Forty-Sixth Report - BBC Digital

The BBC has a high-level plan in place for its £500 million of annual savings and reinvestment into digital, but it is unclear whether this will cover its new ambition to transition to an internet-only future in the 2030s. Following its January 2022 licence fee settlement with government, the BBC estimated that it would have a funding gap of £285 million a year by 2027–28. It says that has now increased to nearly £400 million due to inflation, in addition to its funding being cut by 30% in real terms over the past 10 years. The BBC has an overarching target for its digital services to be within at least the top three for UK market share. As part of its digital first plan, announced in May 2022, it committed to an additional £50 million for digital product development from 2025. However, the BBC has not fully determined the details of its £500 million digital investment plan and reports that it is refining the detail required through its current budgeting process. Its plan is heavily dependent on it being able to achieve further savings for reinvestment, but it did not say what it will do if these saving targets become unachievable. Recommendation 2: The BBC should write to the Committee, within two months and once its budget is finalised for the financial year, with reassurance that it has developed the necessary detail in support of its digital investment plan. It should set out: • if its £500 million annual investment by 2025 is sufficient to achieve its plans; • how it will achieve all the required savings; and 6 BBC Digital • what will happen to its digital plans if it is unable to achieve its savings target.

The BBC faces a significant challenge in a very competitive market to recruit and retain staff with the right digital skills. The BBC had a 23% staff turnover rate in its digital product group as of June 2022. Shortages of digital skills are an economy-wide challenge that is not unique to the BBC, and we have regularly heard of similar challenges across government itself, for example with our recent inquiry into the defence digital strategy. The BBC reports that these challenges became more complex during 2022 because of the consequences of the COVID-19 pandemic leading to wage increases as well as more staff working remotely, with people in a local area becoming part of a wider, sometimes international, recruitment market. However, the BBC says that attrition rates are now reducing and its ability to recruit and retain staff is improving. The BBC does not pay digital staff as much as many of its rivals. It acknowledges that it has increased the ranges for some of its digital jobs by more than the standard pay rise that it gave to most of its employees last year. While salaries are important, the BBC also seeks to make the most of its inherent attractiveness as an employer giving the opportunity to work on a very wide range of products compared to others and also supporting a public service purpose. Recommendation 3: The BBC should develop a plan for how it will maintain its recent progress in recruiting and retaining specialist digital staff including succession planning specific to the key digital skills that it needs for the future.

The BBC’s approach to how it will develop personalised services for audiences is not yet well developed. The BBC wants to personalise its products and services such that audiences can access content that is of interest to them, while also fulfilling its public service obligations. The BBC sees this as a new and interesting challenge and says that, unlike its commercial rivals, it aims to strike a careful balance through human curation of content as well as the use of algorithms. It recognises that its public service obligations should be at the heart of its personalisation strategy. The BBC has spoken about personalisation ambitions over the past nine years and worked to personalise individual products such as the iPlayer. But there is as yet no comprehensive personalisation strategy in place to show what this would look like in practice. Recommendation 4: The BBC should move more quickly on the development of a personalisation strategy that serves its public sector purposes while fulfilling its ambitions for a more tailored experience for its audiences. It should write to the Committee on its progress by December 2023.

The BBC has developed its approach to data security since 2019 but is not yet doing enough to manage the risks arising from increased access to users’ personal data. The BBC needs to collect and hold some audience data to help it to compete in the digital space, and crucial to this is sign-in, where audiences register for and use a BBC account to access its digital services. The BBC has a sign-in strategy, with a target for 72% of digital product views to come from signed-in users by 2023. It also has an overall goal of 23.5 million signed-in users by 2023. The BBC tries not to collect or hold more data about audiences than is necessary and reassured us that it has no plans to commercialise the data that it collects. That makes it distinct from BBC Digital 7 other digital providers. The BBC appointed a data protection officer in 2019 and also set up a central data protection team. However, the increased use of personal data exposes the BBC to more potential risks and it has not shown clearly that its active management of those risks is yet sufficiently embedded. The BBC has assured us that there have been no significant data breaches in the current financial year. Recommendation 5: The BBC should review its data collection and storage policies and work out the minimum amount of data that is needed to achieve its goals, what will be sufficient for its personalisation strategy, and how it will keep that data safe. 8 BBC Digital 1 Planning and funding

On the basis of a report by the Comptroller and Auditor General, we took evidence from the BBC about its plans for digital transformation.1

