Fixing the BBC

Dear Mr Davie

I am sure you can’t quite believe it has been a year since you were selected to take up the highly regarded post of Director General of the BBC. I must offer my congratulations; if ever there was a tricky time to take on such a prestigious role in the media industry, mid-pandemic must be it. 

You, your predecessor and your teams seem to have used the challenges of Covid-19 to your advantage. The fact that 84 per cent of British adults used at least one of the BBC’s many platforms in the week that lockdown was announced last March, the same week that your reach among 18 to 34-year-olds peaked at 86 per cent, shows that the organisation remains a trusted source of news across the generations. 

In Britain, we have relied on the BBC to inform, entertain and educate us at a time of international crisis. Almost half us named the BBC as the most trusted source of pandemic information in 2020, we sent over 2bn streaming requests to the iPlayer between March and July and our children browsed BBC Bitesize 5m times in the first week of the summer term alone.  

But while you have emerged from the Covid-crisis on firm footing, I am sure you know that the biggest threats to your organisation’s continued success are still ahead of you. As your chairman warned when you took on the role, “the next few years will define the long term future of the BBC”.

You have inherited an organisation which, for the first time in its history, is competing with international media organisations. Perhaps your predecessor didn’t quite foresee the problems this would pose when he took the BBC down this path back in 2015. But the dangers are now clear. 

Brits are rightly questioning the value of the £159 annual licence fee, compared with the £96 average annual cost of a subscription service from Amazon (US:AMZN), Netflix (US:NFLX) or Disney (US:DIS). Some of us are getting rather tired of the relentless government agenda being spouted from your platforms, which are supposed to be unbiased. If your staff are going to let MPs dictate the narrative, we might as well get our news from a commercial media organisation which we don’t pay for via a licence fee. 

And talking of the antiquated business model, questions must be asked of your investment strategy. Why do you spend over 70 per cent of the money collected from the licence fee on offline content such as television and radio, when we all know that the world is turning increasingly digital? The Reuters Institute in collaboration with the University of Oxford has estimated that the BBC accounts for just 1.5 per cent of all time spent on digital media, compared with 22 per cent for Google’s various services and 14 per cent for Facebook and its subsidiaries. Why are we all legally obliged to pay for a public service which doesn’t deliver for the modern Brit? 

By ploughing headlong into competition with international giants, you have also raised questions about the regulation and support which protects you from domestic rivals. If the combination of a government-backed BBC and deep-pocketed international companies creates a competitive environment which drowns British commercial broadcasters, what will that do to unbiased news provision? Competition law needs updating for the modern, digital era and you should be prepared for the challenges this might bring. 

All that being said, there is no doubt that the BBC is an institution which the UK would be poorer without. And evolving demand should not be seen as a threat. The opportunities that will arise in the years ahead have the potential to be bigger than the challenges, if you pursue the right path. I hope the pointers below might help you take advantage of them. 

Carving your own agenda 

Starting with news, where your journalists have been rightly criticised is for failing to hold the government to account over mistakes made during the coronavirus pandemic. At the time of writing, schools are reporting 20,000 pupil absentees and the NHS surgery waiting list has soared to 4.7m people. Laura Kuenssberg and her team should be asking Boris Johnson how he plans to deal with these crises, rather than fighting a battle to the death over who paid for the wallpaper in Downing Street. 

We know that your journalists have the ability to pursue proper public service journalism: your Panorama team has uncovered scandal after scandal; your features and long reads take us to worlds we may not know anything about; Ms Kuenssberg showed her integrity when she questioned Donald Trump about his beliefs on torture, Muslims and abortion in 2017. So why do you waste your time with click-bait articles such as ‘12 things we learned from Meghan and Harry’s Oprah interview’?

And, more importantly, why don’t you give your proper investigations the platform they deserve? It’s true that TV remains the biggest place for consuming news (75 per cent in the last Ofcom review in 2019), but we also know that the proportion is decreasing and for some age groups, social media has become the leading source of news provision (76 per cent for 16 to 24 year olds). 

And so here is your opportunity: lobby for tighter regulation of the social media giants and improve the quality of your own digital news.

The Australian Competition and Consumer Commission has provided a decent starting point to any lobbying efforts. In February, it suggested platforms (including Facebook (US:FB) and Alphabet's (US:GOOGL) Google) should start paying news providers (including state broadcasters) to publish their articles. Japan and Canada are mulling similar models, while the US and EU continue their battles for better monitoring of social media sites. 

The revenue you might make from the Australia model could be reinvested into optimising your best journalism for all modern platforms, in the same way you do on Instagram, where your long-reads and features are hugely popular. Tortoise Media – founded by your former director of news, James Harding – has proven that balanced, considered journalism has a place in the modern world. Within a few years of starting up, it has grown its international member base to over 100,000 thanks to its impressive use of email, social media, podcast and YouTube. That is some distance from the numbers you capture, but proof that digital initiatives can help support and promote in-depth journalism. 

The costs and benefits of R&D

Which leads us nicely on to technology. Your news website is used by an estimated 15m people a week – I am one of those and I rely on it for the domestic headlines. But I know many others who turn to Twitter (US:TWTR) as the primary source of news if reading the headline is all they are after – an estimated 17m Brits use the website on a daily basis. And then there is Facebook which captures the attention of 43m people a week. 

Building a website that matches the scale of the tech giants is not cheap work. In 2020, Facebook spent $18bn on research and development as it attempted to make the technology across its entire suite of platforms smarter. Research spending is also high at Twitter: in 2020, while marketing expenditure dropped to help the company deal with the costs of the Covid-19 pandemic, R&D rose 28 per cent to $873m. And for the newest breed of news platform, expenditure is crucial to capture an audience. Chinese group ByteDance which owns TikTok – revered in your annual report for “generating the most downloads for any app ever in a quarter, with over 315 million installs” – has said it will spend 10bn yuan to try to grow its global active daily user numbers to 100m. 

