Doing the splits

"AH, BUT a man's reach should exceed his grasp, or what's a heaven for?" So Sir Christopher Bland, the BBC'S chairman, reached for his Browning to explain some of the corporation's imperfections as he released its annual report on June 23rd. He might have applied the quotation more generally to the BBC, which has lately become one of Britain's most ambitious media organisations.

Six years ago, when Sir John Birt took over, the BBC was in bad shape. It was out of favour with the politicians--Margaret Thatcher was narrowly dissuaded from privatising it-grossly inefficient and had ignored multichannel television, BSkyB was taking off, and taking viewers from the BBC. At the time, Sir John expected the combined ratings of the BBC'S channels to drop to 30%.

Sir John--whose career in current-affairs television gave him a feel for political sensitivities--transformed the corporation's relations with the politicians. He talked the talk of the market; and when the health service was dragged kicking and screaming towards a purchaser-provider split, the BBC went voluntarily. His reward was a big increase in the licence fee, which finances the BBC, and which all Britons must pay for the privilege of watching television. The extra cash allowed the BBC to invest in digital broadcasting.

Two stages of management changes shook up the corporation: "producer choice"--which enabled producers to buy services, such as studio time and editing, from the private sector as well as from within the BBC--and the split between the broadcast and production functions, which gave the broadcast side a budget for which the producers were to compete. There were a number of flaws in these designs--the broadcast-production split, for instance, gave broadcast plenty of suppliers but production only one customer--but they have at least changed the BBC'S culture. People within the corporation now think much more about costs.

Sir John also professionalised the corporation's approach to broadcasting. It began to research what its audience wanted, just as any private sector company would; and, in consequence, to think harder about programming and scheduling. As a result, the BBC's ratings first stopped falling and then even recovered a bit. They have been running at around 40%, rather than the 30% Sir John had anticipated.

But the biggest change has been digital. Over the past three years, the BBC has spent more heavily on digital than has any other media organisation in Britain. As a result, the BBC is providing most of the new digital programming that consumers receive. It owns nine digital channels, four of them free-to-air and five commercial; and it wants more. They lose money, of course, but then even in its "commercial" operations the BBC is not constrained by the need to provide returns to shareholders.

On the Internet, too, the BBC is way ahead. It has spent probably four times as much as its nearest competitors and has got twice as many page-views (the meter of web popularity) as its nearest British rival. Only Yahoo!, the giant American search engine, is more popular among British web surfers.

The BBC'S dash for the future has left most others standing. But it has also heightened existing tensions in the organisation-between public service and commercial operations, between high-mindedness and ratings, between spending on the present and investing in the future.

Public service and commercial operations used to be clearly divided. Commercial was magazines and public service was everything else. Now digital television and the Internet have both commercial and public-service sides. The divide often seems arbitrary. Why should Choice, a general entertainment channel, be a public-service channel, while Arena, the arts channel, is commercial and so available only to subscribers? People working on different sides of the divide start competing with each other. By trying to do both, the BBC risks doing neither as well as it should.

Because it is spending so heavily on the digital future, the BBC is finding it harder to keep a grip on the present. Its ratings are falling again, now that ITV has got rid of its ten o'clock news programme, and grumbles are growing about wasting money, making stuff for digital channels that nobody is watching. Some say keep the digital, forget the ratings and junk populism; others fear that each percentage point lost in the ratings is another blow undermining the licence fee that pays their wages.

Gavyn Dawes, chief economist at Goldman Sachs in London, who is chairing a panel reviewing the future of the BBC'S finances, may provide what looks like a resolution of these problems. He is expected to give the corporation a whacking increase, either through a higher licence fee or through a supplement on those who subscribe to digital. That should enable the corporation to buy lots of stars and sport (both of which it has been losing) and pay for digital broadcasting as well.

But if that happens, it will heighten another of the strains on the BBC. Sport and stars notwithstanding, ratings are likely to go on falling, not just because of new television services, but also because television viewing is falling as children and teenagers increasingly spend time on computer games and the Internet. There has been extraordinary public support for (or apathy about) the licence fee. But it looks as though people will be asked to pay more and more for the BBC while watching it less and less. If the licence fee increases sharply, so does the risk that somebody, somewhere, will just say no.