Next year, the BBC may be able, momentarily, to silence its political critics by celebrating its 100th anniversary. The world’s oldest broadcaster (and the largest by number of employees) was founded in October 1922 and has been funded for the last 99 years by a quaint licence fee payable by every British household and organisation with a TV.
The celebrations are certain to include journalistic commentary on the irony that the first live public broadcasts of what became the famously un-commercial British Broadcasting Corporation were sponsored by Lord Northcliffe, founder of the Daily Mail, which is now among its most strident critics. But the BBC has become accustomed to animosity from other media. In the early days, music hall comedians had complained that radio ruined their acts by making their content stale. It soon, though, became a huge audience success for everything from radio plays to live music. The fledgling TV channel was suspended during World War 2 when prime minister Winston Churchill made dozens of speeches on BBC radio.
The BBC has been at the heart of British life for generations and its multi-lingual World Service broadcasts have long been an instrument of ‘soft power’ internationally. Alongside Queen Elizabeth, the BBC is the UK’s favourite brand.
Its statutory purpose is to provide impartial news and information, to support learning for all ages, and to serve the diverse communities and the creative economy of the UK. That’s the agenda of an organisation which, in 2021, has:
- £5bn expenditure
- 22,000 employees
- A £1bn commissioning budget for UK content
In the last 25 years, the BBC has faced increasingly tough commercial competition from broadcasters, online media – and Netflix. But the most recent findings of the UK’s Ofcom regulator underline its overall success:
- Weekly reach of 87% of the UK 15+ population
- Average daily consumption of more than 2 hours (1 hour for 16-34 year olds)
- A large majority think its news services are impartial
- Its iPlayer catchup has a weekly reach of 36%, while the Sounds audio app gets 18%
But you don’t have to look too far to find the emerging cracks in this 100-year-old celebration. Among 15-16-year-old Brits, they prefer Netflix; the BBC comes second with YouTube. Among 11-12 year-olds, it’s YouTube followed by Netflix and the BBC. In truth, few media companies would actually regard even that erosion of fickle young audiences as too much of a problem.
The BBC has a brilliant track record of original programming and pace-setting journalism lauded by audiences in the UK and around the world. It has also been at the forefront of tech innovation with its first web site in 1997, podcasts (2004), and its iPlayer catchup streaming (2007). Way back in 1981, it produced (with Acorn) a pioneering ‘microcomputer’ as part of a 13-year Computer Literacy Project in schools.
The BBC has seemed to respond to every challenge in media – and that’s become the problem.
Britain’s baby boomers can still remember the brief 1960s explosion of ‘pirate’ stations which challenged the then BBC radio monopoly and built huge alternative audiences by broadcasting pop music from rusty ships on the high seas. Even at a time when the Beatles and Rolling Stones were captivating the whole world, the UK’s own national broadcaster had been dedicating just a few weekly hours to pop. But, when the radio ships were outlawed in 1967, the BBC launched its own all-day music stations, six years before the belated introduction of commercial radio in the UK.
For a whole generation, it seemed as if the BBC had been fighting to preserve its monopoly, first by denying there was any demand for more radio and then – when the demand had been proved – by rushing to fill the gap before anyone else. That strategy was in evidence in the 1970s when the the BBC launched its own network of local radio stations – to head-off the competition from what were initially local commercial networks.
Few could have forseen the impact of the web when the BBC launched its pioneering web site 28 years ago. But it is clear that the dominance of BBC Online is problematic for traditional news brands fighting for a digital future. That thinking has motivated attacks on the public broadcaster by Rupert Murdoch and other daily newspaper proprietors, with varying degrees of public support. But the plight of regional and local news brands has assumed greater importance because of the widely-held view that local democracy (in the UK and elsewhere) is compromised by the loss of media that can hold elected and non-elected officials to account. That is why the BBC itself now funds 165 journalists in the Local Democracy Reporting Service for regional news organisations. The broadcaster is spending £8m annually on that particular line of defence.
The scheme has been widely supported, but nervousness of the sheer power of the BBC as the UK’s dominant news provider has been heightened by its recent strategy to decentralise and localise more of its operations. The News Media Association (NMA) said: “The BBC must not crowd out a cornerstone of our democracy – the nation’s press – that is forced to compete with the might of the licence fee.”
The trade body noted that the BBC had “shifted from being our national broadcaster to being its largest online publisher, ploughing huge resources into its websites and digital services. It now publishes daily a vast number of articles, human interest stories, celebrity gossip, recipes and more, all cross-promoted by its broadcast channels, drawing away audiences and revenues from commercial news providers in the process”.
At a time when the UK government (and especially the current prime minister) is perceived as a critic of the BBC, the NMA’s chief executive condemned its “BBC Across the UK” plan as “ambitions to use its privileged position to encroach further into local news in an unprecedented assault on the space already well-served by commercial news media”.
It’s a familiar refrain dating back to when the BBC was forced eventually to divest its best-selling magazines – after decades of competing directly with commercial publishers – and even daring to promote them on channels which were forbidden ordinarily to carry any advertising at all.
It’s perfect timing for critics of the BBC. But even highly-supportive Brits believe that the world’s oldest broadcaster must now change fundamentally, because:
- While the BBC remains a dominant (and hugely popular) force in UK media, broadcasting is no longer the ‘natural’ monopoly it had once been
- Young audiences, in particular, have largely abandoned linear broadcasting services
- The BBC needs a new business model in a hyper-inflationary media landscape dominated by multi-national video and audio streaming companies
- It is increasingly difficult to maintain outstanding programmes, trust among a global audience, and high standards of impartiality in the era of social media
- Its operations are at the heart of the UK’s high-earning creative industries
- The BBC represents Britain
The criticism of the “BBC Across the UK” plan was ironic because the newly-appointed director-general/ CEO Tim Davie must have thought that decentralisation would be popular at a time when the government itself is committed to “levelling up” an economy that has long been skewed towards London and the country’s south-east. Perhaps it is another example of the BBC being insensitive to the concerns of business “rivals” as it seeks to maintain its dominance of UK media.
