Friday13 March 2020 ★ FINANCIAL TIMES 7

FT BIG READ. MEDIA

With British politics taking on a populist edge and Netflix enticing its younger audience, the BBC’s very

future is in doubt. A number of former leaders are considering changes to its licence fee funding model.

By Alex Barker and Mark Di Stefano

“The problem for anybody who takes

that job: who am I working for? Well, the

chairman,” says the executive who

decided not to apply. “He’s going. So I’m

being recruited and I don’t know who

my chairman is? That’s nuts.”

A second television executive who

considered applying adds: “They would

need to be willing to take a big risk.”

Several potential contenders told the

FT that, under the circumstances, an

interim director-general may make

sense. But Mr Clementi is unlikely to be

convinced. One senior BBC figure

describes the idea as “crackers”.

There are two leading internal candi-

dates. Charlotte Moore,director of con-

tent, has formidable creative pedigree

but limited political experience. Tim

Davie,head of BBC Studios, the corpora-

tion’s commercial arm and production

hub, has business credentials and man-

agement experience. But his business

background makes him a polarising

figure for some in the BBC.

Both may suffer from being insiders.

Lord Grade leans towards an outsider

but acknowledges that candidates

would need to be “stark raving mad” to

take on this impossible job.

That fact may have hit applications.

Many potential contenders have ruled

themselves out:Carolyn McCall, chief

executive ofITV;David Abraham, ex-

chief executive ofChannel 4;Carolyn

Fairbairn, CBI director-general; and

James Harding, a former BBC executive

who co-foundedTortoise media.Alex

Mahon aid she was committed to lead-s

ing Channel 4, whileJay Hunt, a former

BBC executive who is chief creative

officer at Apple, declined to comment.

Mr Dyke says he benefited from being

an external appointee who was not

“bound by the politics of the BBC”.

“The problem with people who have

been there all their lives is they don’t

think outside the box. They think the

licence fee can go on forever,” he says.

“And to be fair to them they’ve won over

the years. They are great survivors.”

Additional reporting by Laura Hughes

Seeking a licence to survive

G

reg Dyke was an outspo-

ken, convention-breaking

television executive. But

when he ran theBBC, he

stuck to the house script on

one defining issue: the model of public

funding based on an annual licence fee.

“There really isn’t a viable alternative

to the licence fee,” he declared in 2002,

defending thelevy that has bankrolled

Britain’s public service broadcaster

since 1927. “Maybe [it] isn’t so bad after

all.”

It has taken almost 20 years, but the

former director-general has changed his

tune. “The thing with the licence fee is

no one would come up with it as an idea

today, would they?” he says. “The idea

that you have a compulsory tax on the

TV set sitting in the corner is dumb.”

Mr Dyke s not the only one whoi

increasingly sees the licence as “an

anachronism”. The BBC’s old guard are

beginning to call time on the corpora-

tion’s oldest source of income, which

evolved from a 10 shilling levy on wire-

less radios into a compulsory charge on

devices of £154.50 today.

The former leaders of the BBC who

are now open to a new, more flexible

funding systemincludeMark Thomp-

son, New York Times chief executive

and director-general from 2004-2012;

Gavyn Davies, the former Goldman

Sachs economist who in 1999 led an

independent review of BBC funding

before being appointed chair; andRona

Fairhead, chairwoman of the BBC Trust

from 2014-17 and former chief execu-

tive of the FT group.

It is the first time the four have spoken

publicly about moving beyond the

licence fee, which generates £3.7bn a

year, three-quarters of the BBC budget.

“The BBC is a heck of an asset for us and

the world,” says Mr Davies. “We really

shouldn’t give that up. Whether the

licence fee is the best and only way to

provide the resources to achieve that, I

don’t know.”

Their intervention reflects a sense

that the BBC needs radical change to

emerge from an era where it isacutely

vulnerable. The advantages of what

John Reith, the BBC’s founder, called the

“ruthless force of public service broad-

casting monopoly” are long gone. Poli-

tics has taken on a more populist edge

andNetflix nd other streaming serv-a

ices are grabbing the attention of many

viewers, especially the young. Genera-

tional change is putting the BBC’s very

future in doubt.

The BBC remains Britain’s pre-emi-

nent media voice. But its challenges are

legion, and its morale flagging ver dis-o

putes such as gender discrimination on

pay. From mainland Europe to North

America, broadcasters are watching its

fate as a test of whether public service

values can withstand the disruption of a

digital age, and the trust-shattering

blows of partisan politics.

