Introduction and Context
The recurring debate about BBC funding and the potential move to a subscription or ad-funded model has intensified in recent years, particularly around the 2027 charter renewal. Events in the past couple of weeks have made the debate even more intense, and I had the privilege of appearing on Radio 4’s Media Show (17m in) recently to discuss my concerns over radio in this process – which is the subject of this blog, which goes into more detail than I could get across in a few minutes of airtime.
The wider context here is that at a recent event hosted by The Sunday Times, Culture Secretary Lisa Nandy said she was “looking at a whole range of options” to replace the licence fee, including a “mixture of licence fee, commercial funding and some subscription services”. More recently she has suggested a mix of reduced licence fee and subscription might be her preferred option.
Alongside her preference for subscription, Ms Nandy doesn’t spell out what commercial funding specifically means, but I think we can assume advertising and/or sponsorship would fall under that broad heading if the BBC is forced to develop new sources of commercial funding above and beyond its current commercial success in overseas programme sales etc.
I don’t intend to dwell on the recent events which have seen the resignation of the DG and CEO of News, although I did comment in passing on the show about lack of leadership at the BBC. Of course this recent crisis has meant much attention has focused on BBC television services and the questions of political bias, metropolitan elitism, and relevance to underserved audiences which inevitably colour charter renewal debate and how the BBC should be funded – but there's a critical blind spot in these discussions – they concentrate far too much on Television and ignore Radio.
There is no doubt in my mind that there would potentially be a catastrophic impact from the introduction of some form of subscription and/or advertising & sponsorship funding within the BBC on the entire UK radio ecosystem.
My analysis below, originally written as a blog in 2020 and updated in 2022 following renewed government interest in freezing or scrapping the licence fee, examines why moving BBC TV to subscription (realistically only in part) and then forcing some elements of BBC Radio to take advertising would destabilise not just BBC Radio but the entire commercial radio sector—to literally no one's listening benefit.
Declaration of Interest
I have spent my entire career in commercial radio, competing directly with BBC services. I have good friends who work or have worked for the BBC, have sat on industry boards alongside senior BBC executives, and was until recently chair of the ARIAs (the UK radio industry awards), which relies on BBC support. It's impossible to play any prominent role in UK broadcasting without having some relationship with the Corporation. That said, I have never worked for the BBC, and at this stage of my career I doubt an offer is forthcoming.
Why the Subscription Model Doesn't Work for Radio
The Technical Reality
While some BBC TV services can be placed behind a subscription paywall, doing so for every BBC TV channel would present a significant technical and societal challenge. The free-to-air Freeview service serves 16 million homes, cannot cope with subscription, and for 10m of the people it serves it is the main or only means of TV access.
Taking the BBC off Freeview completely would be devastating for millions of people – especially older or poorer viewers - and would of course mean the likely collapse of the whole Freeview business.
Perhaps the Secretary of State is imagining (and others have floated similar ideas) that the “Core BBC” services - probably BBC 1 (programming cost £1.3billion) & BBC 2 (programming cost £300m), and possibly the BBC News channel (£53m) remain free to air, with BBC 3, BBC 4, CBBC, CBeebies etc and the iPlayer becoming subscription. BBC online is free too (cost £250m) and would surely also form part of this “core” function – and I would suggest Radios 3 & 4 (programming cost roughly £120m) and BBC World Service (programming cost £250m) could not be jettisoned – so the “Core BBC” will cost roughly £2.25 billion to run by service, and with admin, engineering costs and most critically the very significant transmission costs etc I’d imagine the total running cost to be c £2.5 billion per annum to maintain a “core BBC”, free to air without any ad funding.
How could that be raised?
I could see a mandatory licence fee of £10 a month for all, which would represent a big political win for those politicians and commentators concerned that the current fee is too high. Those upgrading to subscription would pay say an additional £8 a month (so £18 in total - significantly more than the current monthly fee) for those additional channels/iplayer etc.
12m homes paying just the basic £120 per annum, and 10m paying this £10 per month as well as a subscription top up would give “core BBC” £2.6 billion per annum – roughly in line with the costs outlined above.
The “subscription BBC”, if funded by 10m households paying an additional £8 per month, would have £1 billion to manage, although these subscription fees may well be subject to VAT, so only contributing £800 million or so – and of course there would be costs in administering the fee itself.
10 million people paying £8 per month is not unrealistic when compared to the existing streamers. Netflix is the big streamer, 17.6m households with a standard fee of £12.99; Disney plus is in 7.6m homes with a £9.99 standard fee; Apple TV in 2.7m homes paying £9.99 and Paramount+ in 3m paying £7.99 as standard. Quite a few of these streaming subscribers are using a reduced pay tier with Ads – but I can’t imagine the BBC going down this route in TV so I think they will have to be charging around £8 per month on top of the mandatory £10 licence fee – so realistically 10m households is probably at the top end of expectations.
