52.In this chapter we set out the challenges facing the BBC over the next decade and why a review of the licence fee system is both a necessity and a positive opportunity for the BBC to catalyse change. Without change, the BBC will be increasingly constrained in its ability to fulfil its purpose and deliver the benefits we set out in Chapter 2. We focus on two main strategic issues. First is the pace of developments across a rapidly evolving media landscape, and the impact this has on audience behaviours. The second is the need to deliver a valued service for all sectors of society in the context of social and political change. We then examine the BBC’s response to these challenges.
53.Consumption of television and radio remains relatively strong in the UK: over 17 million homes access digital terrestrial television via an aerial, 8.4 million households subscribe to satellite television and 3.9 million have a cable TV subscription. But technologies and audience habits are changing rapidly. Consumers are increasingly watching content on mobile phones, tablets, smart TVs, games consoles and streaming sticks. Almost half of UK adults now use online video services as their main way of accessing TV and film. The rollout of 5G networks and full-fibre broadband will further enable streaming on internet-connected devices.
54.Linear TV looks set for long-term decline. According to Ofcom data, nearly three-quarters of households use a broadcast video on demand service such as BBC iPlayer or All 4, and a similar proportion use subscription video on demand (SVOD) services. By contrast, linear TV’s overall viewing share in the UK fell from 67 per cent in 2019 to 61 per cent in 2020, despite a pandemic-driven increase in the number of viewing hours. These figures are in line with wider trends across the world.
55.Traditional broadcasters like the BBC face increasing competition for audience attention, particularly from large, well-funded international SVOD providers. Slower rates of SVOD growth can be expected following a 2020 boom brought on by the covid-19 pandemic. But competition in the media landscape is nevertheless likely to continue to rise, putting pressure on the whole of the UK’s public broadcasting system. Dr Jeremy Silver, Chief Executive Officer of Digital Catapult, highlighted that these issues are compounded by competition for attention from a variety of other areas, notably the gaming market which is worth around £7 billion in the UK.
56.Growing production costs are another challenge. The BBC told us that it provides the UK’s “largest diet of British creativity across drama, entertainment, and factual TV. BBC Bitesize provides a critical service for children”. Serving audiences through attractive content is one of the core justifications for continued public funding. But paying for it will become more difficult. High inflation is straining budgets across the UK, but the BBC’s production cost challenges pre-date this and are likely to outlast it. New streaming platforms—often loss-leading, loss-making or debt-funded—are investing heavily in content production, particularly drama. This has driven up costs. The BBC’s costs of non-continuing drama production have reportedly increased by nearly two-thirds over five years. Andrew Neil, broadcaster and journalist, told us that while the BBC’s £5 billion annual income was substantial, it was simultaneously restrictive given its aims and rising costs in the media world:
“Not that long ago it was inconceivable that an hour of BBC drama would cost more than £1 million per episode; it is now pretty inconceivable that it would cost less than that. Netflix is spending $10 million per hour … Even £5 billion is nowhere near enough to run a full television network with international ambitions these days.”
In 2021, the BBC’s content expenditure was £2.5 billion and ITV’s was £1.2 billion. In 2019 Channel 4’s content expenditure was £660 million. By comparison, in 2021 Netflix spent $14 billion, and Disney $18.6 billion (roughly equivalent to £10.4 billion and £13.8 billion respectively).
Source: Supplementary written evidence from Enders Analysis ()
*Includes Netflix, Amazon Prime Video, Hulu, Disney+, Apple TV+, Warner Media (HBO Max), Discovery+, Paramount+ and Peacock**BBC’s expenditure on TV content excluding BBC News and BBC Parliament
57.With the huge scale of SVOD budgets comes significant power to influence what consumers want. Enders Analysis described Netflix’s impact on the UK video market as “transformative”:
“In just a decade, the way people view programmes, their expectations around quality and availability, and how they value TV content, has irrevocably changed. Driven by Netflix … this shift has placed pressure onto legacy operators, overturning business models and accelerating a transition of power from localised networks to international platforms.”
