Select Committee on Culture, Media and Sport Eighth Report



Commercial Income from BBC Worldwide

11. The licence fee is not and should not be the BBC's sole source of income. In 1993 the National Heritage Committee urged the BBC to institute "a restructured system to support a more aggressive strategy for the sale of material, facilities, services and expertise at home and abroad".[32] The net benefit from BBC Worldwide since then is summarised in the following table:

Table 1: Net benefit to the BBC from BBC Worldwide, 1993-94 to 1997-98[33]

1993-941994-951995-961996-971997-98
£69 million£53 million£77 million£74 million£91 million

There has thus been a 32 per cent increase in cash terms in the net benefit to the BBC from BBC Worldwide over a five year period. This hardly amounts to spectacular growth.

12. Sir John Birt believed that the recent partnerships with Flextech and Discovery would greatly increase the BBC's commercial revenues.[34] The revenue from the BBC's commercial channels fell in 1997-98 and the losses on those channels increased by 7 per cent to £20 million.[35] However, Mr Gavin attributed these losses to long-term investment which would pay dividends as the channels became established and the scale of the required investment diminished.[36] Overall, he took comfort from BBC Worldwide's "strong, positive performance" and the significantly increased cash-flow benefit in 1996-97 compared with that in 1997-98.[37] He noted that only one-third of the BBC's commercial revenues came from abroad and believed that there was particular scope for expansion of international activities.[38]

13. BBC Worldwide's Annual Report for 1997-98 states as a target the "quadrupling of the cash that BBC Worldwide returns to the BBC by 2006".[39] This would equate to a cash-flow benefit in the order of £200 million or 10 per cent of current licence fee income.[40] Cash-flow is composed of BBC Worldwide's profits and its investment in BBC programming.[41] Sir Christopher Bland described the target as "ambitious".[42] Mr Rupert Gavin, who is responsible for meeting the target as the recently-appointed Chief Executive of BBC Worldwide, termed it "challenging, but ... achievable".[43]

14. We support the continued expansion of the BBC's commercial activities. We welcome the appointment of Mr Rupert Gavin as Chief Executive of BBC Worldwide, bringing as he does outside commercial experience and knowledge of digital technology. BBC Worldwide has a target to increase the net benefit to the BBC from its activities to £200 million by 2006. We do not accept Sir Christopher Bland's characterisation of this target as "ambitious". In view of the potential for further exploitation of the BBC's products and unique and respected brand identity in an increasingly global market and the accelerating demand for high-quality content arising from the onset of digital television, we consider the target to be markedly unambitious. We expect an external assessment of the growth potential of the BBC's commercial income to form an important part of the forthcoming review of the BBC's funding.


32 HC (1993-94) 77-I, para 101. Back
33 Report and Accounts of the BBC for 1994-95, p 62; Report and Accounts of the BBC for 1996-97, p 51; Report and Accounts of the BBC for 1997-98, p30.  Back
34 Q 36. Back
35 Report and Accounts of BBC Worldwide for 1997-98, p 20. Back
36 Q 85. Back
37 QQ 85, 5. Back
38 QQ 5, 86. Back
39 Report and Accounts of BBC Worldwide for 1997-98, p 7. Back
40 Q 82. Back
41 Q 83. Back
42 Q 4. Back
43 Q 5. Back

 
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Prepared 5 November 1998