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Industry Report: Market Trends

The BBC’s licence fee set to be frozen at £159 for two years and to be phased out by 2027

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A tweet published by Culture Secretary Nadine Dorries has sparked debate and prompted strong reactions, making the pubcaster’s future more uncertain and forcing it to seek alternative funding models

The BBC’s licence fee set to be frozen at £159 for two years and to be phased out by 2027
UK Culture Secretary Nadine Dorries

UK Culture Secretary Nadine Dorries recently posted a tweet which has sparked raging debates across the country’s audiovisual industry and beyond. The minister tweeted: “This licence fee announcement will be the last. The days of the elderly being threatened with prison sentences and bailiffs knocking on doors are over. Time now to discuss and debate new ways of funding, supporting and selling great British content.”

The tweet preceded the government’s plan to freeze the BBC’s licence fee at £159 until 2024. It will then rise slightly each year through to 2027, when it is set to be phased out. In normal circumstances, the fee would be adjusted owing to rising inflation, but this will not be the case for the next two years. The licence fee makes up the majority of the pubcaster’s income, thus this move is set to shrink its production budgets and resources to a new level, in an increasingly competitive field where it is struggling to fight US giants such as Amazon, Disney+ and Netflix. Speaking in the House of Commons on Monday, Dorries said the government could “not justify extra pressure on the wallets of hardworking households” and that the pubcaster “must support people at a time when their finances are strained, make savings and efficiencies, and use the billions in public funding it receives to deliver for viewers, listeners and users. […] We need a BBC that is ready to meet the challenges of modern broadcasting. We have five or six years, and that is plenty of time to decide what the future funding model will look like. In 2027-2028, when it starts, many of us [MPs] may not even be here. We're talking six years away,” she added. Before her speech, the Speaker of the House of Commons, Linsday Hoyle, reprimanded her for tweeting about the announcement without first addressing Parliament. Dorries apologised and replied: “I cannot see a world in 2028 where individual households are paying an outdated fee established in 1922 to fund an organisation.”

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Predictably, the plan sparked strong reactions, and both the general public and the audiovisual industry are now concerned about the possible alternative funding models that the BBC should follow.

In a joint statement, director general Tim Davie and chairman Richard Sharp said the settlement would mean the BBC “will now have to absorb inflation” and defined the move as “disappointing not just for licence-fee payers, but also for the cultural industries that rely on the BBC for the important work they do across the UK”. They also noted that the corporation's income from UK services is already 30% lower in real terms than it was ten years ago.

If the cost of the licence fee were not frozen and rose in line with the current 5.1% inflation rate, it would stand at £167 from April 2022. According to governmental figures, the BBC’s total income in 2019-20 was £4.94 billion, 71% of which came from licence-fee revenues, whilst the remaining 29%, or £1.42 billion, came from commercial and other activities (such as grants, royalties and rental income). In 2020, people over 75 began paying for their TV licences, which they previously received for free.

The Department for Culture, Media and Sport (DCMS) reported that the pubcaster is expected to receive about £3.7 billion in licence-fee funding in 2022 and £23 billion over the duration of the settlement period. It added that the BBC also receives over £90 million per year from the government to support the BBC World Service. Finally, Dorries announced that Welsh-language broadcaster S4C would also be allocated an extra £7.5 million a year to develop its digital offering and expand its reach among Welsh speakers, including younger audiences.

Given this new scenario, it will be crucial to see how the BBC will transform its content-production strategies and whether this political decision will have any impact on the continent’s other public players. Currently, most EU countries have either abolished their licence fees or never implemented any. Greece charges the lowest yearly fees (€36), whilst Denmark (at circa 2000 Danish crowns, or approximately €260) and Austria (up to €335.14) demand the highest ones. Watch this space for further updates.

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