58.Engagement with public service broadcasters’ content is therefore decreasing in a range of areas. Traditional broadcasters’ share of total UK video consumption fell from around 97 per cent in 2010 to around 70 per cent in 2021, according to Enders Analysis. Forecasts suggests a further decline to around 60 per cent by 2027. The pronounced decline in linear broadcast TV viewing has been only partially offset by increased viewing of BBC iPlayer. Between 2020 and 2021, the average viewing time of BBC TV fell by 6 minutes, whereas the average viewing time of iPlayer rose by 4 minutes. This was despite a pandemic-induced boost to linear TV viewing—Ofcom noted that in previous years linear decline was more severe, and it expects this trend to continue. Though time spent using the broadcaster is decreasing, the BBC still reaches large audiences, with 87 per cent of UK adults consuming some form of BBC content each week.
59.In terms of the means to access content, there is a widening gap between older viewers, who are likely to account for the majority of future broadcast consumption, and younger viewers preferring SVOD and other online services accessed through a range of devices.
60.Radio provides a partial exception to such trends, where the BBC remains pre-eminent. BBC Radio 1, 2 and 4 account for over a third of all radio listening. An estimated 62 per cent of all adults are exposed to BBC radio each week. While audiences tend to be older, there remains a broad spread of engagement across age groups. As in other areas, the future of radio is gradually moving towards digital consumption. Smart speakers already account for six per cent of all audio consumption. Online podcasts are becoming increasingly popular, particularly among younger viewers. A 2021 Government report projected that live radio (both analogue and digital) will still account for over 50 per cent of UK audio listening in the mid-2030s.
61.We heard that the industry-wide shift towards online consumption was part of an ongoing trend that the BBC was working to embrace. But it will become more difficult for broadcasters to be noticed in a crowded online marketplace. Audience engagement is likely to be influenced heavily by how easy it is to find and use public service broadcasters’ content on future digital platforms, and how attractive the offer appears. Characteristics that draw viewers to online platforms—such as new content, large libraries and free or low-cost access—are likely to become more important, but often favour large international firms that enjoy economies of scale, technological advantages and deep pockets.
62.Responding to this suite of challenges will be difficult in the context of long-term financial constraints. In February 2017 the BBC introduced a £800 million savings programme up to 2022 following the 2015 licence fee settlement. By 2019–20, the BBC had increased its savings target to £1 billion. Following the 2022 licence fee settlement the BBC said it faced a £285 million annual funding gap up to 2027–28 and announced £500 million of additional savings and reinvestment. The BBC’s licence fee income was reportedly 30 per cent lower in real terms in 2020 than in 2010.
63.Mark Oliver, Chairman and Co-founder of the media strategy consultancy Oliver & Ohlbaum Associates, observed that restricted licence fee levels were not a short term issue: “the political will to allow for an increase in the licence fee is not there, it has not been there [for decades] and it might not be there for another 15 years”.
64.On its current trajectory the BBC will likely find it increasingly challenging, though not impossible, to deliver productivity savings without affecting audience satisfaction. The National Audit Office found that the BBC’s early savings targeted productivity and overheads, whereas later savings were likely to target audience-facing areas. It warned that the BBC “must now balance the need to proceed at pace in delivering savings and reform with taking care that its decisions about how to achieve this do not further erode its position with audiences.” Gareth Davies, Comptroller and Auditor General at the National Audit Office, thought however that it was “very unlikely that an organisation the size of the BBC has run out of opportunities to make productivity gains” and that identifying further savings that would not affect programming would be an ongoing task.
65.Challenges to audience engagement matter for the BBC. As we set out in Chapter 2, the broadcaster’s central mission is to deliver a valued service for the whole of the UK. Declining relevance to audiences affects the legitimacy of, and support for, future public funding. And fewer viewers mean lower licence fee income. Between 2017–18 and 2019–20 the number of non-over-75 households buying TV licences fell by 450,000. Archie Norman, former Chairman of ITV, worried that the BBC did not feel a sufficient degree of urgency to act when “time is passing, and the world is moving on dramatically”.
