BBC plc, 2017. The new CEO decides between ITV and HBO
BBC plc 2017 Photograph: Shutterstock
The first Act of the new Parliament is the Future Broadcasting Act which provides for the BBC (as well as Channel 4) to be sold off on the stock market, and the public service commitments of other channels erased from the statue book.
From Sunday 1st January 2017, BBC plc is now run for the benefit of the shareholders. The newly public corporation, now run by suitably remunerated CEO, no longer has the licence fee income to depend upon: the fee has been curtailed during 2016.
Still, the BBC has some breathing space: its market capitalization has provided it with several billion in the bank.
What options does the incoming boss have?
The new CEO has a stark choice, which is summed up by this diagram:
You can launch the BBC as a subscription
service in only 11.8 million UK, homes because 10.3 million have Freeview
and 2.1 million Freesat
. The terrestrial
and satellite services
deliberately do not have subscription-compatible equipment as part of their offer.
It certainly would be possible to create a "Beebview" terrestrial subscription service: the question is how many of the 10.3 million homes would want to pay for it, given they have resisted the barrage of tempting offers from Sky
and Virgin Media over the past couple of decades.
If the BBC could get people to pay £12 a month per home
, at a rate of 80% in 11.8 subscription homes, that would bring in £1.4bn a year, about half the current £3.6bn.
To make up the shortfall in the income the BBC would need to 77% of the Freeview homes pay for an ongoing subscription. This could be quite difficult, plus the associated costs of subscription box subsidies.
The alternative model is to leave out the subscription gatekeepers altogether.
There would be two advantages to making the BBC show adverts, from the point of view of the new CEO.
There would be no need to equip any home with new equipment.
Secondly, the new BBC would need to make 25% less programmes to fill the same timeslots.
However, there are disadvantages to taking adverts. The main one is that economic models suggest that the total revenue that can be taken from TV adverts will not increase. The current revenue would be shared between BBC One
Secondly, the advertising market is very unstable. The income streams for future years would be hard to judge.
Of course, it is possible our new CEO will want to have both adverts and subscription. The new CEO will have to decide if the revenue lost to cancelling subscribers who dislike adverts would be more or less than the benefit to cutting per-hour costs and the income from adverts.
In the next part, I will be looking at the HBO subscription model of BBC plc, 2017. Then I will look at the ad-funded model. Following on from that, I will then examine if there are any other options for BBC plc.