Can the BBC Survive? Broadcaster Alters Its Voice in the Digital Age

As America recovers from its agonizing scrimmage over health care, the United Kingdom is embroiled in its own version of a national identity crisis: Where does Britain's publicly financed, bellwether broadcaster -- the BBC -- fit in a competitive, digital age?

Most Americans have at least a passing familiarity with the British Broadcasting Corp. They've heard those erudite-sounding British voices offering news from far away places like Sri Lanka on National Public Radio. Or they've watched some of the BBC's most popular television exports, including such comedies as "The Office" or the documentary "Planet Earth."

But you really can't appreciate the true scale of the BBC until you've logged some time in the United Kingdom. Founded in 1922, the BBC was, for a long time, the only broadcaster in the country. That's changed considerably over the years, and Britain now has a diverse, competitive media marketplace. But the BBC continues to have a huge presence within it. It runs four main television channels, a popular news Web site, 10 national radio stations, 40 local stations, two children's channels, a parliamentary television channel and a host of other media. It also employs roughly 23,000 people. According to Steve Hewlett, media columnist at The Guardian, "In conventional media terms, it is the biggest player by a huge margin."

What enables the BBC to maintain this pervasive presence -- and what also makes it so foreign to an American consumer -- is the corporation's distinctive financing mechanism. Domestic programming is paid for through what's known as the "license fee" -- an annual fee of £142.50 (roughly $217) collected by the government on behalf of the BBC that amounts to a sort of compulsory flat tax. In other words, if you live in this country and want to watch TV, you have to pay this fee. The license fee agreement, which stipulates both the level of the fee and any changes to it, is renegotiated by the BBC and Parliament every six years. (The current one expires in 2013). The idea is to provide commercial-free, publicly financed broadcasting that is both financially and managerially independent from the government.

But the BBC's hallowed place in British society is also cultural. Words like "national treasure" and "cultural gem" are frequently used to describe it. "There is an argument that it is the single most important institution in Britain," Luke Johnson, the recently retired chairman of Channel 4, is quoted as saying in The Guardian. A former senior official in the Blair administration called the BBC "by far the most potent brand image of Britain worldwide."

It's true that subscription-based Sky TV now outpaces the BBC in terms of revenues. And BBC output now accounts for only one-third of all television viewing. Moreover, according to John Tate, director of policy and strategy at the BBC, the license fee as a percent of U.K. broadcasting "spend" has declined steadily over time, from a high of 100 percent back when it was the only game in town, down to 35 percent 10 years ago, and hovering around 25 percent today. But because "the Beeb" has its tentacles in so many different media markets, it looks massive relative to the other players because, well . . . it's everywhere.

Or it has been until now. A few weeks ago, the corporation announced a series of wide-ranging changes to its programming and services. Titled "Putting Quality First," this strategy review called for, among other things, the closure of two radio stations, halving the BBC's Web presence, fewer outlays on foreign and sports programming and an overall overhead reduction of 25 percent. While no one seems to agree on whether these changes constitute too little or too much, everyone agrees that they are significant. As Hewlett notes: "This is the first time in history that the BBC has volunteered to do less, not more. That's a big deal."

It's worth pointing out that these changes don't actually amount to much in the way of cuts. (When all is said and done, the BBC will shrink by only 0.78 percent). Rather, as Tate -- who authored the review -- put it to me, it's about "re-prioritization."

The changes are also about "showing that the BBC is not on some onward march. There are boundaries to what it can and should do," Sir Michael Lyons, chairman of the BBC's oversight body, The BBC Trust, said in a recent interview.

There's been lots of speculation as to why the corporation felt pressed to "draw the strategic circle more tightly," as Tate framed it, right now. The more cynical take is that the BBC is anticipating a Conservative Party victory in the general elections this spring. As one columnist argued, BBC Director General Mark Thompson "feared that if he didn't jump from the second story window, an incoming Conservative government would push him off the roof." In this view, the BBC is caving to a Tory media policy dictated by the Murdoch family. (Rupert Murdoch owns Sky.)

Economic factors are also at work. Thanks to the recession, all of the BBC's commercial rivals (except Sky) are suffering. As one columnist in The Times On Line pointed out, total advertising revenue for all the commercial terrestrial channels will be £1 billion below the BBC's license fee income this year. Barely 20 years ago, in contrast, competitor ITV's advertising revenue alone was double that of the license fee income. As a senior executive at one of the other terrestrial channels put it to me: "Don't underestimate the power of lobbyists working on behalf of network broadcasting. They are at war with the BBC."

Hewlett maintains that the proposed changes were an entirely foreseeable result of institutional over-reach. Specifically, in its zeal to "lead the nation" into a digital multichannel future (with the government's blessing), the BBC overplayed its hand. As Hewlett writes, the BBC sought "to colonize and control every new service, platform and digital innovation in the belief that it would lose salience among license payers who would flock to other services if the BBC wasn't there." Now, quite simply, it needs to pare back.

There's undoubtedly some truth to all of these hypotheses. But whatever the cause, there's no question that the strategy review has opened up a philosophical debate in the United Kingdom over the meaning and viability of public service broadcasting going forward.

If you read this explanation of the review by Mark Thompson in The Guardian, you'll see that the BBC's "public service" mission encompasses at least four different elements:

1) access -- the idea that everyone in this country has access to the same basic programming;

2) impartiality -- the idea that the BBC is there to provide a trusty, reliable news source;

3) universality -- young, old, well-heeled or "down-market," the BBC should cater to everyone; and

4) market failure -- in an era where information is both overproduced and fragmented, the BBC is a guardian of "quality content."

