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BBC ‘commercial subsidiaries efficient and fair competition’

December 17, 2018

By Colin Mann

The BBC Board has published a review into its own commercial subsidiaries.

The review by EY 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 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 (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 which it says 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 have been 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, the Corporation’s Welsh member Elan Closs Stephens. Other changes to the membership of this board will also be made, with the new directors joining on April 1st 2019.

“I am pleased that this review finds that our commercial subsidiaries are doing what they should,” declared Sir David Clementi, BBC Chairman. “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.”

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