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BBC Worldwide: smoke and mirrors BBC Worldwide: smoke and mirrors
(25 days later)
The BBC’s commercial arm Worldwide – formerly BBC Enterprises – used to be a simple affair. Take BBC-produced programmes, sell them to broadcasters around the world and invest the profits in future BBC productions. BBC Enterprises’ declared profits were always pretty low primarily because the criteria they used to decide on programme investment were (deliberately) in many cases only borderline commercial. The idea was to invest as much as possible in new programmes, thus reducing declared profits – and the tax bills that came with them. Throw in BBC magazines and BBC Books and that was it. True, the relative lack of commerciality almost certainly provided cover for widespread inefficiency, but it was at least relatively straightforward.The BBC’s commercial arm Worldwide – formerly BBC Enterprises – used to be a simple affair. Take BBC-produced programmes, sell them to broadcasters around the world and invest the profits in future BBC productions. BBC Enterprises’ declared profits were always pretty low primarily because the criteria they used to decide on programme investment were (deliberately) in many cases only borderline commercial. The idea was to invest as much as possible in new programmes, thus reducing declared profits – and the tax bills that came with them. Throw in BBC magazines and BBC Books and that was it. True, the relative lack of commerciality almost certainly provided cover for widespread inefficiency, but it was at least relatively straightforward.
The last 10 years, however, have seen BBC Worldwide transformed. Under former director general Mark Thompson and chief executive John Smith, refocusing on profitability – of the declarable type – and expanding into a host of new markets and activities became the priorities. Worldwide now runs channels all over the world and has its own production businesses in the US, India, France and Germany. It set up its own “format factory” in Los Angeles and began investing directly in indies and paying for and distributing non-BBC content. It set out to conquer the world with the “global iPlayer”.The last 10 years, however, have seen BBC Worldwide transformed. Under former director general Mark Thompson and chief executive John Smith, refocusing on profitability – of the declarable type – and expanding into a host of new markets and activities became the priorities. Worldwide now runs channels all over the world and has its own production businesses in the US, India, France and Germany. It set up its own “format factory” in Los Angeles and began investing directly in indies and paying for and distributing non-BBC content. It set out to conquer the world with the “global iPlayer”.
The stated rationale was always to serve licence payers and the BBC better by exploiting its intellectual property, but the strong suspicion was that some senior executives had their eye on a commercial sale or flotation – and presumably the personal rewards that would follow. Sir Michael Lyons, as chair of the BBC Trust, was discomfited by some of what Worldwide did and the catastrophic, trust-approved decision to purchase Lonely Planet for about £100m proved a turning point. His successor Lord Patten reeled Worldwide back in, telling its executives they could forget flotation and insisted it aligned everything it did with the BBC’s broader public purposes. The stated rationale was always to serve licence payers and the BBC better by exploiting its intellectual property, but the strong suspicion was that some senior executives had their eye on a commercial sale or flotation – and presumably the personal rewards that would follow. Sir Michael Lyons, as chair of the BBC Trust, was discomfited by some of what Worldwide did and the catastrophic, trust-approved decision to purchase Lonely Planet for about £100m proved a turning point. His successor Lord Patten reeled Worldwide back in, telling its executives they could forget flotation and insisted it aligned everything it did with the BBC’s broader public purposes.
Which is ostensibly where BBC Worldwide is now. Out there in the global marketplace developing the BBC’s international profile and maximising returns to licence payers. So is that what Worldwide is really doing? Well, on the basis of last week’s annual report the honest answer would have to be – I haven’t the foggiest idea.Which is ostensibly where BBC Worldwide is now. Out there in the global marketplace developing the BBC’s international profile and maximising returns to licence payers. So is that what Worldwide is really doing? Well, on the basis of last week’s annual report the honest answer would have to be – I haven’t the foggiest idea.
Until recently turnover and profit numbers were reported for each of the major business activities – sales, production, channels and so on – and then broken down by territory. So it was possible to see, for example, that in territories where Worldwide chose to produce itself – rather simply sell and license – profitability fell. The justification was that the long-term benefits of being in production would include greater control of content and, critically, better returns to licence payers – dwarfing any short-term loss of revenue and/or investment costs.Until recently turnover and profit numbers were reported for each of the major business activities – sales, production, channels and so on – and then broken down by territory. So it was possible to see, for example, that in territories where Worldwide chose to produce itself – rather simply sell and license – profitability fell. The justification was that the long-term benefits of being in production would include greater control of content and, critically, better returns to licence payers – dwarfing any short-term loss of revenue and/or investment costs.
Similarly, starting channels businesses was initially costly and reduced sales, and licensing revenues as content was withheld from foreign buyers in order to supply the new BBC channels starting up in their territories. The longer term benefit – given that no channel with BBC in its title could realistically be sold, thus ruling out significant capital gains – was subscription revenues and advertising sales.Similarly, starting channels businesses was initially costly and reduced sales, and licensing revenues as content was withheld from foreign buyers in order to supply the new BBC channels starting up in their territories. The longer term benefit – given that no channel with BBC in its title could realistically be sold, thus ruling out significant capital gains – was subscription revenues and advertising sales.
So how are those two long-term investments paying off for us “shareholders”? Absolutely no idea again – as the way BBC Worldwide now reports its results excludes any meaningful financial data on production or channels activity. The business has been reorganised around geographical areas, which might make sense, but all the critical detail is hidden from view. According to the chief financial officer “content sales continued to deliver (and) growth in our channels’ ad(vertising) sales has helped to offset affiliate pressures in our more established markets”. In other words we’re struggling. But the financials you would expect any commercial company to disclose to its shareholders simply aren’t there. Similarly you’ll search high and low for meaningful references to production financials, or for mention of the “format factory” of yore. So do we have any idea whether the underlying strategies that cost us (shareholders) returns in the short term and netted senior executives some eye-watering bonuses are actually working? Er, no.So how are those two long-term investments paying off for us “shareholders”? Absolutely no idea again – as the way BBC Worldwide now reports its results excludes any meaningful financial data on production or channels activity. The business has been reorganised around geographical areas, which might make sense, but all the critical detail is hidden from view. According to the chief financial officer “content sales continued to deliver (and) growth in our channels’ ad(vertising) sales has helped to offset affiliate pressures in our more established markets”. In other words we’re struggling. But the financials you would expect any commercial company to disclose to its shareholders simply aren’t there. Similarly you’ll search high and low for meaningful references to production financials, or for mention of the “format factory” of yore. So do we have any idea whether the underlying strategies that cost us (shareholders) returns in the short term and netted senior executives some eye-watering bonuses are actually working? Er, no.
At the headline level BBC Worldwide seems to be working reasonably well – turnover, profits and returns to the BBC in terms of investment in future content – and the old programme sales business appears to be growing. I’m sure Worldwide chief executive Tim Davie – who has shown himself to be a smart and savvy strategist – and his team are doing their best. Evidently the BBC thinks so since it’s given him a £200,000 bonus. But is Worldwide really being as effective as it could be in generating returns to the BBC? I can’t tell and this shockingly opaque annual report won’t tell you.At the headline level BBC Worldwide seems to be working reasonably well – turnover, profits and returns to the BBC in terms of investment in future content – and the old programme sales business appears to be growing. I’m sure Worldwide chief executive Tim Davie – who has shown himself to be a smart and savvy strategist – and his team are doing their best. Evidently the BBC thinks so since it’s given him a £200,000 bonus. But is Worldwide really being as effective as it could be in generating returns to the BBC? I can’t tell and this shockingly opaque annual report won’t tell you.