Ryan Lewis ryan@razzlewis.com www.razzlewis.

com

T H E c U RRE N T 5Y ST E M OF f U N D I N G T H E b b c A N D W H E T H E R iT I S T H E
rI G H T 0 N E FOR iT S f U T U RE .

Today I will be looking at what the benefits and negative aspects are of the
way the B.B.C is financially supported currently and making an analysis as to
whether it would be beneficial for this method of funding to continue. In order to
do this though we must first outline the way in which the BBC currently obtains its
funds, a manner of funding which makes it a unique entity in broadcasting.
The British Broadcasting Corporation (BBC) is currently funded as set out in
its Royal Charter, which declares “the BBC’s stewardship of the licence fee”
(Department for Culture, Media and Sport, 2006, p.7) as it has since its creation as
a public corporation in 1927. This latest revision of the document came fully into
force on 1st January 2007, and expires on December 31st 2016.
In addition to this, the BBC also generates around £600 million in income
(BBC, 2007, p.107) from various other revenue streams of a commercial nature,
such as magazines, merchandising and the sale of overseas broadcasting rights
for shows. This mixture of public funding and commercial interests allow it to run
with an operating budget of £4.3 billion (BBC, 2007, p.97). This is more than that
of British Sky Broadcasting Group (BSkyB), the next highest spending television
broadcaster, which spends £3.8 billion a year through a combination of
subscription fees and paid advertising (BSkyB, 2007, p.28).
In its most recent budget, for the year ending April 2009, the £11.63 that
made up each licence fee for the month was spent with £8 a month going on
television, £2.01 on radio, 61p per month on web content and £1.01 on the digital
switchover and other administrative costs. This saw the provision of 52 radio
stations both local and national, 9 television channels and regional variations,
interactive services and the BBC website, including iPlayer.
Such a funding structure is somewhat understandably a bone of contention
among the commercial media, with non-executive Chairman of BSkyB James
Murcoch labelling it “perverse” that “the BBC seeks to compete head-on for
audiences with commercial providers” in his 2009 MacTaggart lecture and Alex
Singleton (2008) mentioning how “it is easy to see… why people are upset when

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the Beeb uses the licence fee to subsidise services that directly compete against
the private sector” after speaking to Sly Bailey, the chief executive of Trinity Mirror.
In exchange for this level of public funding though, the BBC’s constitutional
remit is significantly different from those of commercial broadcasters. Based
around “Lord Reith’s ‘inform, educate, and entertain maxim’” (Newby, 1997, p.14)
since the corporation’s foundation, words which remain in the Royal Charter in its
current form, the BBC is there not just to “serve the public’s interest” (Department
for Culture Media and Sport, 2006, p.2) and garner good ratings. Instead, its “main
object is the promotion of its public purposes” (Department for Culture Media and
Sport, 2006, p.2) which are set out to be:

“(a) sustaining citizenship and civil society;

(b) promoting education and learning;
(c) stimulating creativity and cultural excellence;
(d) representing the UK, its nations, regions and communities;
(e) bringing the UK to the world and the world to the UK;
(f) in promoting its other purposes, helping to deliver to the public
the benefit of emerging communications technologies and
services and, in addition, taking a leading role in the switchover
to digital television.”

(Department for Culture Media and Sport, 2006, p.2-3)

Therefore, due to the way it is funded it shouldn’t be commissioning texts

using the same criteria as “commercial stations… constructing their audience
around the promotion of consumer populism”. (Chapman, 1992, p.8) Instead, as
well as some populist programming, it should be producing things of variety,
catering to all the UK’s regions and communities as well as shows of education
and culture.
Essentially then, the public purposes in the Royal Charter secure and outline
the BBC’s position as “the cornerstone of Public Service Broadcasting” (Bromley,
2001, p.36); reflecting how “the BBC was [is] a public service and its output should

