NAO report probes efficiency and effectiveness of BBC Studios
The National Audit Office has warned BBC Studios that increased focus on producing ‘work for hire’ content for streamers could set back its growth plans.
BBCS aims to double in size by 2027/28 by achieving a £3.3bn income and profit of £444m. It suffered a blow this financial year amid tough market conditions, with a 14% fall in income from a record £2.1bn to £1.8bn, and profit down from £252m to £202m.
In its new report into the efficiency and effectiveness of BBCS, the NAO reiterated its 2020 call for the business to focus on generating and retaining more original IP, saying it has failed to meet its internal IP generation targets across UK and international productions for 2022/23 or 2023/24. The specifics of these targets, set for the first time in 2022/23, are not publicly known.
The public spending watchdog suggested BBCS is too focused on ‘work for hire’ productions for non-BBC third parties such as Netflix and Disney+, and “remains reliant” on IP from BBC programmes created before it was established in 2016.
According to the report, changes in viewer behaviours and market conditions - including the increasing prominence of global streamers - have led BBCS to increase ‘work for hire’ contracts, which hand IP and distribution rights over to the third parties.
“Its strategy up to 2021-22 focused on the generation of new IP which could be sold to commissioners in the UK and globally. Although its strategy still stresses the importance of IP generation, there is an increased focus on income from third-party commissioners and other ways of generating returns from IP,” said the report.
The report revealed that only one of BBCS’ 10 most profitable productions in the last financial year was original IP which it owns – a soft drama series which was not named for reasons of commercial sensitivity.
Indeed, ‘work for hire’ projects generated around 30% of BBCS income for the financial year 2023/24, up from around 3% in 2018-19. BBCS plans to double its income generated by this type of work from 2023/24 to 2027/28, according to the report.
“There are advantages and disadvantages to BBC Studios from such work,” the report went on. “It can be highly profitable in the short to medium term but does not generate longer-term returns through the sale of distribution rights.”
The NAO urged the business to “review the risks” associated with missing its IP generation targets, saying: “It should consider whether it fully understands the risks to the delivery of its long-term strategy associated with its current mix of income from ‘work for hire’ and from the production of new content whose IP it owns, and whether any action is necessary to ensure long-term, sustainable returns to the BBC.”
The watchdog also stated that “BBC Studios has adapted to changes in the market to enable its growth to date”.
The report went on: “It will need to ensure its strategic plans continue to evolve to deliver success in a dynamic and challenging market. It will also need high-quality internal performance reporting to identify areas for development in its business and monitor its progress in meeting its objectives.”
BBCS response
A BBCS spokesperson said: “As demand has changed, we’ve pursued a strategy that allows us to flex between owned IP and producing platform defining shows, finding the route that creates most value.
“In this period we’ve brought Bluey, the most streamed show in the US, to new audiences and evolved existing hits like Doctor Who and Strictly Come Dancing, maintaining their must-see status for today’s audiences. We will continue to showcase creative UK and bring new titles to international audiences.”
BBCS chief executive Tom Fussell said: “We’re a trusted supplier of platform-defining shows to both the BBC and global streamers; we bring international audiences impartial, trusted news and the best of British streaming through the world’s biggest English language news website and our Britbox service; and we’re home to some of the world’s most loved entertainment brands.
“This success gives us a strong foundation for our future growth ambitions and we are grateful to the NAO for their recognition and recommendations.”
Fussell welcomed the NAO’s overall “positive” assessment of the business’ performance, including exceeding its BBC returns target by delivering £1.9bn in the seven years up to and including 2023-24, and “substantially growing” its income and profits.
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