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Viewpoints from the frontline of content.

Counting the cost of BBC reform

By Alex DeGroote 10-05-2016

Fast-forward three years. Saturday night on BBC1 comprises low-rent quizshows on a constant loop and news. No Strictly Come Dancing, Match of the Day or expensive costume drama.

The BBC currently spends around £2.5bn (US$3.6bn) annually on all TV programming, including remuneration for talent. With the White Paper imminent, and further wrangling due before charter renewal, we consider there is significant downside risk to the BBC’s TV output going forward.

This is because BBC reform appears cost-led, not revenue-led. The whisper number is that £800m in cuts must be delivered across the whole of the BBC, not just TV – and the White Paper will demand efficiencies.

Internal reforms already underway at the BBC, such as the end of linear BBC3, a cutback on live TV sport and the creation of BBC Studios, hint at the recognition that major change is coming, along with a raft of voluntary senior talent departures (drama chief Polly Hill, head of the Natural History Unit Wendy Darke, and former BBC Studios chief Peter Salmon). This brain drain will be to the benefit of the commercial sector, as will any further reduction in internal commissioning – currently around 50% of all BBC output is derived in-house. However, any impact is likely to be over the medium term, given the length of the programming cycle.

Strictly Come Dancing

Strictly Come Dancing

Opening up the BBC in this way will be a boon to indies. However, it would be a mistake to ignore the role market forces have already had in forming a vibrant and international independent production sector. Consolidation on the supply side has already happened, and the likes of Netflix are already major consumers of new original TV content. Ironically, ITV has turned itself into a super-indie in recent years.

The BBC plays an important role in the mixed ecology we have in UK broadcast and its public service remit must be safeguarded through this tumult. How many long-term careers have also been forged under the benign, if basically inefficient, patronage of the Beeb? The commercial sector will thrive even more with a weaker BBC, but it will remain driven by shareholder demands, as well as creative forces – a tricky balancing act.

The BBC also leads the way in terms of share of linear viewing at present, across all UK viewing. This will surely decline at pace, particularly if the popular shiny-floor shows are moved away from peaktime schedules or scrapped. A focus on infotainment, or cheaper unscripted programming, seems inevitable. The BBC will also no longer bid up star salaries, which again should benefit the commercial sector.

What is sad in our view is that the dismantling of the BBC is taking place without a broader debate on the revenue potential of the BBC, leaving the licence fee to one side. The debate on UK retransmission fees – a huge factor in most TV markets bar the UK – has ground to a halt. Likewise, in our view, subscription VoD could present the BBC, and the other free TV players, with an interesting sideline. The focus instead is cost.

today's correspondent

Alex DeGroote Media analyst

Alex DeGroote works for London- and New York-based trading and advisory firm Peel Hunt and has been analysing the UK broadcast industry for 20 years.

He is a regular commentator on the TV and print industries and has previously worked for stockbroker Panmure Gordon and financial services outfit Cheuvreux.