A new National Audit Office (NAO) report says the BBC’s commercial arm has failed to meet targets for generating new intellectual property (IP) and warns this could thwart ambitions to double the size of the business by 2027/28.
In addition to its UK Licence Fee funded activities, the broadcaster owns BBC Studios, a commercial business with operations in all major TV markets.
In the UK these include UKTV, the largest UK-owned commercial broadcaster in Britain, which owns a portfolio of advert and subscription-only channels including Dave, Gold and Yesterday, the U streaming service and a line-up of streamed FAST channels.
Outside the UK BBC Studios runs themed broadcast and FAST channels, streaming services including BritBox International, plus the BBC.com news site.
It also owns, or has substantial stakes in, production companies which make shows both for its own outlets and third-party channels & streaming services.
Other activities include licensing and merchandising key brands such as Doctor Who and Top Gear.
In the most recent financial year (2023-24) BBC Studios’ total income was £1.8 billion, of which £202 million was profit.
The NAO says this was down on the previous year “partly due to challenging market conditions, including a global slow-down in content spend and fewer programmes being commissioned, as well as high-value contracts coming to an end the year before.”
According to the report, both the purchase of ITV’s share of BritBox International and investment in U (previously UKTV Play), its advert-funded UK streaming service, also dented profits.
It also notes that the BBC’s production businesses have seen an increase in the number of commissions from non-BBC outlets, especially global streaming companies.
Such ‘work for hire’ commissions accounted for around 30% of production income between 2022-23 and 2023-24 and the NAO warns that while this work generates short-term gains, it could impact on future earnings and growth.
Unlike other models, such commissions often see the streamers retain both the intellectual property (IP) and distribution rights, meaning that BBC Studios cannot generate longer-term returns from such shows.
The NAO also finds BBC Studios has not yet met its own targets for generating new IP, despite continuing to stress the importance of generating new content.
The report finds that the business “remains reliant” on the IP from BBC programmes created before the 2018 merger of BBC Worldwide and BBC Studios which created the current business.
It says: “Of the ten titles from its production business which provided the most profit to the BBC in 2023-24, only one was from new IP generated by BBC Studios.”
The spending watchdog has made several recommendations the BBC and BBC Studios should implement to support their growth ambitions:
- The BBC should ensure that BBC Studios’ strategic plans for delivering the growth ambition continue to evolve to reflect market developments
- BBC Studios should review the risks associated with not meeting its targets for generating new BBC Studios-owned IP
- BBC Studios should improve the consistency and effectiveness of its internal performance reporting
Gareth Davies, head of the NAO, said: “Following its merger with BBC Worldwide in April 2018, BBC Studios has succeeded in delivering increasing returns to the BBC.
“Realising its ambitions for continued growth in turnover and profit will mean successfully navigating a rapidly changing and highly competitive global market. Key to this will be developing new high performing content for which the BBC owns the intellectual property.”
Responding to the NAO’s recommendations, BBC Studios said it recognises “the importance and value of new content and will ensure that we track new IP and our mix of income sources across our portfolio via monthly and quarterly performance packs and report to the Studios Executive Board on a regular basis.”
Its CEO, Tom Fussell, said: “We welcome the NAO’s positive assessment of our business and its recognition that we have adapted our strategy and diversified our business in response to changing market conditions and audience behaviours.”
Describing the business as “a trusted supplier of platform-defining shows to both the BBC and global streamers,” he added that its existing successes “gives us a strong foundation for our future growth ambitions and we are grateful to the NAO for their recognition and recommendations.”