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More media, less democracy

By Manfred Kops

This article explores the implications of attempts by the World Trade Organisation to include audiovisual media, especially broadcast programmes, into the General Agreement in Trade and Services (GATS) and thereby promote international free trade in audiovisual services

Broadcasting programmes, like other mass media, serve private interests for information, education, and entertainment. As such they can be sold like other economic goods, either to viewers and listeners directly (pay TV) or to advertising companies that use the programmes as a means of catching the attention of audiences and transporting its advertising messages. In this form TV programmes can be provided by the market, and they can generate high profits.

The exchange of TV programmes can further increase these profits. Due to the economic peculiarity of the media known as non-rivalry in consumption, additional revenues can be generated without additional production costs, especially if large foreign markets can be opened up. At the same time, the enlargement of markets and output units diminishes the average costs per unit, and strengthens the efficiency and competitiveness of media companies to the benefit of the companies and the national economies of the countries where they reside, but also to the benefit of the viewers and listeners. From this point of view, the expansion of media markets also increases public welfare.

However, there are some economic peculiarities of broadcasting programmes – at least programmes with certain contents – for which the market fails. The most important reasons for such failure are:  1) sub-additivity of costs (due to non-rivalry in consumption), 2) non-excludability, 3) positive and negative externalities, and 4) asymmetric distribution of information about the programme quality. They cause 1) media concentration and low diversity of programme contents, 2) discrepancies between the programme preferences of viewers and listeners and the advertising companies served by commercial broadcasters, 3) paucity of programmes with positive externalities that benefit the public and an excess of programmes with negative externalities to the disadvantage of the public, and 4) adverse selection by viewers and listeners, resulting in the crowding out of high quality (and expensive) programmes by low quality (and inexpensive) programmes.

For these reasons mere market provision cannot sufficiently fulfil the broad and diverse public communication that is necessary for complex societies which have to adjust to changing environments and find common and integrative solutions. In Germany, this fact has been recognised, especially by the Constitutional Court, and a dual order has been established, consisting of commercial broadcasters that provide marketable programmes, and public service broadcasters that provide the whole range of marketable and non-marketable programmes.

In view of such failures of the market, on the supra-national and international level, too, strong commercialisation would be to the disadvantage of public communication – both for the public and political communication within nations and between them. The expansion of international programme exchanges and the concentration of media in the course of globalisation (for broadcasters especially as a consequence of the digitalisation) thus jeopardise media diversity and the opportunity for nations to participate in international public communication.

Currently there are conflicting forces on either side of the divide over media globalisation. On the one hand, the World Trade Organisation (WTO) promotes the international free trade of audiovisual services. On the other side there are other organisations, like the United Nations Educational, Scientific and Cultural Organisation (UNESCO), which combat these attempts. In this dispute, large nations with well-established audiovisual industries that stand to profit economically from further commercialisation of the international broadcasting markets, such as the USA, promote the WTO regime, while small nations that would not earn profits on international markets but whose national culture and identity would be jeopardised by the international free trade of programmes, resist it.

As many countries … will be affected both positively and negatively by further commercialisation and globalisation of the media, it will be hard to predict their future policies.

TV programmes as marketable or non-marketable economic goods:
Implications for supra-national broadcasting orders

The quality and quantity of market failure in the media sector does not affect only the design of national media orders; they are also relevant at the supra-national and international levels. Some of the market failures that impact national markets could, in fact, be even more potent in international markets.

