ASSESSMENT OF PUBLIC SERVICE BROADCASTING: ECONOMIC AND MANAGERIAL PERFORMANCE CRITERIA robert g. picard Abstract This article discusses the rationale and purposes of the expanding assessment of public service broadcasting from the perspectives of performance evaluation in public administration and media management. The author argues that increased assessment of public broadcasters is part of a movement toward better oversight of a range of public social services that is designed to improve service effectiveness. The article explores economic and managerial approaches to assessment that are increasingly augmenting traditional content and audience assessment practices in public broadcasting. It introduces and illustrates a variety of types of economic and managerial measures that provide insight into the operations and effectiveness of public service broadcasters and explores what they reveal to assessors and managers and the implications of those measures. Robert G. Picard is Hamrin professor of media economics and director of the Media Management and Transformation Centre, Jönköping International Business School, Jönköping University, e-mail: robert.picard@jibs.hj.se. CTi fN no fY^ o O fN O > A 3 a o c fN Public service broadcasters face a growing necessity to justify their operations and performance as a means of improving credibility and legitimacy, as well as to meet strengthened reporting and assessment requirements placed upon them by parliaments and national regulatory authorities. This article explores management assessment of public service broadcasting organizations, the rationale for assessment of public organizations, and issues of what can be assessed and how. Although some sorts of assessments have been made of public service broadcasters since their inception, the types of oversight given have been rather indifferent to the success of overall operations and programmes and instead have concentrated on whether broadcasters met basic service requirements. In the twenty-first century, however, public service broadcasters are increasingly being asked to provide evidence of effective use of resources to justify their economic activities vis-à-vis commercial broadcasters. This has come about because the digital age is fundamentally changing mediated communication, not merely providing new media and channels of communication. The digital age is increasing communication choices, producing smaller audiences for each channel, and permitting mobile as well as fixed communications. But it is also making audiences far more active participants in the communication process. Digital media are shifting control over communication toward individuals in the audience. They are providing audiences the ability to choose how, when, and where communication is received, and also to filter and personalise information in a way to determine what communication is received. Rather than tying the public more closely to civil society, the primary characteristic of the digital age is the breaking down of collective society and the promotion of a form of isolated, self-centred individualism. The changes produced by digital communications in many ways contradict and impede the ability of public service broadcasters to carry out their primary tasks of serving collective social needs, providing information and services that audiences need to be effective members of society, and improving the communications received by the public. Because digital media are inherently designed to serve narrower audiences and individual needs, have significant investment and operational costs, and relatively low demand among consumers, efforts are increasingly being made to transfer much of the costs to users. Although this fits the commercial operations mode quite well, it runs counter to universal service principles inherent in public broadcasting. Thus, the digital age has not merely produced new opportunities for public service broadcasters but is challenging the roles that they play and their capacity to provide services. Most broadcasters are straining to provide a broad range of services, spreading financial resources and personnel perilously thin, and producing a loss of focus. This situation is particularly problematic because public service organisations exist with the consent and support of citizens. Should the public lose its will to continue funding and attending to public service broadcasters, even the futures of the organisations are at risk. It is sometimes easy to ignore this risk because there is a permanency myth in modern society when it comes to social institutions. There is a bourgeois tendency to attribute immortality to organisations, to assume that structures, policies, and operations are indestructible. But we need to be mindful that across the developed world, the public has supported significant reduction of the public role in telecommunications, post systems, postal banks, state- organised retirement and social wel- fare systems, and airlines and rail systems. It is not unthinkable that in some nations it may seriously be suggested that the management of public service broadcasting be privatised with competitive bidding for the right to manage the companies. Opposition to oversight and demands for change is strong within public service broadcasting (PSB) organisations. The same rhetoric that has been heard for nearly eight decades about the sanctity of public broadcasters and the roles they play is used whenever discussion of PSB takes place and little recognition is given to the changing environment and how it alters some of the roles public broadcasting plays. Discussion takes place within highly defensive postures from public broadcasting personnel and a desire to do everything possible in media, ranging from digital television to mobile content provision, from the Internet to digital audio broadcasting. And there is a general unwillingness to make choices among potential activities. The situation is compounded because there is confused or absent direction from parliaments and governments and many public broadcasting organisations lack effective leadership, vision, and strategy. This article explores the nature of performance assessment, its applicability to social service entities, and measurement of economic, financial, and managerial performance. The context for such assessment is public administration management and media enterprise management. It recognises that public service broadcasting is operated for purposes other than profit maximisation but that it must still contend with economic and financial forces that must be effectively managed in order to provide the best possible service to society. The applicability of this assessment approach is not limited to specific nations but is most appropriate to public service broadcasters whose operations are guided by the philosophy and administration most typically found in Western Europe and increasingly found