In light of the ongoing UK governmental review of the potential decriminalisation of the BBC licence fee, and ahead of the next Charter review, Ampere Analysis has explored four possible alternative funding models which all have been mooted as possible replacements for the licence fee. Ampere has found that each of these would present unique challenges for Britain’s public broadcaster.
The four funding mechanisms include:
1) A shift to a subscription model, akin to Netflix or Sky
2) A move to fund BBC programming purely through advertising revenue
3) A levy on Internet Service Providers such as BT and Virgin Media
4) An income tax model
Ampere’s analysis indicates that each of these models – with the exception of an income tax model – would struggle to generate sufficient income to cover BBC activities, necessitating a scaling-back of output or quality. Many would also have detrimental effects on other components of the UK media and communications economy.
The BBC in light of Covid-19
But in light of Covid-19, the BBC has found a renewed importance amongst the public, with a recent Ofcom study finding 82 per cent are using BBC as a source of news*. The BBC has responded to the current lockdown situation by providing entertainment for viewers at home, as well stepping up their education and health services. The broadcaster has been ramping up its commissioning slate, increasing its box set selection on iPlayer and prioritising education. Each of these responses will improve sentiment among consumers and political audiences, helping to address the effects of the last few divisive years in UK politics and its ramifications for the perception of the BBC.
Hannah Walsh, Senior Analyst at Ampere Analysis said: “There’s no question that during the current COVID-19 pandemic it has become crystal clear just how important the BBC is for the population of the UK. The broadcaster has been quick to act, ramping up commissioning and amending its schedule. We’ve seen the daily updates on the current situation by the Prime Minister and Government health advisors, but there’s also advice clinics on the radio, and specialised children’s content, including educational programmes, BBC Bitesize online and child-friendly news updates.”
What are the options for alternatives to the licence fee?
1. Subscription fee – consumers voluntarily pay a monthly fee in order to access BBC programming, as they might for Sky or Netflix
Fundamentally however, Ampere believes it is unrealistic for the BBC to match current income levels through a subscription fee. The BBC would need to sign up nearly 24 million households for a whole year, each paying £13 per month, to mimic current funding levels. Current market leaders Sky and Netflix have less than half this number of subscribers apiece.
2. Advertising – the BBC introduces commercial breaks, as per Channel 4 and ITV
3. Levy on Internet Service Providers (ISPs) – ISPs would pay an additional tax, which is then used to fund public broadcasting
4. Income Tax – above a specified threshold, citizens would pay a tax to support the BBC
Walsh concluded: “The BBC has said it is willing to consider alternatives adopted by other European broadcasters such as income tax and advertising to compensate for the loss of the licence fee. Ultimately, however, it cannot match the current income levels generated through the fee via most alternative funding mechanisms. Many of these models would have to be coupled with alternative funding support and would not work alone to support current output or quality. However, in the aftermath of the Covid-19 pandemic, the BBC may be seen as an institution we simply can’t afford to lose – even by those who thought they didn’t need it. It will be interesting to see how the broadcaster and government progress this debate when discussions re-open.”