BBC Commercial Operations - Culture, Media and Sport Committee Contents

2  Benefits of the BBC's Commercial Operations

10. We received evidence from a number of sources, including the BBC, outlining the benefits derived from the BBC undertaking commercial activities. These may be broadly split into three categories, which we will consider in turn:

  • Financial benefit to the licence fee payer;
  • Investment in UK creative industries;
  • Champion of UK programming overseas.

Financial benefit to the licence fee payer

11. The BBC contends that BBC Worldwide generates "value equivalent to nearly £9 for each licence fee".[20] The Chairman of the Trust explained to us in oral evidence that this estimate is based on "a dividend in two parts".[21] Firstly, the profits generated by Worldwide, which have amounted to a total of over £200 million in the last three years, are returned to the BBC.[22] As the Chairman of the Trust told us, this means that the BBC can "do more", while moderating the pressure on the licence fee payer. Secondly, we were told that Worldwide is a major investor in new programming. According to the BBC's written submission, Worldwide's contribution to individual programme budgets can be over 70% of the total (made up of both direct investment from Worldwide and the coordination of investment from international co-production partners).[23] This leads the BBC to argue that "programmes such as Planet Earth, Cranford, Doctor Who and In the Night Garden simply would never have got off the ground without the support and investment provided by BBC Worldwide".[24] In fact, the two dividends to which the Chairman of the Trust referred are in effect the same money. It makes little difference whether the BBC invests in programmes using the profits generated for it by Worldwide, or if Worldwide invests its profits in new programmes itself, unless Worldwide has a multiplier effect by bringing in commercial partners who would not otherwise be involved. We accept that Worldwide may contribute in terms of international experience in the commercial sector, which is valuable in nurturing contacts and relationships and bringing in partners. Given the strength of the BBC brand, however, this might very well be accomplished by an internal division of the BBC.

Investment in UK creative industries

12. We received representations from three of the main unions representing artists in the broadcasting industry—Equity, the Musicians' Union and the Writers' Guild. All expressed strong support for BBC Worldwide, due to the income stream it provides for their members.[25] Equity, the trade union representing 37,000 actors, performers and other creative professionals in the UK, estimated that BBC Worldwide generated a total of £24 million for its members last year.[26] Meanwhile, Musicians' Union and Writers' Guild members received £2.3 million and £8 million respectively last year from Worldwide.[27] In addition to the direct payments from Worldwide, the unions' members also benefit indirectly from the dividends paid by Worldwide to the BBC. As the unions pointed out, the greater the financial returns generated by Worldwide for the BBC, the larger the pot of funds for new BBC programmes, with the subsequent trickle-down benefit to the artists.[28] Finally, the unions were complimentary about BBC Worldwide as an employer, testifying to business practices that redistribute income along the supply chain, are sensitive to the risk of over-exposure of talent, and are generally in the interests of UK plc.[29]

13. In recent years, BBC Worldwide has also acquired minority stakes in independent production companies. The Committee received evidence from three of these companies: Baby Cow Productions, Big Talk Productions and Left Bank Pictures.[30] They each attested to the benefits they have derived from the investment made in them by Worldwide. Baby Cow Productions expressed its appreciation that Worldwide was willing to make a "leap of faith" in providing backing, given that its owners had never made a programme before the BBC came on board.[31] Meanwhile, Left Bank Pictures asserted that the success it has enjoyed since its launch in 2007 could not have been achieved without the backing of Worldwide, which owns a 25% stake.[32] We discuss Worldwide's investment in production companies in more depth in Chapter 5.

Champion of UK programming overseas

14. The BBC argues that Worldwide offers international exposure and recognition to UK talent.[33] Acting as a "platform" for BBC and independently produced programmes, overseas channels such as BBC America and BBC Entertainment have been credited with launching British stars on the global stage. For instance, "The Office […] broke new ground in the US following its hugely successful transmission on BBC America".[34] The BBC also claims that this exposure has been the catalyst for programme formats to be purchased by US networks and re-made as local versions (e.g. The Office, Ramsay's Kitchen Nightmares).[35] However, there are no figures publicly available to determine whether this has actually generated a profit for the licence fee payer and the BBC could certainly be more forthcoming in this respect.

15. Nevertheless, BBC Worldwide's overseas network of channels and programmes do have the potential to enhance and extend the BBC's reputation overseas. The BBC told us that Worldwide's activities have built the BBC's reputation for quality and objectivity in key markets such as India, the USA and Eastern Europe.[36] It argues that the extension and development of its brand overseas is an "increasingly important element of the BBC's ability to attract and retain top talent for the benefit of UK licence fee payers".[37] However, some of Worldwide's other activities, notably its investment in overseas production houses, were identified by other witnesses as having the potential to damage the BBC brand.[38] We consider this issue in greater depth in Chapter 5, but a summary of the view of the BBC's critics is that its minority stakes in overseas production houses give Worldwide little editorial control over content, while subjecting the BBC to reputational risk. Critics also maintain that such stakes may limit the returns for licence fee payers by giving individual companies preferential rights to BBC programmes or formats, rather than auctioning each in the open market.

16. We recognise that significant benefits are realised from the BBC undertaking commercial activities. Clearly, the profits generated by the exploitation of its intellectual property allows the BBC to invest more in its public service remit than would otherwise be the case. We also note the positive sentiments expressed by significant sections of the creative economy in relation to the business practices of BBC Worldwide, although we are conscious that the industry is unlikely to bite the hand that feeds it. The principle that the BBC should be able to maximise the value of its brand by exploiting its intellectual property, subject to appropriate safeguards, in order to relieve pressure on the licence fee is clearly sensible. We share the view of the public and the Government in this respect. In the chapters which follow in this report, however, it is the manner in which some of the BBC's commercial revenue is generated, and the governance arrangements within which Worldwide operates, which give rise to legitimate concern.

20   Ev 78 Back

21   Q 155 Back

22   Ev 78 Back

23   Ev 88 Back

24   Ev 88 Back

25   Ev 163, 165, 167 Back

26   Ev 163 Back

27   Ev 165, 67 Back

28   Ev 165 Back

29   Ev 163, 165-166, 168 Back

30   Ev 159, 162, 171 Back

31   Ev 159 Back

32   Ev 171-172 Back

33   Ev 88 Back

34   Statement on Ricky Gervais' website: Back

35   Ev 81 Back

36   Ev 88 Back

37   Ev 88 Back

38   Ev 1, 11 Back

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Prepared 7 April 2009