Report: BBC Worldwide Operations Should be Restricted

LONDON: A report from the British parliament’s Culture, Media and Sport Committee recommends that BBC Worldwide’s operations be "reined back," arguing that some of the commercial division’s deals risk jeopardizing the pubcaster’s reputation.

In its report, the committee said it supported, in principle, BBC Worldwide’s mandate, allowing for profits generated to be invested back into BBC content. "However, the manner in which some of the BBC’s commercial revenue is generated, and the governance arrangements within which the BBC’s commercial arm operates, cause us and others increasing concern," the report continues. "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."

The committee cites, in particular, BBC Worldwide’s investments in production companies outside of the U.K., the acquisition of Lonely Planet and the growing portfolio of magazines, which "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 U.K.’s creative economy as a whole that BBC Worldwide’s activities are reined back."

The committee has recommended that BBC Trust reinstate a rule that all BBC commercial activity must have a clear link with core BBC programming. In addition, it questions BBC Worldwide’s "preferred distributor" status with the BBC, calls for a more transparent process for program sales and wants to "open up the market for the BBC’s programmes to competitive bidding…What we propose here would not spell the end for BBC Worldwide’s sales and distribution business. Clearly, given its background and track record, it would still stand a good chance of acquiring many programmes. However, it would ensure that Worldwide always paid the full market value to the BBC and hence the licence fee payer. We accept that the BBC will not be able to effect this transformation overnight, but we recommend that it now begins a steady migration away from the ‘first look’ arrangement by opening up an increasing number of programmes to competitive bidding."

Also at issue are BBC Worldwide’s investments in production companies, both in the U.K. and abroad. On the British investments, the report states: "We recommend that Worldwide should exit existing investments as soon as is feasible, and without damage to the viability of the production companies concerned." On international expansion, meanwhile, the Committee says: "It is very difficult to make a case for BBC Worldwide’s investments in overseas production houses. We were convinced by the arguments of those who demonstrated that the risks, both financial and reputational, far outweighed the possible return to the BBC. More importantly, the attempt to create an international BBC Worldwide business creates the clear risk that it is this business, rather than the core public service remit, that will increasingly drive BBC programming. That is not a risk that licence fee payers should have to bear. We therefore recommend that the strategy of overseas investment is brought to an end. Investments already made should be disposed of when market conditions permit a profitable (or at least loss-minimising) exit."

The report was also critical of a proposed BBC Worldwide and Channel 4 tie-up, noting: "We are sceptical as to whether a wide-ranging partnership or even merger with BBC Worldwide would be the best solution for Channel 4, for the licence fee payer, or for the media industry as a whole. While we do see some value in the direct transfer of assets—particularly Worldwide’s UKTV channels—to Channel 4, we believe that a broader and more complex arrangement would have a number of drawbacks. The extra businesses in which Worldwide would have a stake in would be likely to make Worldwide an even more aggressively commercial organisation. Furthermore, we see no obvious synergy between Channel 4, which produces no content of its own, and Worldwide, which is primarily a content distributor. It is also apparent that any partnership, however great the scope, would still only account for a proportion of Channel 4’s £150 million annual funding gap."

Responding to the report, BBC Trust said it would give the findings "careful consideration. The Trust believes that through its own review of BBC Worldwide it already has in hand most of the issues the committee raises." The statement from the Trust adds that there "should be greater clarity to the direction, parameters, and strategic priorities of Worldwide’s operations in the U.K. The Trust also concluded that there should be changes to Worldwide’s detailed control framework to establish a more contained focus for its operations."

The statement continues: "On the suggestion that a proportion of the licence fee should be made available to Channel 4, the Trust believes that solutions to the challenges facing public service broadcasting must find new sources of value, rather than simply reallocate existing funds. Partnerships, such as the one proposed with Channel 4, have a role to play in sustaining the wider U.K. broadcasting industry. If carried out successfully the BBC’s partnership plans can deliver better value not only to the industry, but also to licence fee payers. Because of this, it would be premature to pre-judge the outcome of any partnership discussions when there is the potential for benefits to accrue to all parties. The Trust has also previously stated that there is still a strong rationale in favour of the ‘first look’ arrangements. The ‘first look’ allows for ‘vertical integration’ in the production process, which is common to many broadcasters, to return greater value to the BBC and licence fee payers. Through the ‘first look’ the BBC can also exercise greater control over the BBC’s brand and reputation."