In December 2022, the BBC’s Director-General followed up on the May announcement, describing the BBC’s vision for where it should aim to be by the 2030s and setting out plans to move to an internet future with greater urgency.6 He stated that the BBC would be active in future in planning for the switching off traditional broadcasting. However, as reported by the National Audit Office, also last December, the BBC has only conducted limited work planning out scenarios in which it could potentially move away from traditional broadcasting at a more wholesale, strategic level. Nor had it set out those older services which it will protect, or the wider implications of removing certain broadcast channels for access by disabled audiences and other groups at risk of being digitally excluded.7

At our evidence session in January 2023, the Director-General reiterated to us the need for urgency and how, by any forecast of the future, the vast majority of media consumption will be via the internet.8 However, he also told us that, in his December speech, he had been deliberately provocative, and that his speech had also been somewhat misreported. He stressed that “I didn’t say we are going fully digital by the 2030s”.9 He also stressed the BBC’s strategic desire to maintain universality and that the BBC was not actively setting a date for a switchover. He said that the BBC understood how many people relied on DTT (Digital Terrestrial Television) and it would be “an act of self-harm to cut people off from the BBC.”10

BBC Three was taken off air as a traditional linear broadcast channel and was made an internet-only channel in 2016. Six years later that decision was reversed on the grounds of it having reduced the BBC’s impact with younger audiences, particularly those who still watched broadcast TV.11 We raised this, and the BBC acknowledged that “We went a bit early” and that while it might be easy to go to digital, “you can go to digital and be a lot smaller quite fast”.12

The BBC also acknowledged the four recommendations in the NAO report, one of which was to build on its December 2022 announcement and plan scenarios for how it could move between broadcast and internet services in the future. It said that those recommendations were extremely helpful, appropriately challenging, and that it had been working hard on them.13

We raised the question of education for people, typically older people, who are not familiar or confident with adopting what may be new technology to them. The BBC stressed its universality obligation to ensure that content is accessible. It also said it was critical that there was focus and prioritisation of its limited resources to ensure it continued to serve all its audiences, young and old.14 The BBC told us it had a huge role to play in education, 6 C&AG’s Report, paras 3, 1.2 7 C&AG’s Report, para 1.19 8 Q 23 9 Qq 24, 25 10 Qq 36, 45 11 C&AG’s Report, para 1.18 12 Q 68 13 Q 91; C&AG’s Report, para 20 14 Q 44 10 BBC Digital commenting that people tend to trust the BBC, and that it would have a lot of services for getting older populations to engage. It said that education would have to be part of the transition through the 2030s “and for as long as it takes”.15

Good quality access to online services will rely of course on the roll-out of broadband, overseen by the Department for Digital, Culture, Media & Sport. We noted that the BBC’s universal service commitments could not be met with current broadband provision.16 The BBC highlighted that with a perfect broadband service, audiences could get much better functionality than with traditional broadcast TV.17 But broadband roll-out is of course a much wider issue than just concerning the BBC and the BBC is not responsible for any of the build out. The BBC also said that affordability of broadband, that is the cost to households of purchasing contracts, was an issue.18 Shortly after our session with the BBC we took evidence from the Department on a range of matters, including progress with gigabit broadband roll-out. It acknowledged that the roll-out is critical to the BBC’s plans for an internet-only future, that discussions were already in train and it will expect to have further discussions on it as part of the charter renewal. We will continue to keep a close eye on progress, in particular for providing people living in harder to reach areas with decent broadband coverage.19 Funding the digital strategy

Following its January 2022 licence fee settlement with government, the BBC estimated that it would have a funding gap of £285 million a year by 2027–28, and that it needs to deliver £500 million of annual savings and reinvestment to achieve its digital- first ambitions. This funding gap was calculated on the basis of the licence fee being held flat in 2022–23 and 2023–24 with no links to inflation, followed by four years linked to inflation.20 The BBC told us that with inflation the funding gap had now risen from £285 million to nearly £400 million, on top of its funding having reduced in real-terms by 30% over the last 10 years.21

The BBC’s spending on its product development has also declined, from £109 million in 2018–19 to £98 million in 2021–22 (in 2021–22 prices). However, due to the renewed focus on the growth of its digital products, the BBC has budgeted £116 million to spend within its product group in 2022–23 (in 2021–22 prices). This includes an extra £10 million announced as part of its digital-first plans through to 2025. After this, the BBC expects to invest up to an additional £50 million a year into transforming its use of data, personalisation and user experience.22

