A small scandal has raised ire on social media after Twitter added the mention of “publicly funded media” under the twitter handle of the British Broadcasting Corporation (BBC) and National Public Radio (NPR). In Canada, the conservative leader of the official opposition jumped on the opportunity and asked that the Canadian Broadcasting Corporation (CBC) be branded with a similar label.

The reaction from such media outlets and their defenders has been to point out that it is an unfair attempt to stigmatize them by likening them to true state propaganda outlets in countries like Russia or China. To be sure, these entities have high degrees of editorial autonomy and independence. Calling them “propaganda outlets” (either explicitly or implicitly) is untrue.

This does not mean, however, that state-funding of media outlets is good for democracy. In fact, many people simply assume that editorial independence is sufficient proof of the absence of political interference. In fact, the very existence of these editorially independent organizations and of subsidies to media outlets are proof of interference by political actors unduly using the powers of the state.

To see how this can be, one must understand the basic economics of the media. Each media has different types of cost structures due to the nature of how they produce their services – newspapers, radio broadcasters, television broadcasters, etc.  Each media type has “fixed costs” which are incurred when they are setting themselves up. As they start producing, however, average costs start falling. These are economies of scale that different media outlets want to exploit, and thus they want a large mass of customers.