Those of you not in the UK may wonder what the relevance of
a popular BBC television programme has to do with economics, but please bear
with me. The story concerns a programme called the Great British Bake Off,
which has been poached by Channel 4, a rival domestic channel. Big deal, right?
Yet it has commanded a lot of newspaper column inches over the past week or so,
suggesting that it is an issue of cultural significance. It is also a story of
great economic significance.
To recap, The Great British Bake Off is a show in which ordinary members of the public compete against one another in a baking contest. It has struck a chord with the viewing public who like the idea of a wholesome TV show with four presenters who are down to earth, generally sympathetic characters. One of the undoubted stars is its 81 year old presenter Mary Berry, who has become the nation's favourite grandmother and endeared herself to millions. In these troubled times, the show has captured the imagination of the viewing public for its sheer ordinariness.
Imagine the horror when it was announced that the independent production company which makes the show asked for more money from the BBC than it was prepared to pay. So it was picked up by its commercial rival Channel 4. However the show's three female presenters have announced that they will not go with the show when it switches channels and only one (who is male) will transfer.
Despite all the ballyhoo, it is after all just a TV show. But it demonstrates a number of features of how modern economies work. For one thing, it provides a test of the power of franchising. It is one thing for McDonalds to set up thousands of franchises in order to provide the same meal experience across the world, but does it work quite so well in services, particularly when they are personalised in the way that TV programmes are that rely on its presenters? Having lost 75% of the onscreen team, will the new programme be able to retain the same appeal? We have already had the experience here in the UK of Top Gear, a product sold around the world, which lost all of its presenters and the new team was simply unable to recreate the chemistry of the old one. In a wider context, this raises the question of whether any personalised service can be treated as just another commodity? The argument underpinning much of the UK's market economy over the past 30 years is that they can. But if you are unable to replicate exactly the same conditions under changed circumstances, what you actually have is a different product.
It is hard to put a price on star quality, but that is what we are talking about here. If we think of it in standard microeconomic terms, we can almost exactly replicate the supply curve, but not quite. Moreover, we don't know the shape of the demand curve for what is essentially a different product. Therefore even small changes in the position of the demand and supply curves could result in a vast change in the size of the audience.
There is also a potential problem in that Channel 4 may be considered an inferior good to the BBC, which may reflect some lingering snobbishness associated with commercial TV in the British psyche. Channel 4 does some things very well but it does not compete with the BBC for the same demographic. Older viewers, for example, are more likely to be irritated by the ad breaks. Or it may be that Channel 4 simply cannot match the BBC's brand name, which has after all been broadcasting since 1922, whereas Channel 4 first hit our screens in 1982. From an economics standpoint, you would have thought that Channel 4 should be paying less, rather than more for the product given that it has a smaller audience share.
Then there is the motivation of the presenters themselves. The three ladies opted to demonstrate loyalty to the BBC and not follow the show to Channel 4. But Paul Hollywood is following the money. This may reflect Hollywood's more entrepreneurial background. It may say something about the different attitude of men and women to brand loyalty (I'm out of my depth on this one). Either way, it says something about the different motivations that drive individual's economic decisions.
Above all else, what all these issues demonstrate is that there are numerous complex factors which determine whether changing the underlying conditions result in economic success. Brand loyalty above all explains why the Brits are attached to their National Health Service and are loth to see radical change. The fact that Bake Off is able to switch channels in this way is exactly the kind of free market in services that the Thatcher government strove for in the 1980s. But whether it is what the public wants, we shall let the viewing figures be the judge.
To recap, The Great British Bake Off is a show in which ordinary members of the public compete against one another in a baking contest. It has struck a chord with the viewing public who like the idea of a wholesome TV show with four presenters who are down to earth, generally sympathetic characters. One of the undoubted stars is its 81 year old presenter Mary Berry, who has become the nation's favourite grandmother and endeared herself to millions. In these troubled times, the show has captured the imagination of the viewing public for its sheer ordinariness.
Imagine the horror when it was announced that the independent production company which makes the show asked for more money from the BBC than it was prepared to pay. So it was picked up by its commercial rival Channel 4. However the show's three female presenters have announced that they will not go with the show when it switches channels and only one (who is male) will transfer.
Despite all the ballyhoo, it is after all just a TV show. But it demonstrates a number of features of how modern economies work. For one thing, it provides a test of the power of franchising. It is one thing for McDonalds to set up thousands of franchises in order to provide the same meal experience across the world, but does it work quite so well in services, particularly when they are personalised in the way that TV programmes are that rely on its presenters? Having lost 75% of the onscreen team, will the new programme be able to retain the same appeal? We have already had the experience here in the UK of Top Gear, a product sold around the world, which lost all of its presenters and the new team was simply unable to recreate the chemistry of the old one. In a wider context, this raises the question of whether any personalised service can be treated as just another commodity? The argument underpinning much of the UK's market economy over the past 30 years is that they can. But if you are unable to replicate exactly the same conditions under changed circumstances, what you actually have is a different product.
It is hard to put a price on star quality, but that is what we are talking about here. If we think of it in standard microeconomic terms, we can almost exactly replicate the supply curve, but not quite. Moreover, we don't know the shape of the demand curve for what is essentially a different product. Therefore even small changes in the position of the demand and supply curves could result in a vast change in the size of the audience.
There is also a potential problem in that Channel 4 may be considered an inferior good to the BBC, which may reflect some lingering snobbishness associated with commercial TV in the British psyche. Channel 4 does some things very well but it does not compete with the BBC for the same demographic. Older viewers, for example, are more likely to be irritated by the ad breaks. Or it may be that Channel 4 simply cannot match the BBC's brand name, which has after all been broadcasting since 1922, whereas Channel 4 first hit our screens in 1982. From an economics standpoint, you would have thought that Channel 4 should be paying less, rather than more for the product given that it has a smaller audience share.
Then there is the motivation of the presenters themselves. The three ladies opted to demonstrate loyalty to the BBC and not follow the show to Channel 4. But Paul Hollywood is following the money. This may reflect Hollywood's more entrepreneurial background. It may say something about the different attitude of men and women to brand loyalty (I'm out of my depth on this one). Either way, it says something about the different motivations that drive individual's economic decisions.
Above all else, what all these issues demonstrate is that there are numerous complex factors which determine whether changing the underlying conditions result in economic success. Brand loyalty above all explains why the Brits are attached to their National Health Service and are loth to see radical change. The fact that Bake Off is able to switch channels in this way is exactly the kind of free market in services that the Thatcher government strove for in the 1980s. But whether it is what the public wants, we shall let the viewing figures be the judge.
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