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National Audit Office report: BBC Studios

BBC Studios

This report examines the rationale, implementation and success of BBC Studios.

Background to the report

In May 2016, the BBC brought together in-house production teams from across its public service broadcasting (PSB) operations to form BBC Studios as a separate division within PSB. It then established the division as a commercial subsidiary in April 2017 to create and produce content, principally TV programmes, for itself, and, crucially, for the first time for non-BBC clients. In April 2018 the BBC created the new BBC Studios as its largest commercial subsidiary following a merger of the existing BBC Studios and BBC Worldwide, its commercial distribution business.

Before the merger, the BBC faced strategic challenges from increased competition for content and the talent needed to create this content, and from a significant change in how audiences in the UK and globally were consuming this content, moving away from watching a traditional TV set to online viewing.

 

Content and scope of the report

According to the BBC, BBC Studios’ success in creating and commercially exploiting new content and its associated intellectual property will be critical in helping it meet its ongoing challenges. Given this, this report examines:

  • the BBC’s rationale for the creation of BBC Studios (Part One);
  • implementation of the merger to create the new BBC Studios (Part Two); and
  • the success of BBC Studios so far (Part Three).

 

Report conclusions

The April 2018 merger of the BBC’s production and distribution businesses to create the new BBC Studios was supported by a clear strategic rationale and the BBC planned well to get the merger off to a good start. However, it is still too early to tell if the merger is delivering sustainable value for money as delivering the associated changes in organisational culture takes time. BBC Studios still has work to do to align the differing cultures and processes in its production and distribution arms, but lacks performance indicators for assessing the extent to which it is achieving this alignment. Also, the BBC and BBC Studios cannot easily identify the extent to which the non-financial benefits expected from the merger have been delivered, and the extent to which the merger has impacted on BBC Studios’ financial performance to date.

In its first full year, 2018-19, BBC Studios met the overall profitability target set for it by the BBC Board, despite lower than expected sales. Beneath this top-level performance, it faces wide differences in profitability within business areas, and its continued profitability remains dependent on parts of its business performing well. Faced with a highly dynamic and competitive market for ownership of intellectual property (IP), from which it can generate profitability and returns to the BBC, BBC Studios faces a rising risk profile in its business. It is therefore crucial that the oversight of the BBC Board and the BBC Commercial Holdings Board is informed by a sound understanding of where weaknesses lie across BBC Studios’ full range of activities. This includes clarity about the extent to which BBC Studios is winning new business and generating valuable IP against its plans, and how far its investments, particularly in some of the new, more complex deals, are leading to sustainable margins and returns. Since April 2019, the BBC has strengthened governance over BBC Studios and taken steps in November 2019 to improve reporting of BBC Studios’ performance to the BBC Commercial Holdings Board. However, it is too early to tell how effective these changes will be in practice, and there is still scope for improving the reporting to the Board of BBC Studios’ non‑financial performance.

 

Publication details:

ISBN: 9781786042873 [Buy a hard copy of this report]

HC: 18, 2019-20

Published date: January 9, 2020