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London (CNN Business)Britain’s public service broadcaster has been at the heart of media in the United Kingdom and many parts of the world for the best part of a century. Now it’s facing a brutal fight for survival.
The British Broadcasting Corporation is confronting unprecedented political hostility, looming threats to its funding, deep cuts to some services and ever increasing competition from digital platforms ahead of its centenary in 2022.
The UK government, led by Prime Minister Boris Johnson, has launched an investigation into the TV license fee that could lead to it being scrapped. The license fee is the tax all British viewers must pay to raise billions every year to fund the BBC’s sprawling news, documentary, scientific and entertainment programming.
BBC Chairman David Clementi said on Wednesday that while he welcomes a debate on its future funding, programming people love and rely on is at stake.
“The BBC is a great national asset; a diminished BBC is a weakened United Kingdom,” he said during a speech at the BBC’s offices near Manchester.
A fight over funding
The license fee review comes after a bruising election campaign in which both main political parties bashed the BBC’s journalism, and amid a souring relationship between Prime Minister Johnson and the media generally. Piling on the pressure: starting this year, the BBC will have to cover the estimated £250 million ($324 million) cost of free TV licenses for some people over the age of 75.
And just as its future funding is called into question, the BBC is facing an ever bigger challenge from huge global digital rivals such as Netflix (NFLX), Amazon (AMZN) and the Google-owned YouTube (GOOGL), eating away at its audience.
“There is a more existential risk to the BBC now than there has been in a very long time,” Claire Enders, founder of the research firm Enders Analysis told CNN Business. “This is going to be some gun fight.”
The BBC gets at least 75% of its budget from the £3.69 billion ($4.78 billion) it receives from the license fee. The rest comes from BBC licensing deals and commercial sales outside of the United Kingdom.
Every UK household that watches live broadcasts on any platform is required to pay the £154.50 ($206) every year. Though tens of thousands are prosecuted each year for not paying, only five people went to jail in 2018 for failing to pay the fee and ensuing fines, according to the BBC.
Announcing the investigation into the fee earlier this month last week, the UK government said the broadcasting landscape had changed significantly, and warned the BBC could face the fate of bankrupt video-rental store Blockbuster, which failed to spot the threat posed by Netflix.
“More children recognize the names Netflix and YouTube than they do the BBC — this should be an eye opener for the BBC,” Nicky Morgan, former Secretary of State for Digital, Culture, Media and Sport, said recently. “Quite simply, the world in which the BBC was created, and the license fee was established, has changed beyond recognition.”
The BBC began in 1922 as a radio service, and started charging a TV license fee in 1946 when television programming was reintroduced following its suspension during World War II. Including its famous World Service radio program, in operation since 1932, BBC content reaches 426 million people worldwide every week. Its website is one of the top digital news outlets in the world. (CNN competes directly with the BBC in news.)
The BBC has been vocal about the possible change to its funding, saying the fee is the best way to ensure an independent universal broadcaster. A BBC spokesperson pointed to a government commissioned review in 2015 that found the current system to be the fairest and most effective.
“The BBC is the most used media organization in the UK. It reaches the most people. It’s used for the most time. You wouldn’t think that from some of the things being said,” the spokesperson told CNN Business.
“If we want a strong BBC which champions the UK abroad, brings the nation together, drives the success of the creative economy and invests heavily in British talent, people need to explain how other models would deliver that better than the license fee.”
No matter the resistance, changes are inevitable.
The first could come in 2022 — on the 100th anniversary of the BBC’s founding — when the government could decriminalize failure to pay the license fee, turning it into a civil offense. But some media experts and the BBC say that would just lead to even greater evasion and the loss of hundreds of millions of pounds in revenue.
An even bigger disruption could come in 2027 when the BBC’s Royal Charter — the contract with the government that determines how it is funded and run — is up for renewal. That will be the first year the license fee could be completely scrapped, an option government ministers have said they need to keep open.
Lord Michael Grade, who was chair of the BBC Board of Governors from 2004 to 2006 and then chair and CEO of commercial rival ITV from 2007 to 2009, told CNN Business decriminalization of the license fee would be welcome, “but it’s just not practical.”
Alternatives could include introducing a tiered license fee based on household income or offering BBC services such as podcasts and additional channels on a subscription basis. Or the license fee could just be reduced.
But Richard Broughton, research director at Ampere Analysis, said such models would result in a very different BBC — one that has less programming, less investment in the creative sector and less local content.
Regardless of what happens with the license fee, “we are inevitably heading toward a slimmed down BBC,” he said, as it is already facing budget cuts because the license fee isn’t rising in line with inflation. In 2016, the corporation announced it needed to save £800 million ($1.03 billion) by 2022, and it recently announced 450 layoffs in its news division as part of that effort.
“Even under current trends if we adjust the BBC’s revenue for inflation, it’s already seen a 15% cut in real terms in its funding over the last 4 years,” Broughton said, due to agreements with the government to freeze or slow license fee increases.
Less money, less content
Cuts to the BBC won’t just take chunks out of its own output, it will hobble one of the biggest drivers of an important economic sector, experts warn.
The BBC is one of the biggest commissioners of content in the world and an important global launching pad for seminal shows and creators from Dr. Who to Phoebe Waller-Bridge.
According to government data, the film, TV and music sector contributed £21.3 billion ($27.6 billion) to the UK economy in 2018, while the overall creative services industries brought in £111 billion ($143 billion). That’s not far behind financial services, which contributed £132 billion ($171 billion) to the UK economy in 2018.
“Playing around with the funding would have many implications for the rest of the UK economy,” Broughton said.
Plus, Lord Grade said, the BBC cannot — and should not — try to compete with the digital giants like Netflix. If they do, he said, British citizens will lose access to programming made just for them.
“You can’t pretend they’ll make the same editorial judgment that they make now,” he said. “There’s a direct link between your source of funding and what goes on the screen or radio.”
Beyond the commercial pressures, there’s diplomacy at stake too, Lord Grade said, noting that the BBC’s global reach in entertainment and news are an important aspect of Britain’s “soft power” around the world.
The debate over the future of the BBC is not just happening in the context of a rapidly changing media environment. The political overtones of the government’s review are hard to miss.
During the election campaign, Johnson snubbed one of the BBC’s top anchors for a traditional interview. The relationship soured further after the BBC decided not to broadcast a Brexit day address by the prime minister because the government insisted on handing out video rather than allowing broadcasters into Downing Street to film.
Government ministers are reportedly boycotting the BBC’s top morning radio news program over its supposed biases. And the BBC’s political editor was one of a group of journalists who walked out of a Downing Street briefing when some reporters were blocked from attending.
The government denies the license fee threat is “political payback.” Morgan, who was replaced as culture secretary last week in a government reshuffle, has said she “utterly refutes” the suggestion. But former BBC chairman Grade is warning the government to tread very carefully.
“The public will not forgive any government that interferes with the independence of the BBC,” he said. “The BBC belongs to the people.”
Questions are now swirling over whether the BBC really needs so many television and radio channels, whether it should be the premiere home of entertainment shows and whether its most recent dive into podcasts is worth it.
“The big question is what do we want if anything from public service broadcasting for next 20 years,” Lord Grade said.
No other public broadcaster in the world covers as much ground as the BBC — from popular entertainment television and radio to factual documentaries with conservationist David Attenborough and one of the most popular news organizations powered by thousands of journalists around the globe.
“The BBC will survive this … but what BBC will survive this, I am not sure,” Enders said.
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