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be guided accordingly”. (Newby, 1997, p.14) This guidance for the BBC is
provided by the BBC Trust, a quango headed by Sir Michael Lyons consisting of
twelve trustees who seek to maintain its independence, standards and variety
whilst “only spending as much money as the BBC needs to”. (BBC Trust, 2009)
Under a Memorandum of Understanding, OFCOM also has “jurisdiction of
certain kinds of programmes” (Conlan, 2008) meaning the output of the BBC
should be very tightly monitored as there are two regulatory bodies who have the
power to step in and ensure that no “material harm and/or offence” (Conlan, 2008)
comes to the viewing public.
Due to the BBC having a guaranteed level of income from the licence fee
payers, it is able to set about making shows with a greater amount of freedom and
this is the first advantage of this method of funding I wish to discuss. Whereas
commercial broadcasters are always “under great pressure to attract the
audience” (Gunter, Harrison & Wykes, 2003, p.219), the BBC under the remit
outlined by the Royal Charter, have an ability to produce shows without having to
bow to audience figures and ensure the strength of public service broadcasting
within the UK.
This is the case more so now than ever, with a House of Lords select
committee report noting a “very severe… decline in the UK television advertising
market” of “12.5% year on year in 2009 following a 5% decline in 2008”. (House of
Lords, 2010, p.401) Such a decline in advertising revenue has only further
exacerbated a situation set into motion by the 1988 White Paper on broadcasting
policy.
In this ITV was “allowed greater freedom to match its programming to
market conditions,” (Bromley, 2001, p.36) in essence excusing it of much of its
public service broadcasting obligations due to its need to generate advertising
revenue to maintain its service. Channel 4 was still to maintain a public service
remit but, as a commercial broadcaster, it wasn’t to be as broad as that of the
BBC.
Since then, in 2001 Channel 4 has cut its budget for schools programming
by a figure that was at least “20 percent… [and] as high as 50 per cent” (Hughes,
2001) whilst ITV’s public service remit to broadcast 8 hours a week of children’s

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programming on terrestrial television was dropped after much negotiation with

Ofcom in order to “schedule output that would appeal to a wider adult audience”.
(Conlan, 2007) Now, in the current climate, Stephen Tall points out that “as
recession reality bites, and advertising revenues dwindle, this process will only
accelerate.” (2008)
In this case then, in comparison to the pressures faced by commercial
broadcasters in attempting to generate income and fulfil their legal obligations, the
advantages of the licence fee funding the BBC when looking at public service
broadcasting are therefore somewhat obvious.
The possession of a guaranteed revenue stream has also afforded
commissioning editors like Ben Stephenson (Controller of BBC Drama) the
opportunity to take advantage of “a unique opportunity to commission risky
projects” (Midgley, 2009) outside of the public service remit. These include
commissions like ‘Life On Mars’, which Channel 4 rejected as they thought it was
“going to be silly”, (O’Brien, 2006, p.59) as the BBC don’t have to worry about poor
advertising revenue costing a significant amount to the channel in lost revenue on
top of the production costs.
Indeed, they can even give critically successful shows, such as the 1983
International Emmy winning ‘Blackadder’ a second season despite “lower than
expected ratings and huge costs” (Snelling, 2007); a decision vindicated by its
subsequent success, but unlikely to have been made by a commercial
broadcaster. These may only be two examples, but they are certainly advantages
to the licence fee system in terms of being able to make decisions based upon
diversity and critical weight over populism.
That being said, it would still be tough to argue that the licence fee funding
system does not provide for the mass audience as well. Of 2009’s top ten most
viewed television shows four of the programmes were aired on BBC1, whilst the
two programmes from that decade which drew the most viewers were also BBC
productions. The appetite for the BBC’s biggest and best shows is there amongst
the licence fee payers then; peak figures of over twenty million viewers are a
testament to that.

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There are some though who argue that the licence fee is an outdated form
of funding given the modern television landscape. The “availability of multi-
channels and ample choice has created a fragmented audience” (Logan, 2008,
p.399) and with audiences spread in such a manner, is it debatable whether it is
still right to be paying out a substantial amount to one broadcaster with ratings that
have understandably dropped.
However, despite there being many channels to choose from, and a
considerable number of them ‘narrowcasting’ and catering for specific groups and
tastes, it could also be that there is still the need for a wider platform for some
elements of public service broadcasting. Indeed, one group well represented
among the narrowcasting stations, the Catholic Church, found in their review of
Ofcom’s public service broadcasting review that there was still “a significant
recognition of the need for public service broadcasting… and underline[d] the
continuing relevance of broad-casting in contrast to narrow casting.” (Arnold,
2008)
Here then, the advantage of the licence fee income is that the BBC has the
funds to create both shows for the mass audience as well as specialist magazine
programmes or documentaries watched by far fewer people but the same
broadcasting channels to show them on.
Yet, there is also an argument from some quarters that the licence fee
funding is something that provides an unfair advantage over its competitors in the
marketplace as I mentioned at the beginning of this post; there are those within
other broadcasters and media outlets that see a publicly funded broadcaster
competing as detrimental to their free market ideals.
However, due to its state funded status the BBC is at the disadvantage of
not being able to take full advantage of the commercial opportunities available to it
in response. John Whittingdale MP of the government Culture Committee stated
last year how the BBC needs to look into “preventing damage to its commercial
competitors”, (BBC, 2009) and there were calls to remove the Chief Executive of
BBC Worldwide from the Board as it “gives Worldwide an unfair advantage on its
competitors.” (BBC, 2009) It was also noted how the ‘first look’ policy Worldwide
has on all BBC programming should be removed and “the BBC should open up its

