The BBC is established under a Royal Charter and operates under its Agreement with the Secretary of State for Culture, Media and Sport. Its work is funded principally by an annual television licence fee which is charged to all British households, companies, and organisations using any type of equipment to receive or record live television broadcasts and iPlayer catch-up. The fee is set by the British Government, agreed by Parliament, and used to fund the BBC's radio, TV, and online services covering the nations and regions of the UK. Since 1 April 2014, it has also funded the BBC World Service (launched in 1932 as the BBC Empire Service), which broadcasts in 28 languages and provides comprehensive TV, radio, and online services in Arabic and Persian.
Around a quarter of BBC revenues come from its commercial arm BBC Worldwide Ltd, which sells BBC programmes and services internationally and also distributes the BBC's international 24-hour English-language news services BBC World News, and from BBC.com, provided by BBC Global News Ltd.
Britain's first live public broadcast from the Marconi factory in Chelmsford took place in June 1920. It was sponsored by the Daily Mail's Lord Northcliffe and featured the famous Australian soprano Dame Nellie Melba. The Melba broadcast caught the people's imagination and marked a turning point in the British public's attitude to radio. However, this public enthusiasm was not shared in official circles where such broadcasts were held to interfere with important military and civil communications. By late 1920, pressure from these quarters and uneasiness among the staff of the licensing authority, the General Post Office (GPO), was sufficient to lead to a ban on further Chelmsford broadcasts.
But by 1922, the GPO had received nearly 100 broadcast licence requests and moved to rescind its ban in the wake of a petition by 63 wireless societies with over 3,000 members. Anxious to avoid the same chaotic expansion experienced in the United States, the GPO proposed that it would issue a single broadcasting licence to a company jointly owned by a consortium of leading wireless receiver manufactures, to be known as the British Broadcasting Company Ltd. John Reith, a Scottish Calvinist, was appointed its General Manager in December 1922 a few weeks after the company made its first official broadcast. The company was to be financed by a royalty on the sale of BBC wireless receiving sets from approved manufacturers. To this day, the BBC aims to follow the Reithian directive to "inform, educate and entertain".
The financial arrangements soon proved inadequate. Set sales were disappointing as amateurs made their own receivers and listeners bought rival unlicensed sets. By mid-1923, discussions between the GPO and the BBC had become deadlocked and the Postmaster-General commissioned a review of broadcasting by the Sykes Committee. The Committee recommended a short term reorganisation of licence fees with improved enforcement in order to address the BBC's immediate financial distress, and an increased share of the licence revenue split between it and the GPO. This was to be followed by a simple 10 shillings licence fee with no royalty once the wireless manufactures protection expired. The BBC's broadcasting monopoly was made explicit for the duration of its current broadcast licence, as was the prohibition on advertising. The BBC was also banned from presenting news bulletins before 19.00 and was required to source all news from external wire services.