That's a tall order. And given these mandates, it's easy to see why the organization has been so expansive over the years, leading to charges of cultural imperialism and mission creep. It's also easy to see why how much you buy into the BBC's "public service" mission determines crucially what you think about where the organization ought to be headed.

Let's start with "universalism." It's important to point out to Americans that the BBC is not just a purveyor of up-market cultural offerings like Radio 3 (which airs classical and jazz music) or critically acclaimed costume dramas like "Pride and Prejudice." Having something for everyone also means that even the BBC's so-called "shiny floor shows," such as "Strictly Come Dancing" (on which "Dancing With the Stars" is based), are part of the "shared national resonance," as Tate put it to me. Translated: This, too, is worthy of compulsory public financing.

But is it? I'm not sure. I listen to Radio 4 religiously every morning ("required listening for the nattering classes," as one friend eloquently described it). But do I think that it is a public good to which everyone must contribute -- or a privilege for which listeners should pay?

And while we're on the topic of public goods, let's talk about market failure. Pretty much everyone agrees that if the BBC didn't exist, the market wouldn't step in to create it. In other words, while you might still get "Strictly Come Dancing," you almost certainly wouldn't get "Pride and Prejudice." And while I love Jane Austen as much as the next guy, you sometimes get the sense that part of the BBC's justification for being is that it knows what's good for you. (It's not for nothing that the BBC is nicknamed "Auntie.") As one columnist in the Times On Line wondered aloud: "No one ever asks why, in an age of remote-controls and time-shifting digi-boxes, viewers can't be trusted to build their own niches?"

Which brings us to competition. You don't need to be Adam Smith to feel that the BBC is, as one competitor put it to me, "a license-funded behemoth which sits there imperiously," crowding out commercial players. One extreme solution to this problem -- favored by the likes of James Murdoch -- is to eliminate the license fee altogether and have the BBC stand (or not) on its own two feet, just like everyone else. Hewlett argues that Murdoch's is a minority view and unrealistic to boot. Like it or not, he says, the BBC is "part of the furniture."

But some have argued cogently for paring the BBC back considerably by eliminating one or two of the television stations or getting it out of the pop music industry altogether, where the commercial sector does just fine. Others think that the BBC should be limited to the news and that everything else (drama, entertainment, sports) should be available by subscription.

Tate dismisses the notion of a highly streamlined BBC devoted only to high-culture programming. "The idea that we'd do some Himalayan Height of highbrow shows? Yes, you can do it. But that's not the BBC. We will not be the public service broadcaster of last resort."

In Tate's defense, even some of the BBC's competitors feel that it's done more good than harm, at least in the realm of television. Chris Shaw is the senior program controller at Channel 5, the smallest commercial television network in the United Kingdom. According to Shaw, the BBC sets "a high bar for impartiality," to which all U.K. news broadcasters must adhere. It explains why, to his mind, Britain's Sky TV is far better than America's Fox News, for example. Shaw also credits the BBC with having created such amazing technologies as the immensely popular iPlayer precisely because it has the resources -- courtesy of the license fee -- to attempt those innovations and risk failure. "None of the commercial networks can match the BBC for technological innovation and no one has invested as much money in their Web site," Shaw said.

But if, as many argue, you don't make everyone else better off in television by making the BBC worse, is that equally true of the Internet? That's a much trickier question. Because whereas you can make the case that the BBC is not directly competing with its commercial rivals for advertising dollars in TV and radio, in the wide world of the Internet, it is. That's because in the online world, eyeballs equal cash. As Hewlett put it: "If the eyeballs are sitting on the BBC site, they're not sitting elsewhere."

The BBC's standard counter to the argument that it is unfairly crushing its Internet competition is to point to places like the United States, where there is no BBC and news organizations are still struggling to figure out a viable business model. The corporation is also promising to double the number of times users click through to rivals' Web sites -- to 20 million a month. But in an era where all journalism is multimedia, mingling printed word with videos and podcasting, it becomes harder to rationalize a free Web alternative with no bottom line when everyone else is moving toward subscriptions. That's particularly true when the future -- as Tate himself acknowledged to me -- lies in embracing digital on-demand technology and Internet-connected TV.

In short, there's a lot to sort out about the BBC's future, and the strategy review seems more like the beginning than the end to that process. Whether the license fee is sustainable as a financing mechanism in its current form in the on-demand, subscription-TV era is anyone's guess. A friend of mine who's worked as a producer at the BBC for more than 20 years told me that inside the organization, there's a sense that "we're on a sinking ship. It's just sinking very slowly."

In the meantime, it's worth noting that the corporation's most valuable asset of all is the deep and entrenched public support it enjoys. The strategy review's proposal to close the small but much loved BBC6 music station provoked an online protest by more than 100,000 people. According to The Guardian, 77 percent of Britons interviewed told pollster ICM last September that the BBC was "a national institution we should be proud of," compared with 68 percent in 2004. Support for the license fee, in contrast, was considerably lower than support for the overall organization, at only 43 percent. But as Mark Thompson has pointed out: "Despite endless invitations from critics for the public to turn their back on it, they haven't. We have a relationship that frankly many companies and institutions would kill for."

Perhaps this is because many people see the BBC as a really good value when you compare it to the cost of the alternatives. A basic, no-frills annual subscription to Sky Sports alone costs £218 ($330) -- and that's without factoring in movies or any other services. Don Guttenplan, a 52-year-old journalist and longtime (American) U.K. resident, told me that "the license fee seems to me -- like my contribution to the [National Health Service] -- the greatest bargain in British life." Su Kent, a 48-year-old marketing communications manager, put it even more emphatically: "I'd pay double! Where else would you hear a program on how the fork came into being?"

Where else indeed?

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