112. There are major benefits from the BBC undertaking
commercial activities. Most importantly, the profits generated
by the exploitation of the BBC's intellectual property can be
reinvested in the BBC's public services, to the benefit of licence
fee payers. We fully support this principle. However, the manner
in which some of the BBC's commercial revenue is generated, and
the governance arrangements within which the BBC's commercial
armBBC Worldwideoperates, cause us and others increasing
concern. Worldwide has proved successful in recent years in exploiting
new commercial opportunities. Its expansion was largely made possible
by a loosening of the rules that govern the limits to its operations.
However, there is clearly a balance to be drawn, between Worldwide
generating a return for the BBC, and limiting Worldwide's operations
in order to ensure it upholds the BBC's reputation and does not
damage its commercial competitors.
113. The new businesses in which Worldwide has
become involved, particularly its minority stakes in overseas
production companies, its controversial acquisition of Lonely
Planet, and its growing portfolio of magazines, suggest that the
balance has been tipped too far in favour of Worldwide's unrestricted
expansion. Worldwide's new activities risk jeopardising the reputation
of the BBC and have had an adverse impact on its commercial competitors.
Furthermore, it seems likely that the BBC could gain a better
return for the licence fee payer if it sold more of its rights
on the open market rather than offering them exclusively to Worldwide.
We believe it is in the interests of the UK's creative economy
as a whole that BBC Worldwide's activities are reined back. Among
our other recommendations, we therefore recommend that the BBC
Trust reinstates the rule that all BBC commercial activity must
have a clear link with core BBC programming.