Greg Dyke was an outspoken, convention-breaking television executive. But when he ran the BBC, he stuck to the house script on one defining issue: the model of public funding based on an annual licence fee. 

“There really isn’t a viable alternative to the licence fee,” he declared in 2002, defending the levy that has bankrolled Britain’s public service broadcaster since 1927. “Maybe [it] isn’t so bad after all.”

It has taken almost 20 years, but the former director-general has finally changed his tune. “The thing with the licence fee is no one would come up with it as an idea today, would they?” he told the Financial Times. “The idea that you have a compulsory tax on the TV set sitting in the corner is dumb.” 

Mr Dyke is not the only one who increasingly sees the licence as “an anachronism”. The BBC’s old guard are beginning to call time on the corporation’s oldest source of income, which evolved from a 10 shilling levy on wireless radios into a compulsory charge on devices of £154.50 today.

Activists impersonating Dominic Cummings and Boris Johnson take part in a 'whack a mole' photo call outside BBC New Broadcasting House in London, during the launch of the 'It's Our BBC' campaign to defend the broadcaster. PA Photo. Picture date: Monday March 9, 2020. See PA story MEDIA BBC. Photo credit should read: Jonathan Brady/PA Wire
'It's Our BBC' protest to defend the broadcaster, at New Broadcasting House in London © Jonathan Brady/PA

The former leaders of the BBC who are now open to a new, more flexible funding system include Mark Thompson, New York Times chief executive and director-general from 2004-2012; Gavyn Davies, the former Goldman Sachs economist who in 1999 led an independent review of BBC funding before being appointed chair; and Rona Fairhead, chairwoman of the BBC Trust from 2014-2017 and former chief executive of the FT group. 

It is the first time the four have spoken publicly about moving beyond the licence fee, which generates £3.7bn a year, three-quarters of the BBC budget. “The BBC is a heck of an asset for us and the world,” says Mr Davies. “We really shouldn’t give that up. Whether the licence fee is the best and only way to provide the resources to achieve that, I don’t know.”

Their intervention reflects a sense that the BBC needs radical change to emerge from an era where it is acutely vulnerable. The advantages of what John Reith, the BBC’s founder, called the “ruthless force of public service broadcasting monopoly” are long gone. Politics has taken on a more populist edge and Netflix and other streaming services are grabbing the attention of many viewers, especially the young. Generational change is putting the BBC’s very future in doubt.

On the BBC’s future Greg Dyke

Greg Dyke, former director general of the British Broadcasting Corporation, speaks at the Confederation of British Industry annual conference in London, U.K., on Monday, Nov. 26, 2007. The annual CBI conference, organised by Britain's main employers' body runs until November 27. Photographer: Graham Barclay/Bloomberg News
© Graham Barclay/Bloomberg

The director-general of the BBC from 2000-04 says ‘the idea that you have a compulsory tax on the TV set sitting in the corner is dumb’. Mr Dyke thinks the successor to Tony Hall as DG should be an external candidate who is not ‘bound by the politics of the BBC’.

The BBC remains Britain’s pre-eminent media voice, and perhaps the world’s most influential public broadcaster. But its challenges are legion, and its morale flagging over disputes such as gender discrimination on pay. From mainland Europe to North America, broadcasters are watching its fate as a test of whether public service values can withstand the disruption of a digital age, and the trust-shattering blows of partisan politics. 

With Boris Johnson’s government attacking what he has called the “Brexit Bashing Corporation”, negotiations to reset the level of the licence fee in 2022, and renew the BBC’s founding charter beyond 2027, are approached within the corporation with dread. Some fear the licence fee could be abolished when its charter is renewed.

Most worrying still may be the bigger structural forces and global competition that are weakening the BBC’s hand. Like many national broadcasters, the corporation is seeing the likes of Netflix snatch its talent and YouTube and social media mesmerise audiences. 