66.The other main challenge we found was representation of all UK audiences. We heard that the legitimacy of the BBC’s public funding is underpinned by its ability to deliver valued content that reflects and represents the spread of UK society. Our evidence suggested that this task is becoming both more important and more complex in the face of societal change and political realignments. The BBC must improve on two core interrelated areas.
67.The first is due impartiality. Ofcom’s 2020–21 annual report on the BBC found that achieving due impartiality remained a “complex challenge”. Their data show that audiences scored BBC TV news highly for accuracy (71 per cent) and trust (68 per cent), but consistently rated it less favourably for impartiality, with just 55 per cent giving it a high score. The BBC website, app and BBC radio all perform better, with 65 per cent of BBC website and app users and 61 per cent of radio listeners rating these services highly for impartiality. Research published by Ofcom in June 2022 found that audience perceptions of the BBC’s impartiality were not only influenced by the content itself but that other factors—such as relationships with news brands, personal views, cultural climate and the effect of other stories in the media landscape—played a “pivotal role in shaping perceptions of due impartiality”. Ofcom also note that “BBC TV has a much greater number of regular news viewers than other TV channels, and therefore more people who consider it impartial”.
68.Several witnesses said that the BBC did not fairly reflect the spread of legitimate perspectives in the UK. Dr Adrian Wooldridge said that the BBC had a “tendency to think about the classical political divisions of left and right” which did not necessarily capture the complexity of issues which it must take account. He argued there were specific areas that merited particular improvement, such as BBC News’s business coverage, which he told us was “local, parochial and treats business as a boring embarrassment.” David Goodhart, Head of Demography, Immigration and Integration at Policy Exchange, argued that the BBC needed to address criticism of insufficiently representative coverage “so that more of the country feel that their voices are there, as well as the completely legitimate liberal metropolitan one.” Mercy Muroki, a researcher and journalist, said there was a “perception that the BBC looks down on some of the opinions … whether that is in relation to politics, Brexit, concerns around immigration”, and believed the BBC needed to represent better audiences to ensure they felt it was worth paying for.
69.We received mixed evidence on the prospects for improvement. David Goodhart believed the BBC had become more aware of these criticisms since the 2016 EU referendum. Andrew Neil thought the issue was more intractable, saying the BBC “reflects the biases of the metropolitan world, which are different from the biases of the red wall—or in some areas even the blue wall … you will reflect these biases from the people you recruit.” We also noted the complexity around discussions on impartiality. As Professor Richard Sambrook told us in a previous evidence session on BBC impartiality, “Impartiality is often subjective. What you think is impartial may not be what I think is impartial. Even the Ofcom code has a degree of subjectivity in it”.
70.Second, and relatedly, was the need to appeal to an increasingly diverse UK society. Jasmine Dotiwala, a broadcaster and producer, told us that “we have an increasingly diverse population and a healthy mix of worldviews”, and emphasised the need to “reflect honestly the wider society that we live in.” Polly Mackenzie, then Chief Executive Officer of Demos, similarly noted the need to cater for “increasing diversity of cultural taste, religious background and media consumption.”
71.Data from Ofcom suggest that audiences with disabilities, those in Scotland and those from lower socio-economic backgrounds typically express lower satisfaction with the BBC. Previous studies have shown that the BBC could improve on its ethnic and socio-economic diversity. Ofcom data show that audiences rate the BBC poorly for representation and portrayal compared with its other purposes.
72.These themes were echoed by witnesses. Deborah Williams, Executive Director of the Creative Diversity Network, told us that as someone “young, black and disabled, I do not think that is a part of how the BBC sees its core demographic.” She also argued that more nuanced and relevant coverage was needed to avoid alienating underrepresented communities by portraying them as a “homogenous group”. We heard the BBC needed to better cater for different needs, perspectives and interests, give a stronger voice to local and regional issues and reflect underrepresented communities sensitively.
73.As media and technology choices expand it will become increasingly important to reach all audiences, particularly underserved groups, across a variety of platforms, content formats and languages when catering for their varied preferences and expectations. This requires the data to understand consumer interests and needs, the investment and technologies to engage them in the most appropriate ways, and the strategies to determine which areas to prioritise. We noted the difficulties in achieving this given the significant reduction in the BBC’s budget in real terms over the past decade. We also heard that the BBC risked falling behind other providers in this area. Paul Lee, Global Head of Research for Technology, Media, and Telecommunications at Deloitte, noted that SVODs generally outperformed the BBC in tailoring content to non-white audiences, for example.
