The Adam Smith Institute published a paper last month by David Graham on replacing the BBC licence fee with a voluntary subscription. As part of our debate over Public Service Broadcasting we published a widely read, robust response by Steve Barnett, who defended the merits of public funding of broadcasting. His argument included certain assumptions about what his target (right-wing think tanks) is taken to believe. But if these assumptions are in part false (as I believe), one result is likely to be that the BBC fails to open itself up to vital creative and financial opportunities that could put an end to the steady decline of its influence in UK broadcasting. 

Arguing with assumptions is quite demanding for readers, as these first have to be unpicked before they can be examined. In this case, there are two levels of assumptions, both tied up in Steve’s treatment of HBO (Home Box Office), the high-quality cable TV subsidiary of Time Warner. HBO has produced some outstanding content, so much so that its success challenges a traditional core defence of public service broadcasting: that only public subsidy through an institution like the BBC can ensure intelligent, accessible quality drama, which the market would otherwise fail to deliver to our screens. Why, then, does the US market-place create television drama that is so much better than the BBC’s? And why are Steve and the many who share his views in such strong denial of the facts about the US market, and their implications  

PART 1:  Content 

Steve refers to “the same old nonsense about HBO”, whose experience in the US “tells us precisely nothing about the UK”. Oddly enough, the US drama series that has caught the headlines recently by being hustled into the BBC4 schedules almost as soon as it had hit the screen in America does not come from HBO.

Mad Men is famous for its impeccable style and political incorrectness but also for having been turned down by HBO (its lead writer was working on The Sopranos at the time) before being seized by a rival channel, AMC.  

Casual followers of US broadcasting, like Steve Barnett, give the impression that HBO is unique in its ability to deliver high-concept drama, ignoring the likes of f/x, Bravo, USA, TNT and AMC, which deliver such series as Nip/Tuck, Nurse Jackie, The Closer, The Shield, Weeds, Californication, Spartacus, The Tudors, Rescue Me, Dexter, Law and Order: Criminal Intent and Mad Men’s companion piece, Rubicon.  

Not understanding HBO’s significance is an occupational hazard of licence fee defenders. Steve says that “great drama is all that HBO does”, but of course the main attraction of HBO to its subscribers is its movie and sports offering (on which it spends most of its programming budget). He also says “it does not produce high quality peak-time journalism...or ground-breaking documentaries”, which will come as a huge surprise to anyone in the US. Last year, HBO’s most prestigious prize, ahead of 21 Primetime Emmys (25 this year) was the Governors Award for Sheila Nevins, long-time head of HBO’s documentary division. She is responsible for a dozen or more hard-hitting, big budget peak-time journalistic documentaries every year, often under the label America Undercover, but ranging round the world – recent titles include Sergio, the story of openDemocracy’s friend, Sergio Vieira di Mello.  Spike Lee’s four-hour elegy for post-Katrina New Orleans, When the Levees Broke, was recently shown on BBC4, and his follow-up - If God is Willing and the Creek Don’t Rise – is in production. Music by Prudence won this year’s Oscar for best documentary (short film).  

Steve also says that HBO “doesn’t do stimulating children’s programmes”, forgetting that its first ever original production was Fraggle Rock, and that its portfolio of channels includes HBO Family, targeted at children. Of course, the BBC is far more deeply engaged with children’s content than is HBO, and also has a world-class news operation: but HBO is part of a media empire that includes CNN and the Cartoon Network, so those programming categories are scarcely likely to be priorities.  

The real question of what we have to learn from Mad Men and HBO lies in the way a company like HBO chooses to spend its money, and its reasons for doing so. HBO needs committed viewers who will pay a premium for a service that has “must-see” content: and for those interested in more than movies and sport (where there are anyway other suppliers), high quality scripted drama and comedy, exclusively available on HBO, are the best bet. 

Unlike HBO – with its straightforward rationale of just satisfying its paying customers – the BBC lacks a direct relationship with its viewers. It therefore uses as the nearest measure a combination of audience share (the proportion of all TV viewing it commands) and audience reach (the percentage of the population that sees at least a part of at least one programme a week). This leads to a “touch as many people as possible once” approach, rather than focusing clearly on excellence.  

I hesitate to use a contrast between HCF (highest common factor) and LCD (lowest common denominator), but the fact is that, despite its massively larger spending power, the BBC has not in recent decades produced any scripted, renewable series to compare with HBO’s The Wire, The Sopranos, Six Feet Under, Curb Your Enthusiasm, Sex and the City, Big Love, In Treatment, Entourage and many other award-winners. Nor is there much likelihood that comparable series will ever be produced by the BBC in the future, given the scale of ambition, budget and creative freedom that these productions require. 

