Funding and budgets: Licence fee and advertising
Issues of how television programmes are funded have recently come to the fore. The bottom line is that television programme making has to be paid for. For the BBC the main source of revenue is the licence fee. In effect, the British public fund programmes made by the BBC.
In order to raise money for programmes, commercial broadcasters sell audiences to advertisers by projecting anticipated audience figures. They offer prime slots to the highest bidders. The broadcaster charges advertisers a particular sum of money per thousand viewers that it expects to tune in. The assumption is that among these viewers there will be those who are can be persuaded to buy a range of consumer goods, from cars to health insurance.
In a half-hour slot for a top-rated programme, the audience may be subjected to a combined total of six minutes of advertising. Advertisers' fees are needed both to fund that programme and allow surplus, which can be used to support the broadcasting company's other costs.
Below are recent revenue figures, in £millions, from 2003/04 for the terrestrial channels:
- BBC £2,798,000
- ITV £1,484,000
- Channel 4 £ 625,500
- Five £ 249,000
- GMTV £ 58,000
Commercial TV's combined revenue is around £300,000 less than that of the BBC. In recent years advertising revenue has dropped as audiences have found a greater variety of forms of home entertainment (including DVDs and broadband). In the meantime BBC have launched a successful commercial operation to promote and sell their own programmes. As a result the commercial networks argue that BBC has the best of both worlds, competing with them for consumer markets, like a commercial company, while also securing revenue via the licence fee. Not surprisingly, calls for the abolition of the licence fee tend to be loudest from the commercial sector and future funding of the BBC is likely to come under permanent review.
In the meantime new technology such as hard-drive based video products, like TiVo and Sky Plus, enable audiences to watch programmes and edit the commercials out. In response to these developments and the increasingly competitive market for advertisers, commercial broadcasters are moving towards sponsorship of programmes, as well as advertising.
