In defence of the license fee - my dissertation.

"The License fee remains the best way to fund the BBC"

To what extent is this statement true within the modern media landscape?

Originally submitted to the University of Hertfordshire.

The BBC has been funded via the license fee ever since it began broadcasting in 1922. The fee pays for all of the content produced by the corporation, and is required by anyone who consumes TV content in the United Kingdom. Whilst the BBC has slowly taken advantage of the opportunities offered to it by modern digital technologies, the rise of streaming service Netflix has posed a serious threat. Traditional broadcasting is in a decline, and so support for the BBC dwindles with it.

This essay utilises the advent of Netflix and the market they operate in, and more specifically the effects on the future of the BBC. The debates that have often mired the corporation’s funding will also be re-examined in the wake of this new media landscape, and the potential future forms of the BBC shall be evaluated.

A range of academic literature has been used to produce this essay, which will conclude that an abridged version of the BBC’s current form is suitable for it to exist in the modern era.

Founded in 1922, the BBC is the world’s largest broadcaster and is primarily funded by the television license fee. The fee is required of any household that watches any live television broadcast, regardless of whether or not that content was originally produced by the BBC. Upon its conception, the BBC was the only broadcaster operating within the UK, however the introduction of commercial players to the market has prompted the fee to lose the support of many within the television industry, and as such there have long been calls to privatise the BBC, with these propositions seeing the corporation take on a variety of different forms. It is argued that the license fee allows the BBC to hold a monopoly over the UK television industry and limit the growth of commercial competitors. Advocates of the fee dismiss these arguments however and instead say that the corporation can act as the leader that the market needs, providing stable investment across the UK industry. The BBC now faces threats from subscription based streaming services such as Netflix and Amazon, who offer hundreds of acclaimed programmes from third party providers such as the BBC themselves, and are now expanding to creating original programming. The cultural shift created by the rise of streaming services has drawn the entirety of the television industry into question, subsequently reawakening the traditional debates over the license fee that have attracted controversy since its conception. It is now appropriate to reconsider these arguments within the new media landscape in which the BBC must now operate.

Whilst both Amazon Prime and Netflix began by streaming content from third party providers, they have since expanded into the realm of content creation, and have both been responsible for acclaimed programming. Netflix is heralded as creating a culture of ‘binge watching’ (Schweidel and Moe, 2016) in which audiences consume programmes at their own convenience, no longer needing to follow the schedules of television channels. The ‘technology adoption life cycle’ is a sociological model which specifically designates young people to be “early adopters” of technologies which will later achieve widespread acclaim (Gombault, Allal-Chérif and Décamps, 2016). In 2015, “viewing to traditional live TV was lowest among 16 to 24-year-olds, accounting for just 36% of all their viewing” (Ofcom, 2016), whilst one third of young people’s engagement with television came via on-demand (Ofcom, 2016). These statistics followed a 14% swing to online streaming (ibid.), and so it is likely therefore, that streaming will overtake traditional broadcast viewing in 2017. When contrasting this with older audiences (defined as “laggards; the last to adopt new tech) (Gombault, Allal-Chérif and Décamps, 2016), for whom live TV accounts for 83% of viewing (Ofcom, 2016), the ‘technology adoption lifecycle’ strongly suggests that traditional broadcasting will soon rapidly decline. This creates doubt in the future of the publically funded BBC, and the license fee which is not required to access services such as Netflix, even when consuming content that was originally created by the UK broadcaster. There have always been arguments about the future of the license fee, however if new ways of consuming television are to make traditional broadcasting obsolete, licensing revenues will reduce regardless.

