Home Entertainment

Home Entertainment

Home Entertainment creates consumer products that complement programming and extend brands. It includes 2 entertain, our DVD publishing business, and Audio & Music, which markets great spoken word and music content around the world.

Home Entertainment returned profits of £40.3m (up 17.8% on 2008/09) on sales of £230.0m (up 2.1% year on year). The 2009/10 figures include eight months of control of 2 entertain. A 4.1% uplift in DVD sales was offset by reduced revenue from other consumer products such as books (managed via partnerships with Random House and Pearson). The same pattern emerges at profit level.


2 entertain/DVD

DVD publishing remains a strong profit generator for BBC Worldwide - £38.2m in 2009/10. Our acquisition of the 40% stake in 2 entertain previously owned by Woolworths Group plc was completed during the year, creating substantial value for the company, the BBC and the licence-fee payer (see Chief Financial Officer's Review).

In addition to benefiting from the impact of full ownership of this business, underlying trading has been strong. The business has outperformed the market in the UK, demonstrating its resilience in shielding products from the downward pricing suffered by other catalogues.

2 entertain's UK market share by value increased from 7.9% to a peak of 8.5%, ranking the company at number six in the UK. The UK bestsellers were David Attenborough's Life series, Gavin & Stacey Series Three and Gavin & Stacey The Complete Collection, Only Fools and Horses The Complete Collection and Clarkson Duel. The US market accounted for 29.0% of our video sales this year, with Planet Earth continuing to sell well (over 5.1m units in total to date). The value of the US market (including the Blu-ray format) was down 8.0% in 2009 and, although 2 entertain's US sales followed a similar trend, the business grew profit year on year through strong management of costs. In Australia, the BBC DVD label earned Au$66.8m (£35.7m) at retail with Top Gear: Great Adventures Helmet being the top seller by value.

One reason for the strong performance of 2 entertain was the speed with which we moved to address the wholesale and retail impacts of Woolworths Group's collapse at the end of 2008 and through 2009. In addition, excellent in-store point-of-sale and positioning, plus tactical use of talent for greater marketing impact was highly effective. Online sales channels such as Amazon also delivered increased volumes, with BBC-branded products performing well.


Audio & Music

The Audio & Music business operated in challenging markets although sales decline has been significantly mitigated by careful cost control. The Music team has built a strong catalogue of over 100 hours of TV content for international distribution, including the UK music festival Glastonbury and the Rolling Stones documentary Exile on Main Street.

Following its launch at BBC Showcase in February 2010, this documentary has been sold to 12 countries including Israel, France and Australia. A Robbie Williams concert (part of the BBC's Electric Proms season 2009) was broadcast to over 250 cinemas across 23 countries, setting a new Guinness World Record for the most simultaneous cinematic screenings of a live concert.

We are pursuing strategic options for our BBC Audiobooks business, particularly through a disposal. Though digital downloads of our titles are growing (29.0% of purchases by volume are now digital), the business is strategically non-core, and we believe a faster transition from physical to digital distribution can be achieved.


Outlook

The priority for 2010/11 is to deliver our new strategy for 2 entertain and take advantage of the efficiencies made possible by full ownership. Though sales of physical video products are trending downwards, purchasing by collectors and those buying DVDs as gifts remains buoyant. Driving digital video sales is key to growth and we are developing plans to exploit our content across all digital platforms. To that end, the download-to-own business has transferred into Home Entertainment from Sales & Distribution and works alongside the DVD team to ensure synergies and windowing strategies align. We also intend to invest in more quality music TV content for international distribution.

Creative Thinking

For Fawlty Tower's 30th Anniversary Special Edition DVD box-set,
2 entertain painstakingly re-mastered the entire original series and John Cleese was persuaded, for the first time ever, to record audio commentaries over all 12 episodes. 2 entertain has constantly used such imaginative techniques to reinvent and keep the Fawlty Towers brand as relevant now as it was in the 1970s, selling 1m to date.

TOP

SALES £m

YEAR 10 09
2 entertain/DVD 193.5 185.8
Audio & Music 25.9 27.2
Audiocall* - 0.7
Books, Learning and Retail 10.6 11.6
Home Entertainment 230.0 225.3

PROFIT/(LOSS) £m

YEAR 10 09
2 entertain/DVD 38.2 31.4
Audio & Music 1.7 3.0
Ausiocall* - (0.6)
Books, Learning and Retail 0.4 0.4
Home Entertainment 40.3 34.2

* Audiocall was closed down in 2008/09

* Throughout this Review, sales include Group revenue and the Group’s share of joint-ventures’ revenue, and profit refers to operating profit before specific items. Specific items are not defined under IFRS and may not be comparable to similarly titled measures used by other companies. Specific items are material items which are highlighted by virtue of their size or importance to enable a full understanding of BBC Worldwide’s performance. A full definition of specific items and a reconciliation to profit before tax is provided in Financials.

During the year, BBC Worldwide has voluntarily chosen to employ International Financial Reporting Standards (IFRS), as adopted by the European Union, as the basis for the preparation of its consolidated financial results. This is in line with best practice and to allow greater comparability with other organisations. Throughout this Review all results are extracted from BBC Worldwide’s financial statements and presented consistently under IFRS, unless otherwise stated.