The future of public service broadcasting

As public spending faces further cuts and the way we consume media changes, Raymond Snoddy examines how the BBC might look to other public service broadcasters to find a funding model that works.

The BBC is already aware that it is facing a tense battle to defend the present scale of its activities and even the licence fee itself.

The political push for “a smaller BBC” will almost certainly grow in 2014. At the same time the huge increase in availability of streaming devices of all kinds will lead inevitability to further questions about the viability of making compulsory charges for merely receiving television.

The BBC will not be alone. Public service broadcasters across Europe are coming under financial pressure – partly from commercial competition, but mainly as a response to the financial crisis and the need to cut public spending.

The European Broadcasting Union, which links public broadcasters, this week warned of the impact of cuts it described as excessive and disproportionate.

Public broadcasters were making every effort to improve efficiency but “excessive budget cuts to public service media cannot serve as a quick fix,” the EBU said.

“It is precisely at times of crisis that the public needs strong public service media to be an indispensable source of reliable, quality information,” the organisation added.

The statement from the EBU annual assembly follows plans by the Dutch Government to cut a total of €300 million from the budget of the Netherlands public broadcaster, NPO – one third of its total.

Executives warned of the danger of “a downward spiral” that would be almost impossible to recover from. In Iceland the public broadcaster RUV has recently been forced to downsize by 20 per cent.

In both countries the licence fee had already been abolished, bringing the funding of public broadcasters more directly under government control.

But almost every public broadcaster in Europe has seen its budget cut – even the heavyweights such as the BBC, France Televisions, ZDF of Germany and RAI of Italy. In most cases further cuts in both programme budgets and staff levels are feared.

The BBC is already wrestling with cutting £700 million from its existing budget with the loss of around 2,000 jobs.

Indeed, today the BBC will announce it is scrapping more than half of its 56 pan-corporation management boards as it aims to cut down on bureaucracy. The Corportaion will also appoint former Sony boss Sir Howard Stringer as one of two new non-executive directors, following a joint review into the way the BBC is run.

Over the years there has been a pattern to licence fee settlements. The BBC has typically asked for big rises and then suggested the end of civilisation was nigh when it failed to receive the amount it sought. Then somehow, almost miraculously, savings were found and the Corporation steamed on and usually managed to continue growing.

Those days have probably come to an end. If the UK wants to have a public broadcaster carrying out something like the current range of programme services, which the public on the whole appear to want, then the Corporation cannot continue to face a sizeable financial squeeze in real terms.

The sort of managerial incompetence that wasted £100 million on the recent digital project does not, of course, help the argument for at least the unfreezing of the licence fee.

There is, however, as Dutch television executives warn, the danger of a downward spiral as the BBC not only gets smaller, but also gets much smaller in relative terms compared with rivals such as BSkyB.

In the same week the cry of anguish was issued by the EBU, an apparently mundane piece of trade research, the Consumer Electronics Topical Report, was published.

It said that by the end of the year more than 1.7 billion devices capable of streaming OTT (over-the-top) services such as Netflix and Hulu will have been shipped. Last year 1.43 billion devices were shipped and further growth is expected next year.

The numbers include everything from set-top boxes and smart TVs to games consoles and smart phones but the numbers are still impressive.

So far the vast majority of television viewing takes place in front of a television set and OTT offerings account for a modest slice of additional viewing. But the number of people that claim they only watch online, recorded video material and therefore shouldn’t have to pay a licence fee, is likely to rise.

It is an issue, along with the legitimacy of the licence, that the BBC will have to address as part of the negotiations for a new Royal Charter.

There are a number of alternative models to look at.

Turkey funds its public broadcaster with a one-off tax on receiving equipment combined with an additional charge on electricity bills. Most of those countries which have abolished the licence fee rely on a mixture of advertising and state funding.

Finland is a particularly interesting case. It abolished the licence fee at the beginning of this year and replaced it with a “Yle tax” named after the Finnish public broadcaster.

Unlike the British licence fee, it is progressive – those who earn more pay more, and the tax is paid by individual adults, rather than households.

Very low earners are exempt which makes it markedly fairer than the British system where a billionaire pays the same £145.50 as someone on benefits.

The problem with replacing licence fees with either direct Government support or special tax is that it is very easy to apply financial pressure.

In New Zealand the licence fee was capped at $100 in the 1970s and not increased until it was abolished in 1999. But what is the solution to the online reception problem, a segment of viewing that is likely to increase over time? We only have to look to Ireland for a potential answer.

The Irish have cut through all the arguments about what constitutes television viewing in an increasingly complex world with a simple strategy – a public service broadcasting charge.

The charge will be “device-independent” and will not be tied to ownership of a television set. Every household – occupier rather than owner – will have to pay the new public broadcasting charge. It also should help to eliminate the “freeloader” problem – the nearly one in five Irish households who do not pay their licence fees.

The BBC can make a case for the continuation of the licence fee – and even a modest increase – into the next Royal Charter period but it will be an uphill struggle and the campaign needs to start now.