Commercial Activity

The licence fee is supplemented by income from the commercial exploitation of licence fee funded content and infrastructure through three commercial subsidiaries – BBC Worldwide, BBC Global News Ltd and BBC Studios & Post Production (S&PP).

Commercial performance

BBC Worldwide exists to support the BBC public service mission and to maximise income to the Group on its behalf. It returned £174million to the BBC in 2013/14, up from £156million in 2012/13. This was primarily through investment in BBC commissioned content and dividends. Returns from BBC Worldwide to the BBC support an ongoing commitment to manage financial performance sustainably, protecting the interests of licence fee payers.

Despite mixed market conditions and a significant adverse impact from foreign exchange, BBC Worldwide’s overall financial performance was good. Headline sales of £1,042million (2012/13: £1,116million) declined by 7% (or 5% after adjusting for exchange rate movements), principally due to disposals and a new intra-BBC revenue share arrangement for BBC.com. Headline profit of £157million (2012/13: £156million) was up 1% (or 12% if exchange rate movements are discounted), with headline operating margin improving to 15% (2012/13: 14%). Revenue growth was strongest across sales to digital clients, advertising sales and in emerging markets. BBC Worldwide’s best performing programme in the year was Sherlock Series 3. The Doctor Who 50th anniversary episode was also a global highlight, transmitting in 15 languages in 98 countries, with 3D screenings in 23 countries, and generating unprecedented interest amongst fans across the world.

BBC Worldwide entered a new phase this year, with a new organisational structure and a new strategy. BBC Worldwide’s ambition is to grow the BBC brand around the world, increasing its global presence and future profitability, resulting in sustainable and rising returns to the BBC and the UK creative industry. BBC Worldwide announced that it will concentrate on three core areas: increasing spend on and delivering value from content, developing and rolling out a focused portfolio of new global BBC genre brands and consolidating global digital services.

In its first year, the new BBC Worldwide strategy showed good signs of progress:

• „„content investment was £201million (2012/13: £176million), reaching BBC Worldwide’s target of £200million one year early. It continued to invest in the core BBC genres of drama, natural history and factual entertainment. Major investments included Atlantis, Doctor Who, Orphan Black, The Musketeers and Hidden Kingdoms.
• „„three new global genre brands were announced by BBC Worldwide: BBC First, BBC Earth and BBC Brit. Each will showcase premium content from the three core genres of, respectively, drama, premium factual and factual entertainment. Plans for a mix of linear and over the top launches in lead markets in the new financial year, prior to wider roll out, are underway.
• „„in digital, regulatory approval was received for the launch of BBC Store, to be funded and operated by BBC Worldwide. BBC Store will launch in the UK next year. Meanwhile, BBC Worldwide announced plans for a series of investments in BBC.com, and the end of the pilot of its Global BBC iPlayer app, as it focuses on the BBC.com site. This will help support the BBC in achieving a global reach of 500 million per week by 2022.

The business moved to regional operation at the start of the year, further increasing its focus on international markets. Successful international expansion included the launch of new channels, with BBC Knowledge marking a debut in Vietnam, as well as a Memorandum of Understanding signed with China’s state broadcaster CCTV for the development of natural history titles.

BBC Worldwide is also an important source of revenue for UK independents, and in the year paid £116million (2012/13: £91million) to independent rightsholders in upfront rights investment, profit share and royalties – the vast majority of which was in the UK.

BBC Global News operates two commercially funded international news services, BBC World News and bbc.com, and saw a strong increase in use of its services during 2013/14. Digital reach for News content was up 25%, with bbc.com achieving a record 1.3 billion page views in March from 96 million unique browsers, whilst TV distribution increased to 388 million households. BBC Global News services were the main driver of increased audiences to the BBC’s World Service Group: the total weekly audience grew from 256 million to 265 million. The business has continued to nurture key on-screen talent, and seen great success in the social media arena as BBC World News has welcomed its five millionth Facebook fan and been identified as the most shared news brand on Twitter. As a result of the business’ continued planned investment programme, building on the relaunch of the BBC World News Channel in January 2013, the business returned an operating loss close to plan of £7million in 2013/14 (2012/13: loss of £1million).

It has been a transformational year for Studios and PostProduction (S&PP), moving from its historic home at Television Centre and successfully establishing operations at new core locations – Elstree Studios and South Ruislip – whilst new studios are being built at Television Centre.

The company delivered an impressive range of creative projects for numerous broadcasters, media companies and content owners – including full studios and post production services on Strictly Come Dancing, EastEnders, Children in Need and Channel 4’s Winter Paralympics. It hosted a variety of independent productions including Sky’s A League O Their Own and ITV’s The Chase and built new production facilities for Channel 4’s Deal Or No Deal in Bristol. In addition, BBC S&PP’s award winning Digital Media Services team digitally restored the original black and white televised film footage of the Queen’s Coronation and cult classic The Professionals, as well as completing many other media handling projects.

Whilst the company has achieved £29million in sales from its new locations and smaller studio footprint, it has delivered an operating loss of £3million for the year against a £1million operating loss the previous year (after accounting for BBC pension deficit contributions but before exceptional items). A level of loss was always budgeted for this year of relocation and changing operations and is being funded through S&PP cash reserves which were retained in anticipation.