The challenges posed by online technologies have strengthened the argument of those who criticise the license fee, that the BBC itself is ‘irrelevant’. In its original form, the license fee existed exclusively to fund the use of radio technologies across the UK, with television broadcasts not part of the service until 1946, when the fee increased. A further increase came in 1968 when colour television became prevalent in the country. Whilst the fee continued to increase on a mostly annual basis until 2010, never has a tier for online content been added to the license. Despite this, emerging mediums have become popular outputs of the corporation. The BBC launched their iPlayer service in 2007, allowing users to watch programmes up to seven days after their initial broadcast. The license fee was not a legal requirement for an individual to consume any BBC content online until 2016, and there was no increase in fee made when this condition was added. Whilst the BBC was the first major UK broadcaster to introduce an online streaming portal, the other networks quickly copied them. Karen ARRIAZA IBARRA describes the decision to not charge for iplayer as ‘perverse’ (Arriaza Ibarra, 2012), and this point is strengthened when the BBC’s offering is considered in context of the wider catchup tv space. Channel 4’s ‘all4’ platform offers a similar service, albeit with a wider range of archive content. Channel 4 places adverts throughout their streaming programmes at a similar rate to traditional broadcasts, and it is not unusual for adverts to be heavily weighted to the early stages of a programme when watching online, so as to achieve maximum audience retention. This service has clearly been constructed in a way to maximise revenue, and so represents a very different opportunity to the commercial broadcaster than iPlayer does for the BBC. With streaming services soon to overtake traditional television broadcasting, it is clear that the concept is the next major broadcasting advancement. This would place any related reinvention of the License fee system as simply the same as the addition of television to the radio license. There is a clear precedent for this, and it would strengthen the BBC’s standing in the digital era.

The subscription system adopted by Netflix allows content to be free of advertisements that can “contribute to an increase in viewers’ tendencies to end the [viewing] session” (Schweidel and Moe, 2016) on commercialised channels such as ITV. The BBC can be seen to be ‘dominant’ (Murdoch, 2009) under the current system, and may become more so if commercial networks continue to suffer. Tim Congdon describes the license fee as a “state subsidy” (Congdon, 2016) and argues that the BBC should be privatised so that it can “compete on the same terms” (ibid.) as its rivals. He puts forward the argument that license fee money funds less than 25% of the UK’s television output, and yet is required to enjoy any of it. He posits, as many previously have, that the majority or programmes are not funded by the public money that is still required to watch them, and that the BBC is therefore profiting from great content being broadcast by other terrestrial channels. Whilst the financial safety net that is offered by the license fee can be seen to provide the BBC with a significant advantage over its commercial rivals, there is evidence that the continued stability of the corporation allows them to provide training and investment to talent that will later serve to benefit the entire television industry, and this is the defence that his continuously been used by the corporation itself. ‘Building Public Value’ (BBC, 2004) (a publication made during the campaign for 2006 Charter Renewal), argues that it is for the benefit of the UK industry for the BBC to act “counter cyclically” (ibid.) ensuring that “investment in the UK’s creative economy… is maintained” (ibid.). The BBC is seen as a benchmark for all other UK broadcasters to follow, and there is evidence that when the Corporation has less money to spend, other broadcasters spend less too, leading to “a potential reduction of quality” (Jackson, 2015). Should the BBC be forced into any form of traditional privatised model, either that of ITV and SKY, or a model similar to Netflix, it can therefore be argued that the entire industry would take a hit should there be another financial downturn. In response to the 2008 financial crash, many noted that the BBC had “not been as badly affected” (Arriaza Ibarra, 2012) as other networks in the UK, who were “suffering considerably because of the recession and significant falls in advertising revenue” (ibid.). It is difficult to argue that any television company gained from the downturn of the late 2000’s, and so it seems likely that any changes to the BBCs model as a move to balance the UK TV industry in this way would be largely counter intuitive.

Whilst many have criticised the current funding model of the BBC, and declared that the corporation should be privatised, there is no consistent argument as to what a reformed BBC would look like.

Instilling a commercial system into the BBC would undoubtedly force it to compete with other networks for audiences in order to generate the most revenue and profits. This would please Congdon’s desire to see a “level playing field” (Congdon, 2016), and alleviate the concerns of those in the industry who believe that the current model can hinder the ability of other networks to gain success. However, many fear that forcing the BBC to chase audiences would mean a reduction of its public service content, required as part of the public service remit the corporation has held since its inception. There are fears that “the way that much commercial broadcasting is funded by advertising leads to a focus on mass market appeal at the expense of niche and minority interests” (Foster and Meek, 2008), and so a commercialised BBC would be unable to prioritise the interests of the citizens it serves if to do so would not be financially viable. Many academics such as Patrick Barwise argue that the “citizenship impacts” (Barwise, 2016) of the corporation can be seen to outweigh the financial flaws of the BBC’s current form, and so it can be argued that continuing the license fee is to the benefit of the public, regardless of the effects it may have on commercial entities. However whilst many see the corporation’s PSB commitments as being a motivation for continuing the license fee, other broadcasters such as ITV are also required to provide the public with PSB content, and a commercial BBC could be rewarded with public money for also fulfilling these needs. This is an option that many industry experts have posited, however this system would only succeed if the BBC were to transition to advertising based model.

