Background and strategy

Home Entertainment continued to pursue its strategy of finding partners for the sub-scale publishing businesses and developing thriving joint ventures where appropriate. Despite tough UK retail markets, where the bulk of the business's sales derive, performance was exceptionally good with profit up £17.1m to £25.8m in 2005/06.

DVD/Video

The joint venture with Woolworths plc, 2 entertain, enjoyed its first full trading year with excellent results, with sales of £115m delivering £25.8m profit to BBC Worldwide. This included £15m sales and £3.1m profit from music and film production activities which are reported within Digital Media and Content & Production respectively. This was achieved in a year where the company moved from three office sites to one, migrated to a new IT platform and consolidated distribution. It remains the number one UK-owned DVD distributor.

The key drivers for the success were a number of high volume hits, with Little Britain leading the way, supported by Doctor Who, Davina: My 30 Minute Work Out and Jeremy Clarkson: Heaven and Hell. Little Britain was also a major hit in Australia and New Zealand. In December 2005, 2 entertain was the fourth biggest seller by volume in the UK market, beating established studio labels such as Sony, Buena Vista (Disney) and Paramount.

It was also a year of innovation with the first releases of interactive DVDs, such as best-seller Gary Lineker's Soccer Quiz, and products released in the UMD format for Sony's PSP where sales were led by the ubiquitous Little Britain.

BBC Audiobooks

It was a busy and eventful year for UK market leader BBC Audiobooks. BBC spoken word titles had a sparkling Christmas, occupying nine out of the top 20 places in the audiobook charts - with Alan Bennett's Untold Stories - The Stories and The Diaries topping the charts at numbers one and two. The US operation moved in to a custom built office and distribution centre in Rhode Island aimed at building on growth in this important territory.

The key activity was the growth of the digital download business. Major development work during 2005/06 has laid the foundation for an increase in download activity in 2006/07. Excellent management and cost control at BBC Audiobooks ensured that the business remained profitable.

BBC Books

BBC Books is one of the UK's leading non-fiction trade book publishers, whose best-sellers last year included Rick Stein's French Odyssey, David Attenborough's Life in the Undergrowth, Alan Titchmarsh's The Gardener's Year, Coast and Balderdash and Piffle. Simon Schama's Rough Crossings was a huge critical success, firmly establishing BBC Books as a substantial history book publisher - an achievement underlined at the British Book Awards ('The Nibbies'), where Auschwitz by Laurence Rees won the coveted History Book of the Year.

Having restructured the business in 2003, BBC Books achieved a remarkable turnaround in performance in 2005/06 in an increasingly competitive marketplace, with sales of £20.4m and a move into profit of £1.0m from a loss of £3.1m last year.

We also announced our intention to sell a majority stake in our books business with the aim of completing a transaction in 2006/07.

Retail and direct marketing

BBC Worldwide has seven high street shops and an online retail business. Performance was good in a competitive market. Sales from these activities of £11.8m hit budgeted levels and the business achieved breakeven after a small loss in 2004/05. A strategic decision to move the management of bbcshop.com into the growing direct to consumer business managed in Magazines was taken towards the end of the year. It will sit alongside subscription selling, reader offers and a central marketing database, thus building a substantial and growing direct to consumer operation so that BBC Worldwide can forge closer links with its customers.

Learning

During the year BBC Worldwide pursued its strategy of finding a partner for Learning activities and in October created a partnership with Pearson Education to help drive core school, secondary, tertiary, EFL and life skill publishing under the brand BBC Active. The publishing will draw on the BBC's output creating both traditional and digital products which Pearson will sell and distribute around the world.

Sales(£m)	06	05
Video/DVD	111.4	93.7
Audiobooks	22.7	24.6
Learning	9.0	13.6
Books	20.4	20.0
Retail & direct marketing	11.8	8.9
Total	175.3	160.8

Profits(£m)	06	05
Video/DVD	23.6	12.2
Audiobooks	0.5	0.9
Learning	0.7	(1.1)
Books	1.0	(3.1)
Retail & direct marketing	-	(0.2)
Total	25.8	8.7

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