The Chair of the BBC has told a committee of the House Of Lords that neither advertising nor subscriptions are a viable way to fund the state-owned public service broadcaster in the long-term, despite most people agreeing that the current licence fee model is in serious need of reform.
Samir Shah was asked about funding by Nick Baines, a member of the Lords Communications & Digital Committee yesterday.
Baines noted that an increasing number of households in the UK are no longer paying for a TV licence, having shunned live TV and opted for video-on-demand services other than the BBC’s iPlayer. According to the FT, about 500,000 households cancelled their TV licences in 2023. As a result, the amount of income generated for the BBC each year will decline.
Some have speculated that the ultimate end game for the BBC is a voluntary subscription model rather than a compulsory licence fee. However, Shah disagrees. “The BBC has spent a lot of time discussing alternative funding models”, he told the Lords, adding, “there are some that we have ruled out”.
“A subscription model doesn’t work in terms of public service broadcasting”, he said, and “I don't think the advertising model works either”. Therefore, he went on, “we are looking at different versions of a universal fee”. There are “lots of different iterations” of a universal fee, he said, though without going into much detail about what they involved. But whatever the outcome, he reckoned, the BBC “should be paid for by the British public at large”.
The one thing Shah was very certain about was that any new funding model must not only safeguard the independence of the BBC, but actually enhance it, with the Chair believing that - under the current system - the UK government has too much sway.
Independence is crucial to the BBC’s reputation here and around the world, he said, and “that reputation has been damaged in the recent years” because of “the leverage the government of the day has over the BBC”. Therefore, “we should try this time around to reduce that leverage and make our accountability to do with the public, the licence fee payer”.
It’s known that Lisa Nandy, the government minister who now has oversight of the BBC, wants to investigate if the broadcaster could be mutualised. The FT explains that that would give the BBC a structure “more like a building society - where customers are also members of the institution and people chosen as direct representatives of licence-fee payers are making decisions”.
After setting out the case for the BBC having more independence from government, Shah said, “I think that’s partly what the mutualisation idea is about, can the public be more directly involved, and hold the BBC to account? I think that’s a good idea. I certainly welcome the idea of dialing that up whilst we dial down the relationship with the government of the day”.
In terms of the BBC’s relationship with the government of now, bosses at the broadcaster will be hoping to have a more positive relationship with the new Labour government compared to previous Conservative governments, especially during crucial negotiations for the next BBC Charter, which provides its licence fee funding and is due for renewal in 2027.
Previous Conservative governments put the squeeze on the BBC by freezing the licence fee for a time, so that once inflation was taken into account licence fee funding went down. While the decline in the number of licence fee payers is an issue, to date it’s those past government decisions to freeze what people pay for a TV licence that have had the bigger impact.
BBC Director General Tim Davie also spoke at yesterday's committee, telling the Lords “the BBC has had a billion pounds taken out of it over the last decade plus”. And while the commercial wing of the BBC has doubled its turnover and is therefore contributing more to the public service side of the operation, there’s still a significant shortfall. Plus, in the commercial domain, Davie noted, the broadcaster is now competing with “trillion dollar companies”.
With Labour ministers on the other side of the negotiating table, Shah and Davie may well be able to get a better financial deal in the next BBC charter. However, there are still lots of BBC critics in Parliament and commercial media will continue to lobby hard against the broadcaster.
And even the biggest BBC supporters will acknowledge that, with an increasing number of consumers getting all their content and entertainment from digital platforms, even if the licence fee stays in place for the duration of the next Charter, a new funding model will ultimately be needed. If subscriptions and ads are off the table, a lot of thought will have to be given to what any new ‘universal fee’ looks like and how it can be sold to the public.