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Friday, January 19, 2007

Beeb Licence – The Top Line

I always get frustrated when I hear the beeb expressing its licence fee in the mandatory cost to the individual householder, so here is a different view.


A quick explanation about the model:
  • Number of households is taken from the Annual report and is the combined total of fee paying colour licence payers and over-75’s who are paid for directly by Treasury and indirectly by the colour licence payers. The split in 2006/7 was 20.8m colour households and 3.9m over-75s. In other words there is a hidden 20% premium on the licence fee for "actual" payers.
  • There is another 0.3m households purchasing Black&White and Concessionary licences but frankly these are immaterial and probably are loss making after the cost of collection is taken into account.
  • There is also additional revenue from the Quarterly Payment Premium which is a further regressive tax on the poor. The ideologists at the British Bolshevik Corporation should be proud of their actions.
  • Approx. PSB revenues for 2005/6 and 2006/7 are consistently overstated by 6%. This is due to timing of payments of the licence fee. For instance, I could have paid in Feb 2006 £126.50 for the 12 months licence fee and effectively the model overstates by 10 months the £5 rise to overall revenues. If the figures were adjusted for this timing difference the total revenues in 2011/12 would be £3.7bn and cumulative increases would be £1.9bn
  • Actual revenues for the beeb are incredibly sensitive to amount of new households built in the UK. With a steady increase of 300k households per annum the 2011/2 works out to a 19.7% increase or 4.9% average increase per annum. With a zero increase in households then the fee averages out at an increase of 2.5% per annum.
  • Figures in 2012/13 are outside the five year review and are in fact a maximum so should not be considered definitive in this settlement.
  • All these calculations ignore the effect of rises in the negotiated settlement for the BBC World Service and the Commercial arm which in 2005/6 generated revenues of £260m and £620m respectively.
All told, I think the executives at beeb have negotiated themselves an extremely cosy guaranteed future, especially given they can blame the meanness of future staff pay settlements on the nasty government. However, if I was an executive I would be more concerned about this graph:

bbc-audience share

It will be extremely hard to justify any compulsory licence fee at all in 2012/3 if people continue to vote against beeb content as they have done en masse in the last 5 years. This is the beeb nightmare scenario and why they continually try to be trendy and attract the “youths” and ignore their core market.

Additionally, I think the beeb have fallen into a far more dangerous trap in the digital switchover. Effectively, £600m of the final cumulative increase in revenues is earmarked for assisting the elderly and disabled people make the switch to digital and whilst this admirable in its aims it is setting a dangerous trap in two areas: allowing the government to ring fence part of the revenue and committing to “helping” people do something they rather wouldn’t do.

The transition is a potential PR nightmare and will bring support issues that are beyond anyone. It is not just a case of giving away a fee set top box: it is installing it, user training, support and replacement once the box is defective. Even the charm and tact of Mussolini would struggle to run this transition on time. The fact is that for the beeb viewing age is directly proportional to viewing hours and the beeb are running the risk of upsetting their core audience in the digital switchover.

Even scarily, the BBC Trust highlighted zero knowledge of their products on offer, when they issued this statement yesterday:
The important principle of universal access to all the BBC’s services means it is right that the BBC should play a leading role in digital switchover and it is why the Governors agreed in principle that the licence fee could be used to fund it.
Can you imagine how expensive it is going to be once the government asks them to fund the transition to universal Digital Radio? How about universal access to the popular beeb Websites? What about people who have been in the “naughty pipe” because of their "non-standard" use of the p2p BBC video-on-demand service? Can the beeb please set them free of the ISP shackles?

The Executives should have stood firm and said the government should pay for the digital switchover out of future auction revenue for the farmed spectrum or even asked the purchasers of the spectrum to pay for clearance of airwaves as in the States. (ed: the beeb would never admit publicly that the USA have done anything correct)

In the near future and given the precedent, I cannot see any political party being able to resist ring-fencing some of the beeb income for “social communications” policy, after all it is one of few communications institutions left in the public sector.

It is hardly surprising that Chief Licence Negotiator, Michael Grade, has jumped ship to ITV. The Murdoch empire will be quivering with fear ;-)