There was a very interesting piece in the MediaGuardian yesterday by Anthony Lilley. Lilley generally argues for a more robust discussion of public involvement in what he calls the cultural industries. Here are the relevant nuggets, with my reactions:

‘First, innovation. Improving the ability of artists, creators and the people formerly known as the audience to take risks should be the main target. Without that, there can be no hope of building more UK-based, global-facing companies to distribute or aggregate stuff, because it just won’t exist.’

Fair point. But I think it is also a fair point for people to question why the monetary value of the state intervention seems to grow year upon year. Everyone was once told public subsidy was necessary because the market was failing in certain respects. Only now — when we have reached the golden era of digitalised media abundance and the market failures are becoming more difficult to locate — the rationale has switched somewhat. Now we are told the state intervention is needed to foster Creative Industries UK, plc. Brilliant. We used to subsidise smug journo-types, now the hipster geeks also get to pocket the public’s money. Getting people to take calculated risks should certainly be encouraged, but public subsidy usually means it is the taxpayer — not the cultural industries — that takes the risk.

‘Second, it is simplistic to argue that public intervention in the creative industries should be thought of only in terms of having a negative impact on the market.’

That’s true. Public intervention in the creative industries can also be thought of in terms of its negative impact on the taxpayer.

‘What is the difference between subsidy and investment? The conclusion I have come to is that one reason we “subsidise” arts organisations is because we cannot always measure their wider benefits….’

In Watergate, Deep Throat famously told Woodward and Bernstein to follow the money. My ex-boss once told me that’s also the easiest way to get to the heart of any policy problem. Follow the money. The problem with media subsidies is that they are difficult to follow. Not only can we not measure the wider social and economic benefits as Lilley notes, but we often cannot even measure the direct benefits. Let’s face it — the biggest beneficiary of cultural subsidies is probably not the public, but those firms on the receiving end of the subsidies. Of course they are going to claim that the wider public benefits. Whether and to what extent the public ever benefits is heavily dependent on the particular subsidy. Some are real winners. Others are terrible investments. The problem is accountability and the lack of government expertise to act as a smart investor — particularly when the investment has little or no liquidity. There are very few good exit options from a failed government investment.

Accordingly, I think the important question is not whether state intervention in the media or new media is a subsidy or an investment. The important question is whether it’s a smart thing to do at a particular level. I often hear people heap praise on the BBC as a great public investment. But that’s not how we should view investments. Case in point: I own Disney stock. It’s no doubt a terrific firm but my investment in that great and historic entreprise is calculated based on the expected return on my investment. The same is true of the BBC. The BBC is probably a fantastic public investment at about 1 to 2 billion GBP per year. With roughly 3.5 billion GBP per year invested, the U.K. taxpayer is probably getting a terrible return. Rough numbers, but you get the idea.

Anyway, it’s an interesting debate that Lilley is shaping. So stay tuned…