in broadcasters in some other European states. The article itself does not conduct an assessment of public service activities but introduces economic and managerial assessment concepts and methods that can be used by those assessing specific firms or making comparative assessments. The concepts involved include the most relevant concepts for assessing economic and managerial performance in firms (Brinkerhoff & Dressler 1990; Van Horne 2000; Fraser & Ormiston 2001). The concepts are illustrated by examples from European public service broadcasters that are designed to show the kinds of information produced with the methods and implications of those kinds of information for individuals making assessments. Data for the examples were gathered from the annual reports of a number of public service broadcasters and other sources. Because economic, financial, and managerial assessment is based on individual broadcasters and results for individual broadcasters vary, the results shown are not generalisable but the methods can be applied to other public service broadcasters. Because the data are exemplary and not generalised, no sampling techniques were use in selecting the public service companies from which data were acquired to illustrate uses of concepts and methods. The Role of Performance Assessment In this environment there is a growing internal necessity to justify operations and performance that coincides with the strengthened assessment requirement being placed by national authorities that are part of a broader trend to assess public services overall. Public broadcasting organisations need to understand that they are not being singled out for assessment but that it is now being required for many public services ranging from hospitals to schools, from child welfare agencies to homes for the elderly (Swiss 1990; Newcomer 1997; Letts & Grossman 1998; Kearney & Berman 1999). The development of assessment methods and requirements has grown stronger in the past three decades with the increasingly managerial approach introduced in higher education programmes in public administration. In the past, some assessments processes existed for PSBs but they were rather weak. Stronger methods are now being required by national governments and the European Commission as part of competition, social, and cultural policies. Assessment of public services is a process that examines institutions and their practices, rather than the philosophy, purposes, and functions of public services. It examines organizations, their structures, and their effectiveness in meeting its obligations and desires. Institutions make all kinds of strategic and operational internal choices involving activities, organisation and division of labour, and use of various resources (Heinrich & Lynns 2000). These choices and their outcomes are the focus of assessment. Thus assessment should be viewed as oversight of public service broadcasters, not public service broadcasting. Examining and questioning the ways in which broadcasters operate is not the same as questioning public service broadcasting itself. Current assessment requirements take place within an understanding of the maturity of public service operations and the historic contexts in which they have operated. Public service broadcasters were relatively small organisations until the beginning of television broadcasting. In the 1950s and 1960s, as regular TV broadcasting emerged, there was a dramatic growth in revenues. Broadcasters typically created large, centralised organisations with large numbers of employees. As broadcasters expanded and offered more channels, particularly in the 1970s, parliaments, commissions, and regulatory bodies began questioning the efficiency of PSB operations and inducing structural changes. In the 1980s and 1990s policy changes created more commercial broadcasting, and efforts to increase operations and efficiency in PSBs were promoted both externally and internally. Today, public service broadcasters operate in mature markets and there is little potential for market growth. They are challenged by opportunities and demands that they provide more services in the digital age. However, these are being presented without new financial resources in most cases. And there is a need to ensure that existing activities are operated efficiently and continue to be relevant to the needs of the public. It is in this environment that regulators and boards of public service broadcasters are increasingly implementing assessment procedures to determine the performance of the broadcasting organisations they oversee. In doing so they are implementing regular reviews of the activities and seeking measures that provide insight into the performance of the organisation and its operations. Such performance measures involve measurable indicators of the degree to which objectives and goals have been fulfilled. Indicators are specifically related to requirements, objectives, and goals that have been stated by the organisation's mandates or managerial strategies and by general managerial requirements for enterprises. Assessments typically begin with a review of the requirements and objectives and making a self-analysis of how they have been met. This is usually followed by a review by the overseeing organisation. In the past, assessment of PSB performance tended to involve traditional performance measures such as hours of service provided, hours of original programming produced, amount of news and public affairs programmes and cultural programmes, amount of programmes for children and minorities, amount of domestic and imported programming broadcast, amount of first-run versus rerun programmes, the degree of universality of audience service, the audience produced, and the amount of hours of viewing. In the contemporary environment, these content-oriented and audience-oriented assessments are now being augmented by requirements for economic and effectiveness measures that focus on the performance of the management of public service broadcasters. These economic and effectiveness performance measures are justifiable because public service broadcasters are large, well-funded organisations that need oversight to ensure effective internal use of resources and to help manage increasing efforts to produce additional income that reduces dependence on license fees and state funding, to create funds to develop and improve the organisation and its services, and to create reserve funds for major investments such as digital television. Despite the perception that PSBs are poor organizations struggling against the odds to serve public needs, they are actually large, well-funded enterprises with immense resources and financial strength. In 2000, for example, the revenues of public service television broadcasters in the European Union alone were twice those of Rupert Murdoch's News Corp. worldwide, 40 percent higher than that of Bertelsmann, slightly higher