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The Business Model Of The BBC

Paper Type: Free Essay Subject: Media
Wordcount: 4343 words Published: 9th May 2017

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The business model of the BBC is quite complex as it is funded by the government through TV licence fees, however, it is expected to be many things: [3] “private and public, profit and non-profit making, a respected and responsible national institution as well as a nimble entrepreneurial entity”. The BBC could be defined as an [4] “intersect organization” which demonstrates its conflicting objectives. The BBC’s “mission” is to [5] “enrich people’s lives with programmes and services that entertain, inform and educate” through its various forms of media communication, that is to say, its purpose is to provide a value for money service to the public. It provides value for money through a variety of shows, for example, regarding ethnic minorities which other channels would not consider and also there are a wide range of channels which are dedicated to specific age groups such as CBeebies for kids and BBC Four focuses on documentaries whilst there are different radio stations for various genres of music thus conveying the diversity of the BBC appealing to all kinds of people including minorities through radio, television and internet. This value is also extended through the use of BBC iPlayer which enables viewers to catch up on watch again episodes such as Top Gear. The BBC prides itself on delivering innovative and informative programmes through the revolutionary technology of internet, digital and satellite communications.

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The BBC claim their vision is to be [6] “the most creative organisation in the world” and their goal is clear which is to be a global icon. They also wish to represent an independent view point on issues such as politics and be a proud representation of Britain. Their main objective is not to earn significant profit but to be globally recognized as a top quality producer of innovative programmes and services via a wide range of mediums and offer the best news coverage in the world. The BBC provides a wide range of shows from entertainment to sports coverage to educational programmes. It is also committed to earning profit through the sale of educational books and TV shows whilst also doing charity work. In addition, the cooperation is dedicated to research and development which has lead to a strong presence on the internet and BBC radio and television are available in over [7] 99.4% of UK homes. It is mainly based in London, however, through the leadership of [8] Mark Thompson he has decided to diversify and move employees to Manchester to change the stereotype of their image as a London cooperation.

I think that the present situation is viable; however, a few changes could be made which I will mention later. I believe that the current situation is tenable as the BBC is universally renowned for its productions which will generate cash flow though the sale of programmes and the sheer number of people who watch their news coverage which covers sport to politics. The BBC has done very well as it moulds itself to different areas and markets of the world to appeal to certain people through e.g. BBC world or releasing a BBC channel in Arabic. The cooperation has also divulged itself into the technology side making all its information and programmes easily and readily accessible which will hopefully meet the demands of the people in the ever evolving technology based world we live in. The BBC have the upper hand over BSkyB in the sense that their brand image is internationally recognized and their unique selling point is the originality of its programmes which must carry on as they enrich peoples’ lives. Also the plan to go digital must stay on course as when this is complete they will be able to compete with BSkyB as the BBC’s services do not need a satellite box and dish.

Due to the current situation, the BBC must make slight changes to their business model because of the emergence of BSKYB which has dominated the UK market recently. They are now competing with hundreds of channels thus resulting in less “guaranteed” viewers because the BBC has [9] traditionally taken programmes from internal or external sources and fitted them into their schedule via their two channels to meet the needs of the audience therefore they could make more specific channels like BBC education. Firstly they need to do this because it will be able to compete against the plethora of new channels but also to convince people that satellite television is not necessary as the BBC has it all. However the BBC’s income is fixed as the licence fee is set by the government so as its other main competitors are using this profit to expand and increase their range of services whilst the BBC is falling behind therefore the BBC must find new ways of generating more of a cash flow to keep up with its competitors possibly through online advertising. In addition, thanks to the growth of broadband one is now able to stream TV through their computer and access content easily which provides a further threat to the BBC but to which they have taken to their advantage whereby they have introduced BBC iPlayer which has attracted 41 million requests in December 2008 alone.

With regard to the future, the BBC cannot carry on being all things to [10] everyone this is not viable as they are mainly government funded hence they cannot expected to meet the needs of everyone. I think this does not allow it to focus as there is no clarity because you cannot be all things to all people it is virtually impossible and it is not viable at all due to the increasingly competitive market but needs to be careful as its budget is very limited. The BBC needs to be efficient and the job cuts might be justified as they need to ensure their financial stability and future ambitions.

Michael Porter highlights three generic positions which can be implemented to create a competitive and profitable advantage: Cost leadership, focus and differentiation.

