BBC publishes review into its commercial subsidiaries

The review has found that the BBC’s three wholly-owned commercial businesses - BBC Studios, BBC Studioworks and BBC Global News - exhibit commercial efficiency in line with their peer groups and the wider market, fit with the BBC’s mission and public purposes, do not jeopardise the corporation’s reputation, and there are policies and processes in place to ensure that they do not distort the market.

This review, which the BBC Board commissioned EY to undertake on its behalf, fulfils a requirement set by the UK Government in the BBC’s Framework Agreement that the Board must assess whether the BBC’s commercial activities comply with the four “commercial criteria” established in the BBC’s governing documents.

These criteria state that all commercial activity undertaken by the BBC must:

• Fit with the BBC’s Mission and the Public Purposes;
• Exhibit commercial efficiency;
• Not jeopardise the good reputation of the BBC or the value of the BBC brand; and
• Not, as a result of the relationship of the activity with the UK Public Services, trading activities or non-service activities, distort the market or create an unfair competitive advantage.

The BBC’s commercial subsidiaries are:

• BBC Studios - the BBC’s content production, sales and distribution arm.
• BBC Global News - operates the BBC’s two commercially-funded international news services: BBC World News, the 24-hour global news television channel, and the digital platform bbc.com (and its apps).
• BBC Studioworks - provides studio and post production facilities and services to broadcasters and independent production companies.

The commercial subsidiaries are an important part of the BBC and create extra value for licence fee payers through profits that help fund the BBC’s UK Public Services and reduce the burden on licence fee payers.

The Board has accepted the conclusions and recommendations provided by EY, and has published the review in full.

The Board has also published targets for each of these subsidiaries, as required by the Framework Agreement. These targets give a long-range view on what the Board expects each of the commercial subsidiaries to achieve over a three to five year period. The new profit targets are informed by benchmarking analysis carried out as part of the review and are published with background information on how the Board arrived at its decision for these.

Separately to this review, the BBC Board has also reviewed the governance and oversight of the BBC’s commercial subsidiaries, including valuable input from Chris Saul’s review of commercial transparency at the BBC, which has been considered by the Board and will be published in the New Year. As a result, the Board has agreed changes to the membership and composition of the BBC’s Commercial Holdings Board, which is the governance body with responsibility for oversight of the commercial subsidiaries.

The Commercial Holdings Board will now be chaired by a non-executive director from the BBC Board, our Welsh member Elan Closs Stephens. Other changes to the membership of this board will also be made, with the new directors joining on 1 April 2019.

Sir David Clementi, BBC Chairman, says: “I am pleased that this review finds that our commercial subsidiaries are doing what they should. They exhibit commercial efficiency in line with their peer groups and the wider market, fit with the BBC’s mission and public purposes, and we have policies and processes in place to ensure they do not distort the market.

“I am immensely proud of the work undertaken by the BBC’s commercial businesses. They are a vital part of the overall BBC, creating even more value for licence fee payers and providing impartial news around the globe.”

BBC Press Office

Notes to editors

Under the BBC’s Royal Charter, the BBC is able to undertake commercial activities alongside its public service broadcasting activities as long as it is compliant with four “commercial criteria”.

The Corporation’s Framework Agreement with the UK Government states that the BBC must carry out and publish two or more detailed reviews throughout the current Charter period on whether its commercial activities meet the commercial criteria. This report marks the conclusion of the first of these reviews by the BBC Board.

Commercial Governance

Following the governance changes agreed by the Board the revised Commercial Holdings Board will consist of ten directors, constituted as follows:

1. Chair: Non-executive Director from the BBC Board
2. Non-executive Director from the BBC Board (and also member of the Board’s Fair Trading Committee)
3. BBC Director-General
4. BBC Deputy Director-General
5. CEO of BBC Studios
6. Non-executive Director
7. Non-executive Director
8. BBC Group Staff Director (who is not on the Board or Executive Committee)
9. BBC Group Staff Director (who is not on the Board or Executive Committee)
10. Staff director from a commercial subsidiary

Elan Closs Stephens CBE - incoming Chair of the Commercial Holdings Board

The incoming Chair of the Commercial Holdings Board is BBC non-executive director Elan Closs Stephens.

Elan is an experienced media director who has spent a career in broadcasting, governance and academia. A former chair of the Welsh-language broadcaster S4C, Elan also spent six years as a member of the BBC Trust. She has a strong background in cultural and broadcasting regulation policy. She is a former chair of the British Council in Wales, the Broadcasting Council for Wales and a former governor of the British Film Institute. She recently stepped down from a second term on the S4C Authority.

Elan is a distinguished expert in corporate governance. She is the Chair of Public Leaders Forum - a forum of Chairs and CEOs of all Welsh Assembly arms-length bodies. Until April 2018, she served nine years as Chair of Corporate Governance for the Wales Permanent Secretary’s Board. She currently serves as the Electoral Commissioner for Wales.

Elan is also Non-Executive Director on the board of the IMAX in Waterloo (Big Screen Ltd), which is a wholly owned subsidiary of the BFI.

Elan is Emeritus Professor of Communications and Creative Industries at Aberystwyth University and was awarded a CBE in the Queen’s Birthday Honours in 2001 for services to broadcasting and the Welsh language.