MARKET IMPACT
83. Despite these apparent advantages, BBC Worldwide
argues that its presence in the magazine market does not adversely
impact upon its commercial competitors. Indeed, Worldwide's Chief
Executive suggested that the contrary was in fact the case. He
told us that "what tends to happen [
] is that the overall
market in [a particular magazine sector] grows as a result of
our arrival, rather than shrinking".[171]
In a subsequent submission to us, the BBC presented evidence which
it claims supports this assertion. It offers an analysis of some
of the major magazine sectors in the UK: food, homes, motoring,
gardening and children's. In each of these sectors it contends
that the launch of a BBC branded magazine, for instance Top
Gear magazine or Gardener's World magazine, has led
to an increase in both the number of titles and the total circulation
of the sector. The BBC concludes that its presence "does
not block out other publishers or lead to an overall decline in
the number of titles".[172]
84. The views offered to the Committee by BBC Magazines'
competitors were rather different. In 2003, Seven Publishing beat
competition from BBC Magazines to acquire the licence to publish
Delicious magazine, a food publication which had previously
been published in Australia. The magazine was launched in the
UK later that year. Having missed out on Delicious, BBC
Magazines instead developed its own magazine, Olive. It
launched this at the same time as Delicious, with, according
to Seven Publishing, "the same editorial proposition into
the same market sector".[173]
The two magazines also retail at exactly the same price. The BBC
launched Olive despite already publishing the market leader,
BBC Good Food. Seven Publishing stated that sales figures
showed that its launch of Delicious posed no threat to
BBC Good Food, and that Olive was launched "simply
as a spoiler" by the BBC.[174]
85. Evidence we have received from the magazine industry
suggests that it is not only the smaller publishers who are competitively
affected by the BBC's presence in the marketplace. BBC Worldwide
recently launched BBC Match of the Day magazine into the
football sector, targeting a pre-teen audience, rather than the
older age demographic of the television programme of the same
name.[175] A long established
youth football title, Shoot!, from the major publisher
IPC Media, was, according to Signature Publishing, "effectively
closed as a result of the BBC's launch into this sector of magazines".[176]
The BBC again claims that early assessments suggest that its new
launch has grown this particular market by 89.5%[177],
but, even if this is an accurate appraisal, it is clear that Shoot!
did not derive any benefits. According to the British Internet
Publishers Alliance, BBC Match of the Day magazine is now
targeting the market of another major publication in the football
sector, Match magazine.[178]
86. The Editor-in-chief of a travel magazine, Wanderlust,
argued that BBC Magazines are now making a "deliberately
aggressive" move into the travel sector of the magazine market.[179]
The launch of BBC Lonely Planet magazine, originally set
to launch on 20 November, the same day as Wanderlust's
100th issue (a move subsequently revisedit was instead
launched on 28 November 2008) drew strong criticism from the panel
of publishers from which the Committee heard evidence. For instance,
Wanderlust told us that BBC Lonely Planet magazine
was undercutting its advertising rates to such an extent that
it struggled to see how the new magazine could possibly make any
profit.[180] Another
major complaint centred around the allegation that there is no
clear link between the BBC Lonely Planet magazine and BBC
programming, an issue to which we now turn.
87. "Predominantly aimed at frequent travellers
with the time and means to indulge their passion", Worldwide
states that the BBC Lonely Planet magazine "will combine
inspirational ideas for future tripsfrom short breaks in
the UK to long-haul journeyswith outstanding journalism
and photography".[181]
However, according to the Government's 2005 Green Paper, the remit
of Worldwide's magazine business is to produce titles that are
brand extensions of existing programming, leveraging the content
that the programme produces (e.g. BBC Countryfile and BBC
Top Gear magazines):
"Magazines will in future be focused more
on brands and subjects that are connected to BBC programmes".[182]
88. Travel publishers, such as Wanderlust and Create
Publishing, contend that the BBC's travel programming has neither
been extensive nor germane to the kind of independent back-packing
approach associated with the Lonely Planet brand. They argue that
BBC programming has instead focused on family package holidays
and therefore there is no natural extension of the BBC brand
in this area.[183]
They conclude that the BBC has acquired a bridgehead in an entirely
new area because it seemed attractive, will use its considerable
resources to start a magazine which it will cross-promote with
a TV series, and the result will be to drive the independent publishers
currently active in the area out of business.[184]
89. The BBC rejected the accusation that there was
no strong link between the Lonely Planet magazine and BBC
programming. In fact, the Chairman of the BBC Trust told us that
the primary reason for the proposition coming forward in the first
place, and the primary reason for the Trust granting approval,
"was that it was seen to be a clear opportunity to explore
a very considerable amount of intellectual property the BBC holds
within its archive and within current programmes which relate
to travel and international affairs".[185]
Worldwide estimates that it has "about 3,000 hours of TV
programming that is in that zone of pure travel", citing
Coast, Britain from Above, and the various Michael
Palin travel documentaries.[186]
It strikes us as odd, therefore, the newly launched Lonely Planet
magazine does not carry the BBC brand or logo prominently on its
front page.
