14 October 2005

Is the BBC licence fee really worth £180?

The BBC licence fee is now £126.50 a year, and in current money this would rise to £150.50 by 2013 if the corporation's ambitious funding bid is accepted. What does "in current money" mean?
It means simply that the rate of inflation is not included in the calculation. Including inflation, the licence fee in eight years' time will approach £180, which sounds much worse. But the figure of £180 is deliberately intended to frighten people, and makes as little sense as marvelling that a semi-detached in London cost £2,000 in 1960. Was that cheap or dear? You tell me.

Is the BBC worth £150 a year? It is impossible to predict whether people will value the new services that will be on offer by 2013, but it is easier to determine whether its current output is "worth" today's licence fee. It is.
BBC radio costs £600m a year and is almost universally regarded as good value for money. But to judge from the hostile reaction that the BBC's bid has triggered (admittedly, mostly from the usual suspects, many of whom are the BBC's competitors), there are severe doubts about whether the £2,300m spent last year on BBC television represented good value for money.

Look at it this way. The cost of the BBC is 23% of the total cost of all television services transmitted in the UK. Yet BBC television wins 37% of the total television audience. So the consumer is paying much less per hour for the BBC than for other types of television. True, this includes advertising in the overall cost of commercial telly. Since advertising appears "free" to the consumer, perhaps it should be excluded. But I think not. Advertising absorbs people's time when they would rather be watching programmes and raises business expenses that are then passed on to consumers in higher prices. Nothing is "free", least of all advertising.

But even if we look only at subscription charges, the BBC offers good value. For each 1% of audience share it wins, the BBC costs £62m a year. Subscription services, mostly dispensed by the Sky platform, cost viewers £156m per point of audience share - far more expensive than the BBC.

I am sure there is an eager executive from Sky sticking up a hand at the back (there always was when I was BBC chairman), desperate to point out that people pay voluntarily for subscription channels, whereas they are forced to pay for the Beeb. That is true. But we can directly ask people how much they would be willing to pay for the BBC's services, if they were not forced to do so through the licence fee. Inconveniently for the BBC's commercial enemies, they would on average pay at least one fifth more than they actually do pay each year.

This leaves the last, and only valid, argument against the licence fee. Even though most people would voluntarily pay a lot more for the BBC than the cost of the licence fee, there are about 7m households in the UK who would not. This minority would gain if the BBC became a subscription service. But the other 16m households would lose. And that, as even a politician could confirm, is an awful lot of voters.

Gavyn Davies Thursday October 13, 2005 The Guardian

This article was so good, I couldn't resist the temptation to repeat it in full here.


  1. You must be dismayed at the way your party has tried to destroy the BBC? Gavyn Davies included.


  2. I think the BBC is excellent. The friction between the Labour govt and the BBC is wierd. I just hope Murdoch doesn't make them do anything bad to the BBC. It was quite funny when the Alistair Campbell / BBC saga was running because the Murdoch press didn't know which one to criticise the most, it tried to criticise both rather unconvincingly. It was good thet the public took the BBC's side. I think the whole episode reinforced the BBC's value in the public's mind.