Recommendation 5

The BBC appears unambitious about setting targets for the financial returns generated by its commercial subsidiaries. The BBC’s net returns from its commercial activities, at under 6% of licence fee income, are not at a level to make a significant contribution to its overall income position. The BBC has recently set its main commercial subsidiary, BBC Studios, a target to grow its financial returns by a further 30% over the next five years. However, the BBC concedes there is potential to go a lot further than this and acknowledges that it does not know where the ceiling is on its commercial returns. The BBC could be more ambitious in its commercial plans by, for example, setting targets for how it will make greater use of its archive. The BBC considers that greater access to investment capital would help it to compete better and generate further growth in its commercial returns. However, its commercial borrowing is subject to limits, imposed by DCMS, which date to 2003. BBC strategic financial management 7 Recommendation: (a) Recognising the new international commerciality of competition, the BBC should be much more ambitious in its targets for commercial returns and be more ambitious in marketing and exploiting its archives, both for old and new programming; and write to the Committee, outlining its plans, within six months. (b) As part of the current licence fee negotiations, the BBC and DCMS should work together to review the current borrowing limits to identify whether they continue to meet the BBC’s business needs and future investment plans. 8 BBC strategic financial management 1 Understanding and reaching audiences