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BBC plc, 2017. The new CEO decides between ITV and HBO

Following a manifesto commitment to "remove the legacy of public service by transferring all broadcasting to the private sector", the incoming government decides to sell off the BBC when the Royal Charter expires on the 31st December 2016.

BBC plc 2017  Photograph: Shutterstock
BBC plc 2017 Photograph: Shutterstock
published on UK Free TV

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.

ITV too?

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 and ITV.

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.

All questions
BBC Three Linear channel re-opens1
Removing all barriers to communication between diverse cultures2
How do I get a test card with Freeview3
What can I do when my Sky Digibox says 'No Signal' or 'Technical fau4
Can I receive UK TV in Ghana?5
In this section
BBC salami-slicing returns to overnight services?1
#GreatBBC campaign launched2
Goodbye BBC Red Button!3
Want to know how much the BBC spend in England, Scotland, Wales and NI per home?4
S4C and Welsh Exceptionalism?5
BBC future: make sure you make the deadline6

Friday, 21 March 2014
Andrew Way
11:02 PM

BBC plc, 2017
What a nightmare! How much would be lost forever. All of BBC Radio, much sports coverage, arts, culture, music, drama, but also just how independent would BBC plc be?
Yet I fear it could happen. The erosion of Freeview is a sign of what the future might hold. Your spoof is a timely nightmare...

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Andrew Way's 13 posts GB flag

11:59 PM

Andrew Way: Yep - its Sky's world, although they are really looking for a PBS style BBC - minimal funding, always under threat, horribly worthy and with a tiny market share.

Spoof or Grant Shapps plan for the BBC? I suspect the latter. Of course Mr Shapps has other things to worry about at the moment. The Twitter tag #torybingo is a joy, and someone has even set up a site just to make your own #ToryBingo Poster Generator

As the quote goes from T2 - 'John Connor: The whole thing goes: The future's not set. There's no fate but what we make for ourselves'

Lets make sure this isn't the future of the BBC.

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MikeB's 2,579 posts GB flag
Saturday, 22 March 2014

10:31 AM

The problem is that the current system is not working. The BBC trust was setup to protect the interests of viewers but has time and time again failed. Patterson has no broadcasting experience and so seems to be out of his depth most of the time.

The licence fee is not fit for purpose any more. The Government is now using it as another form of tax by using it to finance the World Service and broadband. Having a compulsory fee to watch any broadcast television has meant that the BBC is underfunded during a time of economic hardship.

The BBC is also notorious for waisting money as has been pointed out on many occasions by the Parlimentary Finance Committee.

Another problem is the protected rights system which makes certain events available at below thier market value. This deprives certain rights holder from realising the true value of thier events.

Another issue is the fact that the BBC news has been described as "State Sponsered" and so the BBC has an advantage over other news organisations.

Recently there has been alot of concern about the non payment of licence fee being a criminal offence when all other debts of this type are a civil offence. The BBC has said that would increase non payment but there is no evidence that will happen. One issue here is that the BBC deliberatly made Freeview a non encrypted service in order to preserve the licence fee. If it was encrypted they would not even need to prosecute they could just switch them off.

In short the licence Fee is not fit for purpose in a multi channel and multi media world.

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trevorjharris's 367 posts GB flag
Dave Lindsay

11:08 AM

trevorjharris: I thought the offence was using TV receiving equipment without a Licence, which is not the same as non-payment.

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Dave Lindsay's 5,724 posts GB flag

11:35 AM

Actually Dave it has become very complicated. It is based on whether the video was "broadcast or not". Anyone who records a broadcast program needs a licence to play it back. You do not need a licence if you watch the same program on catchup iplayer. You cannot watch a live program on iplayer without a licence. Many people avoid paying the licence fee by only watching catchup.

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trevorjharris's 367 posts GB flag

11:45 AM

Andrew Way: Thanks. I've got a several different possibilities for the future lined up. The second one is BBC plc, 2017. Radio 4, the last voice. | BBC 2017 | - 11 years of independent, free digital TV advice

Just for the record, I'm not advocating any of this... I am just trying to gameplay the possibilities.

If you're a subscriber there's an article in Broadcast BBC revenue doesn't add up | Comment | Broadcast

BBC revenue doesn't add up
19 March, 2014 | By John Mair

Whatever happens in 2017, hard times lie ahead, says John Mair

Back in 2010, during the last BBC licence fee settlement, director general Mark Thompson was effectively mugged by Jeremy Hunt in the helter-skelter negotiation. How did the BBC work out the effect of the proposals?

Simple, Thompson told me, they went back to Broadcasting House and put the figures through an Excel spreadsheet. No fancy econometric modelling there. Since then, the BBC has been having to cope with the de facto 16% cuts agreed under some duress.

With a new licence fee period due to start in March 2017, at the same time as the next Charter, and the noise about those negotiations already building, I decided to repeat the exercise (with help from my econometrist son) with one big assumption and two smaller ones.

Earlier this month, I asked BBC Trustee David Liddiment what was the best licence fee the corporation could expect in 2017. He replied firmly: “What we have now.” So, £145.50 per household, plus annual inflation at the historic level of 3.5% and the number of licence fee payers growing by the historic rate of 0.6% annually, formed my base assumptions.

