The Sunday Times - UK (2022-05-29)

The Sunday Times May 29, 2022 5

BUSINESS

I

TV boss Dame Carolyn McCall

treated senior staff to a business

trip to remember earlier this

month. For two days, executives at

the broadcaster of Coronation

Street and Dancing on Ice revelled in

the delights of Soho Farmhouse,

the lavish members club deep in

the Oxfordshire countryside boast-

ing luxury cabins, a heated outdoor

swimming pool and a Japanese food bar.

By contrast, Tim Davie’s away day at

the BBC a few weeks earlier was a far less

glamorous affair. A low-key BBC office in

Cardiff was the secret hideout the

no-nonsense director-general chose to

discuss the corporation’s future with col-

leagues.

In January, the culture secretary,

Nadine Dorries, sparked outrage when

she kicked off a review of the licence fee.

She froze the £159 charge for two years

and has repeatedly said it should be

scrapped altogether. That has prompted

Davie to plot an alternative future for the

broadcaster as it looks to strengthen its

streaming service iPlayer in the face of

rising competition.

So what are the options up his and

ministers’ sleeves?

THE NETFLIX OPTION

The licence fee, which now brings in

£3.8 billion a year, was introduced in 1923

to fund radio before being expanded to

include television.

Some now want it to be abolished and

replaced by a subscription. A Netflix-style

subscriber model could see households

pay a monthly or annual fee. The cost of

Netflix’s premium subscription, where

viewers can watch in ultra high definition

on four different devices at a time, rose in

March this year to £15.99 a month, work-

ing out at nearly £33 more expensive than

the annual BBC licence fee.

However, parts of the BBC are likely to

be protected from such charges. This

month, Andrew Neil, the broadcaster

and former editor of The Sunday Times,

called for a hybrid model. He said less

commercial genres, such as news, cur-

rent affairs, and documentaries should

be funded through taxation, leaving the

BBC free to charge a subscription for its

entertainment and dramas.

“The licence fee is a wonderful asset

but it’s also a straitjacket because even

£5 billion is not enough to run a full TV

network with ambition these days,” Neil

said.

TAX FUNDING

Taxation is seen as another alternative.

Critics argue that the licence fee unfairly

penalises less wealthy households given

that it is a flat fee, rather than based on

income.

A tax-funded BBC charge would be

based on the household’s tax band, mak-

ing it cheaper for those who can least

afford it.

ADVERTISING

As a non-commercial broadcaster, the

BBC does not carry advertising. Some

believe that could be an option, although

others argue it would naturally push the

BBC to produce content more attractive

A Netflix

model

would

require

monthly

charges

to advertisers — perhaps to the detriment

of quality.

Tom Harrington at the media research

outfit Enders Analysis said that allowing

BBC to sell advertising was unlikely

because of the competitive damage it

would do to other public service broad-

casters. “Carrying advertising is surely a

no-go — the BBC is too big a part of the

market. It would be absolutely terrible

for ITV and Channel 4,” he said.

A senior industry source agreed: “If it

[the BBC] was merely launching itself

independently as ad-supported, ITV

would go ballistic because it would seri-

ously damage ITV’s revenue.”

The BBC is a publicly funded service

that does not need to make a return in the

same way commercial broadcasters such

as ITV do. However, some think that

should change. Last week, the former

director-general, Greg Dyke, said that

The head of the corporation has drawn up options as

streaming rivals cut their prices, Jamie Nimmo writes

How will the

BBC survive

if TV licence

is strangled?

ILLUSTRATION: JAMES COWEN

while part of the BBC could continue to

be funded by a licence, others parts could

be unshackled to make more money. BBC

Studios, the commercial part of the

broadcaster that creates shows and sells

them worldwide, is likely to become an

increasing focus.

SPONSORSHIPS

Other industry figures have more leftfield

suggestions. Instead of advertising, Andy

Bird, who ran Disney’s international busi-

ness before becoming chief executive of

education company Pearson, proposed

sponsorship to help fund the BBC; similar

to that of PBS in the US. It means certain

shows may be “brought to you by” a par-

ticular company, rather than overtly pro-

moting its products or brand.