74.The BBC faces tough choices in responding to these challenges. It must deliver a strategy and vision that answers the BBC’s commercial challenges while addressing its cultural and public service obligations. The dilemmas include:
75.The then Minister of State for Media, Data, and Digital Infrastructure Julia Lopez MP emphasised the need for speed and said the Government was launching an independent review to examine which funding approach would best enable the BBC to thrive in a fast-changing landscape. She said the Government had “not run any numbers” on alternative models and would be led by the results of its independent review, which is expected to last around 12 months.
76.Tim Davie told us “the scale of change in the market is extreme” and emphasised the challenge in retaining linear services while increasingly catering to digital consumption habits. He warned of “jeopardy if we do not make that transition”, but said the BBC continued to innovate and explore new formats—for example using iPlayer, Sounds and social media channels such as Instagram and TikTok. He thought the BBC could “self-flagellate a bit too much”, noting that youth engagement remained at reasonable levels and older audiences stayed loyal.
77.In May 2022 the BBC published a plan to deliver a “digital-first BBC”
involving £500 million of annual savings and reinvestment, 1,000 job reductions and £50 million of annual investment in product development. This built on its earlier Annual Plan 2022–23, which focused on strengthening impartiality, creating distinctive content, transforming the BBC’s digital offer, accelerating commercial and global growth and delivering organisational reforms.
78.We heard that the BBC needed support from a more effective and nimble regulatory framework. There are 148 different regulatory quotas and targets across TV, radio and online services with which public service broadcasters must comply. Clare Sumner CBE, Director of Policy at the BBC, said it took over a year to change the rules to extend the timeframe for which iPlayer content remains available, whereas “Netflix, Amazon and others are changing almost by the second.” We noted initial progress in this regard. The Government confirmed that regulatory reform would be considered in both the Mid-Term Charter Review and the forthcoming Media Bill. In June 2022 Ofcom published proposals to update the BBC’s Operating Licence to incorporate better the BBC’s online services and give the BBC greater flexibility in how it meets audience needs.
79.The BBC addressed some of its representation challenges in its response to the Serota Review into editorial standards, its accompanying action plan and also the BBC Across the UK strategy. When asked how it would better represent all sectors of society given ongoing criticism, Richard Sharp, Chairman of the BBC, contended that the corporation had changed “dramatically” in recent years but acknowledged that socio-economic diversity and minority languages warranted further improvement.
80.On whether the licence fee was the best option for helping the BBC address its challenges, Mr Sharp said the BBC Board was starting to consider “what the strategy of the BBC should be in delivering its public purposes as a public service broadcaster. What are the potential funding options? What are the implications of those options?”
81.We explored what would be needed to turn these reflections into action. Archie Norman, former Chairman of ITV, told us that “Nobody has a divine right to exist, just because they are publicly funded”. He argued that the BBC leadership needed encouragement and space to:
“speak truth to the organisation and to say, ‘If we don’t change, we aren’t going to exist in our current form’, [because] it releases the energy in the whole organisation. You are saying what everybody already knows. But at the moment the Director-General cannot say that, because he would be seen to be criticising his own organisation and his own funding, and putting in peril the future funding and support for the BBC. It will not happen without a combination of strong political and governmental support, together with a leadership in the BBC with an appetite to take it on.”
82.We explored whether the BBC could be more open and dynamic in addressing its problems, and whether changes to the funding model would help address its challenges. Mr Sharp noted the “desire for pace in change” but cautioned that a considered approach was needed to understand the possibility of unintended—and potentially irreversible—consequences of new funding models that could jeopardise the BBC’s existing position as the “world’s leading public service broadcaster”. Mr Davie acknowledged that there were “typical behaviours of successful legacy operations that are 100 years old that continue to do pretty well” but insisted “the idea that the BBC is just digging its heels in is wrong.” In a subsequent speech he said “we all see a changing media landscape, and a need to listen, to evolve, and fast.”
