ICAEW chart of the week - BBC

The BBC released its Annual Report and Accounts last week, but you might have been forgiven for thinking that its financial results had been omitted given the media focus on the sections devoted to staff pay. We thought we might buck that trend and take a look at the BBC's income and expenditure for the #ICAEWchartoftheweek.

The chart illustrates how the BBC generated revenue of £4.9bn in the year ended 31 March 2019. This is less than the £8bn or £9bn generated by Sky in the UK & Ireland each year, but more than ITV's £3bn or Channel 4's £1bn. Some £3.2bn came from the 21.4m households that pay the full licence fee, with the government providing a further £0.6bn and assorted commercial revenue streams adding up to £1.1bn.

Expenditure of £5.0bn included £4.1bn on public service broadcasting, paying for 9 TV channels and 56 radio stations in the UK, radio services around the world in more than 40 languages, and extensive online services - most notably BBC iPlayer.

Net commercial income provides a small subsidy to licence fee payers, with attempts by the BBC to start a global subscription service for British TV content yet to bear much fruit. On the other hand, licence fee payers provided £278m of the £371m cost of the World Service, with the government contributing £93m to expand services.

At the bottom line, the BBC incurred a loss of £69m, compared with a profit of £180m in the previous year. This was driven by a cut of £187m in the government's funding for free TV licences for over-75s, while lower DVD sales led to a decline in commercial revenue.

With the remaining £468m of annual funding for 4.6m over-75s TV licences to be phased out completely by June 2020, the BBC has announced that it will continue to provide free TV licences for around 1.5m poorer households to be funded through efficiency savings. Further losses are likely in 2019-20 and 2020-21 as the BBC loses government funding before over-75s not on pensions credit start to pay the licence fee in 2020.

The fee for a colour TV licence in 2018-19 was £150.50 or £12.54 per month, with the BBC estimating that £6.92, £2.17, £1.24 and £1.08 of this respectively went on TV, radio, the World Service and BBC Online, with the balance of £1.13 paying for other services, production, licence fee collection and other costs.

The BBC faces many challenges. There is financial pressure with the withdrawal of government funding and the struggle to generate more commercial income, competition for viewers from streaming services such as Netflix, and very high levels of political flak from all sides. More fundamentally, the BBC's business model based on a compulsory subscription is under question - will that survive in the new media landscape that is emerging?

Anonymous