blockbuster Movies Period Drama Other local programmes British Drama Gardening Investigative US Films Chat shows programmes Home & DIY Politics Food & Cookery Quiz Shows Business US Comedy Popular music programmes Arts Classical Reality TV programmes music Important to both citizens/ Children’s Animation Religion US Drama Children’s Live consumers Foreign Films Action Observational documentary Art house/ Consumer led independent films Science
5
10
15
20
25
Consumer Ranking Score of Most Important
Slide 36
Some Conclusions
It is possible to assess people’s value of the BBC in purely monetary terms
People place a rough value on the BBC which is double the amount they are currently paying through the licence fee.
People value the BBC even more when they consider its role as a public organisation serving everyone
Slide 37
Some Conclusions
However 19% would still choose not to pay the current licence fee …and there are significant regional variations
The aggregated value people attach to individual BBC services significantly exceeds the value they attach to the organisation as a whole.
Slide 38
Some Conclusions
People value digital services more highly than analogue, in proportion to the cost of providing those services
Broadcasting’s role in providing News is crucial
The genres people value as consumers are largely consistent with those they value as citizens, and reflect the core strengths of the BBC
Slide 39
Measuring Success at the BBC
James Thickett
Controller – Business Strategy, BBC Presentation at the British Library 21st June 2004
Slide 40