BBC 'must rein in commercial arm'

The BBC has been told to rein in its commercial operations by the Commons Culture, Media and Sport Committee.

New activities undertaken by BBC Worldwide risk jeopardising the corporation's reputation and adversely affecting competitors, MPs said.

Their report was highly critical of BBC Worldwide's acquisition of the travel book group Lonely Planet.

The BBC Trust said it was reviewing the role of BBC Worldwide and already had most of the issues raised in hand.

The Culture Committee called for any future commercial activity to have a clear link with core BBC programming.

It also called for the threshold at which commercial activity is automatically referred to the BBC Trust to be lowered.

The committee suggested a limit of £30m rather than the current £50m, to promote greater scrutiny by the Trust.

The committee recommended:

• Stronger governance of the BBC's commercial activities
• Lowering the threshold at which a commercial transaction is referred to the BBC Trust from £50m to £30m, based on the value of 25% of BBC Worldwide's assets
• The chief executive of BBC Worldwide should no longer sit on the BBC board as it gives Worldwide an unfair advantage over its competitors
• The BBC should open up the market for its programmes to competitive bidding. BBC Worldwide currently has a "first look" option on the rights to all BBC programming
• A proportion of the licence fee should be made available to Channel 4 to support its public service programming.

Acquisition

At the time of the acquisition of Lonely Planet, BBC Worldwide was criticised for extending its commercial involvement.

The committee said the BBC failed to meet the level of Stock Exchange disclosure requirements that would apply to any listed firm, when it bought Lonely Planet in 2007.

Neither the BBC nor Lonely Planet are listed but the committee suggests the standards applied should be as high as for those listed on the stock exchange.

Last year the BBC attracted further adverse comment when it introduced advertising to the BBC website for those accessing it outside the UK.

'Adverse impact'

BBC Worldwide channels include BBC America, BBC Entertainment, BBC Knowledge, BBC Lifestyle, CBeebies, BBC HD and BBC Prime.

In 2008 it reported a record operating profit of £117.7m.

"The BBC has been charged by successive governments with maximising the commercial value that it can realise from investment by licence fee payers," the BBC Trust said in a statement.

"Through its work it delivers the equivalent of around £9 for every licence fee payer in value created for the BBC."

The committee found the expansion and diversification of the BBC's commercial operations had had an adverse impact on its commercial competitors.

Its report was sceptical as to whether the proposed partnership between BBC Worldwide and Channel 4 would provide the best solution for Channel 4, the licence fee payer or the industry as a whole.

'Drawing a balance'

Responding to the recommendations, the BBC Trust said the "first look" option was crucial to maximising the value it can generate for the BBC and its licence fee payers.

"There is a balance to be drawn between generating a return for the BBC and preventing damage to its commercial competitors"
John Whittingdale MP

"Through the 'first look' the BBC can also exercise greater control over the BBC's brand and reputation," its statement added.

It also rejected the idea of sharing the licence fee with Channel 4.

"The Trust believes that solutions to the challenges facing public service broadcasting must find new sources of value, rather than simply reallocate existing funds," it said.

But the culture committee felt the BBC's commercial activities had gone too far.

"In many cases there is no reason why the BBC need undertake commercial activities itself and where it does there should be a clear link to BBC programming," said committee chairman John Whittingdale.

"There is a balance to be drawn between generating a return for the BBC and preventing damage to its commercial competitors."

"We believe that the balance has tipped too far in favour of BBC Worldwide's expansion and we look to the BBC Trust to correct this."

Pact, the trade body for independent producers, welcomed the report, calling it "comprehensive and constructive".

"We welcome this report and feel vindicated that a lot of our concerns regarding BBC Worldwide's potential to distort the rights market were realized," said John McVay, chairman of Pact.

"We strongly endorse the recommendation that the BBC should put in-house programme rights out to the market to ensure they achieve the best rates."

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