Falling audience share poses a risk to the BBC’s licence fee income, a report has said.
The National Audit Office highlighted “some uncertainty over the BBC’s financial future” amid a dramatic change in viewing habits.
It said the BBC had been “slow to change” on issues such as the fall in viewing by younger audiences, with “still no central strategy for tackling” the problem.
And “while the BBC remains the most used media brand in the UK, its share of younger audiences has been under pressure”, it said.
“Falling audience share poses a financial risk as people are less likely to pay the licence fee if they do not view licensable content,” the NAO said.
The BBC’s licence fee income fell by £310 million between 2017-18 and 2019-20, to £3.52 billion.
There was a 450,000 fall in the number of non-over-75 households buying TV licences – due to changes in audience viewing habits and more of these households qualifying for a free over-75 licence.
The broadcaster began negotiations with the Government in November last year about the future funding it will receive from the licence fee.
The NAO said the BBC should produce a long-term financial plan to set out the next stage of its savings programme, and how it will fund its new priorities.
Gareth Davies, the head of the NAO, said: “The BBC faces significant financial challenges as it embarks upon licence fee negotiations and its mid-term charter review.
“It has made significant cost savings and has identified the need for more with licence fee income under pressure.
“As decisions about the licence fee are made, the BBC needs to develop a clear financial plan for the future, setting out where it will invest and how it will continue to make savings.
“Without such a plan, it will be difficult for the BBC to effectively implement its new strategic priorities.”
The NAO said that while the BBC “considers that it delivers significant wider value to British and global society… it has not conducted an economic analysis of this in almost 10 years”.
Its financial health has also “been unexpectedly weakened by the impact of Covid-19”, it said.
“Despite its purpose of being a universal broadcaster and still being
the most-used media brand in the UK, the BBC has seen a notable drop in audience viewing times.”
Its “principal source of income, the licence fee, has also declined, and the BBC now faces considerable uncertainty about the income it will receive from the licence fee”.
In 2019-20, the BBC generated total income of £4.943 billion, of which £3.52 billion was public funding from the TV licence fee.
The amount of time that an adult spent watching broadcast BBC TV dropped by 30% from 80 minutes a day on average in 2010 to 56 minutes in 2019.
BBC radio audience time has also declined among adults, falling by 15% between 2013-14 and 2019-20, when national commercial radio stations have maintained or increased their audience time.
A BBC spokeswoman said: “As the NAO has set out, we have made significant savings and increased efficiencies, while maintaining our spending on content, and continuing to be the UK’s most-used media organisation.
“We have set out plans for urgent reforms focused on providing great value for all audiences and we will set out further detail on this in the coming months.
“The report also stresses the importance of stable funding for the future, which we welcome as we begin negotiations with Government over the licence fee.”
Paul Siegert, national broadcasting organiser at the National Union of Journalists, said the report’s findings “come as no surprise”.
He said: “It is unacceptable that the BBC should have been forced to take on the funding of free licence fees for the over-75s. The cost of that is now £500 million annually.
“They have only been able to meet that obligation by cutting costs, when that money should have been invested in quality programming and journalism. On top of that, is the threat of the Government decriminalising licence fee evasion.
“The BBC has played a vital role during the current pandemic but as the BBC begins talks with the Government over the next licence fee settlement it needs to ensure a financially secure long-term deal that will guarantee its future.”