Cost leadership strategy underlines the fact that the company must become the lowest cost producer but produce a given level of quality which the consumers are happy with. This strategy is illustrated via [11] Toyota which “supplies quality cars which are low in cost but have marketing skills to use a premium pricing policy”.

A differentiation generic strategy offers a product or service to consumers which are unique whereby they believe it is better than their rivals. This can be done through creative programmes, strong sales team and developing brand strength.

The focus strategy is a middle ground line taken whereby the organization cannot take on either strategy therefore they focus on a narrow and elite market. This will create a relationship in the long term with specific consumers and the organization must provide whenever needed.

Out of these three strategies the BBC does have a bit of each strategy; nonetheless, I believe that the main strategy utilized by the company is differentiation with a hint of cost leadership. The main strategy is differentiation because the BBC’s brand image is internationally recognized and is well known for its quality programmes. The hint of cost leadership is that they have attempted to minimise cost as much as possible through mainly redundancies and also through the TV licence only costing £142.50 per year, although an increase, is relatively cheap in comparison with rivals. Through the culmination of these strategies this would provide customers real value for money as well as discouraging potential entrants.

12Porter claims that the main ingredient needed is clarity in combination with one of these strategies. He goes on to say that the companies that do not follow this model do not necessarily fail, however, they fail to maximise and optimise their resources hence this does not put them in a comfortable situation which could have been avoided. Due to the fact that everyone must have a TV licence for their television sets the licence the BBC must provide good value for money and cater to peoples’ needs.

Through differentiation strategy the company is able to grab a hold of the market through customer loyalty and if the quality is to the consumers’ satisfaction will discourage potential entrants. I believe this is the generic strategy as the BBC’s main income comes from TV licence fees so it needs to be unique and this strategy can be only maintained if the BBC carries on offering creative and innovative programmes.

There are five industry forces in a competitive market according to Michael Porter: Barriers to entry, Buyer power, Supplier power, Threat of substitutes and Rivalry. With regard to the five industry forces mentioned, the entry barriers of differentiation strategy gives the opportunity to deter potential entrants through customer loyalty in the hope that you gain some kind of monopoly in the market. Buyer power is a strength of differentiation because large buyers have less power to negotiate due to fewer alternatives. The cooperation will also find it easier to pass on supplier costs to consumers as they are willing to pay that bit extra. The company will be well protected from the threat of substitutes due to the consumers’ attachment of the differentiated company. The brand loyalty will keep consumers from rivals and put the company in a strong position.

Overall the strong points of differentiation strategy are that it ensures customer loyalty with guaranteed quality which will discourage and one can pass on costs to the consumer because of their affiliation to the service. From the company’s point of view of the company it guarantees consumers and secures stability in the long term.

Leadership plays a key role in providing the vision and direction that structures the way in which the company will work in terms of strategy. [13] “Leaders are expected to deliver and achieve what they set out to do” and they also are expected to establish standards and motivate the employees to achieve maximum potential whilst also being totally committed. A leader must act in the interests of everyone and achieve quality communication between all staff. Taking this into account I will now analyse the leadership of the BBC with regard to Mark Thompson.

The director-general, Mark Thompson, has decided to pull out of the so called “ratings war” but as the BBC is a public service broadcaster this should not be its priority. I see this as a strength as it will allow the BBC to make original and refreshing programmes that will offer a range to viewers. As the BBC’s revenue comes through the government’s implementation of the TV licence this again gives the BBC an advantage because it provides it with assured revenue and stability which guarantees job security for the staff and also ensures that BBC’s priority are the viewers and not to gain profit. Another positive is that the government does not intervene in affairs of the BBC which permits the BBC to work in its own way and be unconstrained. Thanks to the leadership of Mark Thompson the BBC is to become more diluted through the £200 million investment in the new BBC base in Salford Quays which will diversify and dilute its London influence in the hope that it will be seen as more “British”. The BBC’s commitment to technological advancement is a major strength as the demand is growing and it has certainly provided through the launch of BBC iPlayer and the completion of the switchover to digital throughout the whole country. The technology will also enable the need for fewer job requirements and possibly render some staff to leave which will ease the financial situation.

