BBC Boss Calls for Modernized License Fee, Says Cost Cuts Will Ensure Proper Drama Budget

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BBC director general Tony Hall

UPDATED: Tony Hall tells a conference in Oxford that the U.K. public broadcaster is "great value for money" and is looking for $160 million in additional cost cuts to ensure an appropriate drama budget.

OXFORD – The BBC remains "one of the finest" broadcasters in the world helped by the license fee paid by taxpayers, but it must ensure financial efficiency and quality content to continually prove its value to viewers, director general Tony Hall said here Wednesday.

The U.K. public broadcaster is "great value for money," he told a TV industry conference here, adding that the BBC's services are strong and popular because of, not despite the license fee that has long had its critics. But he also signaled that the fee could be somewhat modernized when the BBC and the U.K. government agree on a new charter following its current one that expires at the end of 2016, particularly to close a loophole that currently allows to watch TV shows on digital player iPlayer without paying the license fee.

Hall also said Wednesday that the BBC would continue to cut costs, but not in a way that would hurt its output. In that context, he mentioned that the broadcaster is looking for additional cost cuts to help ensure its drama production budget remains big enough. Previous cost cutting plans had also called for reductions in the drama space.

Cost controls and the license fee were the underlying themes throughout the speech by Hall who took over the BBC in early April 2013.

To those who question the license fee that taxpayers must contribute to help finance the public broadcaster, Hall said anyone who thinks that the fee undermines competition must only look at the great work that U.K. TV providers such as ITV, Channel 4 and BSkyB do along with other media and technology companies, including Amazon, Netflix, Apple, Google/YouTube and others.

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Maximizing profits and targeting more attractive audiences would be the way the BBC would have to go if it was to lose the license fee, Hall said.

"One of the advantages of the license fee is that is is flexible," Hall said in signaling his openness to changes in the way the fee is currently assessed. "It has adapted itself so well over the decades." The fee could in the future, for example, apply to BBC consumption, he said, instead of to all households watching traditional TV. That could also lead to individual users in a household being charged for BBC services based on whether they consume them or not.

"When and how best to take the next step is, of course, a matter for the government," Hall said. "Our view is that there is room for modernization so that the fee applies to the consumption of BBC TV programs, whether live…or on-demand via the [digital player] iPlayer."

Should other British broadcasters be allowed to get part of the license fee as some BBC critics have suggested? "Contestable funding feels like a solution in search of a problem to me," Hall argued. "In the anxiety to privatize the BBC, this proposal suggests nationalizing the rest of the sector. But, most importantly, the fragmentation of the license fee risks de-stabilizing a broadcasting model that works, a model that is based on competition for quality – but not funding – between public and private broadcasters."

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He said a shared fee and competition for it would mean "less and less funding for content and services that we know people love." He added: "And by weakening the BBC, you also weaken the competitive intensity that underpins the success of U.K. broadcasting."

Hall also said Wednesday that the rest of the U.K. benefits from the license fee-financed BBC as well. The broadcaster is "just one part of one of the strongest media sectors in the world," which "is not an accident," he said. "The BBC helps the health of the U.K. media sector and benefits from it."

Hall opened his speech here by showing a video of popular BBC news and entertainment shows. They are one key reason why "so many people feel warmth towards the BBC – in bad times and good," he argued. "Over the past 18 months, the concentration of so many people has been on the bad," Hall added in reference to the Jimmy Savile sexual abuse scandal, excessive executive severance payments and other scandals that made negative headlines. "So today I want to part those clouds and bring light to what’s been going on beneath: to look at some very real – and I think unsung – achievements, and discuss how we will continue to build the BBC into a model media organization of which this country can be even more proud."

Hall also said: "It's part of my mandate to reflect on these mistakes."

He cited reduced production costs for soap operas, improved corporate governance rules, payout caps, as well as the continuing launch of new services on TV, radio and online as key BBC achievements.

By the end of this fiscal year, the BBC will reach about half of its targeted savings of $1.1 billion (700 million pounds) by fiscal year 2016-2017, Hall said. And he shared that the company is planning to cut an additional $160 million (100 million pounds) in costs, with details currently being worked out. But he said those cuts would come to help ensure a big enough budget for drama production and the continued development of the broadcaster's digital player, iPlayer.

"If we followed the original plan, we would be cutting our television drama budget by tens of millions of pounds, and I’m worried we would no longer be able to compete with the best in the world," Hall explained. "That would have been bad not just for us, but for our audiences and for our creative industries. You could even say it would have been bad for Britain. We decided we’d reached the point where salami-slicing would affect quality and distinctiveness."

He spent some more time explaining his approach to cost cuts. "I want a simpler," leaner organization, Hall said in highlighting that staff and layers of management will continue to be reviewed, but in "the right places." He emphasized: "We'll keep being as efficient as we can," but only where it doesn't hurt the BBC's services. "Quality must come first."

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Hall also touted the BBC's importance Wednesday by saying that its cultural influence matches that of Apple and Google, even though their financials are a multiple of the BBC's.

"The BBC is a great British invention," Hall said in concluding. "But we will only preserve it by doing what the BBC has always done: innovate, change, find new ways of doing things. Providing a quality service for everyone, whoever they are, wherever they are. But always, always, staying true to its values – to inform, educate, entertain – and I hope, inspire."

Meanwhile, Britain's secretary of state for culture, media and sport, Maria Miller, at the conference was asked about her take on the future of the BBC. She said the public broadcaster should build on its public service strength.

"How do we make sure that it is an organization that has strong governance, that has vision and that focuses on this incredibly strong public service [offering]," she said about her main concerns. "They have started this process. For me, I want to see this process progress" before the government starts talks with the BBC about a renewal of its charter and the future of the license fee.

Miller added that the BBC's future shouldn't get mixed up in political discussions. "Quite frankly, the BBC is too important for that," she said.

Twitter: @georgszalai