What do Celine Dion, Shania Twain and Avril Lavigne have in common? They’re all female. They’ve all made their names and fortunes as pop singers. They’re all Canadian. And according to Professor Martin Richardson, they’re prime examples of what’s problematic about imposing cultural quotas on broadcasters.

Richardson is a specialist in international trade theory and commercial policy at the ANU College of Business and Economics. Whole sections of his working week are given over to developing and refining conceptual models that make sense of complex economic interactions. He also likes listening to music, describing his tastes as “catholic”.

“One man’s eclecticism is another man’s lack of discrimination,” he says. “But I’m very eclectic. I’ve got a 15-year-old son, so I listen a little to what my kids listen to. I like country music. I like jazz. I like rock music.”

During his previous job at the University of Otago, Richardson was also tuning into a heated national debate about whether or not New Zealand should impose local content requirements on its broadcasters. Advocates were pushing for a legislated requirement that radio and television stations play a certain amount of content created by New Zealand artists and producers. Such measures, it was argued, would help preserve the cultural specificity of the land of the long white cloud. Eventually the country’s broadcasters agreed to voluntary local content targets.

“It was quite a robust debate,” Richardson says. “Basically, it’s forcing people to listen to music they wouldn’t otherwise listen to. The proponents of it made me suspicious in the first place. What was their motivation? The answer is that if you have to play New Zealand music, the radio stations will tend to play the more established musicians like Crowded House and so on, so the royalties start flowing in. As a cynical economist, my immediate suspicion was that it was nothing to do with preserving domestic culture. The notion that Crowded House is something quintessentially New Zealand, too, is a stretch.”

Pondering the matter, Richardson began to look at other countries that had imposed local content quotas. He paid particular attention to the Canadian example, where such quotas had been in place for decades. Currently, TV stations in Canada must screen a high proportion of local content, while radio stations must ensure that 35 per cent of their popular music is Canadian. Whether or not the music qualifies as local is determined by the MAPL (Music, Artist, Performance, Lyrics) system, which requires that the composer, lyricist, performer or performance has originated in Canada. But Richardson says this kind of system is problematic, as it can lead to what he calls ‘the Canadian diva effect’.

“If you listen to people like Celine Dion, Shania Twain, or Avril Lavigne, they are Canadian, they get played – or, at least, used to get played – preferentially on Canadian radio stations, but they sound generically international,” Richardson says. “There is nothing distinctively Canadian about them at all, as opposed to some of their predecessors. Why? Once you have a cultural quota in place, you are forcing consumers to listen to more local content. Let’s assume that consumers have a preference for more international-type content. The obvious incentive is for local artists to start producing international music. The whole point of this is to preserve the local content, but actually by putting a restriction in place, you give local providers a very strong incentive to actually change their style and sound much more international.

“The Australian scheme is much less rigid. It says any band that is either in Australia or associated with Australia counts as Australian music. Take Nick Cave, who now lives in the UK and records there, but is still counted as producing Australian music because he grew up here. The proponents of these things always say there is some unique culture that is being preserved, but I just don’t see it. This stuff sounds very international.”

While the NZ debate was playing out, Richardson was busy developing a model that would help to describe the economic relationships between a given number of players. A colleague at Otago suggested this work could be applied to the consequences of cultural quotas for broadcasters. Richardson says he was keen to attempt the analysis, especially as he already harboured some doubts about local content targets.

“The model was originally developed to look at location decisions. There are physical locations, but you can think of locations very broadly. It can be any space at all. It can be firms that differentiate by geographical provision, firms that differentiate by some feature of a product – anything you can model as being a differentiation you can fit into this framework.”
To understand Richardson’s model, it’s helpful to think of two points on a line, both representing commercial radio stations making playlist decisions. The line represents a continuum, where the extreme left equates with non-stop local content while the extreme right stands for non-stop international content. Both of the radio stations are free-to-air, which means advertising is their only source of revenue. As a consequence, they both need to get the biggest market share possible. They make decisions about how to place themselves along the continuum depending on what the other is doing, deciding how much local music and how much international music to play. Suppose in equilibrium that one of the stations, the one further to the left of the line, plays around 80 per cent local music, with the remainder of its schedule is international tunes. The other radio station plays around 80 per cent international music. What would happen, Richardson asked, if a local content quota of, say, 30 per cent was introduced?

“For the local station it makes no difference – they’re obviously unaffected. But the international station has to increase the amount of local music that they play, so in a sense they’re shifting down the continuum. Because you’ve got this interplay between them competing for advertising revenue, if the other station did nothing at all, it would find it’s now got a closer neighbour. So the competition over advertisers gets fiercer. The optimal response for the local music station is actually to play more local music, so they move apart. So at first you get this sort of nice double whammy where both radio stations will start to play more local music.

“The gain to consumers is that both radio stations are now playing more local music but, because they’re closer together, they’re competing for more advertising revenue, which drives the price of advertising down but also leads to less advertising overall. The benefit comes because the advertising goes down. It’s a very indirect effect for consumers, and it’s certainly not the effect that any proponents of cultural quotas have put forward.”

Next, Richardson considered what effect introducing an advertising cap would have on the playlist decisions of the two stations. Given that it was competition for advertising that had been keeping the players apart in the first place, he found that limiting the commercials would have a homogenising effect, forcing once divergent rivals into the middle of his local-international continuum.

Finally, the economist introduced a hypothetical third station to his model. This one was publicly funded, commercial free, and played all local music.

“Triple J is a good example and always cited as a very successful example of a public radio station that’s located almost completely at one end of the spectrum (it does play some international music) and has zero advertising,” Richardson says. “The effect is to drive away the commercial station that was playing more local music, which is now having its market undercut. It’s now going to play less local music.”

Richardson admits that his model is only addressing some of the economic consequences around local content quotas. It’s not always possible to neatly convert something like personal taste into a mathematical measure, he says, adding that debates around culture will always include such human vagaries. But he believes his model is useful.

“What I like about the set up is that it’s very difficult to get a simple way of modelling local content. It’s hard to quantify why local content matters, why it is special and why people care about it. In this model that’s sort of assumed. There are some consumers who just happen to like it. We also assume there is some differentiation between local and international content.”
Although Richardson gives backers of local content quotas the benefit of the doubt by assuming that such a thing as local content exists in the first place, he himself remains doubtful about such classifications. For him, Celine Dion and her compatriots make pop music much like that found in the US, the UK, Australia and elsewhere. Whether Canadians choose to count such divas as their own is entirely up to them.

^^

ANU Reporter 
Autumn 2007