NewsLine Column: Letting Consumers Vote With Their Feet

The panel at MediaTel’s recent Media Question Time evening argued that it does not really matter who owns UK media companies, as a good company will run them well, whilst a poor one will fail, as consumers desert its products. With the Government’s recent decision to further liberalise ownership regulations and also to allow foreign ownership, who owns what, and how this effects our media, is a discussion very much on the agenda. With this in mind, MediaTelINSIGHT’s Scott Billings considers the argument that consumers can always vote with their feet.

There is a dictum, ostensibly common sense, which is often dragged out when corporations in an industry are arguing the case for an increase in their power or size in the sector. This is the argument that consumers will, ultimately, vote with their feet; or, to put it another way, supply will follow demand and so the commercial market will be tidily regulated.

This position seems to be regularly adopted in the media industry, the refrain essentially being that consumer sovereignty will ensure that the public will not make a success of something that isn’t very good.

Mike Anderson, managing director of the Evening Standard, told MediaTel’s Media Question Time event that: “It really doesn’t matter who owns UK media companies. At the end of day the public decide; the audience decide whether something is a success or a failure, not who owns it.”

If a magazine, TV/radio station and so on, is of low quality, or too high-brow, or just not to the audience’s taste, they will abandon it by not watching or buying the production. The media group marketing the programme will then be forced to either buck its ideas up and produce something that is demanded or be driven out of the market by more savvy rivals.

This is a powerful argument as it presents a basic assumption that the audience is both discerning and powerful; an intoxicating notion indeed and one that is not so easy to question. We can’t possibly claim that the public is both stupid and toothless can we? Not in public, at least.

But the trouble is, this argument, whilst not at all completely false, seems to mask a little of what is actually going on. Does supply really follow demand in the way that consumer sovereignty arguments claim? To a fairly large extent we, as consumers, have to make do with what we are given. Media output is determined just as much by policy and budgeting as it is by a concern over what the audience might think is a wonderful production.

The larger the media group, the more cost savings it is able to introduce by packaging programmes for a global audience across different networks. In radio, for example, formatted networks of stations are presumably cheaper and more manageable than a disparate variety of localised, niche stations (not to mention massively easier to buy and sell for agencies and sales houses). Of course, this does not always prove successful and many media companies have had their fingers burned attempting this kind of homogenisation. But it is the fact that they are driven to attempt it that illustrates the commercial imperative.

All these things must have a profound effect on how programming and editorial are put together and certainly not all decisions will be based on pleasing the audience as much as possible. More likely, a cynic would say, is that commercial imperatives will produce output that appeals to the largest number of people for the lowest cost. This is a very flimsy definition of supply and demand; that is to say, demand is not the same as maximum acceptance. At brass tacks, it’s the age-old populism versus elitism argument.

That having been said, the many choices presented in a commercial marketplace do at least allow consumers to desert one product for another, making a statement of taste in the process. In this way, some programming/publications will be successful where others fail and the commercial market will look at why this happened and react accordingly. This process hands back some power to the audience.

So it is a complicated relationship, for which the ‘punters vote with their feet’ argument is too reductive.

The reason for raising the whole consumer sovereignty issue in this column is that the Government’s Communications Bill will usher in a relaxation of foreign ownership restrictions and this is likely to cause a bit of a flap in publicly-interested circles.

The Bill allows both further consolidation of UK media companies, as well as permitting non-EU (most likely US) companies to buy into the country’s media assets. US media giant Viacom, for example, has begun to sniff around ITV. US radio giant, Clear Channel, has been set up in the press as a potential suitor to Capital Radio, with chief executive Roger Parry claiming that UK radio has too many companies and is ‘very dysfunctional’ – a good business opportunity indeed.

The relaxed ownership rules will allow consolidation in the radio market down to just two operators. A US media company might be the parent of one, or perhaps both, of these.

In the light of these developments, the panel at Media Question Time was asked whether it matters who owns UK media companies. Panellists almost unanimously agreed that it does not really matter who owns UK media groups, so long as they are aware of the importance of local culture and content.

Andy Jonesco, vice-president of interactive marketing AOL UK, said: “Why would we have a hang-up about who owns the media companies in this country provided that they do it well? If they do it well, it would be in their interest that they make sure that the local market likes what’s being given to it. And [the UK] market likes some American programming and some local programming. These [global companies] have the expertise to understand this.”

However, when asked to what extent the regulators would have to become involved in monitoring the output of ‘overseas-owned’ media groups, Jonesco noted that any potential buyer would first check out their regulatory position before making an acquisition. This suggests to some degree that tight regulatory control may deter foreign companies from buying into the market. If watchdogs are set up to ensure public interest and quality control, the implication is therefore that media conglomerates’ plans would be restricted by these public interest requirements.

That’s the cynical, pro-public service position. Of course, it’s also true that new entrants to the UK media sector will be likely to invigorate, invest and innovate, with a positive benefit to both companies and consumers alike. Nevertheless, we should be wary of the notion that it does not matter who owns our media companies and of the simplistic argument that a good media company will run things well and a bad one badly. Definitions of good and bad from a corporate perspective are not quite the same as from a consumer perspective, despite the overlap.

Historically, it seems that it has mattered who owns UK media companies, as the Government has adopted a guarded position in ownership legislation. Without strong regulatory frameworks, consumer sovereignty will not be the most influential factor in media output and ‘good’ media companies will not necessarily be the ones with the best products, but perhaps those with the strongest balance sheets, primed for further acquisitions.

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