Thursday, March 09, 2006

Turning The BBC Into A Proper Business

The BBC is putting some of its TV content online. This is the basis for a nice business model - if it charges for the service. Instead it's offering it for free, leaving itself dependent on an unpopular tax that all Brit TV owners have to pay, whether or not they watch the BBC.

The story:
New statistics show that the prime leisure activity of Britons is no longer sitting "couch potato-like", in front of the TV. The top spot has been taken instead by people surfing the web after work or at weekends.

The average web user in the UK spends 164 minutes online each day, compared to 148 minutes for TV viewers. Men are the biggest internet addicts, logging on for about 172 minutes a day.

The BBC has trialled an "integrated media player" based on the highly successful "RadioPlayer", which gives listeners access to radio shows via their computers.

The player will let people download programmes to their PCs, using peer-to-peer technology. Viewers will be able to watch a show for up to a week after its transmission.

The software prevents users e-mailing the shows to other computers, or copying them onto a disc. The players will be available free of charge.
Here's how to run the BBC as a proper business.

It spends about £4 billion annually, mostly on two flagship TV channels. So if it broadcasts 6 hours a day on each channel that people would pay for, that's about 4,300 billable hours a year.

Hence to recover its costs and make a 20% profit, it needs revenues of about £1 million per broadcast hour. It claims that 50% of Brits watch it's programs, so if 20% of those are online users, that's 6 million. If online take-up for any given hour is 10%, that's 600,000 customers, so a charge of £1.50 an hour covers the BBC's entire costs and profit. Plus, any half-competent marketer would double the viewer numbers by promoting it to the Anglosphere, cutting the price to an affordable 75 pence/hour -say $1.

In this model the BBC recovers all of its costs from a small minority of is users. If it was smart it would ultimately distribute all of its TV on the Internet, increasing its billable market to 30 million - in that case the price per hour falls to 3 pence! Plus its costs fall since it's can dump all of its TV broadcast and digital cable infrastructure and their associated costs (about £400 million annually).

That leaves plenty to pay my modest consultancy fees.