Digital TV channels BBC Three and BBC Four offer poor value for money, according to an independent review carried out for the government.
Comedy Little Britain has become one of BBC Three's biggest hits
The report, led by marketing professor Patrick Barwise, covers the performance of BBC Three, BBC Four, CBBC and pre-school children's TV channel CBeebies.
It said the BBC's digital offerings had "many strengths" and praised Cbeebies in particular.
But low viewing figures meant BBC Three and Four were poor value, it added.
Jana Bennett, the BBC's director of television, told BBC Radio Four's The World at One that value for money will improve.
"The report issues a challenge to us, which is to continue to improve value for money, but also acknowledges that these are channels in their earliest stage."
"If they were babies, they would be toddlers now."
"It also says that the public value they provide already outweighs their cost.
BBC governors responded by saying they would carry out research "to judge the effectiveness and distinctiveness of these new services".
They also said new service licences to define the remits, performance targets and budgets for each channel would help make the BBC more accountable to the public.
The governors, who regulate the BBC, said they welcomed Prof Barwise's overall conclusion - that the new services had "largely met" the remits laid down by the government when they were established.
BBC Three, which launched in February 2003, is aimed at 25- to 34-year-olds with new comedy and drama plus youth-oriented documentaries.
The report said BBC Three should relax its focus on its target audience, calling it an "obsession" and a "creative straightjacket".
The channel's daily news show at 7pm should be scrapped because it "achieves nothing and attracts tiny audiences", while the BBC Four news show, The World, which airs at 8pm, should be substantially revamped or replaced.
BBC Four made its debut in March 2002 as a home for more highbrow arts and current affairs.
But the report said BBC Four should have wider appeal and fewer arts programmes that "virtually no-one watches".
CBeebies and CBBC, which is aimed at six- to 13-year-olds, both launched in February 2002.
The report said CBeebies was "a triumph and an exemplary public service for pre-school children", while CBBC was a "distinctive service with high quality UK-produced content".
Prof Barwise said: "The BBC's digital channels have many strengths - CBeebies in particular shows that a channel of substantial public value can be created at minimal cost.
"But there is room for improvement. BBC Three and BBC Four need to increase their impact and value for money, while retaining their public service ethos."
Culture Secretary Tessa Jowell, who commissioned the report, described it as a "considered" judgement, although its recommendations are not binding.
BBC Three remit 'impossible'
She said: "It raises important issues about how the BBC can develop its digital product, while staying true to its public service aims and maintaining an awareness of their impact on an increasingly competitive market."
CBeebies is described as an "exemplary" pre-school service
Prof Barwise also said BBC Three's original remit, which it had to meet to be allowed to survive, was "close to mission impossible".
When BBC Three originally applied for government approval in 2001, Ms Jowell refused, saying it was not "distinctive" enough from competitors.
She only agreed when the remit was revised to include more news and current affairs, with more emphasis on education, music and the arts.
She also forbade it from being too similar to BBC One and Two.
WEEKLY AUDIENCE REACH
BBC Three - 7%
BBC Four - 2.1%
CBBC - 2.3%
CBeebies - 5%
Source: BBC Annual Report 2003/4. Proportion of UK homes who watch at least 15 mins per week
"I think the idea of whether BBC3 has too many constraints is a really interesting point," Ms Bennett told BBC Radio Four.
But she insisted the channel could "grow organically and be a creatively valuable channel".
But Prof Barwise has now said the corporation should stop thinking of BBC Three and Four as niche channels, and "start treating them as mainstream channels, like BBC One and BBC Two, but smaller and more innovative".
Prof Barwise added BBC Three should build on its successes in edgy comedy and innovative entertainment, such as Little Britain, Monkey Dust and 3 Non-Blondes.
"Mainstream doesn't mean everything should be the same," said Ms Bennett, in response to Prof Barwise's comments.
"But I think 'more inclusive' is already what BBC3 is, it may have targeted a particular section of the audience but actually it doesn't drive away other people - either the young, or people outside that demographic."
BBC research published on Tuesday found 81% of people surveyed agreed the BBC is worth the £121 licence fee per year.
It also said BBC digital channels, particularly BBC Three, CBBC and CBeebies, were positively received by viewers.
The findings of a similar review into the BBC's digital radio services are due next week.
BBC Three - £124,100/hour
BBC Four - £56,400/hour
CBBC - £37,700/hour
CBeebies - £60,500/hour
Source: BBC Annual Report 2003/4. Figures refer to BBC-originated programmes
The independent reviews come as the government decides whether to give the BBC a new royal charter.
The current charter, which sets out its functions and funding, expires at the end of 2006.
Ms Jowell also published a review by media regulator Ofcom, which found the BBC's digital services had helped persuade viewers to get digital TV - but probably not as many as the BBC has claimed.