Crunched into that Excel spreadsheet, the results do not make for happy reading for the BBC. To keep up with inflation, the licence fee would have to rise to £177.78 in 2017. That will never happen. The BBC is too soft a target for any government to agree to that.

Kept at £145.50, there will be a very large funding gap of at least 16%, and possibly as high as 18.2% over the 2017-2022 period. In real terms, taking account of inflation, income will fall over that six-year period from £21.3bn to approximately £17.4bn. That’s an annual drop from £3.55bn to £2.9bn. At best, very hard times lie ahead.

But the situation gets even worse if you build in another assumption. If not having a TV licence is decriminalised (which may happen in theory as soon as next week) then by the BBC’s own reckoning, up to 10% of licence fee payers – double the current percentage – will join Noel Edmonds in simply not paying. Real income could fall by 21% from 2017 compared with the previous six years. Not quite a funding Armageddon – but not far off.

Could that missing 16-21% cut in real income mean a licence revenue loss of up to £1 billion per year? Using the BBC’s own 2013 figures from its financial statement, that’s the total spend on BBC2 (£543.1m), BBC Online (£176.6m), BBC4 (£70.2m) and the BBC News Channel (£61.1m), with more than £100m in further savings to find each year. Whatever the final funding solution arrived at, the situation looks grim.

As the political sharks circle the corporation and its commercial media rivals lick their lips, the BBC’s best hope is that the electorate in 2015 does not return a Conservative government where anti-BBC backwoodsmen hold sway. If that scenario plays out, it’s curtains for the BBC as a universal provider of broadcasting on the widest variety of platforms. Ninety years of quality and world-respected public service broadcasting could come to a messy end at the stroke of a ministerial pen.

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Briantist's 38,899 posts GB flag

8:48 PM

Briantist: At least he BBC has seemingly been much more savvy this time round. Last time, as the article pointed out, Thompson basically had no game plan, and just caved on the grounds that if they did complain, the government would hurt them more.

This time, although a settlement is going to be hard fought, no matter what government is in power, the BBC has at least come out fighting. Tony Hall has made the case early for a licence fee in line with inflation, and has warned very early about what will happen if the settlement does not increase revenue - goodbye to BBC4, local news, etc (some might see this as the 'Blazing Saddles' defence).

Even Daily Mail readers, who might regard the BBC as the Bolshivik Broadcasting Corporation are going to hate that. Perhaps they dont watch/listen to the Proms apart from the Last Night, but they like to know its there. MP's (perhaps even Andrew Bridgen) might not like a deluge of outraged letters from Middle England. By 2017, it will be 9 years since the credit crunch, so 'austerity' will no longer work as an excuse. If the Tories want to starve the BBC, they are going to have to come up with an idea which passes the smell test.

Hall has also fought hard to answer the push for decriminalisation of non-payment of the licence fee, which at least means the legislation will be enabling, rather than immediate. Hopefully, when the BBC do prosecute, they will be as ruthless as Sky is.

And he has come out strongly against moochers just using Iplayer without paying the licence fee - the problem is going to grow, so its wise to try to kill that loop-hole as soon as possible. Again, Sky would simply not allow that to happen, so why should the BBC be any different? TrevorHarries's legalistic sophistry not withstanding, if your viewing content, you should pay for it.

The idea of restricting revenue as a political weapon is one learnt from conservative circles in the US. Amoungst 'shrink government and drown in bathtube' types, this is known as 'starving the beast' (read Thomas Frank's 'The Wrecking Crew' for more background). However, it can rebound. Mitt Romney argued for, and the GOP actually tried to defund PBS - this led to articles like this Don’t Mess With Big Bird - and cartoons like this:

imgur: the simple image sharer
and this: Internet Gets Big Bird's Back After Romney Says He'd Defund PBS | Underwire | . (the F & U is particularly good) It did not end well for them.

Brigden probably didn't think it up himself, but it fits in well with the gradual erosion of the BBC's finances. I suspect that the bulk of the MP's that currently support the move are Tories, apart from the occassional 'useful idiot' from LD or Labour circles. If the BBC is to survive, it has to make it clear that any politician will pay a very high price for harming it.

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MikeB's 2,579 posts GB flag

10:53 PM

As far as I can see there is nothing to stop the BBC charging for the iplayer. They could give every licence payer a login or they could charge a seperate fee.

In times of recession an increase in the licence fee is politically unacceptable. Why should poor of this country continue to finance the fat cats at the BBC.

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trevorjharris's 367 posts GB flag

11:07 PM

trevorjharris: There are some things you can rely on in life, and one of them is you saying the usual factoids and opinions, but supplying no evidence to back them up.

Of course if the BBC does become extinct, will you have the same sympathy for the poor of the country who will have little choice but to pay for the fat cats of Sky? The channel MD is paid about £7m a year in total, and Sky's tax situation means that at one point in the 1990's, it had paid no UK corporate tax for 11 years.

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MikeB's 2,579 posts GB flag
Sunday, 23 March 2014
1:24 AM

Australia removed its licence fee many years ago, so that the ABC (the Australian version of the BBC) is funded directly from government. This has the disadvantage that the ABC is beholden to government for funding, and they have to go, cap in hand, to government every now and then.
Is this feasible for the BBC?

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Tim's 8 posts AU flag
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