If, for instance, media markets grow spatially in the course of globalisation, the costs per unit of output will further diminish, the optimal output size of media companies will further increase, and the number of surviving media companies will further reduce.  A higher degree of media concentration and an increase in the economic, journalistic and political power of the few remaining companies would be the consequences for the international media markets.(1)

The reduced diversity of media content – already a problem in domestic media markets – could also intensify in the course of globalisation. “Minority” programmes – for small cultural, ethnic or religious communities within countries or for small countries in the international arena – would be crowded out further; and the domination of programmes for “majorities” – representing large language communities at the domestic level and large nations at the global level – would escalate. This would especially benefit nations with large domestic markets, allowing them to dump their programmes on foreign markets.(2)

Despite the opportunities and advantages associated with free trade in TV programmes (described in the first chapter), the above reasons underpin objections to further commercialisation and globalisation of the media at the supra-national and international levels. There are concerns, for instance, about the attempts of the World Trade Organisation (WTO) to include the audiovisual sector, especially broadcasting programmes, into the General Agreement in Trade and Services (GATS). The apprehensions stem mainly from non-governmental and non-market organisations representing civil society.

The United Nations Educational, Scientific and Cultural Organisation (UNESCO), for instance, has adopted a Convention on the Protection of the Diversity of Cultural Contents and Artistic Expressions (CCD), (3)  meant to serve as a counterweight against the WTO regime. (4)   The CCD does not view broadcasting programmes (and other audiovisual goods and services) as economic goods but as parts and forms of national, regional and local cultures. Such a categorisation would allow WTO members to exclude certain audiovisual services from the GATS, and to regulate their production and distribution by national law.

During the World Summits on the Information Society (WSIS) (5) – Geneva 2003 and Tunis 2005 – these voices created a platform to articulate their views.(6) It will be interesting to observe to what extent they can combat the worldwide globalisation, commercialisation and concentration of media, which at present takes place in most parts of the world as a consequence of changing cost structures within the broadcast sector (especially as a result of the digitalisation).

Member states of the WTO will have to reveal their various positions on this in the course of negotiations on the GATS. They will have to decide about the allocation between goods (ruled by the General Agreement on Tariffs and Trade or GATT) and services (ruled by the GATS). Further, within services they have to decide about putting specific services into a Service Sectoral Classification List. The latter is important because some classes (like telecommunication services) are currently more liberalised than others (like audiovisual services). It is on the base of this classification list that all member states can request and offer measures for liberalisation. At present the Doha Round of negotiations (indefinitely suspended since July 2006) aims to fit the “initial requests” from 2002 with the “initial offers” from 2003.(7)

Member states’ positions in these negotiations depend on their national views about the relative capabilities of markets and free trade, and on whether they perceive the media as primarily an economic or cultural good. Additionally, or maybe even predominantly, these positions are determined by the various states’ differing chances of making profits from a commercial audiovisual industry. 

Therefore, it is not surprising that states with a well-established audiovisual industry and with a sufficiently large domestic market attempt to classify certain services that are currently classified as “less liberalised” audiovisual services (eg audio streams) as “more liberalised” telecommunication services. It is also not surprising that – within the audiovisual services – these countries try to eliminate existing exemptions from free trade (the so-called “carve-out”). States with small domestic markets and without domestic audiovisual industries, on the other hand, usually try to preserve their autonomous national audiovisual policies. These states therefore prefer a broader definition of the audiovisual sector, and they generally try to expand the number and strength of the exceptions for the audiovisual sector. (8)

In addition, the effects of commercialisation and globalisation of mass media on their citizens and societies as a whole determine states’ positions in the WTO negotiations. If the mainstream content of the commercialised mass media corresponds to citizens´ opinions and preferences (and thus confirms and reinforces them) states will evaluate the disadvantages (costs) of commercialisation as negligible. The USA, for instance, is not bothered by American dominance of the international film industry because – in economic terms – US-made films fit with the “consumer preferences” of its own citizens. A benevolent American government that aims to maximise the welfare of American citizens will therefore promote commercialisation and globalisation.

Under these conditions, even an authoritarian government that tries to maximise the welfare of ruling politicians would favour a commercialised media supply which is in line with its citizens’ social, cultural, and political attitudes, and thus would stabilise the existing political system.

