BBC director rejects subscription as optimum funding model
Joseph O'Halloran | 15 July 2014
In a stinging rebuke to those, in particular chair of Channel 4 Lord Burns, suggesting that the corporation charge for services such as the iPlayer, BBC director of policy James Heath has flatly rejected the idea of subscription as the best way to fund the BBC.

Looking at ways in which to fins a viable and acceptable funding model for the BBC in addition to the Licence Fee, Heath asserted that even if it were possible to generate the same or greater income as the current business model, a subscription model would unavoidably change the nature of the BBC and the UK's successful broadcasting ecology. He remarked: "Subscription is not the answer as long as you want the BBC to be a universal, public service broadcaster that aims to surprise and inspire each and every one of us and to deliver social and cultural benefits at scale. Subscription is also not the answer if you value the current level of overall choice and investment in British content. And it's not the answer if you wish to maximise the value for money that the public as a whole gets from the BBC."

Examining what subscription would entail, he added that subscription was not a new idea for funding the BBC, reminding that nearly 30 years ago, the Peacock report favoured it as the best way to give effect to consumers' preferences.

Yet although digital switchover has now made it technically feasible, Heath warned that charging households directly for the BBC's TV services, but not radio, and excluding non-subscribers would only be possible at "significant cost" and with a reduction of choice and investment in addition to the aforementioned loss of universality.

"Under a subscription model, the BBC's incentives would change." Heath explained. "Normally, subscription prices are set at a revenue maximising level in order for the services to prosper. Previous research suggests that were it entirely subscription-funded, the BBC would need to charge 20 per month, 65% higher than the current licence fee, for the same number of services. As a result, the BBC would become much less affordable. Our reach among the public would suffer.

"The BBC's programming choices would also likely change. It would be perfectly rational for a subscription-funded BBC to focus on services and content of appeal to those with the highest willingness to pay. Some audiences would have to be prioritised over others. People's wants as consumers would take precedence over their needs as citizens."

Drawing up his analysis , Heath said that fundamentally under subscription or some hybrid model, the BBC would be very unlikely to generate sufficient revenues to cover service costs. He reveal3d thateh BBC had calculated that the total loss of consumer surplus would be over 150 million per year from putting BBC Three, BBC Four, BBC Online plus BBC iPlayer behind a pay-wall. "Rather than delivering the best of both worlds, our initial analysis suggests that under a hybrid model some people would pay significantly more for the same number of services and others would pay a bit less for a lot fewer services," Heath concluded. "Perhaps more fundamentally, the BBC would be erecting a pay-wall around the digital future."