BBC, Licence Fee

The ‘Monstrous’ BBC Poll Tax

Brexit and the election campaign have not been fun for the BBC.

A public institution that strives to be objective and even-handed while also holding politicians and those in power to account struggles with an issue as divisive as Brexit and political parties that do not abide by accepted precedents.

The BBC has caught neither the public nor the political mood well. The BBC has felt pro-remain, however hard it has tried to be objective, anchored as it is in the city state that is urban London.

How does a public institution present a balanced view when issues are so divisive? This is made doubly hard when the arguments of one side are largely around economic predictions that sit well within news reporting traditions while the other side’s arguments cluster around more emotive and emotional issues - national self-belief, immigration and sovereignty.

Now it is the results that matter.

The BBC finds itself without friends in the crosshairs of both political parties and Boris Johnson has very publicly made the BBC’s future funding a field target.

“At this stage we are not planning to get rid of all licence fees, though I am certainly looking at it…. you have to ask yourself whether that kind of approach to funding a TV media organisation still makes sense.”
Boris Johnson, December 8th, 2019

Charles Moore is even more vociferous.

Go on. Join in. Take a pot-shot.

Let’s look at the options that Boris’s advisors will be chewing over.

There are 5 broad options:

  1. The BBC is funded through advertising.

  2. The BBC remains advertising free but becomes a subscription service that consumers may choose to pay for, like Netflix.

  3. Funding is through a mix of 1 and 2 like Sky’s television packages.

  4. Funding is through general taxation.

  5. The licence fee continues in the same way, built around rolling charter renewals.

What would happen if the BBC was funded by advertising?

Overnight, a major new player would enter the UK advertising market, almost doubling the volume of advertising available to UK advertisers in television and radio as well as creating a new, market-leading online news competitor with enormous reach and lots of high-quality video to compete directly with advertising dependent news sites from the Guardian to Buzzfeed.

The BBC would have a powerful advertising proposition. Although not focused for commercial purposes, the BBC has established a strong understanding of its consumers across platform through login and could use first party data to target audience clusters more effectively than most existing competitors bar Facebook and Google.

The British advertising ecosystem would experience a seismic shock.

Advertising clients and their commercial attack dogs, the advertising buying agencies, would have a field day. With an explosion of supply and only limited demand, they would drive down advertising yields across the market. The BBC would have to take share, making it cut-throat in its approach.

The revenues of commercial players ranging from ITV and Channel 4 to Global and Bauer Radio would be badly affected. They would lose hundreds of millions of pounds in revenue. The digital advertising revenues that news organisations like News UK, Reach and the regional newspapers are reliant upon to a greater or lesser extent would also fall.

Advertising dependent media businesses and their shares would be badly hit. ITV would surely be hit hardest of all. If an advertising-funded BBC looks like a possibility, it is time to sell.

So how about making the BBC a subscription service?

The radio issue would remain. Radio is still largely a broadcast medium despite the explosion of podcasting, so the BBC radio stations would have to focus on advertising, seek voluntary public support (which could well sustain Radio 3 and Radio 4) be turned into or sold to a subscription podcast service or be shut down.

The television and online operations could be subscription funded. Inevitably the BBC would change significantly. The Corporation would have to respond directly to the needs of those who paid their subscriptions and they are more likely to be affluent, liberal and older.

Public service thinking is about creating value for all, unifying the nation, championing the arts, commissioning educational programming for children and creating maximum public value. Public purposes are wide-reaching and try hard to do the right thing not just the popular thing for all.

The result is EastEnders and News at Ten; Hey Duggee and Horizon; The Proms and Chris Packham, Punk Forever; Gavin & Stacey and Blue Planet; Ru Paul’s Drag Race and Match of the Day.

Subscription thinking is about targeting the largest coherent groups of existing and potential subscribers and giving them what they are willing to pay most for. Sky is driven by sport and lives in fear of losing the rights; Netflix is driven by high production value, must-watch drama.

A subscription funded BBC is likely to become something akin to HBO, the premium US channel (think Sopranos, Six Feet Under…) with its mix of quirky, innovative and more challenging programming beloved of its affluent, American audience. The BBC would probably shed much of its less distinctive programming, leaving more space for ITV to own the British mainstream and grow its heartland audiences.

It might be a wonderful opportunity for the BBC to become a globalised Netflix competitor, fighting it out for global subscribers against the other streaming monoliths.

The BBC would need to compete for subscribers to survive. It would inevitably compete with Sky in the UK. It might bid for more sports rights. There would be an impact on Sky’s subscriber base, which is already under pressure from SVOD players like Netflix and Amazon (which has already experimented with Premier League rights). Now that Sky is owned by the American monolith, Comcast, perhaps Boris doesn’t care if Sky’s £1.1bn or so of profits are hacked back?

The BBC would be concerned about its subscribers, wherever they are, not the national interest or the media needs and interests of the whole UK population.

A Johnson government with a desire “to make Britain great again” may want a more domestically focused BBC that is celebrating Britain, British culture and British creativity, rather than developing commissions designed to drive subscription growth in the much larger, more lucrative US market, for example.

What about funding from general taxation?

The licence fee is a household tax so like all taxes, it creates winners and losers.

Small households pay as much as large households. Wealthy households pay as much as less-well-off households. It is simple to implement and administer but it is a regressive tax.

So why not pay for the BBC through general taxation, which may have its weaknesses but at least it is less quixotic and regressive? My instinct is that this would change the position of the BBC fundamentally. How can a media company be truly independent if it knows that the decisions that will define its funding from year to year are in the hands of the government of the day? The BBC is already a political issue. There is a danger that the Corporation would become a daily political football.

It is easy to criticise the licence fee but the obvious other options have tricky implications.

Inevitably, copying the business models of others creates more competition and has a direct impact on them.

The variety of purposes, business models and funding mechanisms that support different UK media businesses has created the media ecosystem that we have today. Like any complex ecosystem, when there is seismic change, its richness, complexity and quality may expand but it may also unravel rapidly.

Dominic Cummings, the Prime Minister’s maverick and thought-provoking advisor, ends a recent blog post with this comment from Paul Graham and Peter Thiel, US West Coast Venture Capitalists: “Most ideas that seem bad are bad but great ideas also seem at first like bad ideas.”

I suspect that Number 10 will have no fear considering radical approaches to many issues in the next few years. Radicalism creates huge benefits, transformative change and enormous wealth as the careers and bank balances of Graham and Thiel vividly demonstrate. But it also creates unintended consequences and casualties.

No wonder the BBC is nervous.

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About Tim Ewington

Co-founder of Shortlist Media. Previously co-founder of media strategy consultancy, Human Capital. Still innovating, consulting and investing.
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