I’ve assumed only 22m households partake in paying for this split BBC model, down from the current licence fee universe of 23.4m – numbers have been steadily dropping over recent years, and I think many people will feel this split BBC, with a reduction in the core offer and fee increase for subscription compares unfavourably to what they get now as part of the licence fee package, and is therefore not for them and will exit terrestrial TV altogether.
In addition, BBC Worldwide generates £2.2 billion in revenues and passes back roughly £250m to the BBC for general UK use. In the event of a BBC split between core and subscription, it would be hard to argue that this cash shouldn’t sit within subscription, to help fund new TV programming for future subscription growth, more overseas sales etc.
So “Core BBC” might have income of roughly £2.5 billion, and Subscription BBC £1 billion.
It’s worth pointing out this is around £500m less annually than the BBC currently has to cover its costs, and I can’t imagine circumstances where a move to part-subscription doesn’t lead to some significant reduction in overall income levels – if it didn’t, I suspect the BBC would already be embracing the move.
The “Core BBC” services outlined above could just about survive with that core fee income.
But here is the issue. Where do the rest of the BBC Radio services sit – services which in total currently cost £375m per annum to run? On a “core BBC” with £2.5 billion of income and £2.5 billion of costs, an additional £375m cost line is inconceivable.
A separate BBC TV subscription service with £1 billion to spend might possibly be enough to run the TV channels BBC 3 and 4, CBeebies, CBBC and the iPlayer and generate enough additional TV programming to make the extra £8 per month worth paying for etc etc – but here’s the issue – will any BBC TV subscription division, desperately fighting for its share of the overall TV subscription pool, want to spend precious cash on radio?
The services other than Radios 3 and 4 collectively cost £300m for content alone with a significant cost for distribution and transmission (I'd estimate £75m-£100m as a whole for BBC Radio given the depth of the FM and DAB networks and resource applied to BBC Sounds). A subscription-based BBC spending that much on free radio services out of roughly £1 billion in subscription income simply wouldn't make business sense. That money would have to go entirely on TV content. And just to state the obvious, radio simply cannot be encrypted. In the UK, all radio is free-to-air. The prospect of scrambling DAB signals and requiring new decoder boxes is pure fantasy (as a point to note though, some online radio services are being paid for by subscription using an app, but the numbers are tiny, and no-one realistically thinks this will change over time).
In truth, neither half of this split core BBC/subscription BBC is going to want the rest of these radio services!
I am not a TV expert or subscription boffin – so some of my assumptions on pricing and subscription levels might be off a little, but I think overall the thinking above is reasonably robust as to how a part-subscription service could be organised and funded – and has to be thought through in order to get to the meat of my argument – the damage to radio.
The Catastrophic Mathematics
If we assume a reduced licence fee would save just Radios 3 & 4 and force the rest of BBC Radio to fend for itself, the seemingly obvious solution—letting these orphaned BBC radio networks (1, 1 Xtra, 2, 5 Live & Sports Extra, 6 Music, Asian Network, Local, Nations & Regions etc) join the commercial sector in taking advertising revenues—reveals itself as catastrophic when you examine the numbers.
Current State of Play:
• BBC Radio costs: approximately £500 million annually to produce and distribute, excluding the World Service – this includes all BBC Network Radio, Nations Radio and Local radio. Of this £500m, Radios 3 & 4 are roughly £125m, the rest £375m• BBC Radio market share: 42% of listening according to RAJAR Q3 2025, of which 3 & 4 are roughly 12% and the remainder 30%
• Commercial Radio market share: 56% of listening according to RAJAR Q3 2025 • Commercial Radio national income: approximately £600m net of ad agency commission but before royalties and sales costs, which generally take up c 25% of net income.• So - Break-even requirement for Orphaned BBC Radio (1, 2, 5, 6, Local & Nations etc): Approximately £500 million in net ad revenues (before those royalties and sales costs of 25% which they would have to incur) if they were to continue at current cost levels.
The Economic Reality
Basic economics tells us that if you significantly increase the supply of something with no increase in demand, prices collapse.
If Radio advertising space for sale goes up by roughly 50% (from just under 60% commercial to just under 90% commercial) that won't lift radio advertising revenue from £600 million to £900 million, let alone the £1.1 billion actually needed across all services just for the BBC services to breakeven, given commercial radio sits already at £600m.
In fact, despite Commercial radio audience levels increasing 25% over the last decade, revenues have increased just 33% from £450m to £600m net – and given inflation over this period was also 33% the real income from advertising has stayed flat over 10 years despite this audience growth of 25%.
So adding another 50% audience growth via these orphaned BBC networks and expecting growth in revenues to even match that £ for £ is not indicated by any current data – in fact the reverse is more likely – just the same revenues, split amongst more players.
