Privatise the BBC

‘Will the BBC suffer the same fate as British Leyland and British Shipbuilders?’

Economy Points East & West
A valueless British Leyland share certificate: Will the BBC go the same way? (credit: W Leiter)

A depressing feature of our national life in recent decades is that organisations with the prefix “British” tend to flop or even disappear. Examples include British Shipbuilders and British Leyland, and in 2011 even British Airways merged with Iberia to form the International Airlines Group. Could that also be the fate of the British Broadcasting Corporation later in the 21st century? 

For many people the BBC is not only the vehicle of their favourite television programmes, but also the epitome of national culture. Like Labour’s deputy leader Harriet Harman, speaking to the Oxford Media Convention in 2012, they believe that “the sheer scale” of the BBC makes it “the world’s biggest broadcasting organisation”. According to the BBC’s head of public affairs, Andrew Scadding, an October 2013 Populus survey in 14 countries rated BBC “highest on quality” out of 66 major TV channels. The BBC may not be part of our unwritten constitution, but surely it will be a fixture of national life for decades to come. None of the major political parties, including UKIP, seems keen to attack the main elements of the BBC’s legislative framework. 

However, the BBC is already a challenged and anxious organisation beset by major strategic uncertainties. In a Standpoint ebook, published this month, I argue that, without a drastic redefinition of its role, the challenges and uncertainties will increase over time. 

Most fundamentally, the advance of technology and the emergence of a worldwide market in media products will render obsolete the BBC’s current institutional structure. The licence fee should be abolished and the BBC privatised, to enable it to compete head-on with foreign competition,  and to help Britain be prosperous and successful in the 21st century. 

Harriet Harman is fantasising if she thinks the BBC is still “the world’s biggest broadcasting organisation”. In the UK itself the BBC’s revenues are now much smaller than BskyB’s. In the year to March 31 they amounted to £5.1 billion, with more than 70 per cent coming from the licence fee, whereas in the year to June 30 BskyB’s were £7.6 billion, roughly 50 per cent higher. Globally, the BBC is a minnow compared with Time Warner, CBS and Murdoch’s 21st Century Fox. 

Moreover, the composition of the BBC’s receipts and hence its “business model” (it is, after all, a business) are all wrong for its long-run competitiveness. The income of today’s global media giants is dominated by rapidly-growing money from subscriptions, and smaller and less dynamic advertising receipts. Both types of income arise, of course, from customer demand in a market setting. By contrast, the BBC does not have subscription revenues and it cannot carry advertising in the UK. The licence fee money is crucial to the financing of its operations and is justified by its obligation to provide “public service broadcasting”. Similar arrangements, with state funding of broadcasting, are found in other countries, but data from Ofcom show that public money for state broadcasters has not grown at all in the last five years. 

One drawback with state funding and a consequent obligation to offer public service broadcasting is obvious. The funding is from the government of one country and public service broadcasting is to benefit the audience in that one country. But a basic long-term trend in broadcasting is towards globalisation, as ever-advancing technology enables media companies to transmit material all over the globe (and indeed throughout the internet). 

Almost by definition, a broadcasting company focused on the public service needs of one country cannot be a big player with a major market share in all the world’s nations. (I do not have space here to explain why the advent of iPhones and Android devices has undermined the tax base for the licence fee, although this also is a heavy nail in the licence fee’s coffin.) 

The long-run opportunity outside the UK must be far greater than that in the UK. The BBC’s heyday was in the late 1940s and early 1950s when the UK accounted for 6 per cent of the world’s output and 2 per cent of its population, and only radio programmes could be meaningfully transmitted across borders. A hundred years from now the UK’s population will be only 1 per cent of that in all those nations (the USA, India, Nigeria and so on) in which English is the first language or the dominant language of business and high culture, and the British share of world output may not be much more. A privatised BBC, free to produce top-quality content for the world market, might then still be a national champion. A state-supported BBC restricted to the UK market will wither away, and suffer the same fate as British Shipbuilders and British Leyland.