In contrast, the disadvantages (the costs) of commercialisation are high if citizens’ attitudes (in economic terms again – ie consumer preferences) deviate considerably from the mainstream supply of a globalised commercial media industry. With regard to cultural attributes, media economists have traditionally labeled this as “cultural discount”.(9)  However, to what extent the (globalised) supply differs from citizens´ demands depends not only on cultural peculiarities but also on social and political attributes. If, for instance, in a given country, the political attitudes of citizens contrast with those presented by a commercialised mainstream media industry, this could induce a rapid and perhaps uncontrollable social and political transformation. Even benevolent governments (not to mention authoritarian regimes), could consider this as a high cost for society since the influence of foreign mass media could be the cause of a revolution, whether peaceful or violent.

Figure 6 illustrates this. It distinguishes between states for which an increased commercialisation of the audiovisual sector would generate (a) high or low benefits of a further commercialisation of the media (due to additional market revenues), on the horizontal axis, and (b) high or low costs of a further commercialisation of the media (due to a deviation and modification of the citizens´ cultural, social, or political attitudes (in economic terms: consumer preferences with regard to audiovisual services), on the vertical axis.

 

States that yield additional revenues from a further commercialisation of the audiovisual sector and that are not affected by large discrepancies between demand and (globalised) supply (Cell 2 in Figure 6) will clearly prefer the globalisation of the audiovisual sector, and they will support the WTO regime (in Figure 6 the USA is taken as example). States that yield no or only small additional revenues and are considerably affected in their cultural identity (Cell 3), on the other hand, will combat the WTO regime (Malaysia is taken as example).(10)

For states that do not gain considerable additional revenues from a further commercialisation of the audiovisual sector and are also not considerably affected by large discrepancies between demand and (globalised) supply (Cell 1, eg, the Netherlands), the action is not determined per se. The same is true for states that do gain considerable additional revenues from a further commercialisation of the audiovisual sector, but also have to suffer from expanding discrepancies between demand and (globalised) supply (Cell 4, eg France, Germany, Canada, the UK, Japan, India and China). In these cases the positions depend on the nations’ evaluation of the costs and benefits, which are often intangible and seldom evaluated explicitly and transparently.

Some states, like France, seem to consider the costs of a further commercialisation of the audiovisual sector as high, perhaps because of the assumed alteration of the (cultural) preferences that were induced by a globalisation (Americanisation) of audiovisual products, especially of movies and broadcasting programmes. Although France could benefit substantially from a further commercialisation and globalisation of its audiovisual sector, as there is a large Francophile and French-speaking community worldwide, and although it possesses a considerable audiovisual (film) industry, it always has opposed the WTO’s attempts to liberalise the audiovisual sector, (11) and it was one of the European nations that recently paved the way for the adoption of the UNESCO CCD. Similarly, Canada has traditionally defeated all attempts to commercialise the audiovisual sector, especially by its neighbouring country, the USA, although Canada´s audiovisual products would find large markets in English and French speaking foreign countries. (12) 

The positions of other countries – like Germany, the U.K., India, Japan or China – are more ambivalent, and have been less consistent and continuous in the past. In these countries many media companies would definitely benefit from commercialisation of the audiovisual sector, where they could raise additional market revenues. These companies consequently favour commercialisation, and they support the WTO regime. On the other hand, there are voices from civil society organisations that resist commercialisation of the audiovisual sector. The public service broadcasters in these countries usually share these concerns. Hence, a clear national position cannot be identified for these countries.(13)

(Dr Manfred Kops, born in 1950, is the General Manager of the German Institute for Broadcasting Economics and a lecturer at the University of Cologne)

This article is excerpted from a recent paper by Manfred Kops (The German Broadcasting Order: A Model for China?, Manfred Kops, Working Paper of the Institute for Broadcasting Economics, Cologne University, Germany,  No 215e, September 2006, http://rundfunkoek.uni-koeln.de/institut/pdfs/21506e.pdf). For a more detailed description and discussion of media globalisation, including trade-related issues, see Globalising Media Markets:  Benefits and Costs, Winners and Losers, Manfred Kops, Working Paper of the Institute for Broadcasting Economics, Cologne University, Germany, No. 211e, May 2006 -- http://rundfunkoek.uni-koeln.de/institut/pdfs/21106e.pdf

