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BBC licence fee on ice for 6 years

Trebles all round at the Trust - it could have been worse

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The BBC Trust has accepted the decision to freeze the licence fee at £145.50 for a colour licence for the next six years. But it could have been much, much worse for the corporation.

Talks on the future of the fee beyond 2012 were due to take place next year, with the BBC pre-emptively offering to freeze the fee for two years up to 2012. But in July, coalition Culture Secretary Jeremy Hunt said that it was reasonable to expect the fee to be cut in line with cuts elsewhere.

In 2007, Labour's review of the BBC's charter granted the BBC increases of three per cent for the years 2007 to 2009, and two per cent for subsequent years up to 2013.

The BBC has also been saddled with new commitments, such as funding the World Service (currently it is the Foreign Office that signs the cheques) and S4C, and funding rural broadband. These add up to £665m of additional spending commitments. It sounds a lot, but isn't: it represents less than three per cent of the corporation's income for the next six years.

But it may not end there. Hunt's junior, Ed Vaizey, suggested that the BBC should also bear the brunt for the expansion of DAB radio transmissions - the commercial radio sector is in the tank, and doesn't want to pay.

In a statement BBC Trust chairman Michael Lyons called it "tough" but said it brought stability and independence - which is really a relieved thank you and a hope for more of the same.

There's one way the BBC could make up the difference. While the licence fee is frozen, the BBC's income isn't.

The BBC has a commercial arm, Worldwide, which sells rights to programme formats (eg, Top Gear), shows, and merchandise such as toy Daleks, as well as publishing. This took home over £1bn in income last year, but the profit was was just £140m. That's a pretty low profit margin for a commercial operation, as we noted here. Selling a show that's already been made (and paid for) entails little more than taking somebody for lunch and engaging a lawyer to look over the contract. The profit margin for such a deal should be close to 100 per cent. Maybe they're not taking potential customers to the right places for lunch? Or maybe those lunches are really, really expensive.

Around 75 per cent of UK households now voluntarily pay for TV services, and it's quite a tidy sum. Sky's ARPU per household is £508 a year, and that's on top of their TV licence. If the BBC ever dared take its choicest, premium content subscription (or was pushed into it), it might not do too badly at all. ®

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