“The BBC is the standard bearer and there is a lot at stake,” says Noel Curran, director-general of the European Broadcasting Union. “The real fear is that any move on the BBC, or even publicity around that, will be used by governments around Europe that are not well inclined to public service media. It will be the excuse to attack.” 

Amid all the uncertainty, the BBC is also looking for new leadership — a successor to Tony Hall as director-general will be chosen in the coming months and take over this summer. 

On the BBC’s future Gavyn Davies

Byline pictures of Gavyn Davies, of Fulcrum Asset Management in London.
© Shaun Curry/FT

Mr Davies, who was chairman of the BBC from 2001-04, believes the broadcaster ‘is a heck of an asset for us and the world’ which shouldn’t be given up. But he wonders ‘whether the licence fee is the best and only way to provide the resources to achieve that’.

The first challenge for the next director-general will be cuts. The BBC’s budget is heaving under additional responsibilities accepted in licence fee negotiations over the past decade — or imposed, in the words of one former director-general, “in the dead of the night, a pistol to its head”. This summer it will even start acting as a social security division: it has to decide whether to pay for — or withdraw — free licences the government used to grant to those aged over 75. 

How determined Mr Johnson is to shake up the BBC is unclear. He has questioned the licence fee, and his government is expected to decriminalise non-payment — potentially costing the BBC hundreds of millions of pounds. Yet when the Sunday Times reported the prime minister wanted to move the BBC to a Netflix-style subscription model, Mr Johnson himself called the paper to play down the idea, according to his aides. 

Even in the Conservative party, there are strong defenders of the existing model. For two Conservative peers who served as BBC chairmen, the political dangers are too great to risk meddling with the licence fee system, however outdated it may seem. 

“There is such an aggressive assault on anything that appears to be a check and balance on executive authority,” says Chris Patten, former chair of the Conservative party and head of the BBC Trust from 2011-14. “It’s the BBC, the judiciary, it’s civil society, it’s anybody that doesn’t agree with them . . . I cannot see an alternative [to the licence fee] that supports and maintains the position of the BBC as a national asset.” 

Boris Johnson, U.K. prime minister, gestures as he speaks during a news conference inside number 10 Downing Street in London, U.K., on Monday, March 9, 2020. Johnson's spokesman said both the government and Bank of England are ready to take action to bolster the economy if needed. Photographer: Jason Alden/Bloomberg
UK prime minister Boris Johnson’s government has attacked what he has called the 'Brexit Bashing Corporation' © Jason Alden/Bloomberg

Michael Grade, BBC chairman from 2004-06, put it more succinctly: “I would die in a ditch for the licence fee.”

The BBC has suffered at the hands of politicians before. It has been leaned on through virtually every election and war Britain has fought in the modern age. From Margaret Thatcher to Tony Blair, once the government’s hue changed, by and large, so too did the BBC’s leadership.

Financial pressures are not new either. In the late 1970s, the cash-strapped Treasury explored giving the BBC part of its licence fee on the 15th of every month or “small fractions weekly”. Mutual suspicion was so great the BBC director-general would sweep his room for bugging devices. 

The corporation has even weathered a Tory government bent on scrapping the licence fee. During the late 1980s, the Thatcher administration pushed subscription funding — today known as “the Netflix model” — and explored it through a formal review. Douglas Hurd, then home secretary, said: “This is a direction in which the BBC should move.” The licence fee survived.

Chart showing per capita spending on public service media in selected European countries. The EU average is 47 Euros, but Switzerland is much higher (over 150 Euros) while Poland's is as low as 15

Today’s threat is the combination of these pressures and a new factor: losing touch with a digitally minded, under-30 audience. Competition from global platforms — from Netflix and Disney to Facebook and YouTube — is leaving once mighty national broadcasters outgunned, and overlooked. 

Oxford university’s Reuters Institute for the Study of Journalism recently noted that the BBC accounted for 63 per cent of all UK radio listening, and 31 per cent of scheduled television viewing. But the BBC claimed just 1.5 per cent of time spent with digital media. 

