Exclusive Interview: BBC Worldwide’s John Smith

PREMIUM: John Smith, the CEO of BBC Worldwide, tells World Screen Newsflash about the company’s record financial performance, its plans for the U.S. and the international rollout of the iPlayer.

As the commercial arm of the British public broadcaster and the largest producer and distributor of programming outside the U.S., BBC Worldwide’s main mission is to generate profits that are pumped back into the BBC and invested in programming. Indeed, BBC Worldwide remained true to its remit and announced record profits of £160.2 million (€183.3 million) for the last fiscal year. CEO John Smith, who oversees six business areas—channels, content and production, global brands, sales and distribution, consumer products and magazines—talks to TV Europe about BBC Worldwide’s success.

WS: What factors have contributed to such a good financial performance?
SMITH: I’m pleased to say this was BBC Worldwide’s best year ever, with record sales and record profits. This year was particularly good due to strong sales performances by our channels, consumer products and sales and distribution businesses and BBC.com advertising sales growing 113 percent in the U.S. This—combined with continuing to run a tight ship—led to a 10-percent increase in profit on the previous year. Our strategy of developing a diversified global media business and extending the international visibility of our brands is producing good results and allows us the flexibility to weather many market challenges.

WS: What was the strategy in increasing BBC Worldwide’s presence in the U.S.?
SMITH: We’ve made a good start in the U.S. but there’s still so much opportunity for BBC Worldwide that we haven’t yet harnessed. BBC America has had its best year ever, so we want to use that as a platform to push U.K. content and brands. Plus, BBC.com is doing well in the U.S.—with a monthly average of over 15 million unique users. There’s a real appetite for great quality British content. Like Dancing with the Stars—this year’s U.S. series was the most popular yet. We’ve set up our own production studio in L.A. and plan to develop both new commissions and local versions of our own formats. We’re also investing in games and apps linked to our key U.S. properties.

WS: In what other territories around the world are you planning to increase BBC Worldwide’s presence?
SMITH: Becoming more international is one of our strategic priorities. Our first priority is growing our market share in the U.S. and Australia—as the major English-speaking markets. We’re also developing plans on a market-by-market basis—for example for India. And to help drive international growth, we’re appointing executives to develop business opportunities in Australasia, Asia, EMEA, Latin America and North America. We want to increase the share of sales from outside of the U.K. to two-thirds by 2012, so finding new territories is very important to us.

WS: What are your priorities in growing BBC Worldwide’s channel business?
SMITH: We’ll be looking into new possibilities for channel brands and channel launches. Jana Bennett, who heads up our channels business, is also keen for us to do more global viewing events. We had a great success with our coverage of the royal wedding, and we’re looking to do something just as exciting around the Queen’s Diamond Jubilee and the London 2012 Olympics. Jana also plans to commission more original content for our channels on both a regional and global basis. We already have five new titles in production this year—including Come Dine with Me South Africa and our first comedy pilot—and are set to announce a new slate of commissions shortly.

WS: How has BBC Worldwide grown its own local production teams in various countries?
SMITH: Our strategy [has] been to build up a network of production bases in major territories. BBC Worldwide now has wholly owned production bases in Los Angeles, Paris and Mumbai, joint ventures in Germany, Canada, Argentina and Australia and partnerships in Russia and Brazil. The benefits include keeping production revenues as well as license fees, keeping control over the format, and being able to keep additional rights. This means more profit to return to the BBC.

Our production bases have done very well this year. All are securing new commissions. The team in the U.S. is currently overseeing 20 scripted development deals and 17 unscripted series. This year our focus is on growing the number of commissions from our existing production network.

WS: With increasing consolidation in the U.K. indie sector, has it become more difficult to access rights to quality programming?
SMITH: There is competition for the best content, so we are always exploring all avenues to increase our catalogue. One of our strategic priorities is to increase investment in new content. Last year we invested £101 million (€114.2 million) in new programs. We’ll continue to invest in new BBC-produced programs and support emerging indies through development finance, co-production deals and international distribution.

We’ll grow the number of commissions from our production offices. We’re also developing more direct relationships with talent, like Kirstie Allsopp and Phil Spencer’s Raise the Roof Productions, to develop valuable intellectual property and content. There’s also a dedicated team at BBC Worldwide who works closely with broadcasters and producers to find imaginative and creative ways of sourcing funding.

WS: In what ways is BBC Worldwide driving digital growth? How are you reducing your reliance on physical products?
SMITH: That’s a really important question for us. We’ve put digital capability in every area of the business. Our objective is to drive online and mobile growth, while reducing reliance on physical products. We’re aiming to have 10 percent of our sales coming from digital by 2012; we’re currently around 8 percent. We’re already doing well. For example, we’ve had 12 million downloads of our apps, 20 million program downloads via iTunes, and our Top Gear Facebook pages have over 11 million fans. We’ve already reduced reliance on physical products by selling our stake in our audiobooks business and moving our magazines business towards a digital future. We’ll also further develop our mobile, apps and games offer and invest in BBC.com and digital sales of programs.

WS: What are your plans for the global iPlayer?
SMITH: In program syndication we’re taking a broad nonexclusive approach, making content available via a range of third-party services as well as piloting our own VOD service, the global BBC iPlayer. I’m really excited about this. We are currently piloting the global BBC iPlayer app in Western Europe and we’ve been very pleased with the success so far. We’ve been topping the rankings in the iTunes app charts in more than half of our launch territories, which is a fantastic start. It’s long been an ambition for BBC Worldwide to launch its own international VOD service, and I believe we’re able to offer something unique. What sets us apart is that this is an editorially curated service that directs international audiences to a mix of current and classic high-quality entertainment online. This service is an important step forward for BBC Worldwide and the U.K. creative industry as a whole. It’s a great way for audiences to access great U.K. shows on the latest devices via a stylish, simple and contemporary user experience.

WS: Will having programming available on the iPlayer affect the way BBC Worldwide licenses its programming?
SMITH: No, that’s not the way our business works. Our sales-and-distribution arm and our portfolio of international channels are both thriving businesses and they work closely together very successfully to decide the best windowing strategies for our programs, and the global BBC iPlayer will operate within that mix. We have incredibly important relationships with broadcasters all around the world whose audiences really rate our shows—and that is certainly not going to change. The evidence to date indicates that online viewing is additive, so we see this service as an “and,” not an “instead of.”

WS: What potential for growth are you seeing in the download-to-own business?
SMITH: Our download-to-own (DTO) revenue has almost tripled year on year and now makes up around 4 percent of our overall video business. We’re iTunes’ number one TV partner in the U.K. and globally we’ve had over 20 million downloads to date. We expect digital to grow massively over the next year. Our strategy is to recognize consumer needs and offer choice, easy access and value. Our DVD and DTO businesses sit alongside each other for this reason, and increasingly we’re looking at ways to combine physical and digital through hybrid products.

WS: The DVD market has decreased in recent years. How is BBC Worldwide product faring in the DVD market, and what opportunities are there still in the DVD business?
SMITH: Consumers are increasingly demanding in what they expect in terms of choice and availability of video content—they haven’t stopped wanting video, they are just watching it in different ways. Our own DVD business, 2 entertain, has just had its most profitable year ever, with strong sales in the U.K. and a significant rise in revenues in the U.S. For us, the key opportunities lie in digital and developing creative and interesting physical products for diehard fans that merge videos, toys, games, books, etc. Gifting is also absolutely key to our business—ensuring the strongest possible pipeline of content for Christmas is crucial.