The licence fee that funds the BBC should be scrapped and replaced with a voluntary subscription-based service, a think-tank has suggested.
The Adam Smith Institute says the growing use of the internet for viewing has made licensing TV sets outdated and it should be replaced with voluntary subscriptions for drama and entertainment programmes.
Current TV services provided by the corporation could still exist but with more flexible methods of funding, the report finds.
It suggests that scrapping the licence fee could equip better the BBC to operate on the world stage.
And the BBC should be given a fixed sum of money from the government to cover any initial losses.
The Institute also calls for a redefinition of what makes up the essentials of public service broadcasting.
He suggests some BBC programming and output should be free, such as news, but customers would pay to receive entertainment programmes and documentaries.
David Graham, a former BBC producer, who compiled the 'Global Player or Subsidy Junkie? Decision Time for the BBC' report, said he hoped the findings would encourage "serious debate at a critical time".
"Today, it is not unfair to describe the BBC as a subsidised entertainment firm with some non-commercial obligations," he said.
"Some public service messages need to reach wide audiences and an entertainment medium can provide them. However, subsidising the entertainment itself is a different matter."
He said that in five years time, he sees a BBC with the "global presence of Hollywood studio, but with a wider range of output than a Hollywood studio and an especially strong presence in news and documentary output".
Negotiations between the BBC and the government on the next licence fee settlement are set to begin next year.
In response to the report, a BBC Trust spokesperson said the funding of the cooperation is a "matter for the government".
"The Trust welcomes the fact that the current government has expressed its support for the continued existence of multi-year licence fee settlements.
"The Trust remains focused on ensuring that licence fee payers are getting value for money."