It represents a potentially devastating trend: the £154-a-year licence fee is compulsory because it assumes the universal UK service is used by all owners of televisions and other media devices. 

“The critical goal must be to recapture the audiences which the BBC has lost in recent years,” says Mr Thompson, who ran the BBC for eight years. “If that means prioritising streaming and mobile services and making painful choices about existing linear TV and radio, so be it. The BBC has placed bold bets on the future before. In the interests of the audiences it serves, it needs to take the radical path again.”

On the BBC’s future Rona Fairhead

New BBC Trust Chairman Rona Fairhead Arrives For First Day At Work...LONDON, ENGLAND - OCTOBER 09: The new BBC Trust Chairman Rona Fairhead poses for a portrait outside the BBC's Broadcasting House as she arrives for her first day in the role on October 9, 2014 in London, England. Rona Fairhead is the first woman to chair the trust. (Photo by Dan Kitwood/Getty Images)
© Dan Kitwood/Getty

Baroness Fairhead, chair of the BBC Trust from 2014-17, says a household tax that funds public broadcasting along the lines of the German Rundfunkbeitrag could work. ‘If you do it by household you have many more options to make it progressive,’ she says. 

What could this entail? One of the most talked about but least deliverable reforms is a voluntary, subscription based system. The main practical problem is restricting access to services such as radio or free-to-air terrestrial television. Even then, Enders Analysis estimated a “huge” cut to BBC revenue from a subscription switch, with the existing budget hit by more than a third in one scenario. 

More feasible is an experiment with subscription as an “add on” to the basic licence fee, a hybrid approach of interest to Mr Davies and some other former BBC leaders. 

The most obvious candidate for partial restrictions on access is the iPlayer. But it would require an internal BBC revolution to boost the streaming service and justify a premium subscription. Under such a scenario, the iPlayer would flip to become a commissioning hub, replete with power and money and premiers of shows. Channels such as BBC One, meanwhile, would act more like the curated catch-up service. 

This Humpback whale is feeding off Cape Town in November, Cape Towns summer. These whales are well known to feed on krill in the southern ocean, but off Cape Towns west coast, these whales feed on other species such as Euphoarsiids (E. Lucens), Hyperiid amphipods (Themisto gaudichaudii) and Mantis shrimps.
A humpback whale featured in 'Our Planet', a documentary by Netflix which is competing with the BBC for audience numbers © Our Planet/Netflix

Within the BBC top ranks the fear is this would harm the mission to provide a universal service. A more favoured reform is moving to “the German model”, a household tax that yields around €8bn in funding for its public broadcasters, almost double the public funding for the BBC. 

Baroness Fairhead sees it as a possible way to make funding less regressive. Since 2013, the Rundfunkbeitrag has been levied on every household, with some means-based exemptions, and businesses based on size. “If you do it by household you have many more options to make it progressive,” the former chair of the BBC Trust says. 

Even under a household levy system, the BBC would never expect the government to grant German-style largesse. On a per capita basis, the BBC’s £3.7bn public support is only the eighth highest in Europe. Far from increasing the BBC’s firepower to face media giants, the trends are pointing towards tighter budgets, bigger challenges and some tough choices. 

On the BBC’s future Chris Patten

BRITAIN-MEDIA-BBC-CHILD-SEX...BBC Trust Chairman Chris Patten attends a press conference at BBC Broadcasting House in London on December 19, 2012 on the release of the Pollard Report into the BBC's handling of the child-sex abuse claims against late presenter Jimmy Savile. The report strongly criticised the BBC's handling of allegations of child sex abuse against Savile but cleared the corporation of a cover-up. The report sparked the resignation of the BBC's deputy director of news, Stephen Mitchell, and led to the editor and deputy editor of the current affairs programme Newsnight at the centre of the scandal being replaced. AFP PHOTO / POOL / CHRIS RADBURN (Photo credit should read Chris Radburn/AFP/Getty Images)
© Chris Radburn/AFP

Lord Patten, chair of the BBC Trust from 2011-14, defends the broadcaster from the ‘aggressive assaults’ and backs the current funding model, saying: ‘I cannot see an alternative [to the licence fee] that supports and maintains the position of the BBC as a national asset’. 

