What Do Licence Fee Changes Mean to the BBC’s Television Budget?

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In a repeat of the move that once caused the BBC Trustees and then director-general Mark Thompson to consider resigning en masse, the government has confirmed that the BBC will have to bear the cost of free licence fees for the over 75s – with the Government likely to bring in proposals to recoup some of the £650 million cost by charging for catch up services like iPlayer.

Culture secretary John Whittingdale announced in the House of Commons yesterday that the corporation will have to bear the cost of the licence fee exemption, which represents around a fifth of the BBC’s £3.17bn licence fee revenue.

Whittingdale told MPs the changes would be phased in from 2018-19 with the BBC bearing the full cost by 2020-21.

The first impact of the exemption will be felt by the BBC in 2018/19, when it will amount to £250m. Its financial commitment will nearly double to £450m the following year, and £750m by 2020/21.

In return, the Government will bring in proposals on paying to use catch-up services like iPlayer, meaning that the corporation could potentially charge people to use the service (effectively closing the iPlayer loophole in the current service), raise the licence fee in line with inflation, subject to efficiency savings, or change the age at which it is available from 2020.

In a move called ‘a natural progression in a digital age’ the BBC will attempt to claw back some of the deficit by launching the BBC Store, a new commercial web service allowing fans to purchase downloads of hit shows including Doctor Who (preumably modern and classic) and Sherlock.

The site will offer permanent downloads just hours after programmes have aired – creating direct competition for Apple’s iTunes which currently charges around £4 to buy an episode of Sherlock.

The Independent says the store is currently in Beta and houses around 10,000 hours of content (6,000 recent programmes and 4,000 hours of archive programmes – some of which have never had a commercial release) to purchasers in the UK.

BBC Worldwide, the corporation’s commercial wing tasked with returning revenues to the licence-fee payer, will take a 70% cut of sales, with the rest going to independent production companies which have supplied the content. BBC sources said the Store was expected to make a modest initial contribution to Worldwide’s revenues with the launch catalogue building up to 10,000 hours of programming.

The BBC Trust approved the launch of the BBC Store, describing it as a “worthwhile commercial service that supplements what the BBC makes available through the licence fee and promises to bring value not only to audiences but also to the wider creative industries.”

However Rona Fairhead, the chair of the BBC Trust, was critical of the way yesterday’s announcement was made. In a letter to Whittingdale, she wrote: “We accept this decision is a legitimate one for the Government to take, although we cannot endorse the process by which it has been reached.

She added that while they couldn’t impede any proposal by the Government, there was still concern for the direction the policy is taking: “We acknowledge that nonetheless, following discussion with the BBC Executive and the Trust, you have agreed a number of significant mitigations… It is our presumption that the Government will not now seek to impose further costs on the BBC during the Charter Period.”

The Government’s plans emerged over the weekend in a newspaper briefing by Treasury officials, followed by an interview given by Chancellor George Osborne to the Andrew Marr Show.

In it, Osborne suggested that the BBC could cuts it’s spend on online content: “If you’ve got a website that’s got features and cooking recipes – effectively the BBC website becomes the national newspaper as well as the national broadcaster. There are those sorts of issues we need to look at very carefully,” he said.

“You wouldn’t want the BBC to completely crowd out national newspapers. If you look at the BBC website it is a good product but it is becoming a bit more imperial in its ambitions.”

Shadow culture secretary Chris Bryant called the announcement “an utter shambles”, adding it was “no way to run a whelk stall let alone the world’s most respected broadcaster”. Meanwhile The Telegraph reports that Philip Davies, a Conservative MP, said that the BBC is able to “suckle on the teat” of licence fee payers because its income rises every time a new home is built.

In response, the Culture Secretary hinted that the corporation’s rising income could be used to justify cuts during the charter negotiations: “My honourable friend is absolutely right that while the BBC licence fee has been frozen its income has been rising year on year due to the growth of households,” he said.

In a further blow to the BBC, Whittingdale said that decriminalising non-payment of the licence fee will be “carefully considered” by the Government.

Rallying to the BBC’s cause, David Tennant has backed a petition by Broadcast to protect the corporation declaring that ‘we must celebrate and protect the BBC for ourselves and our children.’

David Tennant on why we need to protect the BBC #BackingTheBBC

Sign the pledge here: http://t.co/Zh1MiD7keq pic.twitter.com/ton8WKwJ8N

— Broadcast (@Broadcastnow) July 6, 2015

When the idea of making the BBC pay for the licence fee exemption was floated five years ago, it prompted the BBC Trustees and then director-general Mark Thompson to consider resigning en masse. Thompson later wrote in his memoirs that the move would have pushed the BBC “down the cliff”.

The BBC Press Office issued this statement from Director-General Tony Hall on yesterday’s agreement with the Government.

Statement from BBC Director-General Tony Hall regarding today’s agreement with the Government: pic.twitter.com/dulfvL5t6u

— BBC Press Office (@bbcpress) July 6, 2015

What do you think of these changes? Do you fear an impact in the quality of the BBC’s broadcast TV?

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