As a collective, streaming services almost entirely utilise a subscription model to charge for their content, and it has been suggested by some that the BBC should copy this model as opposed to becoming a commercialised broadcaster, current examples of which are seen to be suffering in the advent of the rise of Netflix. Many argue that this would allow the BBC to circumvent the costs of delivering television via the license fee, such as enforcing payment, and delivering the license to over-75s. Transitioning to a subscription service would allow the BBC to “provide the very best in what the British television industry… can do” (Ianucci, in Gibson, 2008), whilst also growing in other areas such as its online and news based offerings, relative to public use of these services. Directly taking payments from consumers would also allow the BBC to be free of the potential bias that it could be alleged infects commercialised broadcasters, and it is posited that “the income from subscription to television broadcasters is twice the income from the licence fee received by the BBC” (Booth and Davies, 2016), therefore marking payment by subscription as one of the corporation’s most profitable options. Barwise concludes that “the net impact of losing BBC TV would be negative for most households” (Barwise, 2016), and yet the public perceptions of the license fee do not equate to this. It is posited that placing BBC content behind a paywall could initially increase appreciation of the broadcaster’s services, which in turn could lead to high subscription numbers, with fees that could be scaled to meet the corporation’s needs. However; Barwise’s work establishes that funding the corporation with any method other than the license fee would result in a reduction of those actively consuming their content, and so “the ability of the BBC to provide universal services for the whole nation” (Helm, 2005) would be diminished if an additional paywall (potentially at “a 30% increase” (ibid.) above the license fee) were placed between the public and the programming via the adoption of a subscription model. The public service remit of the BBC exists so as to ensure that the entire population has a voice that can be observed by the nation, and whilst a 2016 study by Huffington post showed that streaming services such as Netlix and Hulu have been known to provide better representation for BAME (black, Asian and minority ethnic) individuals than major American networks (Boboltz and Williams, 2016), a pricing increase could reduce the engagement of less wealthy citizens and therefore damage the “citizenship impact” (Barwise, 2016) of the corporation. Whilst the financial elements of the BBC and the License fee are important, many argue that the ‘public good characteristics’ (meek and foster) of the broadcaster should be safeguarded.

For those who consider the current license fee model to be essential for the success of British television, one prevalent concession made is that the PSB remit of the corporation could be reduced, with these commitments made available for other broadcasters to fulfil in return for a small portion of license fee money. Whilst offering some of these finances to the likes of Sky, whose content lies behind a paywall may reduce the reach of public service programing, increasing the PSB remits of channels such as ITV1 and Channel four, which too are freely accessible to anyone with a TV license may satisfy the demands for a fairer UKTV landscape whilst also softening the blow dealt to the BBC. However, diluting the public responsibility of the BBC would theoretically allow parliament to ‘“reward’ well-behaved broadcasters” (Davies, 2008), and so manipulate the output of TV channels with the promise of funding. Such a system could create public doubt as to the integrity of the license fee model, and a lack of trust in those who benefited from it, thereby damaging not just the BBC, but also any networks (such as Channel 4 or ITV) who would seek finance in this way (Davies, 2008).

Despite many wishing to see the role the BBC reduced, there are alternative options that would see the role of the corporation expanded so as to increase its value to the public. Whilst Channel 4 does not receive any funding from the licensee fee, it is still a publically owned broadcaster that holds public service broadcasting commitments (as does ITV). Despite this, there is little interaction between the main British networks, and it could be considered that the divide between the BBC and its commercial rivals is itself the main “structural weakness” (Redmond, 2008) of UK broadcasting, and so the corporation’s undeniable benefits to the wider industry should become an official part of the BBC’s PSB remit. There are many across the industry who argue in favour of the corporation transitioning into a “public service provider” and taking on a variety of other responsibilities, including “acting as a pioneer for digital and broadband developments” (Foster and Meek, 2008), and “maintaining investment in UK-originated content and securing editorial standards” (Ibid.). One of the six public purposes established in the government document ‘A public service for all: the BBC in the digital age’, is for the BBC to assist with “building digital Britain” (Department for Culture, Media and Sport, 2006). Support for online services within the BBC’s PSB remit is rather broad where new technologies are concerned (BBC.co.uk, 2013), and so expanding these roles to include new the promotion of broadcasting technologies may allow the benefits of their new rivals to be extended to the wider UK audience. If the BBC wishes to fulfil its role as a “trusted guide” (Hall, 2015) for the British public in an age dominated by new forms of content, it must first embrace those new technologies itself.

