How should public broadcasting companies (like NRK) be financed?

NRK, is the Norwegian public broadcasting company. Owned by the Norwegian government, and financed by a invoice that is sent to every Norwegian household owning a TV. This year they did a very smart trick to send out the invoice. With two weeks to pay it, they sent it during the time of holidays in Norway. And if you fail to pay within the deadline they would add approx 65 kroners in fee. They collect close to 3,7billian kroners total from about 1 million households. So why should we continue to finance this public broadcasting company with a separate invoice? They could be financed by the public with taxes, or they could finance with commercials?

In the days with a lot of channels with a lot of commercials is it good that there is a public offering. Having a company that can air programs with lower commercial value is good. It is also good that the public gets access to programs that would have been on paid channels if the public channel could buy them - like the Olympics and other international events.

In an article on dn.no June 2nd 2008 did the professors Hans Jarle Kind, Guttorm Schjelderup and Lars Sørgard at the Norwegian School of Management (bi.no) write about the way NRK was financed. They say that the cost of financing the NRK with invoices costs aprox 100 million kroners a year, and the cost of doing with taxes would be 20% of each krone more in tax. Giving the cost of financing 3,7 billion kroners a 0,74 billion more to get the money needed. This is seven times more expensive. I will not question these calculations, but I would say that this is just the pure economic side. As long as we have the tax model we have in Norway will it be expensive to collect the taxes - but that is something the government has decided. Simpler and more efficient systems exist - but that is a subject for another blog entry.

The question about how you finance public offerings will also be subject to values. When you decide to finance something based on "have" or "not have" is it important to see what effects different tax regimes has had. In Dublin (several years ago) was the tax on houses based on the number of windows. This made people build houses without windows. People will overtime adjust to tax regimes. As it is possible to get the tv shows from the internet will we see more people dropping the TV. As it is the TV that is subject to the license fee, then you get the TV-shows for free if you get them from NRK web-TV. With the current rules, you can even connect a hard disk recorder, and connect it to a projector and you could argue that you don't have a TV.

The most problematic side of the public financed channel is the boarder of where they do their business. Some part of the media world should be aired on commercial financed channels. Not all of the parts of what NRK does should be financed by the public as it isn't in the best interest of the public. Why should the license fee be used to operate sites like nrkbeta.no (even if it is a good blog) or video upload sites and online chat programs? The rules of what the public channel can do with its money should be more firm  - and if it is to stay as a commercial free channel, then it should be that - not have a lot of programs sponsored by Statoil, SAS, Telenor and other major brands.

I hope that NRK is still a major player in the media industry in Norway in 50years, but it will need to get is finance model changed. And it also has to adjust to even faster media industry that has only started to change.