The BBC must "change in order to survive", Culture Secretary Ben Bradshaw said today.
He warned the organisation to be more "sensitive" about its impact on the rest of the media and to the views of the public.
Mr Bradshaw's comments came in a speech to Labour's annual conference, which has been overshadowed by a row between the BBC and Downing Street after Andrew Marr asked Gordon Brown if he was dependent on prescription painkillers.
Several high-profile party figures have criticised Marr for asking the Prime Minister about unconfirmed internet speculation surrounding his health, which Mr Brown denied.
Former BBC journalist Mr Bradshaw has previously called for changes to the way the organisation is governed and has suggested there may be a case for the licence fee to be cut.
Today he insisted that Labour was "committed to the BBC and the values of public service broadcasting" and would "never sacrifice the BBC on the altar of free market dogma".
"But like all successful organisations the BBC must change in order to survive," Mr Bradshaw said.
"It must be more sensitive to the views of the public - you who pay for it - and it must be more sensitive to the impact its power and size have on the rest of the media."
The Culture Secretary said anyone who had watched the news in America or continental Europe could only be "extremely grateful" for the BBC.
He insisted that plans to use part of the TV licence fee to fund regional ITV news, a move known as "top-slicing" which BBC management is opposed to, would help local media to survive.
"Good quality local news is vital for the health of our democracy, and we face losing it completely unless something is done," Mr Bradshaw warned.
"Many of our local newspapers are also struggling to survive.
"We are the only party that is guaranteeing high-quality news on ITV in the English regions, Scotland, Wales and Northern Ireland, and saying how we are paying for it.
"Our solution and other measures we are taking will help local newspapers too."
Mr Bradshaw also hit out at the Tories, claiming sport and culture would be "decimated" under a Conservative government.