How Much Does UK Television Cost?

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Abstract
The cost of watching off-air TV programmes (BBC or ITV) for the average UK viewer is about 2p per viewing hour. The amount spent by UK advertisers on ITV is equivalent to about 3p per viewing hour per viewer. But how much of this is paid by consumers; that is, how much less would they pay in the shops if TV advertising stopped tomorrow? If there were no TV advertising, much of the money advertisers now spend on it would go into other marketing activities, including other media. Only a proportion would be passed on to consumers in lower prices. On this basis, ITV costs the average viewer less than the gross cost of 3p per viewing hour—perhaps only 1p or 2p per hour. ITV would be absolutely free to the viewer if advertisers spent no more on marketing because of it. Although this might be possible we believe that it is unlikely, since most marketing activities are competitive. ITV might also cost the viewer nothing if television advertising led to reduced manufacturing costs for the advertiser. But television advertising by itself does not lead to significant economies of scale. The cost of watching BBC television is about 2p per hour for viewers with a colour set, that is, much the same as ITV is for the average viewer. (Most people watch both ITV and BBC in a typical week.) In either case, television programmes at only 2p or so per hour are extremely good value for money—if anything, they cost less than the cost of the set itself for most viewers. Although advertising is a cost-effective way of paying for ITV, there is little scope for major increases in the amount of TV funded by advertising because the potential revenue is limited. Direct competition for the same source of revenue would also be likely to produce side-effects on the range and quality of programming. The low unit cost of TV viewing and the very high level of usage (about 20 hours each week for the average viewer) suggest that viewers would generally be willing to pay more for more or better choice. However, more choice may in practice tend to mean more of the same, rather than a vastly larger or different pool of programmes. The scope for extensive narrowcasting is limited by the nature of television as a medium, irrespective of the form of distribution (off-air, satellite, cable, etc.). People are unlikely to change radically in the kinds of programmes they actually watch most of the time. Thus, with more choice becoming available at a given point in time, the natural tendency for viewers will be to select the more relaxing programmes. The more demanding and expensive programmes will tend to be squeezed out of production and screening schedules on cost-per-viewer grounds, thus potentially depriving the public of a wider choice despite its paying, or being willing to pay, more. The impact of this process can, however, be reduced by suitably adapting the UK's traditional forms of programming controls, thereby, in fact, increasing viewers' effective choice.

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