Annual Review 2007/08

NOTES ON THE ANNUAL REVIEW

SALES, UNLESS OTHERWISE STATED, INCLUDE BBC
WORLDWIDE SHARE OF JOINT VENTURES

PROFIT, UNLESS OTHERWISE STATED, REFERS TO PROFIT BEFORE INTEREST AND
TAXATION INCLUDING PRIOR
YEAR EXCEPTIONAL ITEMS

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BBC Worldwide Digital Media

David Moody, MANAGING DIRECTOR

As access to broadband expands across the globe, Digital Media is ideally placed to be one of the world’s most effective distributors of rich web content.

SALES (£m)

YEAR08 07
bbc.com1.5
-
Digital Syndication7.0 1.2
BBC Motion Gallery13.4 12.7
Digital Media21.9 13.9

PROFIT (£m)

YEAR08 07
bbc.com(5.7) (1.6)
Digital Syndication(4.6) (2.3)
BBC Motion Gallery(0.6) -
Digital Media(10.9) (3.9)

Digital Media’s web strategy has two parts. First, to have a network of strong BBC-branded sites, supported wherever possible by TV channels and magazines. Secondly, to distribute BBC Worldwide content widely across the web to reach potential users who are unlikely to come directly to BBC Worldwide’s own sites. Digital Media achieved real progress in all of its online-based businesses during 2007/08 and the team worked closely with other areas of the company to guide and support the development of existing and new websites.

Overall BBC Worldwide saw an increase in online revenues from 1.1% to 2.7% of total sales year on year. This reflected growth from Digital Media businesses as well as magazine websites and video on demand sales reported elsewhere in this Review. Substantial investment in bbc.com and new project Kangaroo, as well as in developing infrastructure and acquiring rights in order to drive long-term growth, will continue through 2008/09.

Digital Media delivered sales of £21.9m, up 57.6% year on year, driven by revenue from syndication of content to partners such as YouTube and Apple iTunes and by the launch of bbc.com. However, losses increased to £(10.9)m from £(3.9)m in 2006/07, largely as a result of investment in developing bbc.com and the proposed Kangaroo service (see below). Costs for Kangaroo are included in the digital syndication business figures. The revenues gained from digital syndication were more than offset by the cost of the start-up businesses.

bbc.com

In October 2007, BBC Worldwide gained BBC Trust approval, subject to certain conditions, to introduce advertising to the international traffic to bbc.co.uk. The service, known as bbc.com, was launched in November 2007 and is visible only from outside the UK. The revenues will allow BBC Worldwide to invest to make bbc.com the international showcase for the BBC’s key brands. The company intends to build on the existing strong position of the BBC website internationally, grow its reach, add more content, and make this content more relevant to overseas users through personalisation and localisation. bbc.com delivers a new flow of income into the BBC for investment in its core journalistic mission and capabilities, in addition to the fees that BBC Worldwide pays the BBC for the rights and services it uses.

The service, only visible to ex-UK users, launched with advertising on the most visited parts of the website – news and weather and a new homepage – in November 2007. During 2008/09, advertising will be rolled out to other high-traffic areas of the site. In addition, an international commercial iPlayer functionality is being explored.

KANGAROO

BBC Worldwide is developing a proposal for a commercial media player in partnership with ITV and Channel 4. In 2007/08 an independent joint venture was created by the three broadcasters to develop a new UK on-demand service known to the industry as Kangaroo. The proposal is subject to various approvals, including that of the BBC Trust. Should it be successful in securing these approvals, it would become an important site for those seeking to access UK-aired TV content on the web. Over 10,000 hours of TV content would become available and revenues would be generated from a mix of advertising-supported and pay-funded content. In April 2008, Ashley Highfield, formerly Director of the BBC’s Future Media and Technology Division and the key architect of its very successful public-service iPlayer, was appointed as CEO to take the proposal to the next stage.

DIGITAL SYNDICATION

The Digital Media team also works with major online partners to ensure BBC content is available across a range of platforms to a wider audience than is reached by BBC Worldwide’s own websites. In February 2007 BBC Worldwide became the first global broadcaster to partner with YouTube, and in January 2008 it secured a worldwide deal with MySpace to provide clips of BBC content to MySpace TV. It also signed an agreement in the UK to sell BBC programmes on a download-to-own basis via Apple iTunes, a deal repeated in the US and which will be replicated in other territories around the world. Another deal was struck with Sony Playstation for Top Gear to be downloaded through Gran Turismo TV. Such agreements help establish BBC Worldwide as a leading UK distributor for both BBC and independently produced content on digital platforms.

OPERATIONS

Digital Media has created a centre of expertise in building and operating websites as well as syndicating content. It works with other businesses, particularly Magazines, to enhance existing sites and introduce compelling new services supporting people’s 'passions'. The team invested in recruiting expert personnel in London, New York and Melbourne during the year. Working alongside other BBC Worldwide teams, Digital Media has created a global advertising sales capability and has also invested in a dedicated global rights team.

MOTION GALLERY

During the year this video archive sales operation successfully developed new business in a variety of digital markets and continued to expand its geographical reach. Continued investment in the website helped online sales grow by 47.0% as part of an overall 5.5% growth year on year. Profits, however, were reduced as a result of increased infrastructure costs. These were required in order to provide a platform for future growth in a world where demand for online video content is increasing rapidly.

OUTLOOK

In 2008/09 Digital Media aims to enhance bbc.com significantly, launch Kangaroo, if approvals are granted, and continue to develop its content syndication business. Profits will again be impacted by investment costs.

Digital Media