Economic study shows BBC radio could not be funded by advertising

Detailed analysis of the radio advertising market, conducted by a team of leading competition economists at Compass Lexecon, has revealed the potentially devastating impact of an ad-funded BBC radio for audiences, advertisers and the BBC itself.

The report was commissioned by Radiocentre, the industry body for commercial radio, in anticipation of the government’s review of BBC funding. The results of the study have now been shared with government and were unveiled at an event in central London on 18th April 2024.

Last month the BBC announced that it plans to start advertising on some podcasts and on-demand audio content in the UK for the first time. While no details have yet been announced to extend this to advertising across all BBC radio, there are concerns that this will be the next logical step as the corporation is being challenged to rethink its future role and funding.

However, the independent economic modelling from Compass Lexecon suggests that advertising would not support most BBC radio stations in their current form, with an estimated shortfall of 63% in funds required to run the existing services. Most BBC radio services would be loss making and it is likely that many would be forced to close.

Radio 2 and 6 Music would be the only stations to break even, assuming they are able to retain their current audience once advertising is introduced, while Radio 1 would need to change fundamentally with cost reductions of 25%. Radio 4’s high value public service content like news, current affairs and drama would become unaffordable as it would require its budget to be cut by 50%. It is estimated that most other services, including all of BBC Local Radio, would not be viable at all and would most likely have to close down.

For commercial radio, the financial impact would also be devastating with a predicted drop in revenues of 36%. This could force many stations to close, while specialist and niche services would find it even harder to survive therefore narrowing choice for audiences, with an inevitable knock-on effect on employment. In addition, the positive economic and social impact of commercial radio would be greatly diminished.

Radiocentre’s CEO Matt Payton said,

“This study demonstrates that introducing advertising on BBC radio and audio services is a dangerous road to go down and will ultimately be bad for everyone.

It would have a devastating effect on the BBC and commercial radio, as well as a huge impact for audiences, with the disappearance of public service radio as we know it and less choice available in future.

While we recognise this is only one scenario, even partial advertising would have a significant negative impact. These findings are stark, and we hope that both the government and the BBC will take them into account.”