Whilst digital competitors such as Netflix have the potential to compete with the BBC on the grounds of drama programming, they are unlikely to infringe on traditional current affairs coverage. The news output of the corporation has long been the motivation for attacks on the license fee from individuals such as James Murdoch, whose commercial interests are potentially harmed by the advancement of the free BBC News service, provided online and as a broadcast channel. Murdoch criticized the BBC for its “state-sponsored news” offerings (Murdoch, 2009), which are also funded by the licence fee. The influence of government funding or control on a nation’s media can allegedly lead to strong bias and censorship, altering the public’s perception of current events to support the plight of the incumbent political party. (Cpj.org, 2012) However the BBC argues that it is an impartial news provider and therefore has no political or financial incentives to report the news in a certain way, guaranteeing reliability. It could also be argued that if the BBC’s news output is truly independent, paid for by “the British people… not the government” (Heath, 2014) as the corporation would claim, then allowing the BBC to continue with its current funding model provides a much needed alternative to commercial news corporations, with whom there is a risk that “institutional interests may take precedence over public interests” (Foster and Meek, 2008), a sentiment which is conceded by Murdoch, who agrees that “bias is present in all news media” (Murdoch, 2009). Many have suggested that expansions to the BBC’s ‘public good’ provisions may include an increase in regional news coverage for which the only other provider is ITV, who could potentially fall victim to the flaws of commercialised news. In future negotiations to defend the license fee, it is essential that the BBC defends its role as the only British non-commercial provider of news and public information; transitioning to a ‘public service provider’ would allow them to achieve this.

Netflix and Amazon compete with the BBC to offer the highest quality of content in an attempt to attract audiences, in a similar vein to Sky, ITV and Channel 4. However, they also pose an additional threat, in that they have disrupted the “ideological perspective” (Barwise, 2004) of the public, and the traditional mindset with which programming is viewed. Audiences are now “agnostic around networks and programmes (Landau, 2016)”, and so the perceived identity of a broadcaster (or streaming service) must be strong to remain relevant. Netflix’s Chief content officer Ted Sarandos argues that the major contributor to a television brand’s success “turns out to be quality (ibid.)”, and the streaming service ‘can’t let… one show define the brand” (ibid.). Consumers must want to watch ‘Netflix’, not just ‘House of Cards’. This is a vast difference from the strategy of the BBC, for whom shows like Doctor Who and Sherlock are consistently placed at the forefront of marketing campaigns, with key personalities such as Graham Norton and Chris Evans also fronting numerous shows across the organisation’s multiple outlets. It can be inferred that the BBC sees its shows as key tools for defining the strength of the brand. A similar strategy is adopted by online retailer Amazon, who’s ‘Prime’ service is another attempt to dominate the streaming market. Neil Landau designates Amazon Studios as being a “wild card” (Landau, 2016), in that their brand promotion is “more laidback, casual, and far less urgent” (ibid.) than Netflix. Despite this, major campaigns have been more comparable to the traditional model of network branding, with star presenter Jeremy Clarkson frequently fronting campaigns not just for Amazon Prime, or his show ‘The Grand Tour’, but for the retailer as a whole (A campaign which also indicates Amazon considers the BBC as a competitor, as opposed to Netflix who often can be seen to distance themselves from the broadcast television market). This more traditional mindset may explain why Amazon prime, despite the other benefits it offers, has fewer subscribers than Netflix (Jackson, 2016), and could be seen to prove the proposed theories of show strength outweighing brands. Although Barwise’s study of a commercial only industry (Barwise, 2016) concludes that was the BBC is ultimately a significant positive to the wider British public, he concedes that public perceptions do not currently acknowledge that. If the most significant threat posed by streaming services is the reduction of confidence in the brand of specific broadcasters, it is reasonable to assume that the public are likely to lose support for the license fee, regardless of any positives it provides, and Barwise’s study is essential in proving this hypothetical.