With Boris Johnson’s government

attacking what he has called the “Brexit

Bashing Corporation”, negotiations to

reset the level of the licence fee in 2022,

andrenew the BBC’s founding charter

beyond 2027, are approached within the

corporation with dread. Some fear the

licence fee could be abolished when its

charter is renewed.

Most worrying still may be the bigger

structural forces and global competition

that are weakening the BBC’s hand. Like

many national broadcasters, the corpo-

ration is seeing the likes of Netflix

snatch its talent andYouTube nd sociala

media mesmerise audiences.

“The BBC is the standard bearer and

there is a lot at stake,” says Noel Curran,

director-general of the European Broad-

casting Union. “The real fear is that any

move on the BBC, or even publicity

around that, will be used by govern-

ments around Europe that are not well

inclined topublic service media. It will

be the excuse to attack.”

Amid all the uncertainty, the BBC is

also looking for new leadership — a suc-

cessor toTony Hall s director-generala

will be chosen in the coming months

and take over this summer.

Maintaining a national asset

The first challenge for the next director-

general will be cuts. The BBC’s budget is

heaving under additional responsibili-

ties accepted in licence fee negotiations

over the past decade — or imposed, in

the words of one former director-

general, “in the dead of the night, a

progressive,” says the former chair of

the BBC Trust.

Even under a household levy system,

the BBC would never expect the govern-

ment to grant German-style largesse.

On a per capita basis, the BBC’s £3.7bn

public support is only the eighth highest

in Europe. Far from increasing the BBC’s

firepower, the trends are pointing

towards tighter budgets, bigger chal-

lengesand some tough choices.

Lord Patten and Lord Grade, both

champions of the licence fee and a uni-

versal service, want some hard-headed

decisions to cut back on activities. They

could include: merging BBC2 and BBC4,

or losing other TV channels; paring back

radio stations; or amalgamating the

BBC’s two rolling news channels, BBC

News and BBC World News. Lord Grade

says the measures “should be drastic” to

refocus the BBC on its core mission. “It

has got to reduce its ambitions,” he says.

Decisive cutbacks are not the BBC’s

forte. Suggestions are often met by a

public outcry, however small the

change. Plans to phase out the red-but-

ton service — a sport and news text-led

function on televisions — were shelved

in January, a day before implementa-

tion. The savings were a modest £16m.

“One of the problems of the last few

years is ducking big decisions,” says a

former BBC executive. “It takes strate-

gic courage to take things away from the

super served. But you can’t provide

enough for young people without taking

something away from older audiences.”

‘Who am I working for?’

The deadline for applications to succeed

Lord Hall as director-general closed this

week. The role’s prestige does make up

for its obvious downsides, not least

relentless public exposure. But for some

outsiders, the benefits could never be

enough.

“It’s a bloody thankless task,” says one

executive approached by headhunters.

“You’re going to be hated. You’re going

to have to restructure, to cut costs and

probably preside over a reduced but

reimagined BBC.”

One factor worrying candidates is

timing. David Clementi, the BBC chair

overseeing the process, is expected to

depart early next year. That potentially

leaves his chosen director-general —

and their plans to change the BBC —

beholden to his successor, who would be

approved by Mr Johnson and who may

have quite different priorities.

platforms — from Netflix and Disney to

Facebook nd YouTube — is leavinga

once mighty national broadcasters

outgunned, and overlooked.

Oxford university’s Reuters Institute

for the Study of Journalism recently

noted that the BBCaccounted for 63 per

cent of all UK radio listening, and 31 per

cent of scheduled television viewing.

But the BBC claimed just 1.5 per cent of

time spent with digital media.

It represents a potentially devastating

trend: the £154-a-year licence fee is

compulsory because it assumes the uni-

versal UK service is used by all owners of

televisions and other media devices.

“The critical goal must be to recap-

ture the audiences which the BBC has

lost in recent years,” says Mr Thompson,

who ran the BBC for eight years. “If that

means prioritising streaming and

mobile services and making painful

choices about existing linear TV and

radio, so be it. The BBC has placed bold

bets on the future before. In the inter-

ests of the audiences it serves, it needs to

take the radical path again.”

What could this entail? One of the

most talked about but least deliverable

reforms is a voluntary, subscription-

based system. The main practical

problem is restricting access to services

such as radio or free-to-air terrestrial

television. Even then, Enders Analysis

estimated a “huge” cut to BBC revenue

from a subscription switch, with the

existing budget hit by more than a third

in one scenario.

More feasible is an experiment with

subscription as an “add on” to the basic

licence fee, a hybrid approach of inter-

est to Mr Davies and some other former

BBC leaders.