The BBC’s spending on digital product development is far lower than many other media organisations, many of which are digital-only, though direct spending comparisons are problematic. Additionally, the BBC has a range of universal service obligations that other media firms do not, and provides a range of services that its digital-only competitors 15 Q 45 16 Q 29 17 Q 24 18 Qq 29, 30 19 Public Accounts Committee, Oral evidence: DCMS Recall: Broadband, Gambling and Unboxed, HC 1052. Monday 23 January 2023 20 C&AG’s Report, para 2.2 21 Qq 6, 51 22 Q 37; C&AG’s Report, para 2.4 BBC Digital 11 do not, such as local radio and educational programming. Nevertheless, the BBC is seeking to attract the same audiences as other media providers and has significantly lower funding for developing its digital products. The BBC estimates that its technology product development spending is equivalent to 2.8% of its revenue, whereas its competitors typically spend around 8%–11%. In 2021, for example, Netflix spent £1.7 billion on technology and development. The BBC has therefore not been able to develop its product portfolio with the same pace and sophistication as that of rival media organisations.23

In May 2022, the BBC announced a £500 million investment plan, in support of its digital-first ambitions. The BBC plans for this to come from £200 million a year in spending reductions as well as £300 million a year from redistributing money within the organisation and increased commercial income.24

We asked whether the BBC considered £500 million would be enough for its investment plan. The BBC said that pressure on the £500 million had increased and it would have to “box very clever”.25 It said it had already taken some tough decisions, it would have to focus, and stop things that are less effective. For example, it was making 12,000 hours of content now compared to 13,000 a few years ago.26 But the BBC acknowledged that “we do not know if it is enough” and that it would be “incredibly difficult”. The BBC commented that it would have to find ways of attracting more capital from its commercial arm, and also agreed that it did not want to find savings by doing things that would be acts of self- harm, such as closing lots of radio stations. The BBC also said that the strategic technology review had enabled it to pull departments together, realising economies of scale and also improving performance.27

On financial plans, the BBC also said it thought it would have to find ways of attracting more capital into its technology investment.28 But it made clear that there is no plan in the UK to add subscription services, as people have already paid the licence fee.29

We raised a concern about the lack of sufficient detail to support the BBC’s digital investment plan, for example around how savings will be achieved, what happens if savings targets are not met, or whether additional borrowing would be required.30 The BBC said it was helpful to have had those points highlighted. It told us that it was working through the budgeting process and building detailed budget plans, and that the budget process it was currently in would refine the detail.31 The BBC also highlighted that it did not have the same ability as its commercial competitors to raise debt to fund its digital ambitions. On the other hand, it did have the security and stability of the licence fee, at least to the end of the charter period.32 23 C&AG’s Report, paras 10, 2.5 24 C&AG’s Report, para 2.6 25 Q 51 26 Qq 37, 51, 52 27 Qq 52, 53 28 Q 38 29 Qq 41, 42 30 Q 55; C&AG’s Report, paras 11, 20 31 Qq 43, 55 32 Q 55 12 BBC Digital 2 People and data Staff recruitment and retention

Although the BBC has managed to successfully recruit and retain a number of highly skilled individuals to lead its digital teams, overall it has a shortage of specialist digital staff. In common with other organisations, the BBC has experienced technology staffing shortages and high turnover of staff. This is partly due to the BBC’s pay levels being lower than some other potential employers for technology professionals. This is despite the BBC keeping its pay ranges under regular review, including by benchmarking these against wider industry pay levels.33 The BBC told us that it had increased the pay ranges for some of its digital jobs by more than the standard pay rise agreed last year for the majority of its employees.34

The product group in the BBC—responsible for developing and delivering the BBC’s audience-facing digital products—accounts for 5.7% of the total BBC public service pay bill.35 In its product group the BBC had 23% staff turnover as of June 2022. This high number of vacancies has slowed technical development. The number of vacancies in the search team, for example, has hindered the BBC’s ability to develop its search function further.36

The BBC told us that last year had been really difficult for attracting people. It cited the particular consequences of the covid pandemic for the technology market, with international organisations starting to offer remote working contracts, giving potential employees, for example in the Salford area, more options, with salaries rising fast, and recruitment happening at a faster pace. The BBC said it was in a much better position this year compared to last, with attrition trending down and recruitment having sped up and grown. Nevertheless, it acknowledged it was a real fight to get enough of the right people with the right skills.37

The BBC considered there may be an increasing sense developing of people wanting to ‘reconnect with purpose’ and of that being a material consideration for people when choosing who they wished to work for; implying that the BBC could benefit from that sort of preference.38 The BBC stressed how it can offer something unique for people in terms of what they could do with their career, the range of products, and the appeal of working for an organisation with the BBC’s public service mission and purpose.39 It noted how the BBC does not have a competitor producing the same breadth and type of content.40 It also said it needed to make sure that the BBC is not seen as a bureaucratic place to come and work.41 However, and in the context of discussing how stretched the overall budget for digital investment will be, the BBC also acknowledged that “We are going to need to attract brilliant people at a massive discount to the market.”42 33 C&AG’s Report, para 2.11 34 Q 87 35 Letter dated 25 January 2023 from Tim Davie, BBC Director General, to PAC Chair; C&AG’s Report, para 6 36 C&AG’s Report, para 2.11 37 Qq 84, 98 38 Q 98 39 Qq 84, 85 40 Q 58 41 Q 98 42 Q 37 BBC Digital 13 Personalised services