It is clear that the BBC must seek to redefine its strengths when arguing for its existence. Despite arguments that the corporation sets “benchmark quality standards” (Foster and Meek, 2008), across broadcasters throughout the United Kingdom and even Europe (Macintyre, 2010), many would suggest that the corporation acts in ways that fail to “serve the public rather than … its own institutional interests” (Foster and Meek, 2008). It has frequently been alleged that the self-centred nature of the corporation began with original president Lord Reith, who felt he "knew what in other people's interest better than they did themselves" (Hendy, 2013). Reith famously dismissed claims that the BBC was dictating the wants and needs of its audience, saying that “few know what they want and very few know what they need” (Nesbitt-Larking, 2007), and it is likely to be statements such as this which lead Glen Creeber to talk of how Lord Reith’s BBC resembled “An authoritarian, paternalistic and innately highbrow institution that tended to promote the interests and tastes of the English upper middle class” (Creeber, 2003). This perception of an elitist form of broadcasting has frequently been used by critics to portray the corporation in a negative light. If the BBC is to survive in its current form, it must prove that the controlling nature of early BBC TV outputs is no longer a problem that is faced today. Decades after Lord Reith’s tenure, former BBC TV controller Huw Wheldon is quoted as saying that that the corporation should “make the good popular, and the popular good” (Leith, 2016). This mantra, that the ‘good’ will not become ‘popular’ without input and effort from the BBC can be seen to conform to the authoritarian perspectives of the broadcaster that many seem to hold, and directly contradicts the corporate climates of business’s such as Netflix, who operate by “letting the creatives run the show without so much interference”, (Boboltz and Williams, 2016). Authoritarianism in the BBC is theoretically regulated by the BBC Trust, a body intended to govern and oversee the corporation. The trust describes itself as “the guardian of licence fee revenue and of the public interest in the BBC” (BBC.co.uk, n.d.), however is often heavily criticized for failing its key task, and has been branded by some a failure. As a result of this, fears of the BBC acting with its own interests as a sole focus remain to the present day, and are key to arguments of the Licence fee’s scrappage, put forward by the likes of James Murdoch, who argues that a culture of authoritarianism still remains rife in UK PSB. (Murdoch, 2009). Even for those who argue in favour of the BBC, it is often conceded that greater regulation of the broadcaster’s priorities is essential. (Foster and Meek, 2008).

It is undeniable that the British Broadcasting Corporation faces a difficult ordeal in continuing to justify its current form of existence in the modern digital age. Competitors such as Netflix are taking advantage of new technologies, and have already achieved high market share with the audiences that are often seen to define which entertainment forms achieve success. Despite this, the BBC continues to offer a benchmark of quality that other channels can aim to compete with, resulting in a higher standard of television content for the British public who fund it. Furthermore, continuing to allow an independent broadcaster to operate in the market can be seen to provide a much-needed source of trust in a market increasingly affected by private interests. Those calling for the BBC’s abolishment are yet to collectively agree on a convincing alternative that will include not only what is to become of the BBC, but also how to ensure that its ‘public good’ characteristics are maintained. Without a strong, collated argument of an alternative, critics of the corporation and the license fee can almost be dismissed due to their own financial interests. Whilst the government has stated its intention to “modernise the licence fee” (Sweney, 2015), the political climate and public mind-sets of the 21st century pose a risk as to how this is done. Only suggestions of the corporation becoming a ‘public service provider’ seem to satisfy both viewpoints. The models of online content such as iPlayer and the new form of BBC Three should be expanded to include other BBC products and services, with these expansions becoming official parts of its public service remit; an accessible internet hub. These services should in turn aim to convince the public of the Corporation’s benefits, with the shows that already draw in large audiences being distributed in more modern ways. It is the public who will ultimately decide the fate of this British institution, and so the BBC needs to be better at defining their strengths and communicating why they remain relevant in the new digital age.