The most obvious candidate for par-

tial restrictions on access is the iPlayer.

But it would require an internal BBC

revolution to boost the streaming serv-

ice and justify a premium subscription.

Under such a scenario, the iPlayer

would flip to become a commissioning

hub, replete with power and money and

premiers of shows. Channels such as

BBC One, meanwhile, would act more

like the curated catch-up service.

Within the BBC top ranks the fear is

this would harm the mission to provide

a universal service. Amore favoured

reform is moving to “the German

model”, a household tax that yields

around €8bn in funding for its public

broadcasters, almost double the public

funding for the BBC.

Baroness Fairhead sees it as a possible

way to make funding less regressive.

Since 2013, theRundfunkbeitrag ash

been levied on every household, with

some means-based exemptions, and

businesses based on size.

“If you do it by household you have

many more options to make it

Bold betsFormer director-general

Mark Thompson says the BBC ‘needs

to take the radical path again’

Digital firstOne proposal envisages

iPlayer acting as a commissioning hub,

relegating BBC1 to a catch-up channel

Chain of commandThe BBC chair who

will appoint the next director-general

is expected to depart early next year

‘If you do

[a public

service

broadcast

tax] by household you

have many more options

to make it progressive’

Rona Fairhead, chair of the BBC

Trust from 2014-

pistol to its head”. This summer it will

even start acting as a social security divi-

sion: it has to decide whether to pay for

— or withdraw — free licences the gov-

ernment used to grant to those aged

over75.

How determined Mr Johnson is to

shake up the BBC is unclear. He has

questioned the licence fee, and his gov-

ernment is expected to decriminalise

non-payment — potentially costing the

BBC hundreds of millions of pounds. Yet

when the Sunday Times reported the

prime minister wanted to move the BBC

to a Netflix-style subscription model,

Mr Johnsoncalled the paper to play

down the idea, according to his aides.

Even in the Conservative party, there

are trong defenders of the existings

model. For two Conservative peers who

served as BBC chairmen, the political

dangers are too great to risk meddling

with the licence fee system, however

outdated it may seem.

“There is such an aggressive assault

on anything that appears to be a check

and balance on executive authority,”

says Chris Patten,former chair of the

Conservative party and head of the BBC

Trust from 2011-14. “It’s the BBC, the

judiciary, it’s civil society, it’s anybody

that doesn’t agree with them... I can-

not see an alternative [to the licence fee]

that supports and maintains the posi-

tion of the BBC as a national asset.”

Michael Grade, BBC chairman from

2004-06, put it more succinctly: “I

would die in a ditch for the licence fee.”

The BBC has suffered at the hands of

politicians before. It has been leaned on

through virtually every election and

war Britain has fought in the modern

age. From Margaret Thatcher to Tony

Blair, once the government’s hue

changed, by and large, so too did the

BBC’s leadership.

Financial pressures are not new

either. In the late 1970s, the cash-

strapped Treasury explored giving the

BBC part of its licence fee on the 15th of

every month or “small fractions

weekly”. Mutual suspicion was so great

the BBC director-general would sweep

his room for bugging devices.

The corporation has even weathered a

Torygovernment bent on scrapping the

licence fee. During the late 1980s, the

Thatcher administration pushed sub-

scription funding — today known as

“the Netflix model” — and explored it

through a formal review. Douglas Hurd,

then home secretary, said: “This is a

direction in which the BBC should

move.” The licence fee survived.

Recapturing audiences

Today’s threat is the combination of

these pressures and a new factor: losing

touch with a digitally minded, under-

audience. Competition from global

‘Whether the

licence fee is

the best and

only way to

provide the resources [to

ensure the BBC remains

an asset], I don’t know’

Gavyn Davies, chair of the BBC from

2001-

‘The idea

that you

have a

compulsory tax

on the TV set sitting in

the corner is dumb’

Greg Dyke, BBC director-general

from 2000-

‘I cannot

see an

alternative

[to the

licence fee] that supports

and maintains the

position of the BBC as a

national asset’

Chris Patten, chair of the BBC Trust

from 2011-

36 %

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Timespenton

digitalmediainthe

UKaccountedfor

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Broadcasting House on

election night. Boris

Johnson has called the

BBC the ‘Brexit Bashing

Corporation’. Left: A

protest against the

threat to the licence fee.

Getty Images/PA

MARCH 13 2020 Section:Features Time: 3/202012/ - 18:12 User:dana.prince Page Name:BIG PAGE, Part,Page,Edition:USA , 7, 1