Even at the level of one-off series, the BBC struggles to match the outstanding John Adams, Band of Brothers, Generation Kill, Angels in America, House of Saddam and The Pacific, all from HBO. This is not for lack of access to talent – HBO regularly uses British actors, directors and even production companies. Yet when those same actors return to the UK, they find themselves cast in far inferior productions (Idris Elba, Dominic West and Aiden Gillen, three stars of The Wire, all endured that experience in recent months). 

The UK used to be a haven for talented television writers, but they are now almost entirely restricted to one-offs and short series, whilst renewable series have fallen into middle-brow mediocrity: Waking The Dead, New Tricks, Hotel Babylon, Waterloo Road. By far the largest part of the BBC’s non-costume drama effort is devoted to soap (EastEnders, Casualty and Holby City) or further episodes of what one leading actor calls a forty-year-old children’s programme: Doctor Who, and its direct and indirect spin-offs (Torchwood, Sherlock). The heyday of BBC drama series was back in the 1960s and 1970s (think Z Cars, All Creatures Great and Small and The Onedin Line). Now, the thirteen-part, or twenty-part or 26-part returning series has largely vanished, along with the ability to compete at the highest level with US drama. This, by the way, is not just a BBC failure, even though the BBC has least excuse to fail. 

It should be noted that the US free-to-air networks, under pressure from cable channels like HBO, have raised their game.  Their offerings are inevitably more formulaic, but the UK has no series to compare with Law and Order, Without A Trace, CSI, Grey’s Anatomy, Desperate Housewives, House, Lost, 24, The Good Wife, Glee, Ugly Betty, Lie To Me, Southland and dozens of others that can be found on various UK channels. (Last week, 84 different US drama series featured on the UK’s top 20 entertainment channels, of which 33 are currently in production – I’m not just talking about Diagnosis Murder.)  

Part of the problem is the commodification of content in the UK. The rise of the reality show and the elimination formula, together with “lifestyle” and “observational” programming, has meant that programmes far cheaper and more biddable than drama series have become available for schedule controllers. This allows them to sideline those pesky writers who insist on originality, with all its attendant risks. Format and factual shows are much easier to control, and relatively far safer bets.  

But the shifting patterns of commissioning are not the only evidence that the BBC is in thrall to share and reach. BBC scheduling is just as much slave to the rigid demands of predictability as that of its commercial rivals, even though there are no commercial messages to insert. End credits are ruthlessly squeezed down beyond recognisability so as to promote a forthcoming viewing option – because that is what commercial stations do, and the BBC is competing with them for reach and share. As one actor said, interviewed on Newsnight recently: “in a restaurant, I wouldn’t expect the waiter to plonk the dessert menu into my main course mashed potato: why can’t the BBC show a little respect for the programme makers – and, indeed the viewers?”  

When the BBC finally came round to showing HBO’s most-acclaimed series, The Wire, last year, it could not cope with the irregular length of the episodes within the structure of the BBC2 schedule. Instead, The Wire was consigned to the post-Newsnight graveyard slot, where running times mattered less. Many viewers were thereby forced to record the show, rather than prop open their eyelids, and were suitably punished when an edition of Newsnight over-ran for 10 minutes, and pre-set recording devices missed the last 10 minutes of that night’s episode – including the crucial scene where Stringer Bell meets his fate. 

In the US, the writer-producer is king. A “show-runner” like John Wells of ER, or Chris Carter of The X-Files, or Alan Ball of Six Feet Under, or David Chase of The Sopranos, or David E Kelley of Boston Legal, or Dick Wolf of Law and Order or Mathew Weiner of Mad Men has huge financial and creative autonomy. They make deals with distributors to part-finance their shows and engage with US broadcasters on equal terms. Such a situation is unthinkable in the UK today, especially in the BBC. 

Would subscription funding change the way the BBC behaves? Perhaps not – but at least the BBC would have the chance to escape the tyranny of reach and share, and concentrate instead on using a content budget four times larger than HBO’s to produce shows that made subscribing to the BBC absolutely essential.  

Steve has found some obscure professor in Washington who thinks television products all “look the same”, which Steve takes as a damning critique of the free market. That verdict might be true in the UK, but the professor (and Steve, perhaps) should be made to sit down to watch a series of The Wire, the documentary Music by Prudence, an episode of Curb Your Enthusiasm and the finales of Six Feet Under and The Sopranos to understand how skilled, inventive and humanistic television can be when you have your priorities in the right order. Or just tune into this week’s episode of Mad Men. 

