The BBC faces a cash crisis just as live viewing of its terrestrial channels is falling off a cliff

The villain of the piece is, of course, George Osborne – and it should be counted as part of his legacy to the country.

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This has been a pleasurable autumn for BBC channel controllers. They have achieved the combination they crave of critical acclaim and big audiences after the thriller Bodyguard broke ratings records for a drama, with 17 million viewers on BBC One, supported by the success of Killing Eve and The Little Drummer Girl. There has been the customary mix of newspaper headlines and blockbuster ratings for Strictly Come Dancing. Even radio has been given a digital-age makeover, with the corporation’s tanks rolling into the burgeoning podcast market as BBC Sounds.

But in the management corridors of Broadcasting House, there is considerable unease about the position the BBC finds itself in. A few good weeks can’t disguise the long-term shift in audiences away from the traditional broadcasters. Live viewing of the terrestrial channels is falling off a cliff, and younger viewers spend only three hours a week with BBC television compared with more than five hours at the start of the decade. The BBC’s director-general Tony Hall noted recently, that “for young British consumers, Netflix is now roughly the same size as Channel 4 and close to the size of BBC television and iPlayer together”. 

The BBC must bear some responsibility for this outcome. It was recently criticised by the regulator Ofcom for “not currently doing enough, quickly enough” for younger audiences; and its decision five years ago to single out BBC Three for closure as a television network looks foolhardy. This was compounded by letting further sports rights slip away, when events such as Formula 1 attract a prized younger demographic.

The average age of BBC One and BBC Two viewers has moved decisively over 60. Older people have always watched more television, but the on-demand revolution has made the gap between the generations even greater; and new entrants into the market are producing content that young audiences enjoy more. It is, therefore, a particularly bad time for the BBC to be facing a cash crisis in which the young will be taxed for something they use less and less while the elderly, including the well-off, get a free ride.

The BBC is grappling with the consequences of the licence fee settlement agreed with George Osborne at the start of the majority Conservative government in 2015. It gave the BBC some benefits: increases in line with inflation, and an expansion of the licence to cover online-only consumers. But it also gave it the crushing responsibility of funding free TV licences for the over-75s, which adds up to £745m a year. The corporation’s line on this has gone through what might kindly be called an evolution. Hall said three years ago that “the government’s decision has been more than matched by the deal coming back to the BBC”, and predicted that the BBC would find itself “slightly ahead” in cash terms by 2020-21. Yet James Purnell, the strategy supremo, told Today listeners at the end of last month that “the BBC has been cut by £800m”, which suggests a swing of close to a billion pounds in its financial projections.

The villain of the piece is, of course, Osborne. He had tried this gambit before in 2010 and had been beaten back by the intransigence of the former director-general Mark Thompson and resistance from the Liberal Democrats. But Osborne’s eagerness to get rid of the government’s responsibility for elderly people’s licence fees should have been a warning to the BBC about the perils of taking it on. Thompson said in December 2015: “It’s welfare… It’s totally inappropriate to use the BBC to support social transfer in this country.”

This autumn has shown just how much the BBC needs high-quality and expensive drama; and some of its services are starting to look and sound threadbare. Hall told the Royal Television Society Conference in September that “we need to find more money”, and he is right. But last week’s report from Frontier Economics, commissioned by the corporation, shows what that requires from the elderly. The BBC gets £345m back if it offers the over-75s a licence at half-price rather than free; and it recovers £536m if it limits the concession to those on pension credit. But does anyone think it should be the BBC that is means-testing the elderly?

Within the BBC there is a recognition of how tough the public relations and political battle is going to be. The case is starting to be floated publicly, but executives know they will struggle to shake off all their commitments and the best achievable outcome may be to increase the age qualification or to offer discounts.

Meanwhile, they also need to crack on with their reinvention (the word of the moment) of the corporation. What this autumn has shown more than ever is that a small number of major pieces can define the BBC’s reputation – and the sheer size of Bodyguard’s audience means that it also brings in huge numbers of younger viewers and people from ethnic minorities. This translates into a question about the value of much of the rest of the schedules, where the entertainment offering – Strictly aside – is poor and there are too many limp reality programmes. Insiders worry that the organisation has been too slow to switch from the world of multiple linear channels into a structure that still brings the nation together for the big dramas and news and sport, but offers the rest of the output on demand without the need for channel-filler 24 hours a day.

Whatever the outcome, the sharpness of the BBC’s financial dilemma should be counted as part of Osborne’s legacy to the country. It will take a miracle for the BBC to escape from this without a reputational hammering or old-fashioned cuts – and the likelihood is that it will suffer both. 

Roger Mosey is the master of Selwyn College, Cambridge, and a former head of BBC Television news

Roger Mosey is the Master of Selwyn College, Cambridge. He was formerly editorial director and the director of London 2012 at the BBC.

This article first appeared in the 09 November 2018 issue of the New Statesman, Revenge of the nation state