BBC Annual Report and Accounts 2017-18: Equal pay at the BBC Contents

4BBC Annual Report 2017/18: Wider issues

Finances

80.Since 2010, when the licence fee was frozen, and the BBC was required to assume responsibility for funding the World Service, subsidising rural broadband and supporting S4C and local television, the funding for its services for UK audiences has fallen in real terms by 18%.134 Over this period, ITV’s income has grown by more than 30% and Sky’s by 90% in real terms.135 The Annual Report highlights a great number of savings accomplished by the BBC. £1.6 billion of savings were recorded over the last Charter period and an additional £244 million of annual savings have been delivered since then.136 However, to meet its target, the BBC must save another £800m by 2021/22.137

81.In order to meet its savings targets, the BBC has reduced overheads to 6% of total costs and states that “the proportion of the licence fee we spend on administration is at a record low, while the proportion we spend on content is at a record high”.138 It notes that “The BBC is now operating at, or near to, the frontier for efficiency”.139 However, Lord Hall told us that:

The easier savings have been made. I think it is getting harder for people to see the savings and we have to talk about changes in the nature of the services we offer.140

82.The BBC has accomplished a great number of savings over the current and previous Charter periods. However, in order to meet its target, it must save another £800m by 2021/22. The BBC accepts that the easier savings have been made and believes that the organisation is now operating at, or near to, the frontier of efficiency. We are concerned that, in delivering the next tranche of savings, the BBC may have to compromise on the quality of services provided to the licence fee payer.

Licence fees

83.The Secretary of State for Digital, Culture, Media and Sport sets the level of the TV licence fee, as well as any concessions and payment plans. The licence fee is now £150.50 and will rise with inflation each year. A licence is required for each household where television programmes are watched as they are broadcast, irrespective of the signal method (terrestrial, satellite, cable or online) or the receiving device (TV, computer, mobile phone, tablet or games console). Since 2016, a licence has also been required to watch BBC iPlayer. A licence is not required, however, if a television is only used to watch DVDs, play video games or to watch other channels’ catch-up services.

84.In 2017–18, the BBC received £655.3 million in licence fee income from households with someone aged 75 or over. TV licences have historically been free for such households and this funding has been provided by the Department for Work and Pensions. The obligation for the BBC to take over the funding for free TV licences for the over-75s has been phased in from April 2018, reducing licence fee income by around £200 million in 2018–19.141 The BBC has previously estimated that this will cost the organisation £725 million by 2020–21.142 However, Anne Bulford told us that this figure is likely to grow due to the ageing profile of the population and inflation.143 We were told that the BBC has not currently decided how this will be funded nor whether the current arrangement for over-75s will remain.144 Lord Hall stated that:

[The arrangement for over-75s] could be the same [ … ] It could be reformed. There is a whole load of options and we are not in the position at the moment to say, in all honesty, what the right option would be [ … ] we have to have a proper public consultation about all of that and what we do.145

85.The obligation to take over licence fee funding for over-75s is likely to cost the BBC over £725 million in revenue by 2020–21. At a time when the BBC’s finances are already constricted, this is likely to place a great deal of financial pressure on the organisation. We are concerned that, despite the BBC Board having had over a year to consult on this issue, they seem to have made very little progress. The BBC must start immediate consultation with those who will be affected by the change and must commit to including detailed plans of its proposed actions in next year’s annual report.

Netflix and Amazon

86.The BBC and other broadcasters now face competition from large companies such as Netflix and Amazon which have substantial programme budgets and significant resources. This in turn is driving up the costs of some genres, such as drama, at a time when the BBC’s income is falling. Lord Hall argued that in this climate the BBC must focus “on what we really do well, which is UK content, dramas about big UK issues, finding new talent or giving existing talent its voice to do things it might not otherwise do”.146 We were told that, while ‘The Crown’ cost Netflix £100 million for 20 episodes and was viewed by 14% of UK adults, for the same price the BBC has been able to produce 13 different series of dramas and reach over 75% of the UK population.147

87.BBC’s online platform ‘iPlayer’ is also continuing to grow steadily. iPlayer now has 15 million people actively signed in each month and overall in 2017 total requests were up by 11%.148 In comparison 8.15 million households reported that they subscribe to Netflix, 4.27 million to Amazon Video, and 1.5 million to Now TV.149 These figures have grown substantially since 2016, representing growth of 25% for Netflix, 41% for Amazon Video and 40% for Now TV.150 While these growth figures are much higher than the 11% growth in iPlayer requests, they are not directly comparable since they start from a lower base.151 The BBC Annual Plan noted that in order to keep pace with these global players “iPlayer needs to change [ … ] This year will see further improvements for iPlayer, including enhancements to the user experience, more personalisation, more live content”.152

88.The BBC and Channel 4 have come together to demand new legislation to safeguard the prominence of content from public service broadcasters (PSBs). Alex Mahon, Chief Executive of Channel 4, explained to us that currently “providers of these streaming sticks or set-top boxes also provide their own content offerings, which of course come front and centre, this is all unregulated with no proviso for PSB at all”.153 Both organisations have suggested that the first page of the user interface on any of these platforms should have a prominent position for the players of the PSBs (BBC, Channel 4 and ITV) so that there is guaranteed prominence in these environments for users.154

89.The BBC and other broadcasters now face competition from large companies such as Netflix and Amazon which have substantial programme budgets and significant resources. The arrival of streaming sticks and set-top boxes have altered the television market, leaving a large section of the market unregulated with no proviso for the PSBs. In order to compete with the growing profiles of these global media companies, the BBC must focus on what it does best and deliver unique British content. To keep pace with global players, it must push forward with introducing improvements for iPlayer, enhancing its offerings, user experience, and personalisation levels. In order to ensure the continued survival of PSBs, the Government must to commit to introducing legislation that secures the prominence of public sector broadcasters on streaming sticks and set-top boxes.

