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Memorandum submitted by 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 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
Any small or
larger publisher in the
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 e.g. 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 3 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 e.g. 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 funding - truly 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 |