BBC Radio in a subscription world - an update

Given the recent stories emanating from DCMS about the BBC licence fee being frozen and possibly scrapped, I reposted my old blog post about how radio is always forgotten in these debates, and how moving BBC TV to subscription would destabilise the whole of the UK radio industry.

It got a fair amount of traction - to the point I was invited to talk on BBC Radio 4s Media Show (you can find the link to the show here when it's up).

I thought I'd just revisit some of the numbers and themes as the original post was two years old. I haven't copied you in on the spreadsheet - I'll spare you that - I'll just highlight my conclusions.

I won't revisit all the reasons why this story keeps reappearing but the political phrase "dead cat" rings true here. I'll also avoid going down the rabbit hole of if it's even possible for BBC TV to be subscription based, given 18m homes have Freeview, which is virtually impossible to paywall. If you pull the BBC TV services off Freeview you presumably are putting the whole Freeview business model at risk and destabilising TV as a whole. 

Anyway - back to Radio - which would have to be spun off in some manner if BBC TV was subscription based. No BBC exec is going to spend £500m+ per annum on free radio services out of £2.5bn or so of subscription revenues (£15 per month x 18m households x 12 months (less VAT) if they are lucky) - that money will all have to go on TV.

The three things which jump out at me from reviewing the numbers (and a 300 page BBC annual report doesn't give you too much detail!) are:

A) BBC Local and Nations Radio (Scotland,Wales, NI) just cannot survive in a commercial world. Across these services it costs £3.75 a year to produce an hours worth of listening per week. Commercial Radio as a whole takes in £0.80 a year in advertising for an hours worth of listening each week. Those numbers are simply unbridgeable. Of course from the BBCs perspective this is actually quite handy. There will be a lot of local MPs who rely on one of these services to get their own messages across in interviews and news bulletins. Being told they'll no longer be on the news-desk ring round because the station won't be there might just focus a few politicians minds on the matter.

B) The BBC networks collectively (1, 2, 3, 4, 5 + digital offshoots) could just about survive if forced to carry adverts but 

1. They'd need to reduce their cost base by c 60%
2. That means they won't sound anything like they do now
3. Radios 3, 4, 5 and the digital offshoots are much more vulnerable than Radios 1 & 2 if any disposal involves separating them.

C) The commercial sector would also face a massive revenue squeeze as there simply isn't enough radio revenue to go round with more mouths to feed. A 15% drop in commercial radio revenue would wipe out most profits and be scant reward for the years of investment Global, Bauer, NewsUK and others have made in the sector.

Even on my most optimistic assumptions, the numbers don't even support BBC network radio being worth very much (in Treasury terms) if you put it up for sale as a whole - if the CMA even allowed that. Radios 1 & 2 might fetch something on their own - but that leaves 3, 4, 5 etc with nowhere to go. That's a dilemma.

If instead you closed BBC Radio down (massive redundancy costs and shut down, lease return costs etc) and auctioned off the frequencies you might raise some more cash - but again the existing commercial industry would come under enormous strain, and we've just been busy telling folk FM is on its way out to try and eliminate double payments - so good luck getting a premium price for FM without guaranteeing its survival long past its useful lifespan.

For those of us toiling away in the commercial side of the business we look on at these regular attempts to blow up the BBC with a sense of bemusement. We've managed to get along with the Corporation reasonably well over the past 50 years (not without some rows of course). We've achieved audience parity in radio, despite spending way, way less than the BBC on content. We welcome their cross-industry support on things like Rajar, Radioplayer etc. We can live happily alongside them.

I think we'd just wish:

A) they were consistently held to more rigorous and higher content and programming commitments by OFCOM, commensurate with their income source and funding level, and

B) that there was some constraint on their ability to launch new services whenever they felt like it, or consistently outbid the commercial sector for sports rights etc - and I'm afraid if that constraint is a frozen licence fee (or RPI - X% annual increases) I think we could live with that. 

But beyond that, pulling the plug on their funding completely seems crazy to most of us ad-funded folk. Some of the big commercial operators might spy an opportunity in all the disruption - but not everyone on our side can benefit, and the risks of collateral damage are high. Subscription is an idea that is already past its sell-by date in my view.