83.The BBC faces major challenges. The decade ahead will be characterised by rising competition and costs, and constrained funding. It will need to adapt to a digital future while serving those who will continue to rely on linear services for at least the next decade. It must deliver programming and news that matter, and balance the growing expectation for personalised content against its enduring unifying mission. It must compete with vastly better funded international streaming giants and respond to growing questions about its value in the face of expanding consumer choice and failure properly to represent all sectors of the UK. And it will need to explain more clearly to audiences the relationship between what it is for and how it should be funded. Achieving this will require a more clearly articulated strategic vision that goes beyond its existing published strategies.
84.The BBC should publish a comprehensive long-term vision that sets out its role, and how it will deliver value and distinctiveness in a rapidly changing world. This vision must include costed options for future funding mechanisms, and how these would affect the BBC’s ability to deliver on its mission in the next decade and beyond. This vision must be driven by a positive approach from the leadership. It will require fresh thinking and a more open-minded approach than has been shown in the past. It should include what the BBC will stop doing, what it needs to do differently and what it will start doing. This would provide clarity to the commercial sector, and greater structure and transparency to help Ofcom, Parliament and the public hold the BBC to account. The BBC should submit this work to the Government’s independent review.
85.The BBC cannot provide content that pleases everyone all the time. Yet we continue to hear that the BBC is not representing widely held perspectives in the UK, which often do not divide neatly along party political lines. The legitimacy of a future funding model risks being undermined by dissatisfied audiences and declining viewing share. We note the BBC’s diversity initiatives and encourage it to continue to improve its on- and off-screen representation. The BBC should also embrace this opportunity to show more overtly that it respects, understands and reflects all sectors of UK society.
86.The BBC will need to operate in a more flexible and nimble regulatory framework in future. It currently takes too long for sensible changes to be introduced. We welcome Ofcom’s recent proposals to update the BBC’s Operating Licence better to incorporate the BBC’s online services and give the BBC greater flexibility in how it meets audience needs. In response to this report, Ofcom should set out how it intends to provide a swifter approach to regulatory changes. The Government should likewise outline its plans for introducing regulatory updates.
93 Department for Digital, Culture, Media & Sport,
95 Ofcom, Media Nations UK 2021 (5 August 2021): [accessed 8 June 2022]
96 Ibid., p 6
97 Written evidence from Enders Analysis ()
98 Ofcom, , p 40 and written evidence from Enders Analysis ()
99 Ofcom, , p 40
100 (Magnus Brooke)
101 (Dr Jeremy Silver)
102 BBC, ‘The UK video games market is worth a record £7.16bn’ (31 March 2021): [accessed 5 July 2022]
103 Written evidence from the BBC ()
104 (Tim Davie)
105 Written evidence from Enders Analysis ()
106 National Audit Office, The BBC’s strategic financial management (Session 2019–21, HC 1128), p 22: [accessed 8 June 2022]
107 (Andrew Neil)
108 BBC, Group Annual Report and Accounts 2020/21 (November 2021), p 46: [accessed 6 July 2022]
109 ITV plc, Annual Report and Accounts for the year ended 31 December 2021 (21 March 2022), p 33: [accessed 6 July 2022]
110 At the time of publication, figures for Channel 4’s 2021 content expenditure was not yet published and figures for 2020 were artificially low due to limitations on production as a result of the pandemic. See: Channel Four Television Corporation, Report and Financial Statements 2020, p 132: [accessed 7 July 2022]
111 Ampere Analysis, ‘Content spend sees double digit growth and reaches $220 billion in 2021, driven by SVoD services’ (20 December 2021), p 2: [accessed 6 July 2022]
113 Written evidence from the European Broadcasting Union ()
114 Written evidence from Enders Analysis ()
115 BBC, Group BBC Annual Report and Accounts (July 2021), p 20: [accessed 8 July 2022]
116 HM Government, Digital Radio and Audio Review (October 2021), p 7: [accessed 8 June 2022]
117 Enders Analysis, ‘Radio: protecting the core public value’ (November 2021), p 9: available at [accessed 8 June 2022]
118 HM Government, , p 7
119 Ibid., p 9
120 (Richard Sharp)
121 (Prof Catherine Johnson)
122 Written evidence from Enders Analysis ()
123 BBC, ‘Plan to deliver a digital-first BBC’ (26 May 2022): [accessed 8 June 2022]
124 Enders Analysis, ‘BBC licence fee settlement: A diminished TV ecology’ (10 September 2021): available at [accessed 8 June 2022]
125 (Mark Oliver)
126 National Audit Office, BBC savings and reform (17 December 2021), p 20: [accessed 8 June 2022]
127 Ibid., p 12
129 Audience engagement is understood here as the number of viewers watching, reading or listening to BBC content, the amount of time spent, and their relative level of interest.