90. Worldwide has previously been forced to dispose
of some of its magazines due to a lack of connectivity with BBC
programming. Four years ago, Eve, a women's interest publication,
and Cross Stitch Crazy, were sold off because, as Worldwide
itself admits, "there were not really any cross-stitching
programmes on BBC television, and, similarly, there were not any
general women's interest programmes on BBC television at the time".[187]
The Chief Executive of Worldwide confirmed that "there has
to be that connectivity but it does not have to be directly a
programme to a magazine".[188]
91. It is right that the BBC should exploit its
intellectual property, including by allowing the publication of
magazines using the BBC brand, in order to generate returns for
the licence fee payer. However, the BBC must take due care not
to distort the market, and it should not buy new brandsas
it did with Lonely Planetto enter new markets. The BBC's
assertion that its presence in the magazine market has grown sectors
and benefited commercial rivals is highly counter-intuitive. If
that were the case, we should expect commercial rivals to welcome
BBC innovations in their markets. They do not. Rather than benefiting
commercial competitors, the inherent advantages that BBC Magazines
has over its rivals means that it can dominate markets at the
expense of others. The closure of the long-established Shoot!
magazine shortly after the launch of BBC Match of the Day
magazine was perhaps an example of this.
92. There is no reason in principle why the BBC
should produce its own magazines in-house, and there is certainly
no justification for its stakes in overseas publications. New
BBC magazines should only be launched if there is a clear link
with core BBC programming, and where the public value of launching
a magazine outweighs any adverse impact on the existing marketplace.
This could be assessed using a public value test similar to that
applied to other BBC services.
93. This Report is critical of the acquisition
of the Lonely Planet brand, its exploitation through the recent
launch of Lonely Planet magazine and the market-distorting effects
of those initiatives. We recognise, however, that a forced sale
of the business may well lead to a substantial loss to Worldwide,
the BBC and ultimately, therefore, the licence fee payer. We do
not, therefore, recommend such a step, but urge the Trust to take
account of the criticisms in this Report and moderate Worldwide's
behaviour accordingly in the future. Given the relative size of
the acquisitionand its considerable effects on Worldwide's
balance sheetwe also ask the BBC to disclose further details
of the deal and of the performance of the Lonely Planet business,
both before and since the acquisition.
Websites
94. The BBC's public service website, bbc.co.uk,
is the most popular content site in the UK: 44% of UK adult internet
users use the site on at least a weekly basis.[189]
Less familiar, at least for UK audiences, are the BBC's additional
commercial websites. BBC Worldwide's magazines and digital media
divisions have launched several commercial websites in recent
years. Examples include topgear.com and gardenersworld.com, together
with bbc.com, the international version of bbc.co.uk. These BBC
Worldwide websites provide news, entertainment and services much
like bbc.co.uk but, unlike the public service site, they contain
advertising. The Guardian Media Group argued that some of the
advertisements appearing on these sites were inappropriate, citing
a McDonalds advert on Worldwide's environment website, BBC Green.[190]
However, the BBC strongly refuted this suggestion, and we are
satisfied that this particular allegation was mistaken.[191]
95. Of greater concern to us is the general expansion
in Worldwide's online operations. The Guardian Media Group reports
that the BBC Magazines division of Worldwide has "moved from
extending existing programming brands to creating entirely new,
often multiplatform media brands".[192]
This has resulted in the launch of new "passion" websites
which the Guardian Media Group claims "have no direct link
to existing programming brands and have a significant negative
impact on existing operators in their respective markets".[193]
The example that both the Guardian Media Group and the British
Internet Publishers Alliance (BIPA) cited was BBC Green. According
to the Guardian Media Group, this site was launched despite there
being "at least eight [commercial] websites already struggling
to see where the return is going to come in the area of environment"
(e.g. Treehugger, Telegraph Earth, New Scientist, as well as the
science and nature site on bbc.co.uk which includes all the BBC's
public service natural history, nature and environmental content).[194]
The BBC informed us in November that for commercial reasons the
site would close on or before 20 November 2008 (unless a buyer
could be found), although we note that the website was not actually
closed until February 2009.[195]
Press reports provided further clarity on the reasons for the
closure, with a BBC Worldwide spokesperson quoted as saying "we
are a commercial business and in difficult times we have to look
at our portfolio".[196]
96. Nevertheless, BIPA concludes that "through
superior technology and marketing power the BBC dominates the
UK's online market".[197]
It claims that BBC Worldwide's commercial sites use the same technology
that was developed for the licence fee funded bbc.co.uk site.
