BBC bosses have been told to learn lessons from the failure of the BBC Store download service and their purchase of travel guide publishers Lonely Planet when embarking on new commercial ventures.
The corporation is expected to become more commercial in the coming years as it seeks to reduce reliance on the Licence Fee by monetising existing content and developing new projects.
However MPs on Parliament’s Public Accounts Committee say managers must be more willing to accept when ventures have failed and learn to pull the plug in the interest of Licence Fee payers.
In 2007 BBC Worldwide, the broadcaster’s then commercial arm, bought a 75% stake in Lonely Planet before taking full ownership three years later. The acquisition cost Worldwide around £130m but failed to generate sufficient commercial receipts to recoup the purchase price.
After years of rejecting complaints that the purchase strayed beyond Worldwide’s remit of monetising BBC output and intellectual property, the BBC eventually sold Lonely Planet in 2013 at a loss of more than £80m.
The broadcaster also racked up a high profile failure with BBC Store which was meant to compete with services such as iTunes by offering digital downloads of BBC content, including shows that would have limited appeal to third party distributors.
The venture was mothballed after 18 months, with Worldwide admitting “demand has not been as strong as we’d hoped in a rapidly changing market.”
BBC Worldwide has now been folded into the new BBC Studios business which is meant to focus on “maximising the intellectual property value of BBC programming for the benefit of UK licence fee payers.”
Director-General Tony Hall has previously described BBC Studios as “vital” to “securing the future success of the BBC” in a world where traditional commercial activities such as the sale of DVDs and Blu-rays are no longer guaranteed money-makers.
More recently Lord Hall has claimed the venture’s commercial success would be assured by the production of quality programmes, but the committee says this confidence “will be severely tested in the next few years.”
MPs says that while they accept the need for the BBC to try out new ideas and ventures in order to generate additional cash, managers “cannot afford to be slow in exiting unsuccessful investments.”
To ensure the “limited capital” available for projects isn’t wasted, the BBC “should establish in advance fixed points at which it will assess whether all new ventures are paying off.”
MPs also call for clarity on how the BBC Board will be provided with sufficient information that members can “understand how the BBC’s commercial performance compares to market norms.”
Describing the creation of BBC Studios as “a high-risk strategy,” MPs say “clear expectations” of its performance should be set, with the BBC board “kept informed of varying levels of profitability within, and not just between, the subsidiary’s individual lines of business.”
Managers should also “act decisively if the business seriously underperforms.”
And the committee calls for a clearer understanding of how the BBC’s commercial aims and public service broadcasting obligations can come into conflict – for example the impact on commercial receipts if the BBC decides to make more series available for longer via iPlayer.
Committee chair Meg Hillier said: “We recognise the need for the BBC to take risks but it must be responsible, not reckless, in doing so.
“That means acting on the lessons of past mistakes and taking a robust approach to assessing new ventures.
“That should include improving the quality of information available to the BBC’s Board so that it can, on behalf of licence fee payers, make properly informed judgements.
“The BBC must remember that licence fee payers’ money is on the line. It should never lose sight of its obligations to UK audiences.
“There is considerable scope for conflicts to arise.
“If the BBC decides to extend the availability of programmes on the iPlayer, for example, it may reduce opportunities for commercially exploiting those programmes.
“A balance must be struck and it is vital the BBC underpins its decisions with sound data and a clear-headed evaluation of the options.”