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The Director-General has also highlighted the need to have no imitation programmes and the return to in depth current affairs coverage which will please viewers as they want something unique. The BBC must also ensure it keeps its coverage of certain sports which attract a wide range of viewers and are extremely popular such as Wimbledon tennis championship, Formula 1 coverage and Match of the Day. Mark Thompson has been a great leader to the BBC as he always sent out emails to staff to underline his aims and objectives which give employees a sense of unity demonstrating his clarity of objectives and communication. When the salaries of executives at the BBC were revealed, Thompson immediately proposed the pay of the top 20 executives to be frozen for the next three years including his salary but also the suspension of bonuses for managers. He has done extremely well when the BBC has received so much abuse and attempted to resolve the issue without kicking up a fuss and enforcing absolute standards: the sign of a leader. Mr Thompson is courageous and is not afraid to do what others might not, he recognized that redundancies were needed and so that is what he did this could be perceived as ruthless or rather, putting the company’s interests at heart.

The decision to dilute and diversify from London is in my opinion a weakness of leadership of the BBC as London has always served as an excellent hub to the company and is at the centre of everything. In a way Mr Thompson has contradicted himself because he claims that he wants to dilute the London influence by relocating staff to ensure there is evenness (2004) but a year later he decided that substantial job losses (6,000) were in order from different regional offices then why did he not make redundant those 1,800 going to Manchester. In reality Mark Thompson is a great journalist, however, one cannot expect him to be a great leader as well and this has been exposed during his time through various incidents, Brand-Ross incident and reporting of the war in Iraq, which have put the BBC under some serious pressure and abuse from the media. In 2007, the BBC were faced with losses and shortfalls of up to £2 billion thus announcing the speeding up of the relocation of staff to Manchester, nevertheless, I cannot understand how this ploy is supposed to help the situation and further the announcement of up to 3,000 redundancies is clearly not going to help the situation. I think that this is bad decision making and shows the desperation and weakness of the leadership of the company. As well Mark Thompson has shown a lack of control with the regard to the pay of executives at the BBC, it is [14] claimed that top 47 paid executives’ salaries range from £190,000 to more than £600,000 which is astonishing even though the BBC has had to lay off more than 2,000 staff. This shows real weakness on behalf of Mark Thompson including the running and decision making in the cooperation as well.

I think Mark Thompson is a very direct leader and always has clear objectives or solutions. His main strengths are arguably communication, although, not in person and acting in the interests of the company exhibited by the restructuring of pay and focus on technology. In my opinion, his main weaknesses are his lack of experience and enthusiasm which sometimes leads to uncertainty and does not boost morale of staff.

On the basis of what I am told, the priorities of the leadership should be to resolve the job redundancy levels before strikes might severely cripple the company. As the BBC have decided to divulge more into technology they must ensure that it is fully functioning with no problems due to the fact that they have a history with these sort of issues: electronic accounting system which deletes invoices. Probably the most important priority is to complete the move to Manchester to convey that they are serious and committed to diluting the London influence.

I believe that there are two main priorities which are key to resolving the BBC’s future and ensuring its stability. There needs to be a restructuring of the wage bill at the top of the company the salaries that have been quoted regarding executives and performers are excessive due to the BBC being a public service broadcaster. Through restructuring the wages this will free up some funds and put the interests of the company at heart. Also more attention is needed towards staff as they are at the hub of what the company does and by creating a sense of unity will hopefully move towards optimum performance because without the staff’s capabilities and willingness nothing can be achieved. The relocation to Manchester must be completed as soon as possible because this will demonstrate the devotion and the ability to achieve their objectives. In addition, the BBC must stick to its aim to go digital which will help with their increase in the use of technology and provide consumers with a wide variety of ways to keep up with programmes and watch them in the highest quality possible.

The BBC has had to deal with an array of issues over its time and there are situations which could have been handled differently. The slowness of the relocation to Manchester is a problem because firstly it shows that the BBC are not serious about diluting their London influence and also if the staff are not onboard then the move will not reap its expected rewards. In addition, the magnitude of redundancies that are occurring at the company does not reflect well on the situation and creates an unpleasant vibe with staff possibly leading to strikes causing turmoil.

When the BBC releases technology it must be fully functional because people lose confidence and trust. If there are any issues that give consumers an excuse to purchase an alternative and then the cooperation will acquire a bad reputation. The other issue is the pay and behaviour of executives and presenters. The executives pay is outrageous and upsets the public as their licence fee money is being wasted on the salaries of overpaid executives further damaging the BBC’s image.

