CHAIRMAN’S COMMENTARY ON COMMERCIAL AND STRATEGY REVIEWS We are making two announcements today about how the Trust is re-shaping the BBC. The first is about the conclusions of our review of the BBC’s commercial activities. The second is to set out more detail on how the Trust is steering the major strategic review of the BBC that Mark Thompson is carrying out at our request. Commercial Review So let me start with the BBC’s commercial operations. To clear up any possible ambiguity, the Trust wants a BBC Worldwide that is a confident, viable company that delivers the best possible return on investment to licence fee payers and that delivers real benefit to the creative economy. Equally, our priority is not to promote the growth of Worldwide for its own sake but to protect the BBC’s ability to fulfil its public mission on behalf of licence fee payers. We have been reviewing the operations of BBC Worldwide with the objective of setting clearer parameters and priorities for Worldwide and aligning them more closely with the BBC’s public purposes. We’ve already announced governance changes to create greater separation between Worldwide and the BBC. We have waited for the Government’s Digital Britain process to conclude before publishing our final conclusions – in order not to shut down any options that the Government might have wanted to pursue. With the publication on Friday of the Digital Economy Bill, we are today in a position to publish the remaining findings of the review. When we began the review in July 2008 we started with four main areas of focus: 1. A recognition that it is entirely right for the BBC to create income from its intellectual property and an acknowledgement that in commercial terms BBC Worldwide has been a success; 2. A concern about the competitive impact of BBC Worldwide in the UK – an impact amplified by external structural and cyclical problems in the communications industry; 3. Concerns about the impact of commercial considerations on decisions on editorial and commissioning matters; 4. Concerns about the BBC’s reputation given the growing range of overseas interests bearing the BBC brand that now require content sourced from outside the BBC. These issues have guided our work from the outset alongside three fundamental principles about the way the BBC ought to approach commercial activity: • that the BBC should hold on to the value of its intellectual property; • it should exploit that value on the licence fee payer’s behalf; • it should make sure no commercial activity damages the core brand and reputation of the BBC, either at home or abroad. Conclusions The conclusions we are publishing today are consistent with these principles and they are the result of detailed discussion with the BBC Executive. The Trust accepts the BBC’s recommendations to place new limits on BBC Worldwide’s activity. The key changes to the future remit of BBC Worldwide are: 1. An end to mergers and acquisitions unless there are exceptional circumstances; 2. A clearer focus on securing value from the BBC’s own intellectual property; 3. An exit from any activity that is not in keeping with the BBC brand; 4. Divestment of stakes in non-BBC branded international channels over time where it makes commercial sense; 5. A more transparent ‘first look’, with greater market testing to establish the right pricing structures; 6. A governance framework that complies with the combined code wherever possible and establishes greater separation between the BBC Executive Board and the Worldwide Board. Taken as a whole these conclusions should help deliver the clarity of direction and contained focus that the Trust has been seeking to achieve, particularly in the UK market. We attach particular importance to clearer priority on securing value from the BBC’s own IP. And as a specific point, the Trust would not expect to consider a commercial deal of the scale and nature of the Lonely Planet acquisition in future. The Trust will want to ensure that BBC Worldwide’s plans for Lonely Planet secure the best value for licence fee payers and will keep its long-term future under review. The BBC Executive has also concluded that Worldwide should become a more internationally facing business, focused on improving appreciation of the BBC abroad. The Trust recognises the important contribution that BBC Worldwide can make to delivery of the BBC’s fifth public purpose – bringing the UK to the world and the world to the UK, but considers that such activity must contribute to the BBC’s fulfilment of its public purposes as well as the scale of the dividend passed back to the BBC. The Trust also remains interested in the impact of commercial activities on editorial decisions and what programmes get made and will remain vigilant on these issues. We will insist that the BBC Executive puts in place the necessary controls and checks to ensure that all overseas activity is subject to stringent editorial control in order to ensure that the reputation of the BBC is not put at risk. Implementation We hope that in concluding this review we have made clear where the boundaries have been drawn. We now want the business to develop its more detailed plans for implementing change. Under the new governance arrangements for Worldwide which the Trust announced in September, the business will now develop a more detailed three- year strategy which will show the more specific changes to its activities that will need to be made. That plan will be subject to approval by the BBC Executive and by the Trust before the end of the current financial year, and will be subject to annual review by the Trust thereafter. And in advance of considering the BBC’s three year plan, the Trust is open to views from outside the BBC on the findings we have set out here and how they should be implemented, in particular on the business’s international focus. Wider issues The Trust also continues to encourage the BBC and Worldwide to work to find partnership opportunities with Channel 4. The opportunity to create a structure of lasting value to UK public service broadcasting as well as both individual parties is clear, as long as any deal creates value for both parties rather than transferring it out of BBC Worldwide. The review we have now concluded was focused on the remit of BBC Worldwide within its current ownership structure and did not include consideration of more radical alternatives. In bringing this review to a close we will continue to keep a close eye on the development of the markets and environment in which the BBC and BBC Worldwide operate. As the media landscape continues to evolve and shift we may need to revisit these issues again. The Trust’s guiding principle will remain what is in