Over the past nine years, the BBC has signalled that it sees offering a more personalised experience as important to its future plans and key to this is sign-in, whereby users register for and use a BBC account to access digital services. In September 2021, it produced a sign-in strategy, with a target for 72% of digital product views to come from signed-in users by 2023. It also has an overall goal of having 20.2 million weekly average signed-in users by 2022, growing to 23.5 million users by 2023. BBC Online’s signed-in accounts increased from 14.6 million on average per week in 2019–20 to 18.1 million in 2021–22. This continued to grow and reached 19.6 million signed-in accounts in June 2022.43

Through sign-in, the BBC can collect personal information about its users to understand their preferences. When used alongside recommendation algorithms, this should provide a user experience tailored to their individual preferences. The BBC does not believe that it is possible to compete digitally without knowing users’ viewing habits. However, while the BBC has started to develop plans for how it could personalise some of its individual digital products and services such as iPlayer, it has yet to show that it has begun work on pulling together a comprehensive strategy for personalisation across the organisation.44

The BBC told us that it tried to make the sign-up process as simple as possible, while at the same time giving the user control, and was very conscious of accessibility and different digital familiarity levels.45 The BBC described to us how it was vital to help users find what they were looking for as easily as possible, and that it used data to match users to content and so tried to provide the best kind of shortcut connection.46 It said there was a mix of how it made recommendations to users; with human-selected and curated stories and also algorithmically recommended content.47

The BBC also told us that it needed to build something different to a commercial algorithm, saying that there are many commercial models that lead you to where you do not want to be. Whereas, the BBC also has its public service values, and wants to educate and entertain. “We are going to have to get a very careful balance, and this is a very interesting challenge. It is different … and no one in the world has done it, by the way.”48 Data security

To build a more personalised experience for its users, the BBC will need to increase its use of their personal data. The BBC plans to use these data to support commissioning decisions and to make tailored content recommendations, and needs to meet best practice and transparency in data-handling. There is potential for reputational damage if the BBC does not meet best practice in acquiring, storing and securing personal data, and being transparent about its use. In 2019, a BBC-commissioned report found it was only in the early stages of maturity in compliance with data protection legislation in its use of 43 C&AG’s Report, paras 8, 1.14 44 C&AG’s Report, paras 8, 1.14 45 Q 75 46 Q 59 47 Q 63 48 Q 62 14 BBC Digital audience data. The BBC has since improved its approach to users’ data and data protection, including appointing a data protection officer and creating a central Data Protection Office team in 2019.49

The BBC told us it had no plans to commercialise the data it holds on viewers, assuring us categorically that it had no plans to use or sell UK subscriber data to any other party for commercial purposes. It said that it collected the least amount of personal data that it could on sign-up, and that it did then collect data at an aggregated level and on an anonymised basis as people used products, so that it could see what was being used and to what extent. But that it does not share or sell that data or have any plans to.50 The BBC acknowledged that it would be collecting a lot more information from a lot more people as it expanded its digital output.51

The BBC welcomed the recommendations made by the NAO which included on managing potential data risk and said it was taking action on oversight and policy. It outlined some actions taken in recent years to improve its approach, stressed that these things were key parts of the organisation, and that development of governance in this respect was crucial to make sure the BBC did not breach its data regulations.52 While it would inevitably be collecting more data in future, the BBC felt the framework it had in place meant it was in a good position to mitigate any risk.53 However, in reviewing BBC planning documents on using customer data the NAO found no references to its approach to the management and mitigation of reputational and other potential risks that could arise as it increases its use of such data.54

The BBC told us it has had no data breaches that it has had to report to the Information Commissioner’s Office (ICO) this financial year. It has reported 27 data breaches since April 2020 and told us that the ICO had not taken any enforcement action against the BBC in relation to any of those cases. The BBC assured us that it monitors and manages all data incidents very carefully and that it raises incidents when it needs to.55 49 C&AG’s Report, para 17 50 Qq 72, 74 51 Q 91 52 Q 91 53 Q 92 54 C&AG’s Report, para 17 55 Qq 93–95; Letter dated 13 January from Leigh Tavaziva, BBC Group Chief Operating Officer, to PAC Chair BBC Digital 15