Four minutes to eight on a Sunday morning in mid-January is an odd time to make an unconventional announcement about the end of the BBC Licence Fee, but Nadine Dorries – Secretary of State at the Department for Digital, Culture, Media and Sport (DCMS) – did exactly that by tweeting a signpost to a Daily Mail article claiming that “The days of state-run TV are over”.
It’s not quite clear whether this was a dead cat designed to distract from the government’s Partygate problems, a reverse dead cat – an existential threat sneaked out under cover of a “bad news day” – or a hybrid of the two which might be described as “both of the above”.
Freeze and scrap the BBC Licence Fee
The thrust of the proposal is that the BBC Licence Fee will be frozen for the next two fiscal years and replaced as a funding model at the end of the existing BBC Charter in 2027. Unfortunately, as with many of this government’s radical proposals, the nature of the replacement is the “subject of a debate to be had”. In other words, “we know what we don’t want, but have no idea what we want to replace it with”.
The reasons cited for the change are wide ranging and include:
- An end to (implied anti-government) bias in news output
- Poor value for money
- It will help families cope with cost-of-living increases
None of these arguments particularly hold water.
It is hard to determine bias , but the fact that each end of the political spectrum accuses the BBC of bias in favour of the opposite end, it is arguable that the balance is about right. It is certainly the case that the current government sees any scrutiny or criticism of its policies as bias and has been complaining about bias in BBC output for many years.
The value for money argument is also somewhat suspect. The BBC provides ten national TV channels with 12 English regional variations, plus Wales, Scotland, NI, and Channel Islands, ten national radio stations, 40 local radio stations, internet TV and radio, a hugely extensive website, and BBC World Service in 42 languages round the world at a cost of £159 a year or £3 a week. This compares favourably with other subscription services available. Sky for example, starts at about £6 a week but has so many more channels that it is almost certain that the average viewer watches a far smaller proportion of its output.
In terms of helping with cost-of-living increases, since 2010 Licence Fee increases have been about 1% a year. At current prices freezing the fee would save the average Licence Fee payer 3p a week, which probably falls far short of the support households struggling with the doubling of their energy bills are expecting.
New funding model from 2027
Since the government hasn’t given any guidance on what (if anything) it envisages will replace the Licence Fee, one can only speculate as to the options. The Licence Fee provides £3.8bn of revenue at current prices or about £4.1bn in 2027 assuming 1% a year increases and no dramatic change in the number of licences.
Obviously, thoughts turn to services supported by advertising.
If we look at Independent Local Radio (ILR) there are about 275 radio stations generating about £600m in advertising revenue in 2020 (about £700m in 2019 prior to Covid). If we assume that the BBC’s local radio stations require a similar level of funding to ILR stations that would indicate that they would be looking to generate about £90-100m a year or somewhere in the region of 15% of existing revenues.
Unless this amount can be generated from new radio advertisers, it will simply be transferred from existing ILR income. This leads me to surmise that not all local radio stations will survive, and that those most at risk will be the truly local town or community level broadcasters and that there will be more nationally produced and syndicated shows produced by the larger groups using regional identities and advertising.
The bigger problem is that even if this is achievable, it still leaves somewhere in the region of £3.6bn to be raised from TV advertising revenues. UK TV advertising revenue is generally estimated to be about £5bn in a good year – declining slightly since 2015 – and £4bn in 2020 due to covid. The BBC would need to either almost double the TV advertising industry revenue overnight or capture 90% of the business from all other operators. Clearly neither scenario is realistic.
It seems therefore that some sort of subscription-based access service would be necessary with a similar model to, say Netflix. That, however would almost certainly mean changing the transmission methods from traditional terrestrial transmitters to satellite, cable, or internet delivery. All this requires additional back-office systems; access, billing, etc, and transmission systems, all of which come with a cost. It seems highly unlikely that this can be delivered for £3 per week per subscriber.
At this point it looks as if the only viable option would be to sell off the more commercial output to existing providers for delivery via their subscription systems.
Not only does this look highly likely to be more expensive for those who can afford it, it has the potential to take high quality public service broadcasting out of the reach of those who can’t afford satellite and cable TV or an internet connection capable of handling streaming services, creating yet another divide in an increasingly fractured society.