Lord Patten and Lord Grade, both champions of the licence fee and a universal service, want some hard-headed decisions to cut back on activities. They could include: merging BBC2 and BBC4, or losing other TV channels; paring back radio stations; or amalgamating the BBC’s two rolling news channels, BBC News and BBC World News. Lord Grade says the measures “should be drastic” to refocus the BBC on its core mission. “It has got to reduce its ambitions,” he says. 

Decisive cutbacks are not the BBC’s forte. Suggestions are often met by a public outcry, however small the change. Plans to phase out the red-button service — a sport and news text-led function on televisions — were shelved in January, a day before implementation. The savings were a modest £16m.

“One of the problems of the last few years is ducking big decisions,” says a former BBC executive. “It takes strategic courage to take things away from the super served. But you can’t provide enough for young people without taking something away from older audiences.” 

MEDIA BBC 7...Mark Thompson, the new Director General of the BBC speaks to BBC staff at Television Centre, London, Tuesday June 22, 2004 on his first day in the job. Mark Thompson replaces Greg Dyke who resigned in the wake of the Hutton inquiry which criticised the BBC's handling of the Gilligan affair. Watch for PA story MEDIA BBC. PA Photo Jeff Overs/BBC Copyright
'The critical goal must be to recapture the audiences which the BBC has lost in recent years,' said Mark Thompson, former BBC director-general © Jeff Overs/BBC/PA

The deadline for applications to succeed Lord Hall as director-general closed this week. The role’s prestige does make up for its obvious downsides, not least relentless public exposure. But for some outsiders, the benefits could never be enough. 

“It’s a bloody thankless task,” says one executive approached by headhunters. “You’re going to be hated. You’re going to have to restructure, to cut costs and probably preside over a reduced but reimagined BBC.” 

One factor worrying candidates is timing. David Clementi, the BBC chair overseeing the process, is expected to depart early next year. That potentially leaves his chosen director-general — and their plans to change the BBC — beholden to his successor, who would be approved by Mr Johnson and who may have quite different priorities. 

“The problem for anybody who takes that job: who am I working for? Well, the chairman,” says the executive who decided not to apply. “He’s going. So I’m being recruited and I don’t know who my chairman is? That’s nuts.” A second television executive who considered applying adds: “They would need to be willing to take a big risk.”

Several potential contenders told the FT that, under the circumstances, an interim director-general may make sense. But Mr Clementi is unlikely to be convinced. One senior BBC figure describes the idea as “crackers”.

There are two leading internal candidates. Charlotte Moore, director of content, has formidable creative pedigree but limited political experience. Tim Davie, head of BBC Studios, the corporation’s commercial arm and production hub, has business credentials and management experience. But his business background makes him a polarising figure for some in the BBC.

Both may suffer from being insiders. Lord Grade leans towards an outsider but acknowledges that candidates would need to be “stark raving mad” to take on this impossible job. 

That fact may have hit applications. Many potential contenders have ruled themselves out: Carolyn McCall, chief executive of ITV; David Abraham, ex-chief executive of Channel 4; Carolyn Fairbairn, CBI director-general; and James Harding, a former BBC executive who co-founded Tortoise media. Alex Mahon says she was committed to leading Channel 4, while Jay Hunt, a former BBC executive who is chief creative officer at Apple, declined to comment.

Mr Dyke says he benefited from being an external appointee who was not “bound by the politics of the BBC”. 

“The problem with people who have been there all their lives is they don’t think outside the box. They think the licence fee can go on forever,” he says. “And to be fair to them they’ve won over the years. They are great survivors.” 

Additional reporting by Laura Hughes

Get alerts on BBC when a new story is published

Copyright The Financial Times Limited 2020. All rights reserved.
Reuse this content (opens in new window)

Follow the topics in this article