Hundreds of thousands are ditching the licence fee – and it’s a crisis for the BBC
An exodus of paying viewers has sparked soul-searching at Britain’s biggest public broadcaster
The BBC has struck a $100m deal with Disney+ to air Doctor Who on the US streaming platform Credit: James Pardon/BBC Studios
Tim Davie, the BBC director general, was candid this week about the scale of the financial challenges facing the public service broadcaster.
Speaking ahead of the publication of the BBC’s annual report on Tuesday, Davie said: “We have been working extremely hard to get a budget that balances. The market for content is inflating rapidly … We’ve got all kinds of cost pressures.”
Those pressures were evident in the BBC’s latest financial results, which showed an £80m drop in licence fee revenues – the broadcaster’s main source of income – to £3.7bn.
This was driven in part by a government-imposed freeze on the licence fee. More worryingly for the BBC, though, the number of households paying the levy dropped by half a million to 23.9m – an acceleration from the previous year’s decline.
For executives in W1A, the exodus of paying viewers is nothing short of an existential crisis.
The decline has been fuelled by calls for a boycott of the licence fee, with campaign groups such as the Taxpayers’ Alliance branding the household levy “archaic and unfair”.
Another campaign, calling itself Defund the BBC, has raised concerns about wasteful spending and alleged bias in the broadcaster’s output, as well as its aggressive prosecution of licence fee non-payment, which disproportionately affects women and poorer people.
Patrick Barwise, author of The War Against the BBC, compares the increase in licence fee dodgers to the epidemic of middle-class shoplifting. “This is people freeriding on the basis that they think they can get away with it,” he says.
Yet there is a more fundamental shift that the corporation must contend with. Audiences – especially younger ones – increasingly feel they can do without the BBC’s output.
The BBC is used by 69pc of Britons under 16 each week. That’s down from 72pc the previous year and puts the broadcaster behind YouTube and Netflix. The declines for children under seven are even more acute.
Even BBC Sounds – a cornerstone of the corporation’s efforts to reach younger audiences – is struggling to gain traction. The number of 16 to 34-year-olds using the streaming service slipped to 585,000 last year, behind a target of at least 600,000.
Instead, younger viewers are turning to video-sharing platforms such as YouTube and TikTok. The BBC’s research found more under-35s watched global streaming services on average per week than UK broadcasters.
This trend has sparked soul-searching at the BBC as it battles to stay relevant. Davie has set out his stall by emphasising the broadcaster’s focus on British storytelling, impartial news and “bringing people together” in an era dominated by algorithms on foreign-owned social media platforms.
In the shorter term, however, the focus is on a black hole in the corporation’s finances. The licence fee increased to £169.50 in April, though this was a smaller rise than expected after ministers intervened.
In real terms, the BBC’s funding slumped by 30pc between 2010 and 2020. It is forecasting a deficit of £492m for the year.
As a result, Davie has wielded the axe. A £500m cost-cutting plan has resulted in increased repeats and heavy cutbacks to services including local radio and Newsnight.
A further £200m cost-saving plan was announced earlier this year as output increasingly moves online, while the corporation this week said it will cut another 500 jobs by 2026.
For staff at the BBC, it feels like death by a thousand cuts. Yet it still isn’t enough to shore up the corporation’s finances.
Instead, Davie has put a renewed emphasis on the BBC’s commercial operations. The broadcaster has taken full control of BritBox International, its joint streaming venture with ITV, after buying out its rival for £225m.
It is also looking to extract more money through co-productions and selling its shows abroad. The corporation struck a deal with Disney+, worth an estimated $100m, to air Doctor Who on the US streaming platform. Hit children’s show Bluey offers a lucrative opportunity through rights deals and merchandise sales.
Tim Davie, the BBC director general, has put a renewed emphasis on the corporation’s commercial operations Credit: Max Mumby/Indigo/Getty Images
Overall, Davie aims to double the revenues generated by BBC Studios to £3.2bn by 2027.
Yet he faces fierce opposition from commercial rivals, who view these moves as an unfair intrusion on their turf. When the BBC revealed plans to run adverts around its radio and podcast output on platforms such as Spotify, publishers branded the plans “catastrophic”.
Regulator Ofcom this month blocked the BBC from launching an online spin-off to Radio 2 and ordered a public interest test after rivals described it as an “absolute rip-off”.
Competition concerns aside, however, it remains unclear whether increased commercial revenues will be enough to offset falling licence fee income.
Despite its ambitious plans to boost BBC Studios, commercial revenues fell from £2.1bn to £1.9bn last year as a slowdown in the advertising and commissioning markets took their toll.
Meanwhile, the cost of producing programmes continues to rise above inflation amid fierce competition from US streamers. “I don’t think it [commercial] will come close to filling the funding gap,” says Barwise.
In reality, then, the BBC’s future will hinge on what happens to the licence fee when the current charter period ends in 2027.
The arrival of a Labour Government will be a major relief to executives at New Broadcasting House after years of fierce rhetoric from the Tories.
Lisa Nandy, the new Culture Secretary, has expressed support for the BBC and its licence fee funding model. However, in an interview this week she insisted that all options would be considered, including a potential shared ownership scheme.
Davie, for his part, has accepted the need for reform. “We are not defensive about the future,” he said in a speech earlier this year. The broadcaster, led by chairman Samir Shah, is now carrying out a root-and-branch review of future funding options.
Whatever the outcome, however, one thing is certain – bosses now face an uphill battle to convince audiences that Britain’s biggest public broadcaster is worth paying for.