“There’s a very clear boundary that

the sponsor is helping to defray some of

the cost of the production or service

itself,” said Bird. “I think there is a role

which would be acceptable and not turn

the BBC into ITV or anyone else. Maybe

that’s a way rather than having to go to a

subscription model for.”

A report by EY for Ofcom in 2020

looked at how public sector broadcasters

were funded in other countries. It found

most commercial models were hybrid,

including an element of public funding.

Many other countries also spend more

public money on them than in the UK.

The BBC licence fee costs each Brit about

£56. In Germany, they spend £92 per per-

son, £100 in Norway, £86 in Denmark,

and £71 in Sweden.

Other countries with cheaper systems

include Italy, where it costs each person

about £27 for the RAI channels. Italy

changed its system in 2016 so citizens

now pay a TV tax through their electricity

bills to reduce licence fee evasion. It

worked and the cost per household of

funding RAI has since dropped.

There are other, more drastic options.

A source said mergers could be on the

table between the British broadcasters as

part of the fightback against US rivals.

State-owned but ad-funded Channel 4

is being sold by ministers. ITV, which is

launching its new streaming platform

ITVX this year, is seen as a frontrunner to

buy it.

“If iPlayer was merged with ITVX or All

4 [Channel 4’s streaming service], it

wouldn’t be fighting those other services,

it would be complementary to them,” the

source said, adding that BBC iPlayer

could then take advertising.

The idea of merged streaming services

is not new. In fact, it is nearly 15 years old.

Back in November 2007, the BBC, ITV,

and Channel 4 teamed up to launch

“Project Kangaroo” — a joint venture to

create an online on-demand video ser-

vice. However, the launch was blocked by

the Competition Commission in 2009,

being deemed to be too great a threat to

competition in the then-nascent online

market.

Britain’s commercial broadcasters are

open to the idea of reviving that concept –

but know that regulators will again pose a

threat.

On Thursday, Davie told staff the cost-

cutting measures and digital shift were

necessary. “This fight is intensifying, the

stakes are high,” he said.

Those stakes have never been higher

as big American streaming giants prepare

to launch cheaper streaming subscrip-

tions that are partly supported by adver-

tising. Netflix, Disney+, and Discovery+

have all hinted at starting “ad-lite” servi-

ces to attract more eyeballs as they look

to keep subscribers hit by the cost of liv-

ing crisis.

On Thursday, Davie announced a wave

of drastic changes aimed at countering

the funding hole caused by freezing the

licence fee.

He is axing BBC4 and CBBC from the

airwaves and putting them online, merg-

ing BBC News with BBC World to form a

single rolling news service, cutting 200

hours of content, ending long wave radio,

and removing 1,000 staff from the pub-

licly funded broadcaster over the next

few years.

But these plans are merely a sticking

plaster and he admitted it must do more.

They will save the BBC £200 million a

year and help plug a £285 million funding

gap created by the licence fee freeze as

the BBC looks to invest £300 million into

iPlayer and other digital services.

Davie and Richard Sharp, the chair-

man of the BBC, told a House of Lords

committee last week that the board had

begun examining alternatives.

“The board hasn’t ruled out anything,”

Sharp said. “The BBC faces an existential

question and the board has taken very

seriously that charge to look at all

options.”

The extra £300 million will help to

beef up iPlayer and other digital services.

But Davie knows that is just the first step.

HOW THE LICENCE FEE IS SPENT

More than half of a household’s monthly licence

fee is used to fund the BBC's television production

2019/20: £12.88 per household (2018/19: £12.54) Source: BBC

Television

£6.83

Licence fee

collection

£0.47

To t a l

£12.88

Other

services

£0.88

BBC Online

£1.24

BBC World

Service

£1.24

Radio

£2.22

co

m

o

b

th

cu

n

st

a

to

ti

ti

h

ce

to

in

o

th

li

aiaaaaaa

iniiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiiii

si

h

After Nadine Dorries froze

the licence fee, the BBC’s

director-general, Tim

Davie, right, wants to

strengthen streaming

services to maintain drama

such as Conversations with

Friends, above