PART 2:  Value for Money 

Some of the misunderstanding about HBO arises from a spurious piece of analysis that Ofcom commissioned in 2004, which purported to show that a cable channel in the UK with HBO’s US take-up, fee level and allocation of resources would have just £113m a year to spend on original content (over and above movie and sports rights) – less than a quarter of HBO’s actual such spend: ergo, subscription funding for the BBC would be bound to fail. 

The absurdity of this conclusion derives from several mistaken assumptions. In the US, HBO is just one of scores of successful non-terrestrial channels. More than twenty channels have 100 million subscribers – HBO has just 41 million. Of course, the most widely distributed channels are “basic tier”, rather than “premium”, but even at the premium level, HBO has significant competitors, such as Starz and (closest in size) Showtime, which has a similar line-up of movies, sports and original productions. HBO’s income is barely 5% of total US cable income, and its viewing share is at the 1% level. And as mentioned above, there are other ambitious competitors for HBO’s status as the prime provider of high-end drama. 

Yes, as Steve and Ofcom point out, the US market is five times larger than the UK’s – but so dominant are the UK’s terrestrial broadcasters that non-terrestrial channels barely register on the income and expenditure radar, with Sky One being the only basic tier channel with more than £100m a year to spend. In the US, there are eighteen broadcasters with the equivalent of ITV’s annual £850m spent on origination, and HBO is not one of them. Far from having scooped the pool in a larger market, HBO has simply refined its commissioning policy to a particular effect, despite having no more cash to spend on origination than BBC2. 

Any analogy between HBO and a BBC putatively funded by voluntary subscription has to recognize that BBC TV commands 32% of all UK viewing – gargantuan by HBO standards. The chances of the BBC languishing with just 35% of homes taking its services (as with HBO in the US) are minimal. Ofcom research has shown that 81% of homes would pay at least the current licence fee voluntarily to keep BBC TV.  Given that a subscription mechanism would allow the BBC to charge per set rather than per home, it is imaginable that the per set charge for a range of services (from a “just BBC1 and BBC2” package at the bottom of the scale, through extra charges for access to all BBC digital channels, to new premium channels at the top) could start as low as £6 per month, or half the present cost of the licence fee: a level that might attract many of the 19% who said they would not voluntarily pay £12 a month. 

Value for money, of course, is one of Steve’s favourite arguments: “obviously” the BBC is much better value than a Sky subscription, which is more expensive – however hard it may be to express actual value for money for a service where people have no choice as to whether to pay for it or not. However, the assumption that the BBC is “value for money” compared with Sky, even ignoring the difference between a broadcaster you are forced to fund and one you choose to fund, is increasingly hard to sustain.  

If we discount BBC radio and online (which you can use without paying the licence fee), effectively the cost per person per hour of viewing BBC TV is about 14p, allowing for 2.4 persons per household, £145.50 annual licence fee cost and over an hour a day of viewing BBC TV (the national average). By comparison, a Sky TV subscription (not including telephony or broadband) costs some £30 per month; and as Sky households are larger than average and viewing of TV in Sky households is also above average, so the cost per hour of viewing all non-BBC channels in a Sky home is 13p.   

Steve also touches on the virtues of universality of availability, not seeming to quite follow that a voluntary payment scheme for the BBC would not exclude anyone who did not want to be excluded. The BBC may be “free of commercial messages” (other than for itself – but so is HBO in the US), and “free at the point of delivery” – but so is Sky, provided you have paid your subscription. The BBC is only “free at the point of delivery” if you have paid your licence fee: otherwise, viewing live BBC programmes is prosecutable.  

There is, says Steve, “no reason for not paying it”, because however poor you are, the cost of a licence fee is assumed in the level of income support. However, the fact that nearly 1.5m households anyway evade payment suggests that they may have better things to spend their income support on than the BBC. And most proposals to replace a compulsory licence fee with a voluntary system – including David Graham’s – also assume public funding of core public service content (news, current affairs, arts, children’s) which would be available to all at no charge. 

Steve also busies himself with a range of straw men he himself invented. Opponents of the licence fee do not want to dismantle the BBC; they do not object to taxation (some even see using tax revenues as the means of funding the BBC to be a good deal fairer than the regressive licence fee); and they do not oppose public funding of public service content (they just see the BBC as an increasingly ineffective deliverer of such content).  

But the real giveaway in Steve’s diatribe against David Graham is his visceral rejection of the relevance of HBO. Creatively and financially, HBO (and that multi-award-winning non-HBO drama, Mad Men) has a great deal to tell us here in the UK: burying our heads in the sand will not make that go away.