Broadcasters on the verge of a drastic decline, as annual shortfalls could rise above £500m.Tim Davie, BBC boss for three years now, is used to the ups and downs of a pre-crisis organization.
The threat of further funding cuts will be a sour surprise for anyone, but even he may not have expected it.
The BBC was preparing for a rise in license fees after a two-year freeze. This rise would provide a much-needed boost to its finances.
Rishi Sunak threatened to break the agreement, cautioning that the corporation should be realistic about what households can afford.
Davie, who is now forced to further cut the BBC’s output as it struggles financially, will be forced by the BBC to do so.
According to current projections, license fees are expected to increase from £173.30 to £173.30 by April. The average inflation rate for the year ending September would have resulted in the largest increase since almost 40 years.
The government will make the BBC accept a smaller increase, probably based on a lower inflation rate.
This decision would only exacerbate the BBC’s problems. The BBC has warned of a £400m deficit in its finances due to the two-year financial freeze.
Davie, an executive with a strong commercial bent who led BBC Studios previously, has already started to swing the axe.
BBC announces plans to stream 1,000 hours fewer new TV shows in order to save money.
It has announced plans to move BBC Four, CBBC and local radio online. It also made drastic cuts to the output of its local radio and merged their domestic and global news channels.
Last week, the broadcaster announced that it would reduce Newsnight to 30 minutes. It also cut more than half of its staff.
Deborah Turness, BBC chief executive for news and current affairs, blamed “tough financial circumstances”.
Together, these measures will save approximately £200m per year by 2027. This is only half the amount needed to recover the deficit.
The situation is set to get worse. If the government increased the license fee by 6.7% next year, as suggested by Enders Analysis, the BBC would face a £516m shortfall for the entire year.
The cost of producing programs is rising due to inflation in the production industry.
The BBC had to raise wages for 21,000 of its employees because of the cost-of-living pressures.
Roger Mosey, former head of BBC TV News, calls the funding squeeze “shortsighted” and “destructive”.
Jane Martinson is a former Guardian media editor and journalism professor. She has accused the Government of using BBC as “a strange scapegoat”.
The BBC is going to have to cut even more budgets. But where is the crucial question?
According to Alice Enders from Enders Analysis, the BBC will probably reduce the budgets of its large-scale projects instead of making minor cuts.
The broadcaster announced earlier this month that it would remove Top Gear from airing for “the foreseeable future”.
This decision was made after Freddie Flintoff sustained serious facial injuries during a high-speed accident last year. However, the bosses will likely welcome the financial gains of halting such an expensive program.
The TV show Strictly Come Dancing and Sir David Attenborough’s nature series could also be canceled.
The BBC is losing viewers, especially younger ones, to streaming competitors. They are making it worse by cutting back on popular shows.Last year, the public broadcaster lost over 500,000 license fee-payers.
Enders says, “The moment you reduce the content, you also reduce the audience.” It’s difficult for a public broadcaster to recover.
Davie also has other levers at his disposal. Davie’s strategy focuses on the broadcaster’s commercial arm to reduce reliance on license fees.
BBC Studios was also affected by the rising production costs, as well as other industry problems such as Hollywood’s strikes.
The BBC boss must decide now which of his sacred cattle to slaughter, without plunging into a downward spiral.
Davie is preparing himself for the future, which will likely be without a license fee. When the BBC’s Charter Agreement is renewed in 2027, other funding options, like advertising and subscriptions, can be considered.
The BBC director-general won’t be alone in this battle. The new BBC chairman is expected to announce his appointment this week. He will have a top priority of securing a model that can be used for ten years.
Amanda Spielman and Dr. Samir Shamir are the top candidates for the position of head of Ofsted.
In the short-term, however, the BBC is faced with a difficult dilemma: how to boost its finances without alienating viewers. It may never be able to regain its audience if it loses them.