The BBC today sets out its ambition to ‘build commercial income’ - one of four top priorities set out by Tim Davie in his first week as Director-General, and now underway to modernise the BBC and offer better value to every licence fee payer. As well as an ambition to build commercial income, these priorities are to renew the BBC’s commitment to impartiality; to focus on unique, high impact content; and to extract more from online.

Tim Davie, BBC Director-General, says: “We are actively building commercial income with ambitious commercial plans for high quality programmes, vital funding and international audiences. The BBC’s commercial activity will become even more important in future as we expand commercial disciplines to new areas, such as children’s production, and - despite a challenging market - seek to achieve the highest possible return from all our assets. This enhances value for licence fee payers and boosts the wider creative economy.”

Commercial activity has been part of the BBC throughout its history, and today encompasses production and studio facilities, channels and digital services, content sales and ancillaries. This benefits audiences and the UK’s creative sector through direct financial contribution; wider enjoyment of BBC content and brands beyond broadcast and BBC iPlayer; and exporting British creativity and journalism to screens across the world.

New financial returns target of £1.5bn

In 2019/20, financial returns from the BBC’s largest commercial subsidiary, BBC Studios, totalled £276m, principally via content investment and dividends. Building on that success, BBC Studios today confirms that it is on track to meet its five year returns commitment of £1.2bn by 2021/22, an increase of 18% on the previous five years, despite a significant impact on this year from the Covid-19 pandemic. Against a backdrop of fierce global competition, BBC Studios has committed to grow this total by a further 30% to a new target of £1.5bn in the five years from 2022/23.

Wider deployment of the BBC Studios commercial model

As part of this, the BBC is today announcing that BBC Children’s Production, makers of Blue Peter, JoJo & Gran Gran, My Mum Tracy Beaker, Something Special, Crackerjack and Ferne and Rory, will transfer into BBC Studios from April 2022. This will enable it to access the commercial model proven in UK production since 2017 - competing in the market for commissions and working for a range of customers.

The global children's entertainment market has grown dramatically in recent years, bringing more competition for ideas, talent and content from well-funded global players. This transfer will bring together BBC production teams, supported by brands and marketing expertise, to maximise the value of existing Children’s properties and build new global brands for a range of broadcasters and platforms, alongside BBC channels, with a better return on investment from programme development.

Patricia Hidalgo Reina, Director of BBC Children’s & Education, says: “Moving children’s production into BBC Studios will safeguard our specialism within a producer of scale, enabling them to continue to make world-class public service content for our UK audiences, and increasing their potential of taking British children’s content to the wider global market.”

The transfer of Children’s will follow two other moves into BBC Studios this year. BBC Three’s in-house production team, producer of match-making comedy show Hot Property with Yung Filly, will become part of BBC Studios from April, bringing its multi-genre team into line with the BBC’s model for UK production.

Meanwhile, BBC Studios will also become responsible for the commercial management of BBC Global News Ltd (GNL), bringing all international commercial activities under single leadership. This will enable a joined up commercial strategy, at a time when the demand for trusted news has never been greater, allowing the BBC to structure its international audience offer in a more holistic way. Editorial control and operation of the BBC World News channel will move to the public service news operation, with its international advertising and distribution provided by GNL. These changes will take place in the course of 2021.

Stretching targets for existing lines of business

BBC Studios has seen revenue increase 6% pa and EBITDA 31% pa from 2017/18 to 2019/20. Major drivers include the successful transition to a commercial basis of the BBC’s UK television production arm, producer of Strictly Come Dancing, Seven Worlds One Planet, EastEnders, Planets, Famalam, Life and Death Row, The One Show, Countryfile and Good Omens; the acquisition of UKTV; continuing transformation of BBC Studios’ global distribution business, entering large-scale multi-year customer partnerships and the BritBox International JV with ITV; and successful equity partnerships with premium British indies built on home-grown talent and ideas.

BBC Studios has a unique position in British creativity as the UK’s leader in new commissions and the world’s leading television distributor outside the US studios. While recognising very real pressures from rapidly changing market dynamics driven by well-capitalised global media companies, BBC Studios expects to deliver continued strength across its existing portfolio of businesses.

Future business opportunities include unlocking considerable further creative and commercial potential in production, creating valuable new IP across both BBC and third party titles with delivery of a strong slate and future commissions; talent initiatives and strategic content investment; new and expanded customer partnerships; and optimising content across its linear services.

New business areas in direct-to-consumer digital services

At the same time, BBC Studios is putting plans in place to realise new digital revenue streams for the medium to long term outside the UK by establishing complementary focused digital services built around British content. This includes exploring future commercial possibilities for both audio and news, areas where BBC content has a unique proposition.

Existing digital business plans include further expansion of the BritBox International JV in up to 25 markets, as announced last year, with four now operational or imminent outside the UK, and new SVOD channel BBC Select, for culture, politics and ideas, which launched last month in the US and Canada.

Tim Davie will be interviewed today at 12.40pm by Ed Shedd, Managing Partner, North & South Europe Technology, Media & Telco (TMT) Practice, Deloitte as part of the Enders Analysis and Deloitte Media and Telecoms 2021 & Beyond conference.

Regulatory assessment

Under the Charter and Agreement, the BBC has to assess whether changes to its commercial activities are material. If a change is material it requires a Commercial Test and Ofcom approval. The BBC will be assessing whether the changes to BBC Children’s Production and Global News Limited are material. The changes to BritBox International, BBC Three in-house production team, and the launch of BBC Select are not material changes to the BBC’s commercial activities.