So realistically the range of total commercial radio advertising revenue after this change might be as low as £600m (i.e. no growth at all), and with a maximum figure of £900m – i.e. growth just in line with increased audiences (BBC radio audiences are not any more attractive to advertisers than existing commercial audiences).
Given the fierce competition from TV, outdoor, digital, press and magazines, there would be no surprise if you did not get much extra income at all, and that a figure closer to £600m than £900m might be the realistic outcome.
Commercial Radio’s Trade body, Radiocentre, commissioned economics experts Compass Lexecon to do some research on the effect ad funding for the BBC Radio sector would have on overall commercial radio prices – their conclusion was prices would drop by 36% - you can read more here. That would suggest very little growth at all.
Even under an optimistic assumption - a midway increase to £750m in total (ambitious given all players would drop prices to secure revenues) - and that this revenue was distributed evenly by market share:
• The Orphaned BBC Radio Networks would keep only around £250 million before royalties and sales costs, so £200m at most after taking those costs into account - requiring pretty much 50% cost reductions just to break even (and distribution costs are hard to reduce, so these needed savings would all fall on content).• Commercial players could face 15% revenue drops, from £600m to £500m, plunging many into losses and destabilising the whole sector
You couldn't privatise BBC Radio on this basis - there would be no profits to base any valuation on and leaving these stations within either of the two split BBC businesses is just passing on a huge financial headache, with these losses leaching away at the two divisions.
Even on the most optimistic assumptions, the numbers don't support BBC network radio being worth very much in Treasury terms. Even if they were offered for sale/privatised, The Competition and Markets Authority might not even allow these Orphaned BBC Radio assets to be kept together given their combined size.
Three critical points emerge from reviewing the numbers in detail:
A) BBC Local and Nations Radio Cannot Survive Commercially
Across BBC Local Radio and Nations services (Scotland, Wales, Northern Ireland), it costs £3.75 per year to produce an hour's worth of listening per week. Commercial radio as a whole takes in just £0.80 per year in advertising for an hour's worth of listening each week. These numbers are simply unbridgeable. From the BBC's perspective, this does create a political shield—local MPs rely on these services to get their messages across. Being told these stations won't exist might focus politicians' minds considerably – so maybe they might be saved as part of “core BBC” – although adding another £125m to the costs of running “core BBC” might be challenging – and force more savings on BBC 1 & BBC 2, undermining the rationale for a core licence fee in the first place.B) The BBC National Networks Could Barely Survive with Advertising
Excluding Local/Nations, and Radios 3&4, the residual BBC national networks (Radios 1, 2, 5, plus digital offshoots) could just about survive if forced to carry adverts, but:
1. They'd need to reduce their cost base by approximately 50% from £250m to £125m (again mostly content as distribution is pretty much fixed)2. They wouldn't sound anything like they do now and would be running with probably 10 minutes of ads per hour.
We know from research the absence of ads is a key draw (if not the primary reason) for people tuning in to BBC networks. The introduction of heavy ad loads could massively impact their current audience levels, reducing numbers and further undermining any commercial viabilityC) The Commercial Sector Would Face A Massive Revenue Squeeze
There simply isn't enough radio revenue to support more mouths at the table. A 15% drop in commercial radio revenue would wipe out most profits - scant reward for the years of investment Global, Bauer, NewsUK and others have made in the sector, and a terrible betrayal from government following decades of forced investment in DAB (the industry has faced a regulatory “support it or lose your licence” Hobson’s choice since the beginning of this century).
Are there other solutions?
Realistically could the BBC afford to keep all those radio services within its “core BBC” licence fee bundle, even part-funded by ads.
I just can’t see it – I don’t think the revenue is there and I’m sure plunging audiences driven by huge cuts and heavy ad-loads would make most senior BBC execs wonder why it was worth the bother. Neither can I see any future for them within the subscription element. So there might have to be some form of dismemberment!
BBC Local Radio & Nations/Regions
If “core BBC” can’t afford them, these would almost certainly have to close. As highlighted above, at c £125 million per annum including distribution, it carries larger costs than any national network. The chances of significant advertising funding through growth in local ad revenues is non-existent (in total, local commercial radio ad income is circa £100 million and falling). This would be a hugely politically sensitive decision.
BBC Radios 3 & 4
Could probably survive within the “Core BBC” bundle.
