Within days of her appointment as culture secretary, Lisa Nandy met one of the few prominent BBC presenters who is not currently embroiled in a scandal: Hacker T Dog, the puppet star of CBBC. “Hacker, I don’t know if you remember but you once met my little boy and made him cry,” Nandy told the troublesome terrier at the BBC’s Salford studios last month. “So I’m afraid I am announcing today that I am shutting the BBC down.” “Hooray! It worked!” replied the dog. Watching this exchange between two Wiganers was the BBC’s director general, Tim Davie, who will be hoping for a slightly different outcome from his future negotiations with Nandy. He now faces the single challenge that will define his legacy at the corporation: whether he can strike a deal with the government over the long-term financial future of the BBC. Negotiations over the future of the licence fee – and whether it is retained in its current form or replaced with a subscription model or funded by a new tax – are expected to begin in January and last two years, with a deal needing to be in place by the end of the current royal charter in 2027. Labour’s election victory – and Keir Starmer’s vague commitment to the licence fee – suggested the clouds may be parting for the BBC after 14 years of cuts by Tory-led governments. Yet one BBC insider warned “don’t count your chickens yet”, as the political threat is replaced by an acknowledged threat of irrelevance with 500,000 households a year cancelling their TV licence. As a result, there is a growing acceptance that extreme thinking might be required to secure public service broadcasting. One radical suggestion is to consider merging Channel 4, which was threatened with privatisation by the Conservatives, with the BBC to create a public service television powerhouse. Two television industry sources have said that the BBC discussed a merger as part of the next round of licence fee negotiations. Such a move would combine two publicly controlled broadcasters, add £1bn of revenue to the BBC’s balance sheet, and could enable Channel 4’s profits to subsidise other parts of the BBC. Phil Redmond, the veteran television executive who created Brookside and Hollyoaks for Channel 4, is a proponent of a merger. He said that, in the face of declining youth audiences, a deal between the BBC and Channel 4 would secure the long-term future of public service broadcasting in the UK: “Reforming the BBC has to include reforming Channel 4. The big debate is not about who is sitting in what desk in what building.” He said it could enable cost-cutting at Channel 4 and free up its budget to be spent on commissioning new programmes. “You could get rid of a lot of the technical side, the admin, HR, finance, all that stuff can go. The only thing you’d keep is the sales team for a while,” he added. Another commercial television executive said they had heard the BBC has looked at a merger with Channel 4 under which the commercial channel would operate as a semi-independent entity under BBC Studios, the corporation’s for-profit subsidiary. They said this could be similar to how the BBC owns UKTV, the parent company of Dave, and such a move could “soothe” independent production companies worried about the commercial broadcaster’s longtime financial future. Channel 4 could then act as a talent incubator for British formats created by BBC Studios that could then be sold around the world. A BBC spokesperson said: “We do not recognise what you’ve put to us. There are no ongoing discussions regarding the acquisition of Channel 4 and nor are we developing a proposal to do so.” A government source also said a merger of the two public service broadcasters was “not a proposal we are currently considering”. Another radical idea for the future of the BBC is mutualisation, with all licence fee payers given a stake in the broadcaster on a model similar to the Co-operative Group or a building society. Nandy proposed such a scheme during her 2020 leadership campaign, saying it would allow licence fee payers to “decide the trade-offs that the BBC must make to secure its future” while ensuring the organisation is protected from meddling by politicians withholding funding or appointing board members. The BBC could also ask the government to pick up the bill for the World Service. This used to be subsidised by the Foreign Office as a tool of British soft power but the cost was largely lumped on to licence fee payers as part of coalition-era cuts. Yet convincing the chancellor, Rachel Reeves, to hand over hundreds of millions of pounds for overseas broadcasting would be a tough ask, given the government’s messaging about difficult decisions. The BBC’s overall audience remains enormous, especially among older age groups, but the future is less rosy. A growing number of young people barely engage with the broadcaster’s content, undermining the long-term case for a universal licence fee. Less than half of British 16- to 24-year-olds watch any linear television in a given week, according to the latest Ofcom research, raising questions about how long the BBC can maintain dozens of separate television and radio channels – and when it should start to close outlets and lump everything on its digital offering. This combination of financial pressure and changing audience habits could force Davie and Nandy to envisage a radically different BBC, doing less with less but still acting as a hub for British public service television output. In a sign of the times, this week the BBC began experimenting with using artificial intelligence to produce transcriptions of BBC Sounds content – while also preparing for a further round of human job cuts in the autumn. The hope for the BBC is that Nandy accepts warnings from the British media industry about the existential threat it is facing. The playwright James Graham, responsible for the hit show Sherwood, last week told the Edinburgh television festival that the UK is being too complacent about the future of the BBC and other public service broadcasters: “We will miss them, if they ever go.”