BBC Model Is ‘Unsustainable’

The BBC’s funding model will become ‘unsustainable’ without substantial increases in commercial revenue from BBC Studios and BritBox, according to Damian Collins.

Collins’ DCMS Committee (DCMSC) declared that young viewer habits, coupled with super-inflation instigated by the SVoDs, will lead the value of the licence fee to “diminish in the coming years” as a source of revenue to the BBC, as 16-34s in particular tune out of linear and costs continue to rise.

BBCS returned £243m to the BBC last year, taking the figure over the last five years above the £1bn mark. However, this still comprises a small proportion of the corporation’s overall £3.7bn licence fee income.

Meanwhile, BritBox will launch in November, priced at £5.99 a month, but the BBC has not invested a penny in the service – its 10% stake is comprised fully of programming and branding. It could take five years for the ITV-backed PSB SVoD to break even, according to a recent report.

‘Invidious’ position

Examining the impact of the BBC’s decision to take on some over-75 licence fee payments, the DCMSC said it had uncovered “a disturbing picture of the BBC’s overall finances”, which will come under intense scrutiny at the 2021 licence fee review.

This pessimistic picture was laid out in the DCMSC’s BBC Annual Report and Accounts 2018–19: TV licences for Over 75s report, published this morning.

The BBC recently opted to take on the payment of over-75 licence fees but only for those on the means-tested Pension Credit benefit, amounting to a cost of £250m per year for around 1.5 million homes.

Collins described the BBC’s position as “invidious” and urged the corporation to reach an agreement with the government to restore free licences to all pensioners. There is no indication that this will take place. 

“It [the BBC] agreed to fund a pensioner benefit that it couldn’t afford and as a result, false reassurances were given to the over-75s that their free licence fees would be maintained,” said Collins.

“The issue has also exposed the fact that the value of the licence fee will continue to diminish as a source of revenue if the current trends in inflation and rapidly-changing viewing habits continue.

“We are seeing clear evidence that the funding model of the BBC will become unsustainable without substantial increases in commercial revenue from BBCS and BritBox.”

‘Deeply flawed process’

Collins also backed Hall and BBC chair David Clementi’s recent calls for a radical shake-up to the way the licence fee is set.

Collins described the 2015 negotiations – during which the BBC agreed to take on the over-75 concession from 2020 – as a “deeply flawed process on both sides”.

The report added: “The next round of negotiations must be conducted in a wholly different way, with a sensible timescale, parliamentary oversight and meaningful involvement of licence fee payers.”

In a statement yesterday, Clementi said he was “pleased that the committee recognises that there was no automatic assumption that the BBC would continue to bear the cost of free TV licences”.

”There is also clear recognition from the committee that it would be unsustainable for the BBC to take on the full cost of all these free licences alone,” he added. “The committee report is also clear that the value of the licence fee will continue to be under pressure from inflation in the TV sector.”

PSC move welcomed

Turning to the issue of Personal Service Companies (PSCs), the DCMSC welcomed the BBC’s decision to earmark £12m to help freelancers with back-dated tax bills, which HMRC has been clamping down on.

The committee urged the BBC to use the funds to support presenters facing “life-changing” liabilities, rather than higher-paid presenters who can better manage.

Several high-profile former BBC presenters have faced tribunals recently and Hall admitted for the first time earlier this year that some staff had been coerced into setting up PSCs in the past.

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