The document discusses the governance challenges facing public service media (PSM) in an environment of transition. It makes three key points: 1. PSM historically had close links to states but relationships with governments and accountability have been ongoing challenges, with different models adopted in different countries. 2. PSM now face new governance challenges due to declining audiences and funding, needing to develop new digital services while maintaining relevance and charter obligations. 3. There are debates around who should decide priorities for PSM - managers, boards, governments? And how can accountability and value for money be ensured while allowing independence from arbitrary political interference?

1. Markets, Values and Governance:
Economic Aspects of Public Service
Media in Transition
Terry Flew
Digital Media Research Centre, Queensland University of
Technology, Brisbane, Australia
Presentation to International Media Management Academic
Associaition (IMMAA) Annual Conference, Moscow State
University, Moscow, Russia, 17-18 September, 2015
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2. Digital Media Research Centre
Most public service media debates are
about content

3. … and Politics
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4. The 20th century public servive
broadcasting settlement
“The rise of broadcasting in the 20th century established new
relationships among states, publics, and the media. Alongside private
media, some countries established broadcasters with closer links to
the state and a nonmarket model of accountability to the public.
Relationships between these institutions and governments as well as
other centers of power became key challenges, with some countries
adopting direct state administration of broadcasters and others
favoring independent public-service broadcasting.”
• Damian Tambini, “Five Theses on Public Media and Digitization:
From a 56-country study”, International Journal of Communication
9(2015): 1400-24.
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5. The challenge of governance in the
context of change
“A unique set of institutional arrangements for broadcasting
evolved in each national setting. In some cases, the constitutional
framework defined fundamental duties for all broadcasters. In others,
ownership and operation remained in private hands, with duties left
undefined. In some countries, the market share of publicly owned
broadcasters was small, and in others they were—and in many cases,
still are—dominant. In all countries, allocation of broadcasting
frequencies was the responsibility of agencies of the state.
Broadcasting institutions generate the meanings and narratives that
frame reality for citizens. For this reason, governance of these
institutions has been a source of conflict that resurfaces during times
of change.”
• Damian Tambini, “Five Theses on Public Media and Digitization:
From a 56-country study”, International Journal of Communication
9(2015): 1400-24.
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6. Context for PSM worldwide
1. Declining share of national audience
(although highly variable between nations)
2. Declining public funding
3. Need to develop new digital services in order
to maintain relevance
4. Uncertain relationship to Charter/remit
5. New regulatory questions (e.g. relevance of
competition policy)
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7. New governance challenges for public
service media
• Is the ‘scarcity’ rationale still relevant as a
basis of support for PSB/PSM?
• How much expansion into new digital services
should PSM be undertaking?
• Charter implications of PSB-to-PSM transition
• Can PSM ‘crowd out’ commercial services in
new digital markets, or do they ‘crowd in’?
• Should new services be taxpayer funded or
funded through other revenue streams?
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8. Who decides?
• The Managing Director?
• The Board?
• The government of the day?
• The Parliament?
• The community? If so, how?
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9. Configurations of ‘the public’ in PSM
debates
1. As collective beneficiaries of public good
aspects of PSM (e.g. national events,
documentaries, disasters, international
coverage, specialist programming)
2. As consumers of PSM services (how many
watch/listen to/download XXX?)
3. As taxpayers funding PSM: how to ensure
value-for-money in uses of funds?
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10. Media economics and the governance
question
• NEOCLASSICAL ECONOMICS (market failure,
public goods, public value tests)
• CRITICAL POLITICAL ECONOMY (market vs.
state, public interest, media citizenship)
• NEW APPROACHES
– INSTITUTIONAL ECONOMICS
– INNOVATION/EVOLUTIONARY ECONOMICS
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11. Neoclassical media economics
• ‘Market failure’ rationale for PSM
– Merit goods
– Externalities
– Public goods
• Spectrum scarcity case for PSB no longer plausible
• Public good/merit good case (possibly) challenged in
multichannel environment
• PSBs not the only providers of ‘quality’, ‘niche’ or
‘minority’ content
• Diversity of PSB histories – no single template
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12. Public Value Tests (PVT) and PSM
innovation
• Public Value Tests being applied to digital
expansion of PSBs in EU
• How is ‘public benefit’ to be assessed?