The broadcaster now earns some 25% of its annual budget from a rich combination of programme exports and TV channels both in the UK and internationally. The commercial subsidiary BBC Studios employs some 12% of the BBC staff. In many ways, these activities started with its former magazines linked to TV programmes. But now they include the ownership of TV channels in the UK and elsewhere funded by advertising. You can’t find a commercial TV broadcaster in the UK which wants the BBC to accept advertising on its main domestic channels (they wouldn’t want the competition). But there is an obvious inconsistency in eschewing ads on the BBC’s branded channels while accepting them on the UK TV cable and satellite network – which is merely owned by the BBC after 30 years as a joint venture.
That issue takes you straight to how the BBC might make the changes necessary to retain audience and electoral support in times when the media competition will only intensify. The BBC – which has been forced by recent governments to accept a standstill in funding – will, inevitably, have to find ways to reduce its overall budget and hence the burden on taxpayers. By way of a benchmark, the licence fee paid by 25m UK households is £159 annually – or £13.25 per month, which is virtually the same as the top Netflix rate. Many people pay half the price for Netflix.
It is an obvious pressure point but – in addition to reducing the competitive friction between the BBC and commercial media – any UK government will want to find ways to reduce its existing budget and minimise future increases. The emphasis will – soon enough – be on identifying which activities absolutely depend for their survival on the BBC and those which would be operated quite satisfactorily by commercial companies.
That provides the ultimate challenge for the BBC and its hinterland of creatives and contractors. The tough question is: what could the BBC give up? Here are some possible answers:
- Local radio. While BBC local radio has strong audiences, the 40+ stations compete directly with commercial operators – and with beleagured local news brands. The network costs £200m annually. The BBC could extend its support of local journalism by divesting its local stations to regional news brands. Augmented print-digital-audio partnerships could be a real win-win for local democracy. Cost saving: £200m
- Pop music radio. The BBC could save some £100m by closing or selling its three national pop music radio channels which compete directly with national and regional commercial radio stations. It would safeguard the undoubted core strengths of BBC Radio 4 and Radio 5 news and documentaries, and also Radio 3 classical music. Cost saving: £100m
- TV broadcasting. The £1.4bn spent on programming for four terrestrial TV “entertainment” channels is 50% more than the UK’s ITV commercial network. Fewer channels and an acceptance that sport (once dominated by the BBC but now largely prised away by the Comcast-owned Sky TV) is no longer worth even the £49m still spent on it, could reduce costs substantially. Within the £470m Drama, Film & Entertainment budget are reality TV shows which (as the transfer of Bake Off from the BBC to ITV showed) would not die without the BBC’s patronage. Cost saving: £100m
- Licence fee funding. It seems almost inevitable that a future UK government would decide to switch its funding for the BBC from the antiquated – and highly visible – licence fee (which might increasingly be challenged or ridiculed by those who don’t watch any domestic TV). The funding could instead come from regular taxes where it would be less exposed to controversy. On that basis, it is believed there could be a £125m annual saving in the cost of outsourcing the TV licence collection to a commercial operator – and that’s before the funding itself had been reduced by the BBC’s own transformation. Cost saving: £125m
- BBC Studios. The BBC’s commercial activities in the UK and elsewhere have long been trumpeted as a winning subsidy for domestic programmes. Last year, they generated £1.3bn of revenue. But the BBC’s treasure-chest of fine programmes – in demand across the world – manages to generate only £148m of EBITDA – a margin of 12%, lower than ITV, Sky, and many TV production specialists. Could BBC Studios – with 63% of its revenue from content, 17% from subscription fees, and 17% from advertising – increase its EBITDA margin to 20% ? That would increase BBC Studios’ profit from £148m to £260m (on the recent financials). Profit increase: £110m
You may surmise that a relatively small number of strategic decisions – and the ending of the cumbersome TV licence (which 7% of Brits avoid paying) – might successfully reduce the taxpayer funding required by the BBC to £3.2bn – a saving of some £600m or 17%. More online, less free-to-air broadcasting and (who knows?) new collaboration with commercial partners could produce much greater cost savings. Viewers and online users might (almost) not notice the difference, and we haven’t touched the World Service budget of £400m or £236m for online, or most of the TV for adults and children. You get the picture.
There’s some way to go before the 2027 expiry of the BBC’s legislative “charter”. But the whole survival of the BBC as a major media group may depend on whether it is able to “get out in front” and start a plan of transformation ahead of time – and before the coalition of critics forces its hand.
Tim Davie, a former marketing professional who had been CEO of BBC Studios, might open exploratory conversations with would-be commercial partners, many of which would rush to be involved in specific parts of the BBC output. There’s room for a lot of creativity in building new partnerships and re-focussing the BBC. But what will actually happen?
It is easy to feel that the BBC only changes when it is pressured to do so. Even relatively small concessions like the 2011 sale of its magazines, had been difficult to extract from an organisation that is accustomed to fighting for its independence. The regulator Ofcom has commented on the BBC’s deficit of transparency and accountability. One tiny example this week was the BBC’s comms team – having last year announced 139 job savings in local radio – refusing to tell Flashes & Flames how many people were actually employed in the local stations, either before or after those redundancies. It’s confidential.
You can imagine how hard the fight will be for the things that really matter.
All around the world, public service broadcasters (not least the ABC in Australia which is in a fierce fight with its government) will be watching the BBC even more closely for the next few years. It may not be comfortable viewing.
Additional research by Alex DeGroote