This, combined with "unrivalled, privileged access to un-regulated
cross-promotional opportunities, cross-subsidised access to content
production and assets", creates, according to BIPA, "unfair
competition" with commercial websites.[198]
For instance, Shoot Gardening, an "online gardening
diary" and commercial competitor of the BBC, has submitted
a complaint to the BBC that Worldwide has violated its fair trading
guidelines. It reports that some of the content on Worldwide's
gardenersworld.com site has been copied directly from the public
service site bbc.co.uk/gardening. Shoot Gardening's founder
argues that "even if [Worldwide] paid a fair market price
[for the information], which I am not certain they did, the fact
they have it at all gives them a significant leap forward in competing
with us".[199]
The Guardian Media Group concluded that "the 'passion sites'
take eyeballs and advertising income away from existing commercial
sites [
] private investment is crowded out by an expanded
public service".[200]
97. We believe that there is little justification
for Worldwide to launch commercial websites in markets that are
already well served by commercial competitors, or where a clear
link to BBC programming is absent. We therefore welcome the closure
of the BBC Green website, which was clearly operating in a crowded
marketplace and was not directly linked to a specific BBC programme.
We hope that this sets a precedent and represents an end to such
online expansion by Worldwide, although we note the BBC's insistence
that this decision was taken purely for commercial reasons, rather
than due to any adverse impact on competitor sites. We believe
the BBC should exhibit extreme caution before launching any further
commercial websites. In particular, we recommend that it undertakes
thorough market impact assessments prior to launching new websites
or services on existing sites.
158 BBC Worldwide, Annual Review 2007-08, July
2008, p 29 Back
159
BBC Worldwide, Annual Review 2007-08, July 2008, p 29 Back
160
"BBC Magazines delivers robust ABCs for July-Dec 08",
BBC Worldwide press release, 12 February 2009 Back
161
BBC Worldwide, Annual Review 2007-08, July 2008, p 29.
BBC Worldwide is estimated to own around 40% of the children's
magazine market (Q 35) Back
162
BBC Worldwide, Annual Review 2007-08, July 2008, p 30 Back
163
Qq 29, 37 Back
164
Q 29 Back
165
Ev 160 Back
166
Ev 47 Back
167
Ev 160 Back
168
Ev 161 Back
169
Ev 161 Back
170
Frontline: Partners, www.frontline.ltd.uk Back
171
Q 182 Back
172
Ev 143 Back
173
Ev 206 Back
174
Ev 206 Back
175
The BBC Magazines website lists BBC Match of the Day magazine
in its "pre-teen" category, see www.bbcmagazines.com Back
176
Ev 161 Back
177
Ev 143 Back
178
Ev 177 Back
179
Q 59 Back
180
Q 59 Back
181
"BBC Magazines to launch Lonely Planet title", BBC press
release, 5 August 2008 Back
182
Department for Culture, Media and Sport, Review of the BBC's
Royal Charter: A strong BBC, independent of government, March
2005, p 101 Back
183
Ev 51, 174 Back
184
Ev 51-52, 176 Back
185
Q 156 Back
186
Q 202 Back
187
Q 238 Back
188
Q 238 Back
189
BBC, Part Two: Annual Report and Accounts 2007-08, June
2008, p 31 Back
190
Q 65 Back
191
Letter from the BBC to the Chairman of the Committee, John Whittingdale
MP, 11 November 2008 Back
192
Ev 47 Back
193
Ev 47 Back
194
Q 48 Back
195
Letter from the BBC to the Chairman of the Committee, John Whittingdale
MP, 11 November 2008 Back
196
"BBC must axe business ventures, insist MPs", The
Guardian, 14 February 2009 Back
197
Ev 177 Back
198
Ev 177 Back
199
Letter to Balbir Binning, Controller, Fair Trading & BBC Compliance
Officer, BBC, from Nicola Gammon, Founder, Shoot Limited Back
200
Ev 49 Back