BBC must deal with income cut

Contained contestable funding is not a phrase to get your heart racing, even for devotees of the glossary in the Digital Britain report… Unless you’re a member of the BBC’s top management. This indigestible phrase is causing a degree of bellyache at the Beeb because it refers to “top slicing”, which in turn means taking away some small percentage of the BBC’s licence fee – 3.5% is the proposed cap – and using it to fund possible public service commitments from alternative providers.

This is the key media policy decision for government shaping the next decade, and is far more important than universal access to broadband or DAB radio.

There are two reasons why the BBC licence fee is back in play. First, the strategic imperative to ensure the continued delivery of high quality local news content from a breadth of providers (what’s known as plurality to the policy wonks). This is one of the cornerstones of an informed electorate and a flourishing democracy. The alternative is one state-funded single source news provider, which doesn’t sound like a very good idea.

In the analogue world, by and large, the market provided a workable solution. In broadcast radio and TV, the government gifted spectrum for free in return for commitments on news provision at a regional or local level and a certain amount of public service programming, such as children’s TV and religious broadcasting. Newspapers required no gifted spectrum, but a plethora of local and national titles were all profitable enough to survive and the government passed media ownership laws so that a Northcliffe, Rothermere or Murdoch couldn’t command too great a share of our media consumption.

But now the market is not working to provide such plurality of provision. The combination of a structural shift of ad revenues to online and a cyclical downturn in the ad market is making swathes of local media unprofitable. Only last week, Trinity Mirror axed more jobs at its Midlands titles and the Local Radio Company closed its head office in High Wycombe. So there’s a growing recognition that there needs to be a new intervention, one way or another, if we value the plurality of provision and diversity of output at a local level that the market can no longer afford.

In a world where the government is bailing out the banks, nationalising the east coast railway line and funding a war in Afghanistan, it’s pretty obvious there’s no more water in the well for media plurality above and beyond the £3.5bn a year that the BBC currently scoops up from the licence fee. So the debate has begun about what might be appropriate to fund and how might it be funded.

That’s driven the second reason for why top slicing is now top of the agenda. Tactically, everyone has got their bids ready. Andy Duncan at Channel 4 was first out of the blocks with a proposal to prop up C4’s £100m funding gap; ITV sees an appropriate opportunity for the same amount of money to support regional news and everyone else is off and running too.

Through all of this, the BBC has played a number of hands to try and win the game. First, it tried to deflect attention with the offer of a series of “partnerships” with the commercial sector – sharing technology and expertise in exchange for retention of all the licence fee. This seems like a grand idea but is either greeted with scepticism from hardened commercial folk wondering how many initiatives in the market will seriously happen once the rhetoric is peeled away or greeted enthusiastically by those who believe partnerships are an appropriate addition to top slicing, not an alternative. It is our money after all.

So, now, the BBC defends its position by advocating that the principle behind 100% of the licence fee going direct to the corporation is the “unbreakable contract” it has with licence fee payers. Maybe so. Maybe not. Licence fee payers don’t want a choice between the BBC and a local paper or a local radio station. They want both. If that’s the contract, then the BBC could keep 100% of a lower settlement (let’s say 3.5% lower to be mischievous) and consumers could enjoy the plurality and diversity they want, while the BBC keeps its funding model intact.

In a world where the government is bailing out the banks, nationalising the east coast railway line and funding a war in Afghanistan, it’s pretty obvious there’s no more water in the well for media plurality above and beyond the £3.5bn a year the BBC currently scoops up from the licence fee. So the debate has begun about what might be appropriate to fund and how might it be funded

It amounts to much the same thing, but might be easier for the BBC to accede.

But can the BBC continue to deliver its own great programming on TV, on radio, online with 3.5% less money – a mere £130m less each year from its £3.5bn guaranteed income? Well, it could start by not buying commercial travel guides like Lonely Planet; it could stop paying to import US-made TV drama and film, which would otherwise be bought by the commercial market; it could not bid for exclusive sports and music rights – transferring licence fee income direct to F1’s Bernie Ecclestone or promoter Harvey Goldsmith; and it could trim the salaries of its talent. It could also realise the property value from its central London real estate before it tackles a management overhead bill on salaries, expenses and pensions that has got the third estate suitably exercised.

Until the BBC shows the leadership and foresight to propose how to cut its coat according to the new media cloth it can afford, politicians and commercial operators will continue to broadcast how it could be done.

Andrew Harrison is chief executive of the RadioCentre