The BBC faces an unsure future as a result of it depends closely on the licence charge as its viewers share plummets, Whitehall’s spending watchdog has concluded.
In a pointed warning, the Nationwide Audit Workplace mentioned the company has postponed making tough choices about future earnings streams, and is dipping into its reserves to cowl the price of free licences for viewers over 75 years previous.
The NAO’s findings come amid criticism from senior Conservatives of the BBC and its reliance on the licence charge forward of the BBC’s constitution renewal in December 2027. Richard Sharp, the company’s incoming chair, mentioned final month the charge “could also be price reassessing” as a part of a evaluation.
Reacting to the findings, Meg Hillier, the chair of the Commons’ public accounts committee, mentioned the BBC has “shied away from making powerful choices for too lengthy and has underestimated the price of main initiatives”.
“It’s a lot too complacent about dangers that might materialise as quickly as subsequent 12 months,” she mentioned.
The watchdog’s report, launched at the moment, assesses the BBC’s monetary technique. It mentioned the BBC had been “gradual to alter” on points akin to the autumn in viewing by youthful audiences, and nonetheless had no central technique for tackling the issue.
“Falling viewers share poses a monetary danger as persons are much less more likely to pay the licence charge if they don’t view licensable content material,” the NAO mentioned.
Analyzing the company’s funds, auditors discovered that the BBC’s licence charge earnings fell by £310m between 2017-18 and 2019-20, to £3.52bn.
The variety of under-75 households shopping for TV licences fell by 450,000, because of adjustments in viewers viewing habits and extra households qualifying for a free over-75 licence, the report mentioned.
In 2019-20, the BBC generated earnings of £4.943bn, of which £3.52bn was public funding from the TV licence charge. The BBC started negotiations with the federal government in November in regards to the future funding it should obtain from the charge.
Auditors expressed concern on the company’s failure to guage its monetary future. They mentioned that though the BBC “considers that it delivers important wider worth to British and world society … it has not carried out an financial evaluation of this in nearly 10 years”.
The company’s monetary well being has additionally been unexpectedly weakened by the affect of Covid-19, akin to a drop in promoting gross sales, the report mentioned.
As we speak’s report additionally examines a drop in viewing. The period of time an grownup spent watching broadcast BBC TV dropped by 30% from a median 80 minutes a day in 2010 to 56 minutes in 2019.
BBC radio viewers time has additionally declined amongst adults, falling by 15% between 2013-14 and 2019-20, when nationwide industrial radio stations have maintained or elevated their viewers time.
“Regardless of its function of being a common broadcaster and nonetheless being the most-used media model within the UK, the BBC has seen a notable drop in viewers viewing occasions. [The BBC’s] principal supply of earnings, the licence charge, has additionally declined, and the BBC now faces appreciable uncertainty in regards to the earnings it should obtain from the licence charge,” the report mentioned.
Gareth Davies, the top of the NAO, mentioned: “The BBC faces important monetary challenges because it embarks upon licence charge negotiations and its midterm constitution evaluation.
“It has made important price financial savings and has recognized the necessity for extra with licence charge earnings beneath stress.
“As choices in regards to the licence charge are made, the BBC must develop a transparent monetary plan for the long run, setting out the place it should make investments and the way it will proceed to make financial savings.
“With out such a plan, it is going to be tough for the BBC to successfully implement its new strategic priorities.”
BBC insiders level out that executives have been inspecting various funding fashions. In August, it was reported that Tim Davie, the director-general, checked out whether or not the licence charge might finally get replaced with a brand new particular earnings tax, primarily based on the Swedish mannequin for funding public service broadcasting.
A BBC spokesperson mentioned: “Because the NAO has set out, we’ve got made important financial savings and elevated efficiencies, whereas sustaining our spending on content material, and persevering with to be the UK’s most-used media organisation.
“We’ve set out plans for pressing reforms centered on offering nice worth for all audiences and we’ll set out additional element on this within the coming months.
“The report additionally stresses the significance of secure funding for the long run, which we welcome as we start negotiations with authorities over the licence charge.”