the best interests of licence fee payers – in particular a solid assurance that the BBC’s intellectual property and brand would remain secure. Strategic Review In addition to the commercial review that will reshape BBC Worldwide, we have under way a much bigger piece of work to reshape the BBC as a whole. Before the summer break, the Trust agreed with the Director General that he should conduct a thorough review of what the BBC should concentrate on in the future. Mark and his team have been working on that since July, with input and oversight by the Trust. There were four main drivers behind this work: 1. The current external debate about what the appropriate limits are for the BBC’s activities and ambitions; 2. The growing reality that the so-called digital future is really the digital present and the BBC needs to define its place in that present; 3. The Trust’s own concerns that if it spreads itself too thinly the BBC may lose focus on the core mission to provide fresh, new, high-quality content; 4. The need to leave some time, space and resources available for work in new areas where there is real public value, including for example improving the public's access to the BBC's archive. We won’t see the full results of this until well into next year. But today we are setting out some details about the direction of travel and how we are ensuring this isn’t just the BBC examining its own entrails, but that the public and the wider media industry have a real input into the way the review develops. Distinctive, high quality content There are three early areas of focus. The first is the highest possible quality in content – the BBC’s programmes and services. One of the Trust’s main ambitions for the BBC is that it should serve all audiences. But that doesn’t mean providing people with a diet of the predictable and comfortable. And that’s not just me saying that – audiences themselves tell us they want something fresh and new. Licence fee payers are in no doubt about what they expect from BBC services in return for their licence fees – something special, something different from what’s on offer elsewhere - across the full range of genres. They want the quality and distinctiveness that they associate with the BBC. We’ve asked Mark and his team to focus hard on what that means in practice. The key question from the Trust about content is: What are the tests of distinctiveness and quality? First thoughts about possible answers include: • Creative and editorial ambition; • Range and depth; • The highest editorial standards; • And there’s something about content made for the UK and nurturing home-grown talent. Further questions include: • How do we make BBC services more distinctive? • How do we balance the need to be distinctive with the need to make content with mass appeal? • And does increased quality and distinctiveness come at a price? An open BBC After content the second big area of focus is making the BBC more open. The BBC is a large-scale public institution. Where possible it should use that scale to create space and opportunities for other creative businesses. The Trust set a first challenge to the BBC to develop new partnerships. It has proved a difficult challenge to meet. Partnerships by definition sometimes exclude non-partners and that exclusivity can bring with it unexpected effects on a much wider range of companies. There is a risk that we end up protecting the status quo rather than opening up innovation. The projects developed so far have also tended to be partnerships with commercial operators, rather than with the wider public and not-for-profit sector. The Trust’s challenge now is for the BBC to take a step beyond its existing partnerships and test how far the BBC can be a genuinely open system – both for programme-makers and for audiences. And as well as looking at partnerships that are led or directed by the BBC, in future the Trust will also want to look at how the BBC can contribute to the best public service ideas from elsewhere – led by other companies and organisations. The key question from the Trust here is, how can we open up, in a neutral non- exclusive way, the BBC’s resources of talent, technology, property, archives and platforms to other creative businesses in ways that they want and on terms that make sense? A couple of examples of what might be possible: • On technology and training: how can the BBC work with the rest of the industry to ensure its investment creates the greatest possible value? • On audiences: could we share or link our online space with other public or not-for-profit cultural and creative organisations, from national museums to community radio? Streamlining the BBC’s online services And finally, there is a question about streamlining the BBC’s online services – in ways that could both narrow the focus on distinctive content and help to create a more open BBC. The Trust recognises external concerns over scale and growth of BBC online operations. Equally, it’s an immensely popular service with audiences and an important tool for the UK economy. We have no intention of diluting BBC commitment to universal access to free news online. But beyond that we want to question honestly what licence fee payers really expect to get from their licence fee and what they might be surprised to see the BBC doing in the online world. So the key questions from the Trust here are: • Beyond the core offer of news, sport, education, children’s and the iPlayer, which parts of the online service are essential to the BBC’s mission and which could be stopped? • In particular, where should the boundary be drawn between the online expression or extension of BBC programming and the creation of new online content with a less direct relationship to BBC programming? • Could clearer boundaries help the online service to provide even greater depth and authority in core areas? Opening up the strategic review We want to make sure this review is not just the BBC talking to itself. We are committed to making sure that the voices of the public and of the wider media industry are properly heard in the strategic review. To make that happen, we’ll publish Mark’s initial conclusions early next year and open them to public consultation. And before then, we’re going to be talking to other major players in the media industries to get their perspectives on the BBC, where its boundaries should be and how it could change. We’re holding one such event today. So that’s our agenda for reshaping the BBC: • Immediate moves to reshape the BBC’s commercial operations; • And full and early consultation on the emerging conclusions of Mark’s bigger review of the whole future of the BBC. Sir Michael Lyons BBC Trust 24 November 2009