The Wiki Man

Turn the licence fee into a digital currency – and save more than just the BBC

When people are free to choose what they buy, they buy more and pay more

1 August 2015

9:00 AM

1 August 2015

9:00 AM

What follows is a proposal for reducing the BBC licence fee and improving the corporation’s output while saving the British newspaper industry.

All that’s involved is a basic understanding of pricing psychology combined with a digital currency for micropayments. Under my proposals, half the licence fee would fund the BBC’s Reithian purpose; the other £60 could be paid direct to the BBC as now or, if you chose, paid to you as a digital currency (6,000 Beebcoins). People could buy additional Beebcoins, which could be spent on BBC or competitor content — including content from newspapers. Notionally the BBC would lose out; in practice they would gain revenue, as they could now sell premium services. When people can choose what they buy, they buy more and pay more.

A simple fact: people hate paying for things they don’t want. Nothing remarkable there, except people especially hate paying for things they don’t want bundled with things they do want. One behavioural experiment asked people what they would pay for three attractive pens; the average was about $30. But offer the same three nice pens with one crappy pen added and the amount people pay falls. I know, I know — it’s illogical. Why not throw the crappy pen away? But that’s not how we think. People who’d pay £10 a month just for Radio 4 resent the licence fee because they don’t like Graham Norton.

I’d pay £1 to read any article by John Kay, but can’t bring myself to subscribe to the FT because I’d have to pay for pages of guff on the ‘Central Bank crisis in Ecuador’; I won’t subscribe to the New York Times because, as a Brit, I refuse to pay for articles about the ‘knife-edge gubernatorial race in Iowa’. If I could buy articles one at a time, I’d pay a lot.

In a nutshell, people spend more when they feel they can direct their spending. Millions of people would not have a mobile phone if there were no pay-as-you-go option. People would never go to Starbucks if they were billed annually.

Starbucks makes money because it ingeniously offers people something costing £2.30 at a place and time when people are in the mood to spend £2.30. Create a payment mechanism where the BBC (and The Spectator and the Guardian) can microcharge, and you capture far more consumer surplus. ‘Viewers can wait a week to watch the concluding episode of Unfeasibly Attractive Forensic Scientists, or pay 199 Beebcoins and watch it now.’ Ker-ching! ‘This week’s Rod Liddle Uncut is available for 40 Beebcoins.’ Ker-ching!

I once spent £35 taking my daughter and friend to a premiere of Doctor Who at a multiplex cinema. Halfway there she admitted that the same episode was being shown concurrently on BBC1. (‘What if I buy a £10 ticket to Screen 2?’ I asked. ‘Can I watch Newsnight?’) I had spent 25 per cent of the annual licence fee on a single programme. It goes to show that if you want to grow a market, you need to practise what economists call ‘price discrimination’. One-size-fits-all charging kills your ability to charge. Hollywood sells the same film seven times over at different price points. The low-cost airlines survive on the sale of add-ons.

Charging in this way also helps niche content — chasing a small passionate audience rather than a large homogeneous one. Credit cards are fine if you’re buying a film for £10, but not for a newspaper article for 10p or a TV programme for 50p. The technology to microcharge already exists (my bitcoin address is in the QR code above, if you want to send me 1p). What’s missing is the critical mass.

Got something to add? Join the discussion and comment below.

You might disagree with half of it, but you’ll enjoy reading all of it. Try your first 10 weeks for just $10

Show comments
  • davidshort10

    Excellent proposal. I too would gladly pay for R4 although I’d prefer the option of everything between 6am and 2pm and 5pm and midnight, if only to show how awful I think their afternoon output is.

  • Tom

    I find what micropayments could do for news content to be even more profound.
    When we pay for news with our eyeballs, it favors the production of cheap, highly shareable, mass market news, the world of Buzzfeed and viral nova.
    When we pay with micropayments it favors stuff we value, which may happen to be more expensive to make and have a smaller addressable audience.
    Between ad blocking, micropayments, better data, the future of the internet could look quite different.

    Back to the BBC, if they had half a brain they’d negotiate global rights to content and could probably make an absolute fortune selling access to content globally, demand is there. They seem to forget that the internet doesn’t know about national geography unlike transmitters .

  • Steve O

    This is the future. I don’t think we’re ready for it yet, but I sincerely hope micropayments soon replace ads as the dominant revenue model for media companies.

    You may be interested in this long form Atlantic article on the subject:

  • too right; but can we please re-evaluate the BBC’s luminous “Reithian purpose”? Why is “entertain” in there? Why does the BBC consume my licence fee 1,000 times over to produce Strictly Come Dancing, when any commercial channel would do it, or if nobody did we’d be none the poorer? Why does my money go to that moron Clarkson? Since I gave up having a TV when they went digital, I guess it’s not my place to complain, but now that a universal you-can’t-escape BBC tax is apparently on the agenda, we really do need to entertain the notion that the whole thing should be canned.

  • In the print edition, your bitcoin address does appear, but it does not appear here. It would be more useful for it to appear as a text address than a QR code.

  • Leon Wolfeson

    So your proposal is to halve the funding of the BBC. Right. Then create a new payment infrastructure limited to spending on media. (I do hope you’ve got i.e. Netflix on board with this.)

    Never mind that most of the decent BBC output won’t be produced because of the way funding works. Certainly the interesting and creative programs will be by the wayside, replaced with news – and what they think will sell.

    • Bertie

      What decent BBC output? Can just about manage with Topgear, HIGNFY – the former has gone, the latter off air. Occasionally watch University Challenge. Otherwise I’m watching Sky Atlantic. Great to see BT linking up with AMC for exclusive access to decent US shows.

      • Leon Wolfeson

        So you don’t watch a lot of the output. How is that the BBC’s fault?

        HIGNFY is a key example of something nobody else would air, though (legal issues).

        • Bertie

          I STILL have to pay for it though! And I’d still have to pay for it if I watched no BBC output.

          Which is my point. Why should you have to pay the licence fee if you dont watch ANY Beeb channels?

          One can always get HIGNFY on DVD so in that instance I’d be watching NO BeeB but still having to pay for it.

          Do you think that’s fair?

          • Leon Wolfeson

            Actually, I’d fund it from general taxation.

            You could also lop a good 10% off it that way…collecting it the current way is expensive.

  • WTF

    I like the pen analogy but the trouble is the BBC is that crappy pen !

  • Ali MacManus

    I completely agree, although I am enjoying the irony that your analogy about the FT and NYT are exactly the reason I don’t have a paid subscription to The Spectator. Another great article though Rory!

  • Sung Bok Lee

    I like this idea. I would buy one major article for 50cents instead of buying a whole thing(like 12 extra stuff) for 3 dollars!