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Worth the licence fee: Is television’s golden age over?

ITV’s financial results suggest a downward spiral of demand which might pave the way to the end of British television
November 13, 2020
  • A comparison of ITV and Walt Disney financial results shows the extent to which television is changing
  • British broadcasters must adapt faster if they hope the survive

It feels wrong to question the value of the television licence fee at a time when Britain is enjoying His Dark Materials on the BBC, the finale of The Great British Bake Off on Channel 4 and the conclusion of the Six Nations on ITV (ITV). But aside from this small handful of gems, we Briton’s are coughing up £157.50 a year to watch Gary Lineker spout drivel about football and have coronavirus death figures shouted at us. Fewer and fewer are willing to pay.

In 2019, 37,000 fewer households bought a licence fee than the previous year (the first time that the government had reported a decline) and in 2020, we’re flocking in our thousands to streaming services. At the last count, 25m Brits were signed up to Netflix (US: NFLX), Walt Disney’s (US: DIS) Disney+ and Amazon’s (US: AMZN) Prime service. That’s the same number of licence fees that have been bought so far this year after sales collapsed by a further 250,000.

Perhaps in years gone by, the soothing voice of the nation’s favourite naturalist David Attenborough might have kept people interested in British content. But in 2020, the nation wants cheering up. Thanks David, but we’d rather watch The Mandalorian’s adventures on alien planets than be reminded that the Earth’s penguins are in jeopardy.

ITV blamed a 4 per cent decline in its share of broadcaster viewing in the first nine months of 2020 on the enormous volume of BBC news and Boris’ bulletins, but domestic competition is the least of the company’s worries. Broadcast television itself is declining. In 2019, video-on-demand accounted for over half of Britain’s viewing time, while traditional broadcast only consumed 40 per cent, down from 51 per cent in 2017. Streaming alone contributed 20 per cent and that was before the launch of Disney+.

The UK’s domestic broadcasters have attempted to satisfy the shift in demand with streaming services of their own and a cross-party service called BritBox. The platform has 32m registered users, but ITV fails to disclose how many of those users are actually paying. Not enough to make up for lost revenue elsewhere – ITV sales fell 16 per cent to £1.9m in the nine months to September.

By contrast, Walt Disney’s streaming service has done a decent job in plugging the immense revenue gap left by the closure of the company’s parks and cinemas around the world this year. Direct-to-consumer revenues rose 81 per cent to $17bn in the year to October and have now overtaken studio entertainment sales. Chief executive Bob Chapek said streaming is “key to the future of our company” – a concept that ITV executives have apparently failed to grasp. In the first nine months of the year, the company’s online audience declined 6 per cent – an extraordinarily bad performance when home entertainment is one of only a few permitted pastimes.

Meanwhile, production quality is in short supply this side of the pond. ITV has proudly bulked up its studios businesses through investment and acquisition in the past few years but, in the absence of Love Island, the best the studios have managed to deliver this autumn is Des, Prince William's A Planet for Us All and John Bishop's Great Whale Rescue­ – that hardly matches up the eagerly awaited fourth season of The Crown, which lands on Netflix on 15 November.

The financial firepower of the US giants means Britain’s broadcasters are losing the battle for quality content. Even sports rights are gradually slipping away. Amazon already broadcasts selected football matches, all three of the non-UK tennis majors and has recently won the right to broadcast the Autumn rugby internationals. How long before it comes for Wimbledon?

And the financial challenges facing domestic production companies have only escalated this year. ITV says it has re-opened 85 per cent of the 230 productions that were paused during lockdown, but safety while filming is proving an expensive challenge. Walt Disney has said it will invest $1bn next year to make sure its staff and cast are safe during filming. That’s money none of the British broadcasters have spare.

For many consumers, superior technology, graphics and storytelling combine to make the £264 annual cost of a Netflix, Amazon and Disney+ subscription far more worthwhile than a £157.50 licence television fee, which seems to be predominately spent on inflating the egos and wallets of the BBC’s ‘talent’. ITV may not need the licence fee for its bottom line, but it needs Brits to be watching traditional television so it can sell advertising. The downward spiral of demand makes both ITV and Channel 4 looks more like takeover targets than anything else. As for the BBC, it needs to decide whether it wants to take on international content giants, or hack back its spending and return to its roots as a national news, education and entertainment service. Neither option warrants a £157.50 annual tax. Television is changing. The UK’s broadcasters must change with it.