BBC Parliament

90.BBC Parliament remains the only UK television channel dedicated to the coverage of Parliament. It is the only place where the proceedings of the House of Commons and House of Lords can be viewed on a conventional terrestrial television channel, free at the point of use. In July 2018 the BBC announced changes to its coverage of Parliament and politics, including changes to the BBC Parliament channel.155 The press release stated that BBC Parliament:

Will still broadcast live and replayed coverage of Parliament and the devolved parliaments and assemblies, but will no longer make bespoke programmes and will not air in the weeks when the UK Parliament or the devolved Parliaments and assemblies are not sitting.156

91.The key driver of the change is the £80 million of cuts being faced by BBC News, as part of the BBC’s wider spending reductions.157 As part of this press release, the BBC also noted that UK Parliament, the devolved assemblies and chambers are increasingly livestreaming their proceedings and that “the BBC will signpost these livestreams alongside our journalism”.158

92.When questioned on the issue, Lord Hall refused to confirm that BBC Parliament would remain as a broadcast channel.159 He noted that although the BBC would like BBC Parliament to be maintained as a broadcast digital service “there may be a time in the future when everything goes [online only], when we want to migrate [BBC Parliament] to [online only]”. While the BBC did note that this would not would not happen within the next year, it refused to give any assurances beyond this period.160

93.Parliament provides BBC Parliament and all other media with broadcast coverage from all chambers and committees, paying for cameras, microphones and operational staff. The BBC tends to lead subsequent coverage, both editorially and financially. Once a decision has been made by the BBC (for example, to cover a select committee session), UK and international media tend to follow, and the fee charged by Parliament is shared among all interested parties. Over the past year only one other media organisation (Bloomberg) on one occasion has felt able to pay outright for a select committee to be covered.161

94.The importance of BBC Parliament’s work leads us to believe that the BBC must lay out a new strategy for the BBC Parliament channel, developed in collaboration with both Houses, including via their domestic committees. The best mechanism towards achieving this would be the creation of a working group which could consult both Houses in order to develop a new vision of the service.

95.A supplementary submission of evidence from the BBC received just before this report was published indicated that the decision about bespoke programmes was still up for discussion. It stated: “Having reflected on this over the summer, we now believe that the edited daily and weekly summary programmes should continue as they provide important reflection and clarity for audiences.”162

96.We were concerned to hear about the possibility of BBC Parliament moving to an online only service. The channel remains the only UK television channel dedicated to the coverage of Parliament. It has a unique importance to Parliament as the only place where the proceedings of the House of Commons and House of Lords can be viewed as a conventional terrestrial television channel, free at the point of use.

97.The BBC’s unwillingness to commit to safeguarding the broadcast channel beyond the coming year is troubling. More than 60% of BBC Parliament’s viewers are over 55, and we are deeply concerned that any move towards an online channel would cause a significant number of people to be disconnected from access to Parliament. Beyond this indication of demographics, we found that the BBC had little detailed information about the channel. The BBC must lay out a new strategy for the BBC Parliament channel. This will require careful thought about how this important service can continue to be delivered as a broadcast channel. This thinking should be done via collaboration between the BBC and both Houses, including their domestic committees. In order to do this, the corporation should commit to establishing a working group, aiming to report back to both Houses with a new vision of the service. This should be done swiftly, and certainly by the end of this calendar year. The group should supply more detailed information on the viewing figures for the channel, and projected savings scenarios.

98.Since we took evidence in Salford in September, we have had assurances that changes to BBC Parliament announced earlier this summer may be dropped or amended. The BBC had stated that daily and weekly summary programmes on BBC Parliament may be cut. In supplementary evidence to us the BBC states that it now believes that these programmes should continue as they provide ‘important reflection and clarity’ for audiences. We welcome this change of heart. We are also pleased that the Speaker’s lectures will continue to be broadcast by BBC Parliament.


134 BBC, Annual Plan 2018/19 March 2018, p 25

135 Ibid

137 Oral evidence taken on 11 September 2018, HC 993, Q 2

138 BBC, Annual Plan 2018/19, March 2018, p 4

139 Ibid

140 Oral evidence taken on 11 September 2018, HC 993, Q 3

142 Ibid

143 Oral evidence taken on 11 September 2018, HC 993, Q 6

144 Ibid, Q 9

145 Ibid, Q 9

146 Oral evidence taken on 11 September 2018, HC 993, Q 5

147 Ibid, Q 5

150 Ibid

151 Ibid

152 BBC, Annual Plan 2018/19, March 2018, p 6

153 Alex Mahon, speech to Parliament on the importance of PSB prominence, June 2018

154 Ibid

156 Ibid

157 Ibid

158 Ibid

159 Oral evidence taken on 11 September 2018, HC 993, Q 21

160 Ibid, Q 21

161 Parliamentary Broadcasting Unit, House of Commons

162 BBC Supplementary Written Evidence (BAR0001)




Published: 25 October 2018