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programmes to competitive bidding”. (BBC, 2009) All of these adjustments would,

of course, leave the BBC at a monetary disadvantage in comparison to what they
would otherwise have.
That is not to say the licence fee doesn’t have some benefits for all
television broadcasters in general. As I previously mentioned, around one pound a
month from every licence fee collected currently goes toward the Digital
Switchover Help Scheme, setup to ensure that almost all (98.5%) the British public
are able to access television broadcasts. In turn, the BBC itself benefits from
being at the forefront of technology as a broadcaster too, pioneering new
technologies such as colour television in 1967, teletext in 1973 and their iPlayer in
2007 whilst getting something of a jump in any competitors who are not as readily
able to adapt.
Still, this is not to say that the BBC’s broadcasting competition are placated,
nor are they the only ones who take issue to the way in which they are funded as
there are elements of the British public that take objection to it as well. In 2004, a
survey taken by the BBC show ‘Panorama’ showed that 67% of people believed
the licence fee should be paid for by alternative means, be they subscription or
advertisement based whilst another poll in 2008 a YouGov poll found the same
figure of 67% of people thinking that the TV licence was a ‘rip-off’. (Daily Mail)
This in turn has seen a vocal minority set up numerous websites and
campaigns in order to make their dissatisfaction with the television licence known.
Some, such as the ‘Campaign to Abolish the TV Licence’ make it known that they
“are not against public broadcasting - though not financed by threatening criminal
sanctions.” (Miller and Oostveen, 2009) Their petition contains only around 10,000
signatures, but it does begin to indicate that it is not just the quality of the
programming that influences the public perception of the licence fee, something
that “the BBC… contemplating a radical revamp of the television licence fee to
make it more acceptable to the public” (Hastings and Jones, 2008) would certainly
suggest. It could be that the BBC is at a disadvantage as a result of the method of
collecting the current system of funding, which could result in support for its
removal growing.

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One of the founding tenets of the BBC is that “it should be an independent
voice, untampered with by government or commerce” (Newby, 1997, p.14) yet,
especially when altering funding is a concern, this is an impossible aim. It is noted
that there is “a tradition of the incumbent administration finding anti-government
bias in the BBC” (Palmer, 2003, p.9) which is the opposite of what you’d expect
from a situation where the ‘incumbent administration’ are setting income levels, but
even with any issues between the BBC and the government are in charge there.
The BBC will never have the advantage of being as independent as a commercial
broadcaster due to this funding structure.
This is particularly relevant now that it is apparent that there is now a
substantial amount of the populace who are unhappy with the way the license fee
is imposed upon them and collected, and the accountability of the BBC to the
public means that these people need to be appeased. As the Royal Charter itself
decrees the BBC “must represent the interests of license fee payers” (Department
for Culture, Media and Sport, 2006, p.8), something that it cannot be said to do if
between as much as two thirds of the country is unhappy with its service.
How to address this though, as I have demonstrated so far, is an issue even
those in charge find complex and difficult to resolve. It could be that a slimmed
down BBC could focus on making shows which commercial broadcasters wouldn’t
make whilst using an equally slimmed down licence fee, however that would
almost certainly cause a larger proportion of people to complain that the BBC isn’t
catering for them and increased resentment for the fee.
Alternatively, advertising based approach to revenue generation would
ensure that the BBC would have to attempt to make programmes in an attempt to
generate the largest audience figures in order to ensure its sustainability. This
however would impact upon its more niche products, local radio, arts shows such
as those seen on BBC Four or shows such as ‘See Hear’ or ‘Songs of Praise’
which are hard to envisage being shown on commercial stations. The impact of
such cuts can be seen in the reaction to the announced closure of digital radio
stations ‘6Music’ and ‘Asian Network’ which, though minor in terms of audience
figures, led to a number of complaints to the BBC Trust consultation “rumoured to
have topped 100,000”. (Plunkett, 2010)

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Similarly, a subscription based model “would exclude millions of