It is clear that one of the main problems that could have been tackled in a different way is that of the relocation to Manchester. There is no problem with the idea itself, however, there seems to be a lack of drive and determination to progress by Mark Thompson and the move only seems to lead to further redundancies. In summer 2008, it seemed as if the BBC were not serious about relocating which gives us a reflection of the ambition of Thompson to complete this move of certain departments. I believe the relocation should have been completed by now and this is a sign of weakness for the BBC because they have been funded by [15] millions of public and private money so there should be no excuses. Also the fact that they are now offering [16] generous relocating packages to London staff is absurd because they are employees of the company hence they should either agree to it or not. On the face of it, it seems a pretty desperate move by the BBC as employees should be excited about moving into a modern base and that is the way I believe the BBC should have tackled it in order to convince employees to move through the excitement factor of being a part of something special. Culminated with all this there are lay-offs occurring in order to save money and then we see them offering these charitable packages. Also I believe there is a contradiction because the majority of these redundancies are to come from different regional offices so the idea to become more “British” by relocating to Manchester will not work as other offices will have fewer employees. If they want the BBC to become more “British” then they should employ people from other regions rather than relocating London based staff but the BBC defend this [17] position claiming they need their “experience” and ironically some of them will not even move. I believe that the redundancy issue should have been tackled by more London based staff facing the sack.

In my opinion, the BBC are taking the relocation in the right direction in the sense that this move needs to be completed as soon as possible and they need their experienced London staff to ease the transition. It is now paramount to complete this move and if the relocation package speeds things up then it is a positive move. The desired outcome would be that everything is up and running by 2011 because it has taken too long.

Despite the BBC’s previous track record regarding technology which has caused them numerous problems the release of BBC iPlayer sparked several issues and frustrated viewers all over the country. [18] 100,000 people registered for the iPlayer during its first weekend of release which demonstrates the popularity of BBC’s media and this problem could have easily been remedied through applying various tests and ensuring a pretty much flawless version. I believe if it had been fully functional when released the BBC would have gained applause and restored the confidence of the nation in them. The desired outcome of this case is very simple which is to have a fully functioning media player which provides viewers with what they want and the ability to carry out any function that was promised.

The BBC has become shrouded lately in controversy and has been accused of bias which affects their global iconic image and their supposed independent view point on issues. Taking the Brand and Ross incident, this has damaged the BBC’s integrity and generated massive media attention once again denting their image. This issue should have never arisen in the first place if the BBC had been more stringent and set out the rules with these two presenters the idea would have never popped into their heads as it clearly was unprofessional and uncalled for. It was a very daft and unnecessary incident which has smeared BBC radio two’s reputation. The BBC would hope now that this sets a precedent and is now a warning to those others to not generate such extreme media pressure needlessly.

Last of all, the BBC must now tackle the issue to do with salaries of executives and presenters which it has dealt with to a certain extent. The issue initially begun because Mark Thompson himself is earning an incredible amount, [19] £647,000 basic salary, which sets the standard that other top executives can as well. The BBC’s way of tackling this issue was to publish the salaries to show their “cautiousness” with licence payers’ money because once the MPs’ expenses came to the light they were bombarded with complaints. This could have been tackled by completely restructuring the pay of the whole company which is unlikely to occur or simply not revealing the salaries. The second option is the easiest and seems sensible because the BBC should have known that when they released these figures it would cause mass uproar as they are a public service broadcaster. Taking into account everything, the best but not easiest solution is to restructure the pay of executives as they have done with certain presenters such as [20] Graham Norton who earned £2.5 million a year before agreeing to a pay cut and Bruce Forsyth. This will certainly ease the financial pressure on the BBC by reducing the magnitude of redundancies and manage the £3.6 billion budget to maximum efficiency.

Overall, the BBC has had its ups and downs but that is possibly down to the management and leadership of Mark Thompson. He is a respected journalist, however, this does not mean that he will be an implausible chief executive and this has been reflected in some of his decisions. The main two issues that must be resolved are the completion of the move to Salford Quays and the financial structure of the company with regard to executives and presenters. If both of these are achieved the BBC will be able to do what it does best which is to provide innovative and informative programmes and ensure value for money for licence fee payers’.


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