Endnotes

  1. In his book “Rich Media, Poor Democracy”, Robert McChesney has criticised this perspective (which partly has come true already), and he has warned that these global media companies possess a high political power which is not controlled by public institutions. For details see KOPS 2006.
  2. ibid
  3. See http://portal.unesco.org/culture/en/ev.php-URL_ID=11281&URL_DO=DO_TOPIC &URL_SECTION =201.html
  4. The UNESCO CCD does not consider broadcasting programmes (and other audiovisual goods and services) merely as economic goods but also as parts and forms of national, regional, and local cultures. This allows WTO members to exclude certain audiovisual services from the GATS, and to regulate its production and distribution by national law. See KOPS 2006.
  5. http://www.itu.int/wsis/
  6. KLEINWÄCHTER 2004
  7. See http://www.wto.org/English/tratop_e/dda_e/dohaexplained_e.htm. For the Doha Round an agreement originally was expected for 2005. Meanwhile most observers do not believe in an agreement before end of 2006 at the earliest, mainly because of the controversy, the developing countries have with the USA and the European Community on subsidies for agriculture. See BBC News:“Q&A: World trade in crisis”,  http://news.bbc.co.uk/1/hi/business/4512367.stm.
  8. There are growing concerns, for instance, with the WTO’s attempts to include the audiovisual sector, especially broadcasting programmes, into the GATS. They stem mainly from non-governmental and non-market organisations of civil society. Consequently, the UNESCO CCD mentioned above, does not consider broadcasting programmes (and other audiovisual goods and services)as economic goods, but as parts and forms of national, regional, and local cultures. This allows WTO members to exclude certain audiovisual services from the GATS, and to regulate its production and distribution by national law.
  9. 1 If for instance viewer (consumer) preferences for films in a country differ considerably from the output of the Hollywood film industry, the costs of a further globalisation of the film industry are high. Already in the sixties of the last century this effect was discussed and criticized as “media imperialism”, with regard to the dominance of US-American media products also as “Americanization” of the media, e. g. by SCHILLER 19690, p. 8: “Free trade is the mechanism by which a powerful economy penetrates and dominates a weaker one, the “free flow of information”, the designated objective incidentally of UNESCO, is the channel through which life styles and value systems can be imposed on poor and vulnerable societies.” Similar arguments are provided by Noam, Collins, and Tracey, in NOAM/MILLONZI 1993.
  10. 1 It is a simplification that the nations´ decisions about combating or supporting the globalisation of the AV-sector only are determined by the related benefits and costs. Also states whose net benefit from globalising the AV-sector is negative might support it (and vice versa states whose net benefit is positive might condemn it), if they are compensated for their decisions by advantages in other sectors. BIRDSALL/LAWRENCE 1999, p. 147, state that such bargains are common practice: “In the  Uruguay Round, for example, many developing countries were only willing to conclude an agreement on intellectual property in return for the elimination of the Multi-Fibre Arrangement, which restricted textile export from developing countries.”
  11. See CHAUDENSON 2003, COCQ 2005.
  12. The Canadian broadcasters cannot compete with the US-American networks that possess considerable economies of scale. The Canadian government, therefore, traditionally has regulated the Canadian broadcasting system to enable its domestic broadcasters to provide content for the Canadian citizens. See the instructive report of the Standing Committee on the State of the Canadian Broadcasting System“ -- www.parl.gc.ca/InfoComDoc/37/2/HERI/Studies/Reports/herirp02/18-Ch17-e.htm#4, also see DORLAND 1996, ACHESON/MAULE 2005
  13. For Germany, the U.K., and other ambivalent European countries such a clear position might not really be necessary, though, as the European states are not directly involved in the GATS negotiations (the European Commission takes a common position on behalf of all European states). However, as unanimity is required for all contracts that affect the cultural and linguistic diversity of the European Community, the national interests of the member states are guaranteed.

InfoChange News & Features, February 2007