Will Netflix spell the end of the licence fee?

Television, viewed as little more than a novelty for the well-heeled before the war, was clearly there to stay. While the 10-bob-a-year radio licence had been sufficient to fund the BBC since its launch in 1923, it was not going to be enough to fund the requirements of the new dawn of television

Seventy-four years on, the funding of the BBC is once more the subject of debate. In February this year, then culture secretary Nicky Morgan announced a public consultation on whether enforcement of the licence fee, now set at £157.50, should be decriminalised.

Baroness Morgan said at the launch of the review: “As we move into an increasingly digital age, with more and more channels to watch and platforms to choose from, the time has come to think carefully about how we make sure the TV licence fee remains relevant in this changing media landscape.

“Many people consider it wrong that you can be imprisoned for not paying for your TV licence and that its enforcement punishes the vulnerable.”

But while the review is strictly about the enforcement of the existing licence fee, it has inevitably reopened the debate about the fee itself, and whether the flat-rate charge on everybody with access to BBC television is still relevant in today's multi-media age.

The BBC says that by making the fee more difficult and expensive to enforce, decriminalisation would cost it £1 billion over five years, inevitably leading to cuts in programme budgets. The corporation also warns that the transition to and cost of running a new system will be “significantly higher” than at present, with an estimated initial cost of about £300m.

But that is small fry to the losses the corporation could potentially face if the BBC was forced to switch from the licence fee to a more commercial model. At present the licence fee is secure for the present charter, which runs until 2027, but the Government has indicated it is open to considering other funding models.

One suggestion that has frequently been mooted has been a subscription system of payment, similar to that operated by the online-streaming service Netflix. But to provide a similar level of income, it would need to find far more paying customers who would be willing to pay a much higher fee than subscribers to the American broadcaster.

At the moment, just under 26 million households in the UK hold a TV licence, generating £3.83 billion each year, about three-quarters of the corporation's total revenue. By contrast, Netflix has just under 10 million UK subscribers, who pay £72 a year, generating about £720 million per annum, well under a fifth of what the BBC receives.

But there have also been concerns that viewers have been turning away from the BBC. Nearly six million licences have been cancelled since 2012, and 2018/19 saw a 37,000 fall in the number licences issued in the UK. Younger viewers, in particular, are reported to be turning away from the BBC. The corporation's 2019 annual report showed that the biggest drop in audiences was for the 16-34 age group, with the number watching BBC television at least once a week falling from 60 per cent to 56 per cent. The same age group is also watching for a shorter period of time, down from an average of nearly three hours a week to just over two-and-a-half hours. On the other hand, for 55-and-over age group, 92 per cent watch the BBC.

A Savanta-Comres poll of 2.005 adults in February this year showed that 60 per cent believed the licence fee should be scrapped, with just 29 per cent believing it represents good value for money. However, an admittedly less scientific poll, of readers of the media trade magazine Press Gazette, found a small majority – 53 per cent to 47 per cent were in favour of retaining the licence fee, although those opposed to the fee were divided on how it should be replaced, with opinions split between a Netflix-style subscription model, commercial advertising, or a combination of both.

The BBC is reported to have submitted a counter-proposal as part of the consultation process, which would see the flat-rate licence fee replaced with a 'progressive' form of taxation, either through a broadband levy, or a council-tax style charge based on property values.

In its submission to the government consultation, the BBC said it strongly supported retaining the enforced television licence fee system in place for the medium-term.

But it said it was willing to consider following other European countries such as Germany and Finland and implement a funding model “linked directly to an existing common household bill” such as an internet connection, council tax, or electricity supply

“This would be a significant change for the UK and we are not, at this stage, advocating it,” the corporation said in its submission. “It does however raise an interesting question as to whether the current system could be made much simpler, more efficient and more automated. We are open to exploring this further.”

A BBC source is reported to have added: "The future is probably some sort of household charge, possibly based on utility bills or council tax bands.

"It should be progressive, too. The old flat charge doesn’t work when so many people are living longer and, in many cases, are considerably more affluent than the young.

"The only absolutely non-negotiable point is that the fee, or whatever you call it, has to be compulsory."

It seems hard, though, to envisage the Government agreeing to a proposal designed to specifically discriminate against the elderly, particularly when many over-75s are still smarting over the corporation's decision to end their free TV licences. Some 3.7 million pensioners were due to lose their entitlement to free TV licences on Monday this week – the actual anniversary of the licence fee – but the decision was put back by two months due to the coronavirus outbreak.

The campaign group Silver Voices has written to BBC director-general Tony Hall, warning of a 'non-cooperation campaign' to 'gum up the works' if the BBC goes ahead and implements this decision. The group says it will encourage over 60s to cancel direct debits, and only deal with the TV Licensing agency by post, and only pay by cheque.

Silver Voices director Dennis Reed says the aim of the protest will be to make the cost of administering and enforcing the licence fee “much more expensive than keeping the free licence for a relatively small group”.

On taking up his post, new Culture Secretary Oliver Dowden likened the BBC to the NHS "as an institution to be cherished" and one that "the UK would be crazy to throw away."

But he also said the corporation must be "ready to embrace proper reform to ensure its long-term sustainability".

It will be Mr Dowden who will decide whether evasion of the licence fee should be decriminalised, and possibly whether it should be replaced.

Whether the reform he talks about will be as far-reaching as the introduction of the TV licence in 1946 is something many commentators are waiting to find out.