We’re delighted to present this guest post from our friends at Prospero Strategy, a strategic advisory firm, specialising in the media and sports industries. Our thanks to Tabitha Elwes and Conrad Roeber.
The Budget licence fee agreement between the Chancellor and the BBC in July continues the erosion of BBC funding started in 2010. The deal will see core service funding between 2010 and 2020 decline by one quarter in real terms.
In 2010/11 the BBC had licence fee revenue of £3.7bn. In 2014/15 the BBC no longer had to finance Digital Switch Over, but under its 2010 licence fee settlement it took on commitments to fund S4C, broadband, local TV and the World Service. In addition the licence fee was held flat (a decline in real terms). This combination meant that in 14/15 licence fee income for core services was down 12% in real terms (£460m) when compared with 2010
The deal agreed with the Chancellor in July has continued this trend. On the upside the BBC will no longer have to fund broadband or local TV and a change in licence definition will mean the 500,000 (and rising) people who watch television only over IP will have to pay a licence fee. In addition it looks as if the licence fee will rise with CPI from 2017 (flat in real terms, but a nominal increase of £340m to 2020). However, from 2020 the Chancellor will require the BBC to fund the cost (previously funded by the DWP) of “free” licence fees for people over 75. This large and growing segment will cost the BBC about £670m in real terms (£735m nominal) by 2020.
Back-to-back these two settlements mean that in real terms the BBC is likely to see licence fee funding for core services decline by 25% over the ten years to 2020/21. It is in this context that the Green Paper discussion about role and remit is now going to take place.