The BBC is at risk of losing a generation of younger viewers who have drifted away to services such as Netflix and YouTube, potentially putting the future of the licence fee at risk, according to the media regulator.

Ofcom said the corporation must do much more to make the case that the BBC is worth supporting to audiences who have grown up with YouTube as their main source of video and who now instinctively turn to social media channels for news.

Among the stark findings laying out the challenges for the BBC were that:

Fewer than half of Britons aged between 16 and 24 watch a traditional live BBC television channel in the average week.

Younger viewers are twice as likely to watch BBC programmes on Netflix than on the BBC’s own iPlayer service, suggesting they may not know that popular shows such as Doctor Who and Peaky Blinders were created using licence fee money.

Children in their early teens are more likely to recognise the YouTube and Netflix brands than the BBC.

Younger listeners are twice as likely to listen to commercial radio rather than the BBC’s stations.

The regulator also concluded that the reputation of the BBC’s news output had come under attack during the Brexit debate, partly because the corporation has always tried to ensure “both sides” of a debate are heard. Ofcom said this could be problematic and urged the corporation’s journalists to be more willing to directly call out lies and fringe views rather than allow them to go unchallenged in the name of balance.

“BBC journalists should feel able to challenge controversial viewpoints that have little support or are not backed up by facts, making this clear to viewers, listeners and readers,” said the regulator, emphasising that this did not break rules requiring due impartiality.

Despite the criticism and warnings about issues with its future audience, Ofcom concluded the BBC still has a central role in the lives of many Britons, is well-trusted and supports the production of distinctive high-quality programmes that commercial rivals would not match.

More broadly, the findings show the industry-wide shifts that are creating two nations divided by age who have largely distinct media consumption habits and therefore can end up with very different views of the world.

Older viewers remain incredibly loyal to the media outlets they grew up with. Ninety-four percent of people aged 65 and over watched television news – compared with just half of those in the 16-24 age category.

On the other hand, individuals currently turning 18 and considering whether to buy a television licence for the first time have never known a world without internet video streaming.

Even the BBC News website, the dominant British news website, is struggling with an increasingly ageing readership because younger audiences are more likely to encounter headlines on social media rather than visit the site or app directly. There is also a broader perception that the broadcaster’s news output is dominated by a “mainly white, middle-class and London-centric point of view”.

One problem is that younger audiences value more “opinion-led” and “gritty” investigative journalism, where the presenter is allowed to insert their personal take on events into a story – a format that poses challenges for the BBC’s traditional stance of requiring its reporters to remain neutral. Supporting research also found that consumption “is handed down through generations”, suggesting that this tradition of parents introducing younger generations to programmes through collective viewing or listening may be breaking down.

However, focus groups often “spontaneously” highlighted the BBC as providing impartial coverage, with its reporting “widely perceived as measured in both its approach and tone”.

Ofcom’s research suggested that growing political polarisation is affecting the broadcaster: “People with strong political views generally saw the BBC as too left or rightwing, depending on their personal political persuasion. Our social media analysis suggests that those with the strongest political views were the most likely to make critical comments about the BBC.”

The report found that a small number of highly politicised individuals, often older, had played a key role in eroding trust in the BBC’s news output, by repeatedly highlighting perceived bias on Twitter and Facebook. These criticisms are then picked up and amplified by mainstream news outlets, an issue that is likely to be exacerbated in the coming general election.

The regulator concluded that most complaints about BBC bias were driven by anger at just a handful of programmes such as Question Time and Newsnight: “Our research indicated that people are increasingly avoiding spaces and programmes where their ideas are challenged … When they did watch programmes where opposing views were represented, or their own views were strongly challenged, they seemed to find this deeply uncomfortable.”

Other recommendations including encouraging the BBC News website to include more links to rival news outlets and improving the transparency of its complaints process following the Naga Munchetty row.

The BBC said its focus was on bringing young audiences to its services through iPlayer, Sounds, and its news website: “Our most up-to-date data shows that our plan is delivering, with iPlayer’s reach to young audiences up by around 20% in the last year, BBC Sounds reaching more than 2.6 million adults weekly and the number using BBC News Online weekly up 26% year-on-year.”