Memorandum submitted by Signature Publishing
Ltd
SIGNATURE PUBLISHING
LTD
Signature Publishing Ltd is an independent consumer
magazine publishing company, which produces a range of consumer
magazines and websites. These titles are available throughout
the UK, and some are distributed internationally. The company
has private shareholders who own and run the business. It is not
supported by any larger corporate company or other external equity
holder.
By definition it is a small publishing company,
but it faces the same issues such as dealing with major supermarkets,
paper and print costs, marketing and promotion, as does the BBC.
Within the UK, smaller publishers collectively
produce a range of specialist magazine markets. It is because
of this that the UK magazine publishing market offers possibly
the best quality and most diverse range of titles compared with
anywhere else in the world. It is certainly ahead of any other
European country, and only the USA can vie with it.
Any small or larger publisher in the UK is perfectly
happy with the concept and reality of open competition in magazine
publishing.
However, the primary reason for supplying the
attached information to the Commons Committee is to highlight
the increasing presence of the BBC in the magazine publishing
market; and that the BBC's primary role is being over-extended
into commercial activities, which would not exist if it were not
for the funding enjoyed by the BBC in its public service capacity.
BBC Worldwide has a privileged position in that
its activities are inspired and encouraged by the enormous creative
and financial position of the BBC. Without the security of the
BBC behind it, BBC Worldwide would not be able to propel its products
into the market. Furthermore, the real transfer costs of assets,
brands, concepts, celebrities are not passed over at real market
value between the BBC and its commercial arm.
That means that BBC Worldwide is enjoying a
subsidised benefit to progress its commercial activities, such
benefit not being available to its competitors. It is noteworthy
that all magazines state BBC on the cover, not BBC Worldwide,
thereby using the primary licence funded brand!
SUMMARY OF
MAIN POINTS
1. A major part of the BBC's commercial
activities is its magazine publishing business. It publishes some
40 magazines within the UK, and has a number of links to international
operations, some of which seem to stretch beyond even a reasonable
understanding of a connection to the BBC's role eg a tie in with
Hello in India.
2. It is now the UK's 3rd largest consumer
magazine publisher out of some 500 consumer magazine publishers.
It is also a part owner of Frontline, the UK's largest distributor
of magazines to wholesalers, and then on to retailers.
3. The BBC brand, and all that those three
letters convey, has been created and funded from a combination
of the licence payers fees and government subsidies.
4. As a result placing the BBC brand on
the front cover of a magazine, and adjacent to its title, provides
that magazine with a significant advantage over other magazines
competing in that sector.
No other publisher has the luxury of being able
to establish credibility, authority, and the instant understanding
of an internationally recognisable and familiar brand, all of
which brand assets have been provided and paid for by, in effect,
"compulsory revenue sources" from within the BBC's primary
public service operations of TV and Radio.
Any independent commercial publisher has to
progressively build up their brand and Intellectual Property assets
through, firstly creating, and then re-investing its company income,
generally over a long time period.
The BBC magazines, by contrast, have this brand
value asset instantly and freely available to them for no transfer
cost. This gives them a distinct unfair competitive advantage
over other magazines particularly in these key areas:
A. The true publishing costs of producing and
marketing a magazine.
B. The improved reception and willingness to
listen when a BBC magazine brand is presented to the key major
retailers of magazines, all of which are large corporate groups,
particularly supermarkets.
C. It is inevitable that a new title carrying
the BBC logo will gain a "preferred" status over a comparable
new but unknown title from another publisher, particularly one
from a smaller independent company.
5. In the children's magazine sector, BBC
magazines are the largest publisher with more titles and revenue,
and represent some 40% of the entire children's magazine market.
In some retail areas and certain ranges of shops belonging to
supermarket chains, the BBC's market position can increase to
over 50% because of the supermarkets range listings policy. This
affects the ability of smaller publishers to find sufficient opportunities
to be stocked on supermarket shelves, as the range is occupied
by large number of BBC titles.
It is not only the smaller publishers, who are
competitively affected. A recent example has been the launch of
the children's football magazine, Match of the Day (MOTD).
A long established title, Shoot, from
a major publisher was effectively closed as a result of the BBC's
launch into this sector of magazines.
Again it is a clear example of a successful
TV programme being leveraged by a BBC magazine for no cost, compared
to the brand awareness cost that would make it impossible for
any competing publisher to match.
The increasing presence and market size of BBC's
children's magazines is now restricting the range of choice available
to the consumer, and it undoubtedly has an unfair commercial advantage
which distorts the market.
6. The BBC, through its worldwide involvement
in TV, can ensure that it has the top range of current and popular
TV characters and cartoons. These characters are then "given"
to the BBC magazines without the real cost of acquiring them,
or the real licensing cost for them being transferred over to
the magazines. BBC CBeebies has a dominant position in children's
TV, and therefore, can provide its magazines with an immense selection
of popular characters.
7. This benefit is also reflected in the
cover price of magazines such as BBC Toybox, which managed
to be kept at 99p until 2008, despite being packed with major
branded characters. A cover price that other publishers would
find difficult to match for content cost.
8. It is clear that BBC magazines enjoy
a significant revenue, cost and marketing advantage over their
independently funded competitors. This is demonstrated by the
fact that many of its titles are the market leaders in their subject
area, or collectively best sellers.
9. The BBC may attempt to claim in its defence
that its commercial arm returns profit to the BBC to benefit the
licence payer. However, BBC Worldwide appears to be incentivising
celebrities to share in the proceeds of its commercial arm. These
are the same celebrities whose persona and public awareness was
created via BBC TV and who were already paid substantial sums
for that work via the licence payer.
Now they are gaining extra income for side deals
with BBC Worldwide eg Jeremy Clarkson allegedly being paid over
£300,000 for commercial involvement in Top Gear magazine.
This level of money, if such profit is there, should be returned
to the BBC not giving extra lining to the pockets of a celebrity,
who has already been paid for his work on that brand.
10. The purchase of Lonely Planet for some
£80 million on a publication turning over £10 million
raises substantial question-marks. Not only is the financial judgement
of such an acquisition there, but also why the need to buy it,
and then it is inevitable that a BBC Lonely Planet brand magazine
will follow in order to help justify the acquisition, and once
again distort the market competition.
11. The BBC's commercial activities are
based on a far lower risk assessment than other commercial publishers.
The BBC has a very high level of funding certainty and predictability
in total income for a number of years ahead. This is not the case
for independent publishers, and the difference between the BBC
and its "real" commercial competitors has never been
as great as now, with the huge economic uncertainty raging. BBC
executives do not have to spend every day considering literally
tomorrow's fundingtruly commercial operators have to. Thus
BBC Worldwide inevitably senses a high degree of safety net within
the overall protection of its parent company.
12. Entrepreneurs have to accept risk, but
BBC Worldwide is not an entrepreneurial business. It is a parasite
business feeding off the comparative fat of the BBC. For all the
above reasons, that is why BBC Worldwide's activities need to
be curtailed and controlled to allow real and fair competition
to exist, not licence payer subsidised competition available to
only one organisation.
October 2008
|