BBC Radios 1 & 2 & Five Live
There might be an attempt to privatise/sell these off. Even here, there are serious concerns about sufficient advertising income being available. Strategists at Global, Bauer, NewsUK and other organisations would need to make careful calculations about:
• How much of the existing Radio 1, 2, 5Live audiences would stay in an ad-funded environment• The overall effect on the size of the radio ad market• What programming elements that make these stations unique would inevitably be lost
One Alternative: Closing Down and Auctioning Frequencies
If instead you closed BBC Radio down entirely and auctioned off the frequencies, you might raise some cash, but you’d also face:
• Massive redundancy and shut-down costs• Lease return costs• And … we've been telling everyone FM is on its way out to eliminate double payments—good luck getting a premium price for FM without guaranteeing its survival long past its useful lifespan
What the Commercial Sector Actually Wants
On last weeks R4 Media Show, conservative commentator Tim Montgomerie said the most sensible thing I’ve heard in this whole debate – government should just leave the funding of the BBC alone for another period, as it’s too difficult to resolve without major disruption somewhere.
There are changes to leadership and structure that might be sensible to make and that could and should over time restore trust and faith in the BBC – but leave the licence fee as is for now.
The world will look different again in 10 years – deal with the inevitable disruption then not now. There’ll be a steady erosion in both audiences (especially younger ones) and licence fee income, but that should just force the BBC to live more within its means.
For those of us in the commercial radio business, these regular attempts to blow up the BBC are met with 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 better than audience parity in radio despite spending far less than the BBC on content. We welcome their cross-industry support on initiatives like RAJAR and Radioplayer. We can live happily alongside them.
Personally, I could live with a licence fee that was set to be fixed at c £170/£180 per annum (£15 per month), with a very modest subscription element for the iPlayer (perhaps just an additional £10 per annum, rising over time). Not radical – but would perhaps force the BBC to do what it does best, and only what it does best – and perhaps nudge it to get out of areas it doesn’t need to be in such as podcasting, ancillary offshoots of its current radio brands etc..
And specifically in terms of radio, what we as the commercial sector would actually like to see:
A) More rigorous programming commitments
The BBC should be consistently held to higher content and programming commitments by Ofcom, commensurate with their income source and funding level. Ofcom really needs to demonstrate that its content regulation is as strong and impressive as its economic regulation.B) Constraints on new services and sports rights
There should be some proper constraint on the BBC's ability to launch new services whenever they feel like it or consistently outbid the commercial sector for sports rights. If that constraint is a frozen licence fee we could live with that.
The Broader Impact
Pulling the plug on BBC licence fee funding completely seems crazy to most of us in the ad-funded sector. Some big commercial operators might spy an opportunity in the disruption of even a partial shift to subscription, but not everyone can benefit, and the risks of collateral damage are high.
This isn't just about economics. The three-legged funding approach (advertising, subscription, and licence fee) that we have in the UK has fostered one of the best broadcast ecosystems (TV and radio) in the world:
• Democratic function:
BBC News is our most highly regarded source of information, critical to a healthy democracy, with much of its integrity driven by its radio services. Obviously it has just shot itself in the foot rather badly – but on a longer term view, with new management, this can be repaired• Cultural impact:
We punch above our weight culturally across the world (except perhaps in Trump’s America) because of our strong TV sector, underpinned by the BBC and cross-fertilised by radio• Economic function:
The supply of advertising is essential for a free market economy to operate, and commercial radio is a vital cog in that structure
Conclusion
Can you imagine what 50% cuts to BBC network radio services would sound like? What would 10 minutes of ads every hour do to already shrinking BBC audience figures? How would local politics suffer without local media challenge? The quality, breadth and depth of output would be immeasurably damaged. No doubt there are efficiencies to be made, but the size of cuts likely needed goes way beyond anything management consultants might suggest.
As someone who generally supports a libertarian approach to economics, I can see why mandatory poll-taxes are problematic. I can see arguments for examining the level of the licence fee, whether it should be constrained, and whether greater external scrutiny of BBC editorial output is needed. Whether these concerns require the wholesale dismemberment of the current funding model is open to debate.
And let’s be realistic, the current government is not going to close down the BBC, so any contribution to this debate needs to be made with that in mind.
However, this particular poll-tax has allowed a critical industry sector to survive and thrive on more than just advertising revenue and subscription. Both the BBC radio networks and the big commercial players would be affected in whatever scenario can be envisaged. I simply cannot see a way in which UK radio in its current form survives the collateral damage that eliminating or substantially reducing the licence fee would entail. Both sectors would become poorer, and both would inevitably sacrifice non-essential output for cost savings.
The subscription model for BBC TV (either in whole or in part) is an idea that brings with it huge risks. We're in danger of throwing out both the baby and the bathwater if we're not careful—sacrificing a satisfactory (if disliked) funding model as "punishment" for perceived BBC failings, or because of philosophical dislike of publicly-funded broadcasting, or unhappiness with The Today Programme's editorial line.
Radio is always forgotten in these debates. It shouldn't be. The collateral damage would be catastrophic, and no one—literally no one—would benefit from the listening experience that would result. As Joni Mitchell once said “…you don’t know what you’ve got ‘til it’s gone”.
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