than the Walt Disney Co., and just behind those of Time Warner. European public service broadcasters have combined assets nearly double those of commercial broadcasters in the region, thus evidencing considerable financial strength and capabilities if they are effectively used. Admittedly, there are wide differences in the amount and sources of funding and financial situations among individual public service broadcasters (McKinsey 1999) but claims that public service broadcasting is somehow generally disadvan-taged do not ring true. In dealing with management of broadcasters one must make distinctions between for-profit and not-for-profit institutions because they are driven by different motives although they encounter similar issues. The concept of profit carries a poor connotation among public service proponents because it is associated with the goals of commercially operated entities. Most PSB personnel typically think of their firms as non-profit institutions, but they are better characterised as not-forprofit institutions for which profit or annual surplus is a necessity. The distinction is not merely one of semantics. Not for profit means that its primary goals do not involve making profits that are passed on to owners, but that the institution still makes and uses surpluses (profits) to fund its development and improvement of its activities. In terms of management, the primary issues faced by managers of commercial broadcasters are maximising audience (both in terms of programme share and average daily share), maximising advertising revenue (in terms of average income per programme and viewer or listener), maximising effectiveness in use of resources, and maximising profit (in terms of programme profitability and average profit per broadcast hour). Public service broadcasting managers face issues of maximising service of social, political, and cultural needs and maximising effective use of resources provided. Like their commercial counterparts, public service firms work to maximise their audience (both in terms of programme share and average daily share) as a means of providing service rather than attracting advertisers. They also increasingly face the issue of maximising outside revenue through programme sales, advertising income, etc. To effectively manage these new roles and tasks, regular assessment of performance is necessary. The concept of assessment itself is not new to public service organisations but past assessment approaches and methods have tended to be narrowly defined toward content and coverage. These traditional assessment measures have primarily focused on the social, cultural, and political roles of the organisations, but those measures do not adequately account for performance relating to the other managerial issues and requirements placed on public broadcasting organisations in the contemporary environment (Table 1). As a result, managers and regulators are increasingly moving toward the use of economic measures of performance. Table 1: Assessment Measures for PSB Managerial Issues Managerial Issues Assessed by Maximising service of social, political and cultural needs Traditional PSB assessment measures Maximising effective use of resources provided Economic performance measures Maximising audience (average daily share and programme share) Economic performance measures Maximising efficiency (use of resources; production of reserves) Economic performance measures Maximising outside revenue (maximising advertising income; maximising programme sales) Economic performance measures Types and Uses of Economic Performance Measures There are three major types of economic performance measures that are appropriately applied to assessment of public service broadcasters: market share measures, productivity measures, and financial measures. Market Share Measures Market share performance is indicated by the degree to which the overall group of television viewers or radio listeners attend to public service broadcasters. The basic measures of market share are the same as those traditional for commercial broadcasting (Beville Jr. 1988.) Most public service broadcasters have provided basic viewer and listenership data in annual reports and basic assessments for a number of years, but the meaning of such data has grown more salient as the number of competing channels has increased and reveals whether PSBs are maintaining the ability to serve their mandates or are being marginalised. Changes in market share indicate whether competitiveness has been maintained, improved, or diminished and how market structure is affected by the entry, exit, or improved competitiveness of other broadcasters. In the contemporary multi-channel environment of broadcasting, market shares for public service broadcasters should be considered as the combined performance across the portfolio of channels they offer. This is because PSBs ideally do not compete with each other but offer a coordinated package of programming that serves differing audiences simultaneously in order to serve the wide needs of the public. Broadcasters pursue strategies in which each additional public service channel is established or focused to serve narrower needs within the public, and thus different channels provided by the same public service broadcaster cannot be expected to perform equally. Once the market share for a public broadcaster has been established, one can review trends and changes in viewership or listenership to determine success in reaching and serving the public, as illustrated in Figure 1 with the example of Swedish SVT. The example shows a clear downward trend (with a decline of about 10 percent in the period) that warrants attention and explanation in an assessment. Such a decline could be the result of programme choices, increased competition, or other factors, so the reasons need to be investigated. Managers of PSBs and their assessors can use such market share data to ask questions about how and why the firms' performances in gaining audience attention are changing and the implications of such changes. Figure 1: Sveriges Television Average Daily Viewing Share, 1997-2000 50% H 48% - - 46% -44% 42% -40% 1997 1998 1999 2000 Source: Sveriges Television, annual reports 1997-2000. These basic market share numbers, however, do not account for the number of competing channels and thus do not consider the share performance within the context of what can reasonably be expected of a broadcaster given the economics of audience fragmentation. A minimal level of market performance can be established through market share expectation analysis (Picard 2001). This form of analysis mathematically creates an expectation share based on the average share possible given the number of channels available in the market and allows comparison of performance of a broadcaster against its expected share, as illustrated in Figure 2. Figure 2: Example of Expected and Received Share 35 30 od 25 CD £ 20