7 March 2019

Will Britbox spell the end of the BBC’s licence fee?

By Amy Horscroft

‘BritBox and chill’ doesn’t quite have the same ring to it, but it may very well be an option for British viewers by the end of the year. The BBC and ITV are in the final stages of talks about launching the subscription service in the UK by the end of 2019.

At first glance, this seems promising. BritBox already has half a million subscribers in America. At an estimated cost of £5 a month (and suggestions so far that it will not be subsidised by the taxpayer), this could be exactly the kind of challenge the BBC needs – modernising, competing with its rivals, and delivering television programmes in a user-friendly way.

But as the BBC moves into the world of subscription services, it revives the debate of whether the licence fee is still fit for purpose.

First issued in 1946, the licence fee was designed for TV and radio systems that had not undergone major advancements brought about by technology. At the time, the BBC was the natural monopoly in the market, which operated across limited airwaves, justifying the fee. It was a simple way to pay for a limited service.

But in 2019, it’s hard to view the licence fee as anything but archaic. Paying £150.50 per year (and increasing) for having a television set in your home is becoming increasingly hard to justify.

In the digital age, millions of people across the world stream their television and films online. This change in delivery has led to increased competition in the market, revitalising the television and film industries.

And companies that are willing to adapt are thriving. Netflix, which was founded in 1997, started out as a DVD service, which shipped films to your door. Fundamentally transforming its services with the times, it now has a reported annual profit of $1.6 billion and nearly 140 million subscribers worldwide.

Like Netflix, the BBC can capitalise by venturing into a competitive market. British programming could be showcased worldwide to individuals, on their own schedules, who are willing to pay for subscription. BritBox also has the additional benefit of being a more secure service, which would help tackle the thousands of people who are watching BBC iPlayer without purchasing a licence. Hopefully a subscription service would encourage them to voluntarily pay the small fee, without any threat of force or punishment for breaking the law.

In its current form, the BBC can’t compete with Netflix, Amazon Prime or Hulu – but unlike these other services, who will go bust if they don’t attract consumers, the BBC is protected by guaranteed funding from the licence fee. This makes the launch of BritBox even more remarkable, highlighting how protected funding isn’t even enough to stay relevant in today’s market.

The British public won’t want to pay for both the licence fee and the subscription service to re-watch the nation’s most loved programmes. As such, BritBox should be treated as a stepping-stone for the BBC to move to a fully-fledged subscription-based service.

It is also an opportunity to move parts of the BBC, especially the entertainment streams, out of public ownership and into the private sector where they belong.

This move is long overdue; nearly a decade ago, the BBC attempted to set up a similar, on-demand entity called Project Kangaroo, but it was subsequently shut down by the Competition Commission. Development and modernisation has been constrained within the BBC for years, thanks to public ownership. Now, with Britbox, public sector officials and consumers alike will get to see the benefits of British programming being offered en masse through a private sector vehicle.

In a digital age, the BBC is in danger of becoming obsolete if it doesn’t modernise. It’s time to close the door to the licence free and open a window to subscription services and private sector competition. BritBox is a good place to start.

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Amy Horscroft works at the Institute for Economic Affairs.