• EU: media pluralism established in
broadcasting context (PSB) but role of PSM in
digital environment is contested
• Ex ante tests as an inhibitor of PSM innovation
• Innovation increasingly central to PSM remit
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13. Political economy, PSM and citizenship
• PSM seen as central to nation building, media
citizenship and the public sphere – market versus state
rationale
• Not all PSM are non-commercial, and even ‘non-
commercial’ PSM have commercial activities
• Normative definition of PSM: does not include, for
instance, CCTV as world’s largest state-run broadcaster
• Challenges of PSM Charters – lead or follow ‘public
taste’?
• Private providers can achieve public good e.g. Google
Books case
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14. Does the political economy case lead us to
uncritically defend PSM management?
• Critical analyses of PSB have changed over time: earlier
accounts (e.g. Schlesinger, Hall, Sparks) more critical
• Demand for greater institutional accountability exists
across the board
• High profile governance failures e.g. failure of BBC
Trust to deal with Jimmy Savile case adequately
• Peter Goodwin (2014, p. 84): ‘the friends of PSM …
must adopt a more critical tone in addressing existing
PSB operations’: problems of ‘bloated executive
salaries, conservative programming policies, corporate
arrogance, and lack of inclusiveness – to name but four
in a list that is not short’ (Goodwin, 2014, p. 84).
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15. Relational contracting in public sector media –
how much is Tony Jones worth?
• ABC salary “leak”
reminder that there is
no longer a “base pay”
for ABC presenters
• Differential salaries
reflect various
performance-based
(relational) contracts
within the organisation
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16. New Institutional Economics (NIE)
• Institutions as ‘the humanly devised constraints
that structure human interaction’ (North, 1994, p.
360)
• Institutional arrangements/governance structures
(micro)
• Institutional environment/ ‘rules of the game’
(macro)
– Formal institutions: rules, laws, policies etc.
– Informal constraints: norms, conventions, cultural
codes etc. – links to history and culture
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17. The firm as a nexus of contracts
• Origins with Ronald Coase (1937)
• The firm is an institutional form that
economises on transaction costs
• Implicit and relational contracting
• Contracts rely upon trust, social networks,
reputation – importance of institutional
cultures
• Applicable across both private and public
sector institutions
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18. Core NIE propositions relevant to PSM
• Concepts applicable to both public and private sector
organisations
• Firm as a ‘nexus of contracts’
• Separation of ownership from management, and
principal-agent problem
• Tendency to expand into conglomerates – risk of
becoming too big
• Relational or incentive-based contracting – comparable
employment arrangements across public and
commercial media
• Governance issues arise in context of principal-agent
problem: how is the public interest safeguarded while
also ensuring value-for-money in public provision?
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19. Governance challenges for PSM
• Accountability of PSM managers to the public
– via the government?
• Should a PSM be trusted to regulate itself?
• Distinctiveness of PSM histories and
organisational cultures
• Political problem: electoral politics increasing
a ‘battle for political property rights’ – loss of
autonomy for public institutions
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20. UK Debate on Future Governance of
the BBC
• House of Commons, Culture, Media and Sport
Committee, Fourth Report 2014-15
• Failure of BBC Trust: required to be both
“regulator and cheerleader” of the BBC
• Three part structure proposed:
– Board responsible for BBC performance
– Ofcom responsible for content regulation
– Public Service Broadcasting Commission
responsible for assessing value-for-money
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21. Governance challenges
• Can PSM argue against external regulatory
scrutiny across all aspects of their operations?
• Would better “arm’s length” relationships
reduce scope for arbitrary political
interference?
• How best to enable checks and balances on
PSM management, and address principal-
agent problem?
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