Two parliamentary reports on the BBC have appeared in the same week and generated a fairly predictable set of headlines. But both failed to ask something crucial - just how well run is BBC Worldwide?
Digital switchover surplus should support key aspects of public service broadcasting elsewhere - that's the House of Lords select committee headline. BBC Worldwide should have its commercial wings clipped for fear of unfair market distortions - that was the thrust of the House of Commons crew.
Meanwhile, behind the Commons committee's report on BBC Worldwide is more than meets the eye. Its broad conclusion is hardly a surprise and in fairness to the BBC Trust, it is already pretty much across it. It is virtually certain that the trust's own review – due for completion once the Worldwide/Channel 4 question is resolved – will come to similar conclusions. But leaving aside the question of untoward market impact arising from Worldwide acting too commercially, there are other questions about whether licence payers have been well served by those running BBC Worldwide.
Take the strategy to develop production capacity abroad. The BBC argues it captures more value – production profits on top of distribution revenues – and helps protect the BBC brand. Attractive as that sounds, this argument struggles to withstand scrutiny. Worldwide's accounts show that rates of return in territories where they produce programmes are way lower than in territories where they don't – 8% versus about 30%. The fact is that production is a riskier, lower margin business than distribution. What is more, the need to keep production entities busy has led to BBC Worldwide setting up a unit to devise formats for its own use.
This not only exposes licence fee payers to greater business risk – but churning out content labelled "BBC" that is only produced for purely commercial purposes could significantly damage the BBC's reputation.
BBC Worldwide's new portfolio of global channels raises another set of questions. In the UK the profitable UKTV channel portfolio (at the centre of the C4/BBC Worldwide tie-up discussions) was developed with commercial partners taking the commercial risk and, significantly, the venture carrying no BBC branding. This brings greater commercial freedom and means the BBC's reputational risk is almost zero.
Contrast that with Worldwide's global channels, BBC branded and developed with significant financial risk to licence payers. In the short term, Worldwide will lose money from programme sales as it holds back content for the new channels. And in the long term, the capital value of those channels is hard to realise given that they can't be sold if it compromises the BBC's control of its brand. Which means, in effect, they can't be sold.
And finally there are BBC Worldwide's much-trumpeted investments in UK independent producers. Again the argument is seductive. Indies own secondary rights, so Worldwide has to invest in them to secure access to new product to distribute. But the potential embarrassment of Worldwide missing out on distributing those programmes should not be underestimated. Everyone in the market knows this, so indies could, if they wanted to, up the ante, in effect forcing Worldwide into paying bigger advances. The production companies – who unsurprisingly have welcomed Worldwide's largesse – are doing well. But what about the licence fee payer? Smells like it might be higher risk for lower reward.
But did anyone ask these questions when the strategies were dreamt up? The BBC appears to have struggled with the details in front of the committee when questioned about its purchase of Lonely Planet. But given the broader issues raised by some of Worldwide's strategy you might wonder whether the trust has even now got to grips with its commercial subsidiary.
