[Page 2 of 2] Chief Executive's Review
PERFORMANCE AGAINST OBJECTIVES
At the end of the first year of our five-year growth plan I am pleased to report good progress across all
five growth objectives.
Increasing overseas revenue towards two-thirds
Revenues from outside the UK grew significantly in 2007/08, particularly in the countries we have designated as
Priority One – the USA, India and Australia – where we expect all our businesses to increase in scale. UK revenues, however, also grew
through strong performances from UKTV and 2 entertain. Even with this healthy uplift in UK business, international
revenues now account for 49% of the total revenues compared with 46% in 2006/07. Good foundations have been laid in Priority
One territories which should start to deliver further international growth in 2008/09, a year when more senior executive
time will be devoted to the Priority Two markets of China, Latin America, Canada, Eastern Europe and South Africa.
Grow online revenues to more than 10%
The online business has grown from 1.1% of revenues in 2006/07 to 2.7% in 2007/08. The main areas of growth were advertising sales from websites, including bbc.com and lonelyplanet.com, syndication deals
with partners such as YouTube, plus the migration to online of our TV clip sales business, Motion Gallery. The ‘passion site’ strategy
(building online communities around key consumer interests) is progressing well. We launched gardenersworld.com in September 2007 and
bbcgreen.com in March 2008. The Lonely Planet website already has 4.6m unique users and work is underway to fundamentally improve that site.
Following approval from the BBC Trust, bbc.com was launched in November 2007. We expect the business to build quickly in 2008/09. Kangaroo is
being progressed and if this project gains approval it will also be a significant addition to our portfolio.
Roll out of BBC-branded channels
2007/08 saw the pay-TV launch outside the UK of the channel brands BBC Knowledge, BBC Lifestyle, BBC Entertainment and CBeebies. Total sales from the
Channels business grew by 8.8% year on year. Nine different iterations of the new channels went on air across India, Asia and Central Europe
(Poland), and launches in South Africa, Australia and Latin America are imminent. Also BBC HD, a new channel offering high-definition content,
is now broadcast in Australia.
Create a global production business
Our Content & Production business has seen strong growth since it was created in 2005/06, and this year it doubled its profits to £14.2m. This is
primarily owing to the continued success of Dancing with the Stars in the US, but work is in hand to diversify the flow of IP by identifying or creating winning new entertainment formats. The first
examples – How Much is Enough? in the US and Outback Wildlife Rescue in Australia – are evidence of our progress.
In addition to new production capabilities in the US, India and Australia, BBC Worldwide acquired equity stakes
in the start-up UK independent production companies Left Bank Pictures Ltd and Cliffhanger Productions Ltd. Both
acquisitions feature experienced production talent and deliver valuable IP to the whole business.
Acquire businesses to help achieve the overall plan
The Board identified the need to achieve some growth through acquisition and we set clear criteria to help us assess opportunities
swiftly. The global travel information company Lonely Planet offered a clear fit with these criteria and, after appropriate consideration
by our Board, the BBC Executive Board and the BBC Trust, we bought a 75% stake in the business in October 2007.
Like the BBC, Lonely Planet’s core mission is to serve individuals by imparting accurate and unbiased information and advice. It has a respected global brand, a large customer
base of travellers from all over the world, predominantly in the 25-45 age range, and strong editorial principles which underpin its print, TV and
online businesses. We identified that, whilst the publishing side was profitable, the online business was underexploited yet had excellent profit
potential.
Even more importantly, by developing the Lonely Planet website and linking it to the network of passion sites we are building around BBC
brands and genres, we can introduce a wide community of young consumers to our rich catalogue of BBC travel and world culture programming
(and vice versa). In 2008 the priority is the re-launch of lonelyplanet.com so that the business can take full advantage of the digital opportunity. In addition, many ideas for exploiting the brand are being progressed by our other businesses, including a magazine.
PEOPLE AND CULTURE
For a company such as BBC Worldwide where a creative and specialised workforce is a crucial asset, it is important to support people through periods of change.
In 2006/07 we launched an internal programme that aimed to create the best working environment for our people to achieve their potential
and deliver outstanding results. Although there is still work to be done, this initiative has undoubtedly played a part in last year’s
performance.
One of the major factors that has been a barrier to new ways of working in the past – the company’s ageing headquarters in west London –
has been addressed with the move into the award-winning Media Centre building in the BBC’s main complex nearby. This has been a catalyst
for re-examining every aspect of working life, from IT to team behaviour, and we are confident that it will facilitate more flexible working practices, more interaction between businesses and a more creative and collegiate approach to developing new commercial opportunities. The move began in November 2007
and most staff will be in situ by August 2008.
CORPORATE SOCIAL RESPONSIBILITY
As BBC Worldwide grows, we recognise the need to look carefully at the increasing impact and influence of our activities. Our mission is to
"entertain the world and bring value to the BBC", but this must be done responsibly and with integrity, not just because we are
passionate about corporate responsibility, but also because we are in the unique position of being the commercial arm of a much-loved
public service organisation. We were therefore dismayed by the discovery of a practice in our telephone services business Audiocall, which resulted
in monies not being passed to various charities, when they should have been. In an independent review commissioned by the BBC Trust, it was identified
that income from calls made outside the voting periods within TV shows over a two-year period had been wrongly retained. Subsequently £106,000 plus
sufficient to cover interest was paid over to the rightful recipients. The technology to prevent people being charged for such calls was only available from
September 2007 and was then introduced on Audiocall-run services. The Board and I are committed to ensuring the values of BBC Worldwide pervade every corner of our company and we will do everything we can to prevent such a misjudgement from happening again.
We have been developing a corporate social responsibility programme over the past year that will build on successful initiatives already
in place and introduce some new ideas. Four main areas have been identified – the environment,
ethical sourcing, diversity and outreach.
BRAND MANAGEMENT
In 2008/09 a key focus will be on ensuring that the company’s communications to all audiences, both internal and external, engagingly project
our unique proposition to consumers around the world. This work is essential as the business launches more direct-to-consumer online and
channel services. A brand management project has been in development through much of 2007/08 to define this proposition and we plan to
roll out the results during 2008/09.
OUTLOOK
The way ahead is never crystal clear, but the progress we have made in 2007/08 has further convinced us that our growth strategy is the right one for the
times. 2008/09 will be BBC Worldwide’s biggest-ever year for investment with more channel launches, production offices and online initiatives.
Therefore we project our profits will be impacted by the size of those investments in 2008/09, but the underlying businesses are all expected to
continue to perform well, and the Children’s business will be turned around or restructured. We are also diversifying further our revenue streams
and geographic spread, which will help mitigate the impact of weaknesses in the global economic environment.
BBC Worldwide is focused on delivering a growing stream of additional funding to the BBC and building the BBC brand around the world.
It is one of the additional pleasures of my job to be able to say that, in carrying out that role, we are also delivering value to other
players in the UK media industry, especially the independent production sector. The Board and I are looking forward to working with the
whole company, and our many partners, on the fresh challenges ahead as we continue on our path towards becoming one of the world’s leading
media entertainment companies.
John Smith
Chief Executive, BBC Worldwide