Turning the Tanker

Shock, horror! BBC TV says it will be closing one of its eight channels, in 18 months’ time, perhaps. A modest amount of money may be saved, only to be spent in other ways – on more drama, and on making original content targeted at young people available online. But only if the BBC Trust approves the proposal announced on Thursday by BBC Director General Tony (Lord) Hall, who says he is “certain” that the decision is strategically right – effectively inviting the Trust to dare to challenge his operational control of the Corporation.

How typically BBC! 14 years ago, then Director of Television Mark Thompson told an audience in Canada that the BBC would be converting its embryonic digital channels, BBC Choice and BBC Knowledge, into BBC 3 and BBC4, in response to the inexorable logic driving television, whereby audiences were fragmenting and channels were trying to differentiate themselves, all as a result of the huge expansion of choice that digital television was opening up.

BBC4, we (well, those of us living in Banff) were told, would be dedicated to music, the arts, science, politics, philosophy and the world of ideas (not to mention drama series made in mixtures of Flemish and French, and Swedish and Danish, as well as in a Parisian argot spoken only by the cops and crooks living in a tiny part of the city).

BBC3 would target 16-34s, something that Channel 4 and its own digital offerings, like E4, were doing very well. Indeed, if the objective was for a state-owned broadcaster to beef up its service to that demographic group, giving the money to Channel 4 looked like a sensible bet. But the BBC was then still on its imperial march. It needed to embrace the whole population, in order to justify the licence fee, and as it had exclusive access to the licence fee, if it wanted to splurge £90-100 million a year on that narrow demographic, no one other then than the Secretary of State could stop it (to her credit, Tessa Jowell did reject the first version of BBC3, as unconvincing).

Now, a billion pounds later, the money has run out. Rather like our intervention in Afghanistan, the BBC has invaded unfamiliar territory, made a reasonable advance, and must now retreat. BBC3 did manage to win a slightly larger share of 16-34s than Channel 4, but only by defining the battleground narrowly as “transmission hours” – in other words, it measured its share of 16-34s during its 8 hours on air, compared with Channel 4’s 24 hours: simple maths tells you that Channel 4 attracts nearly three times as many 16-34s in actual total.

But there is a simpler reason for this amoeba-like splitting up of the BBC channels and audiences: protecting the dominant viewership positions of BBC1 – in particular – and BBC2. Because younger viewers actually watch less live television than older ones, it dilutes your overall share of viewing if you cater specifically for them within your generalist channels. Hence the disappearance of children’s programmes from BBC1, now herded together in the digital ghettoes of CBeebies and CBBC (both admirable in their own right, but all part of the segmentation process).

Of course, spreading your output in this way is inherently more expensive. One of the reasons BBC3 became vulnerable was that its “return on investment” (viewing share and additional reach delivered by the channel budget) compared poorly with other BBC channels. In an effort to put a gloss of strategic respectability on economic necessity, Hall has said that he is simply accelerating a process of shifting content aimed at 16-34s offline, which he might otherwise not have done for another five years if the economic straitjacket of the last licence fee settlement had not forced his hand.

The rationale is that this age group spends more time online than most others, so is more likely than others to catch this content once it is shifted to broadband servers. But this is whistling in the wind. Like the rest of us, 16-34s spend the vast majority of their time viewing video content watching it off air on television. Over 90% of all content viewing is captured by TV channels, and the bulk of the rest is accounted for by the catch-up services of those channels, such as the iPlayer.

Hall believes a large part of the BBC’s future will revolve around the iPlayer and its development into a portal whereby consumers can customize their content preferences, essentially by-passing the constraints of channel packaging. Indeed, Hall would like the licence fee to be charged on iPads and other tablets, as well as on smart phones and all other devices capable of gaining access to BBC content. Even if politicians were to agree to this change, the chances of consumers calmly accepting it are probably not very high. Indeed, it would make more sense to use the iPlayer more like iTunes, and start charging for it, as a more rational way of financing content than the licence fee. However, this line of development is much more consistent with a voluntary subscription system – perhaps geared to tiers of content, as with Sky and Virgin Media – than the licence fee itself: a direction of travel the BBC is keen to avoid.

Meanwhile, what of the regulatory process of BBC Trust approval (a mechanism introduced by Jowell to replace approval by politicians of BBC service proposals)? It can be convoluted. When Thompson – during his period as Director-General – tested the waters of service closure by proposing to shut down two small radio channels, he was rebuffed by the Trust, specifically over 6Music, which perversely managed to boost its listenership after a noisy campaign by enthusiasts to keep the station open. It survives today.

But that was a sighting shot, during Thompson’s ambitious campaign to “put quality first” (where had it been up till then?), by making internal savings of £600m a year, and re-distributing them within the BBC to improve its services. Sadly, the coalition spotted this number, and during the 48 hours of shotgun negotiations in October 2010 over the licence fee, imposed on the BBC an income freeze and new spending obligations (including the BBC World Service, S4C, broadband roll-out and local TV roll-out) which would soak up virtually the whole amount, whilst taking the cost of those obligations off the government’s books.

Should the BBC Trust and Executive Board have resigned en masse rather than allow the licence fee to be so heavily top-sliced for services nothing to do with the licence fee payer? Or collectively jumped under the train from Oxford to Paddington? They chose to succumb – and the BBC’s Finance Director even told the BBC Pension Fund Trustees that maybe it was a good thing to have politicians so invested in the licence fee mechanism: they would be less likely to try and replace it with something more rational and equitable, like subscription!

Ironically for the 16-34s, any money saved by closing BBC3 will be needed to plug the deficit in that pension fund, to which the BBC is committed to contributing up to £100 million a year for several years.

Yet how much money will be saved? Nothing on transmission costs: all the BBC3 capacity will be used to add an hour to CBBC airtime, and launch a +1 channel for BBC1 (a tried and tested commercial device for propping up audience share). As for the programme budget, £30m a year will be diverted to BBC drama (where Hall feared that any further salami-slicing of every area of BBC expenditure would most visibly dilute quality), £20m a year will be “saved” (no doubt to spent on the additional programme costs involved in the +1 channel), and – it appears – some £25m a year will be spent on online content designed to appeal to 16-34s.

This seems to me the area of greatest vulnerability during the Trust’s deliberations over the whole proposal. If BBC3 “the channel” was relatively poor value for money, how can any BBC3-style content spend online fail to be worse value, given that it will inevitably attract less viewing? Hall promises that so-called “long-form” online content (that is, traditional TV programmes) will be re-broadcast on BBC1 or BBC2, which will assuage to some extent the creative community who have found an outlet on BBC3. Yet is not this simply going back to a more mixed schedule for BBC1 and BBC2, a bit like the good old days?

That such a modest proposal (not in the Swiftian sense, but literally) should be subject to such a lengthy approval and implementation timetable tells us how hard it is to turn around the BBC tanker. During the decades of constant BBC expansion, and constant rises in revenues as the number of homes paying the licence fee steadily increased, the issue of retreat never really featured in BBC thinking. Now many painful choices will have to be made. Perhaps even the major internal inefficiencies in the BBC’s structure – in-house production, a distribution arm that is only quasi-commercial – will now come under closer scrutiny.

Has a generation been betrayed by the BBC? That is foolish talk. Long before BBC3 was even thought of, brilliant comedy series targeting this demographic – like The Young Ones – were a regular part of BBC mainstream output. Now they will have a brief life online before being re-incorporated there. Much bigger decisions surely await Lord Hall and the Trust. BBC3 may prove to be the first straw in a veritable gale.

This piece first appeared in the Daily Telegraph, 6th March 2014.