And it’s not just in news that technology plays an important role: entertainment is being increasingly consumed via digital platforms and that is an opportunity for your iPlayer and fantastic Sounds hub. 

But, again, the scale of expenditure in this industry happens at a level which your organisation cannot hope to compete. Netflix has spent $8.5bn over the last 10 years to make its platform the biggest streaming service in the world – almost all of that expenditure has come in the last five years. Walt Disney willingly incurred a $2.8bn operating loss in its direct-to-consumer business in the year to September 2020 following a $1.8bn loss in the previous year as it has invested in rolling out Disney+. Together these two streaming services have a combined 302m subscribers to their platform, about 20m of whom are in the UK. 

Spotify expenditure has been similarly high as it has become the biggest audio streaming service worldwide, accounting for 47 per cent of the growth in music streaming in the UK last year. 

The £312 combined annual cost of all three platforms doesn’t seem to trouble people nearly as much as the £5.99 monthly cost of BritBox – the service that your predecessor thought might help allow you to compete more readily with the big boys in the US. You say that the service is “competitively priced”, but most Brits feel like they have already paid for the 2000 hours of content you have contributed to it via their licence fee. 

And there is an extra word of warning as you attempt to take on the behemoths in streaming: Amazon. Most of its UK-based Prime members consider the audio and video functions ‘free’ additions to the delivery service, indeed just over a fifth do not yet make use of the music streaming service which is included (I am one of those). There is ample room for growth which – like your iPlayer and Sounds services – won’t cost their customers any more than what they are already paying. 

Who’s paying?

Which all means there is certainly a conversation to be had about the way the BBC is funded and spends money. I am sure that the prospect of charter discussions – which you will have to face in 2027 – fills you with dread. I sympathise: how can an organisation be simultaneously relevant and modern; inquisitive and opinionated; frugal and extravagant when it doesn’t even have control of its own finances? 

I am equally sure that you are growing tired of the endless advice which you have no remit to act upon, which is given by people who have no knowledge of the inner workings of government expenditure: scrap the licence fee, charge the elderly, create a TV tax, claim a slice of the money raised by National Insurance, for example. 

So, rather than trying to offer solutions to your funding model, I will endeavour to provide examples of where you can save on costs, leaving you with more resources to plug into the features which matter. 

Starting with stars’ salaries. We’re living in a world where celebrities don’t need the big broadcasters to get, or remain, famous. In the past you may have felt the need to raise the salary of your biggest names to save them from the lure of the likes of ITV and Channel 4. But, today, even the commercial broadcasters’ big salaries cannot tempt the boldest stars to stay, not when they have Twitter making everyone famous. Big salaries no longer secure talent, so why bother?

Not that there was ever much justification in the £1m-plus salaries of the likes of Gary Lineker, Dan Walker or Claudia Winkleman – there are so many young presenters who I am sure would do a brilliant job on Match of the Day, BBC Breakfast or Strictly Come Dancing if they were given the opportunity. 

Another source of saving could be the cost of the Premier League. Sport is crucial to the BBC, but not the rare top flight football match that your teams can get their hands on. Might it be time to think about teaming up with ITV (ITV) to ensure the best of British sport (that is not yet corrupted by profits) remains out of the hands of the US giants? Or, if the availability of live sport is being prized away by the recent attention of Amazon and Facebook, perhaps it would be better to improve your highlights shows rather than digging to the bottom of your pockets to pay for the unremarkable punditry of Alan Shearer, Eddie Butler or Gabby Logan. 

And how about high-end drama and beautifully shot nature programmes? I thoroughly enjoyed His Dark Materials, but the estimated £40m-£50m budget is surely a bit extravagant, even if you were supported by HBO. It’s perhaps controversial to say the same thing about Blue Planet II; remarkable though it was, what have you gained from your £10m investment?

You have said you don’t want to compete directly with the big guns in the US by pursuing the subscription route, but then perhaps you need to accept that the big budget studio productions and enormous audience numbers will not be available to you. 

But I believe there are alternative routes to winning over audiences, in areas where you already have an impressive footprint. Local news, for example, which is crucial to many populations. Education, including the BBC Bitesize website and other tools which can help you capture audiences in the classroom. Rising star music, which has helped kickstart many amazing careers and is critical to the enduring success of the UK’s music scene. British culture relies on your support in these areas and, because of that, the BBC will always have its supporters. But by spending big money elsewhere you risk alienating large parts of the population, especially the younger and less educated. 

To ensure you remain relevant, I would recommend that you trim away the bulky costs which cause you so much turmoil when discussions about scrapping the licence fee arise, leaving you with a lean organisation which can exist with the funding of a small addition to the household tax. The star-studded agenda can move to your commercial arm which can then be run as a genuine for-profit enterprise, free from political shenanigans and – more importantly – away from the legal licence fee funding. 

There is money to be made in the production of unique content, as demonstrated by the 20 per cent increase in revenues that your commercial studios managed to deliver in the last financial year. Britbox is a decent starting point for a streaming service, but it needs to carry unique content – no one wants to pay a subscription for a service that they think they have already paid for in their taxes. If you make it more obvious where the line is between licence fee and bonus content, Brit’s might be more likely to pay an additional subscription. But to do that, you must first lower the licence fee and perhaps remove the obvious obligation to pay it. 

I wish you the best of luck – the task is not an easy one. But you have an opportunity to keep the BBC a thriving British establishment. Success will benefit everyone. 

Kind regards

Megan