130 This was reportedly due to changes in audience viewing habits and increasing numbers of these households qualifying for a free over-75 licence. National Audit Office, The BBC’s Strategic financial management (Session 2019–21, HC 1128), p 7: [accessed 9 June 2022]
131 (Archie Norman)
132 (Dr Adrian Wooldridge)
133 Ofcom, Annual Report on the BBC 2020–21 (November 2021), p 3: [accessed 8 June 2022]
134 Ibid., p 28
135 Ofcom and Jigsaw Research, Drivers of perceptions of due impartiality (June 2022), p 7: [accessed 22 June 2022]
136 Ofcom, , p 28
137 (David Goodhart), (Ryan Bourne), (Dr Cento Veljanovski) and written evidence from Liam Halligan ()
138 (Dr Adrian Wooldridge)
140 (David Goodhart)
141 (Mercy Muroki)
142 (David Goodhart)
143 (Andrew Neil)
144 Oral evidence taken before the House of Lords Communications and Digital Committee, 14 December 2021 (Session 2021–22),
146 (Polly Mackenzie)
148 BBC, Reflecting the ethnic diversity of the UK within the BBC workforce (2018): [accessed 8 June 2022] and BBC, On screen diversity monitoring (2018): [accessed 8 June 2022]
150 (Deborah Williams)
151 (Dr Rob Watson), written evidence from MG Alba (), Teledwyr Annibynnol Cymru () and (Deborah Williams)
152 (Dr Rob Watson) and (Mercy Muroki)
153 Written evidence from the UK Coalition for Cultural Diversity ()
155 Written evidence from Cardiff University and PEC ()
156 (Paul Lee)
157 The BBC’s ability to make cuts is restricted by the number of quotas, obligations and targets to which it is subject. Under the terms of the Royal Charter and Agreement, the BBC is required to comply with regulatory quotas in Ofcom’s Operating Licence.
158 (Julia Lopez MP)
159 (Tim Davie)
160 (Tim Davie)
161 BBC, ‘BBC Instagram’: [accessed 8 June 2022]
162 BBC, ‘BBC TikTok’: [accessed 8 June 2022]
163 (Tim Davie)
164 BBC, ‘Plan to deliver a digital first BBC’ (26 May 2022): [accessed 8 June 2022]
165 BBC, Annual Plan 2022–23 (March 2022): [accessed 8 June 2022]
166 Written evidence from Enders Analysis ()
167 (Clare Sumner)
168 Department for Digital, Culture, Media & Sport,
169 Ofcom, Modernising the BBC’s Operating Licence (22 June 2022): [accessed 22 June 2022]
170 BBC, The Serota Review (October 2021): [accessed 8 June 2022]
171 BBC, ‘BBC plan outlines push for fair, accurate and unbiased content’ (9 October 2021): [accessed 8 June 2022]. The BBC’s plan set out commitments which included reviewing impartiality in voices and viewpoints, increased oversight on content, improved investigations, board-level monitoring of impartiality metrics and workstreams to improve editorial values and culture, training and transparency.
172 BBC, The BBC across the UK (March 2021): [accessed 09 June 2022]
173 (Richard Sharp)
174 (Richard Sharp)
175 (Archie Norman)
176 (Richard Sharp)
177 (Tim Davie)
178 BBC, ‘BBC Director-General Tim Davie’s speech to staff’ (26 May 2022): [accessed 8 June 2022]