Raymond Snoddy on Media: Ofcom's lack of answers

name.

The key thing is that the company has developed a new form of economic
forecasting - particularly effective in the future of television
advertising - that will never get it wrong. The potential is
astonishing.

The problem with existing methods can be seen clearly from an Oliver &
Ohlbaum Associates assessment for Ofcom's great survey of public-service
broadcasting (PSB).

The consultancy devised a limited range of scenarios, including one that
shows television advertising virtually collapsing by 2012, down to just
£520m from £3.16bn after radical fragmentation of the
market. More benign outcomes saw TV advertising falling less sharply,
and companies' online earnings soaring to more than £600m.

The flaw here is that there are not enough scenarios. It would be better
to cover every eventuality, including the possibility that TV
advertising will rise by 2020 to £4bn (if the programmes get much
better), or collapse to zero (if the programmes turn out to be really
crap).

No mistakes could be made, and no one would feel left out, because they
can pick the scenario that suits their interests best.

Ofcom has taken a different approach and offered only four options for
meeting the PSB deficit. The regulator hedged its bets on how big the
deficit will be by 2012 - between £145m and £235m - to keep
PSB in addition to the BBC.

Assuming the gap is only £145m, we are talking about quite a small
percentage of overall revenues of the UK broadcasting sector.

The Ofcom research is difficult to get your head around. One journalist
came out of last week's press conference declaring himself 'brain
dead'.

However, highlighting a few niggles and conflicts might be in order.
Ofcom wants to see commercial competition for PSB. Why, therefore,
should this excellent principle not apply to regional news and
production in general, and ITV in particular?

Does it make sense to limit the licence fee income available to the BBC
- an organisation that, with the usual imperfections, still delivers PSB
in spades - and hand it over to an untried and possibly bureaucratic
system?

Has Ofcom allowed for the propensity of British broadcasters to behave
like pessimistic farmers, fearing the worst while looking for state
handouts? It is telling that the minute Channel 4 faced a genuine
financial problem, with the downturn in advertising revenue, it was able
to cut costs by £25m this year and £50m the next.

Not nearly enough attention has been given to one of Ofcom's options,
the possibility of an industry levy to help meet a PSB deficit. It would
be difficult to impose on internet and social networking sites, but the
profitable pay-TV community should be able to pay a levy on after-tax
profits.

On Friday, culture secretary Andy Burnham stepped into this morass with
the clear suggestion that he has not fallen for all the self-serving
rubbish. 'Public-service broadcasting is not fatally damaged,' he said.
'Ofcom's report is a prescription, not the last rites.'

More research is clearly needed on the financial benefits of
co-operation, and Snoddy & Rogers Associates are ready to go. Just give
us the number you want and, unlike other consultancies, we'll come up
with a plausible scenario or two.

- Raymond Snoddy is a media journalist and presenter of BBC TV's
Newswatch

30 SECONDS ON ... OLIVER & OHLBAUM ASSOCIATES

- Oliver & Ohlbaum Associates was founded in 1995, and offers strategic
advice and consumer intelligence in the media, entertainment and sports
industries.

- In 1990, the company predicted that it was 'only a matter of time
before the UK gets its first £1m prize quiz'. Eight years later,
Who Wants to Be a Millionaire? launched, and has become the biggest
international TV franchise and is broadcast in more than 100
countries.

- O&O claims it has 'been involved with most of the major developments
and initiatives in the media, entertainment and sport sectors since
1995', and to offer 'understanding of the most up-to-date, relevant
economic theory, financial modelling and forecasting technique'.

- Clients include the BBC, MTV, Guardian Media Group, Five, Channel 4
and ITV.

- The company produced the Prospects for UK Independent TV Production to
2010 report in 2006, and Prospects for European TV Content to 2012 last
year.