households… generate much less consumer welfare” and though “there would be
some net gainers, they would be in the minority.” (Helm, 2005, p.xviii) In the case
of the BBC, the “harmonious analogy of pluralism to the free market” (Crouch,
1993, p.11) may prove itself flawed as the variety of programming is reduced in
contrast with the exclusion of important minorities.
Instead viewers could find themselves provided with more “populist”
television, following the “reality formula” (Biressi and Nunn, 2005, p.9) as the BBC
looks to produce proven ratings draws (or secure a subscription uptake) as a result
of its income no longer being stable enough to fund ‘narrowcasted’ shows. On top
of that there is the threat to public service broadcasting, which does not sit
comfortably within the remit of a subscription service to begin with, and the various
parts of which are known to be “major issues that a commercial broadcaster rarely
addresses”. (Seneviratene, 2006, p.277)
One idea that has been proposed by the government is the ‘top-slicing’ of
the licence fee, and this is something which looks likely according to the Ofcom
review into public service broadcasting. Where the review says “we do not believe
that… top-slicing… should be considered” (Holmwood, 2009) it does suggest that
“digital surplus” money, left over from Switchover funds, should be diverted to help
fund ITV regional news bulletins and assist Channel 4 in its running costs.
Essentially, this is top-slicing the licence fee as the money is being redirected from
BBC controlled spending and used elsewhere, turning the licence fee from the
BBC’s source of funding to a funding source for public service broadcasting of
which the BBC gets most.
In addition to this, a merger or partnership between Channel 4 and BBC
Worldwide was also suggested in order to ensure the continued existence of the
former as an outlet for public service broadcasting. As of June 2009 talks in this
area were “ongoing” (Holmwood, Sweney and Wray, 2009) and should such a deal
be made it would go some way to appeasing one commercial broadcaster with
regards to the BBC engaging in commercial interests. The culture secretary at the
time Andy Burnham said of Channel 4 “that the clearest path forward was to use
the broadcaster… to provide plurality of public service content beyond the BBC.”

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(Sweney, 2009) and to that end it would also go about increasing their ability and
obligation to undertake challenging public service broadcasting, resulting in the
licence fee payers getting more for their money.
However, Lord Carter’s suggestion that “around 3.5% of the fee could be
allocated to public service programming on non-BBC channels” (Evening
Standard, 2009) once the digital switchover has ended is not an idea well
supported within the BBC itself. Both director general Mark Thompson and BBC
Trust Chairman Sir Michael Lyons both believe that such an adjustment “would
damage BBC output, reduce accountability and compromise independence,”
(Evening Standard, 2009) all of which would make achieving the old Reithian ideals
more difficult.
One last, and more dramatic, option would be for the BBC to cease its role
as a broadcaster entirely, instead using its resources and experience to operate as
a production company. Julie Gardner, current head of scripted projects with BBC
America, could be said to be testing the water for this idea already “positioning the
BBC as a production company, much like any U.S. production studio”; (Anders,
2009) whilst the reputation of the “in-house production teams of the BBC” as being
“extremely specialised… elite in their field” (Semple, 2008) would ensure that there
would be a market for the programming they would produce.
However, the loss of the BBC as a broadcasting entity would also see the
aforementioned issues with regards to who will undertake the broadcasting of
public service television. On top of that, the integration with which the BBC and all
of its media arms are integrated and able to cross-promote activities would be lost,
along with the ability to broaden horizons and introduce people to new things they
would not ordinarily come across – for example, trailing access to coverage of the
Proms during peak time television broadcasts, a taste of something the populist
audience may not otherwise get.
In conclusion I feel that given the weight of arguments on both sides, and
the number of considerations, both to the media as a public service entity and on a
more personal level, the only solution to how the BBC should be funded In future is
one of compromise and not radical overhauls. Forging partnerships with Channel
4 and ITV News in order to ensure public service broadcasting is strong, with the

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possible redirection of some licence fee funding to pay for shared regional news
resources could make practical sense and save public funds whilst increasing
quality and diversity.
However, the flat out removal of the license fee and royal charter from the
considerations of those in charge of the BBC would completely alter its makeup,
threatening its position as “an internationally reputable broadcaster” (Zhou He,
1996, p.79) and its status as “an integral part of Britain’s cultural heritage” (Spar,
2003, p.390).
To this end, I am of the belief that the BBC should essentially be allowed to
continue along with the current system of being licence fee funded as any other
manner of existence would see the BBC ceasing to be what it is now, and has
been for the best part of a century. Changing its manner of funding would almost
certainly change its constitutional priorities substantially, leave it with far less
accountability to the public as a whole and leave the new service provided as the
BBC in name only.
Indeed, the quality of production may still stay the same, or the scope of the
people it serves may receive a diminished quality service, but it is the sitting of the
two under the same umbrella that makes the BBC what it is, unique. It may not be
perfect, but neither is the NHS, dustbin collection or public transport; all the other
public services, just ones at a more practical level.
The licence fee payers could each save themselves a considerable amount
per year but, as Stephen Fry says, “the BBC enriches the country in ways we will
only discover when it has gone and it is too late to build it up again. We actually
can afford the BBC, because we can’t afford not to” (2008) and I am inclined to
agree. If you’ll excuse me for mixing my metaphors, then yes, the BBC may have a
few squeaky wheels asking for oil. However, building it a new chassis may just
result in the whole house of cards tumbling down at the great loss to the entire
United Kingdom.

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