The British Broadcasting Corporation (BBC) is having difficulty competing with Netflix because it is unable to pay the wages of the tech workers necessary to offer online services.
In a report by The Guardian, the UK's public spending watchdog, BBC's technology is not up to par with those of commercial streaming services, which can provide viewers with high-quality personalized suggestions.
Therefore, the firm has trouble providing appropriate material to consumers.
Lack of Resources
BBC's director general, Tim Davie, has announced plans to transition to a digital-first broadcaster in the coming years.
This would include gradually shutting down the network's television and radio broadcasts in favor of distributing all of its material online.
Competition for IT personnel and years of budget cutbacks have contributed to its online offerings falling short, as reported by the National Audit Office (NAO).
While Netflix plans to spend $2.1 billion annually on the technology that powers its worldwide streaming business, the BBC is only allocating $121 million to digital product development.
As per the NAO, the BBC has a well-defined strategy for transitioning to a digital-first future, but it often lacks the resources to make this happen. It is constrained by the requirement to keep its television and radio services running.
The UK watchdog said BBC aims to retain the same audience as other media providers and has a substantially smaller budget for developing its digital offerings.
Audience as Consumers
Based on the report, the vast majority of the BBC's audience, around 88%, consumes content via their televisions or radios.
Considering that Netflix has twice as many users as BBC iPlayer among those aged 16-34, this might consign the BBC to focus on an older demographic.
According to the BBC's own market research, BBC iPlayer and BBC Sounds are less intuitive to use than their commercial counterparts like Netflix and Spotify.
The Future Without TV and Radio
Over the previous 12 years, Conservative-led administrations have consistently reduced the BBC's budget.
British politician Nadine Dorries' decision earlier this year to freeze the license fee for the next two years has resulted in yet another real-terms drop in revenue for the broadcaster.
This implies that the BBC will have to make cuts elsewhere if it wants to raise its investment in digital services since hundreds of layoffs at more conventional broadcast channels have been reported in recent months.
As per The Guardian's report, Davie recently said that the BBC would start making plans for a future without broadcast radio and television, but the NAO found that the BBC had done very little actual planning for this scenario.
The difficulty is reflected in the current situation of BBC's iPlayer service. Its 2007 debut was an early step toward mainstream acceptance of the idea of delivering TV shows via the internet.
Reed Hastings, CEO of Netflix, even said it helped pave the way for his company.
However, newer technologies have rendered iPlayer obsolete, and until recently, the BBC was hampered in its capacity to upload archive programming due to constraints set by the media regulator Ofcom.
The BBC has a hard time attracting a younger audience because of significant employee turnover among its technical personnel due to the low pay and intense competition for qualified tech workers from other organizations.
