BBC Annual Report and Accounts 2001/2002 This BBC Annual Report and Accounts is available in public libraries throughout the UK and on the BBC’s website at www.bbc.co.uk/info. It is also available in Welsh, in an audio version, in Braille and in a version tailored for people with learning difficulties. We also publish the BBC Statements of Programme Policy, setting out the BBC’s objectives and plans for the coming year.This is available in public libraries and on the BBC’s website at www.bbc.co.uk/info. It is available in Welsh, in an audio version and in Braille. Annual Reviews of BBC Scotland, BBC Wales, BBC Northern Ireland and BBC English Regions are published simultaneously with this document, as is the Annual Review of the BBC World Service. The BBC’s wholly-owned commercial subsidiaries, BBC Worldwide Limited and BBC Ventures Group (BBC Broadcast Limited, BBC Resources Limited, BBC Technology Holdings Limited and Kingswood Warren Ventures Limited) trade at arm’s length from the BBC and their accounts are independently audited.This Annual Report includes a summary of their activities in 2001/2002. Copies of any of these publications may be obtained by writing to The Secretary, BBC, Broadcasting House, London W1A 1AA. This publication has been printed using waterless technology which eliminates the combination of harmful solvents and polluting water.The inks and varnishes are soya-based and are 100% free of mineral oils and harmful emissions from volatile organic compounds.The paper is made from 50% totally chlorine-free pulp from plantation forests, and from 50% recycled and de-inked fibres, and any wastage in the finishing process has been addressed and minimised. Both paper merchant and printer are accredited to the ISO 14001 environmental management system. Above: The Blue Planet. Above: In a successful year for BBC Films, Jim Broadbent won an Oscar for his performance in Iris. Left: Simon Schama presented the second series of A History of Britain. Contents Annual Report and Accounts 2001/2002 1 Chairman’s foreword 2 Running the BBC 4 Board of Governors 4 Director-General’s review 6 Executive Committee 8 Delivering value for audiences 10 Performance against last year’s objectives 12 Next year’s objectives 17 Review of services Television 18 Radio 24 Nations & Regions 30 News 34 New Media 36 Learning 38 BBC World Service 40 Putting audiences first 42 The BBC in the community 48 People 52 Commercial activities BBC Worldwide Limited 56 BBC Ventures Group 58 Compliance 60 Financial review 70 Financial statements 72 Broadcasting facts and figures 108 Getting in touch with the BBC 116 Above:Yat-Kha, one of the winning performers in this year’s first BBC Radio 3 Awards for World Music. Right: Martin Shaw and Jenny Seagrove in G F Newman’s drama for BBC One, Judge John Deed. Chairman’s foreword 2 Annual Report and Accounts 2001/2002 It is the view of the Governors that 2001/2002 was a very successful year for the BBC.While there is still more to achieve, real progress was made in delivering programmes of quality and distinction – from the BBC World Service to BBC Radio 2, from BBC One to the launch of CBeebies – and the BBC met its target to spend more on programmes and services and less on overheads two years early.Audience approval rose and the vast majority of the objectives set by the Governors last year were met. I was interviewed for the post of BBC Chairman – the first such interview ever to take place under the new open system for public appointments – at 3pm on 11 September 2001. Less than an hour earlier, events of unprecedented terror in New York City had shaken the world.When, three weeks later, I moved to the BBC, it was clear that the need to report and reflect on these great global events would be the BBC’s greatest challenge in my first year as Chairman. So it proved.The BBC’s news staff responded magnificently to the challenge. Reporters from around the world covered the story as a unified team, and all of our key news outlets – domestic television, radio and online, the BBC World Service and BBC World – added enormously to their reputation by providing balanced, impartial and in-depth coverage of this challenging international story. It was not easy. As the story developed, both at home and overseas, the BBC’s coverage came under intense scrutiny and, as in previous conflicts, its impartiality was questioned. Such criticisms were unfounded and I was proud that our news operations emerged with flying colours. Indeed, there is no other news organisation which had the global presence and skill to better the BBC. The story is by no means over.There may be more challenges ahead.Yet life will go on and, at home, the BBC will seek to Annual Report and Accounts 2001/2002 3 bring great events to all our audiences.The BBC’s traditional role in unifying the country has been to the fore in recent months, with our coverage of the sadness surrounding the Queen Mother’s death, and the happiness which marked the Queen’s Golden Jubilee. Coverage of the Jubilee weekend showed the BBC at its very best. In sport, the BBC remains the popular choice at most of the greatest events.Who can forget – in England at least – Michael Owen’s hat-trick in Munich, or David Beckham’s penalty against Argentina? Or Olympic Gold for Britain – and Scotland – in curling? And, across the UK, BBC Children in Need raised a record £25million for disadvantaged children. The BBC’s ability to bring people together remains central to our mission. It is becoming ever more important in view of the increasing diversity of the UK. People’s outlook, tastes and interests are based not only on social background and ethnicity, but frequently on age or family status or on where they live. The BBC needs to serve them all. It is right for the public to have high expectations of the BBC. The Governors have always been charged with the responsibility of ensuring that the BBC fulfils its public service remit across all of its services.To do this, we sometimes have to stand up for the BBC against attacks from self-interested critics.We will continue to fulfil this role when it is needed. But we know that independence is a privilege which we must continue to earn.This is why, in February, I announced a series of reforms designed to modernise the governance of the BBC. These will enable the Governors to concentrate on ensuring the BBC is delivering the public interest and enable the management to focus on the day-to-day running of the BBC. We will judge these changes a success if the BBC’s independence is protected and it continues to deliver distinctive programmes and services to everyone in the UK. A key objective for all BBC services is to stretch their ambition and provide more programmes of indisputable quality in more genres. Even a year which included The Blue Planet, The Way We Live Now, Perfect Strangers, Conspiracy, A History of Britain and the BBC Radio 3 Awards for World Music, not to mention the launch of our new arts and culture channel, BBC Four, was not enough to convince everyone of our unremitting commitment to quality.The Governors found, however, that, week in, week out, throughout the year, the BBC sought – not just on BBC One but across its portfolio of channels and services – to stretch the imagination and to expand the horizons of its viewers and listeners. Nevertheless, the BBC can do even better on a more consistent basis. Arts and political programmes are two areas where the BBC faces a similar challenge: to engage a broader audience while still providing programmes for enthusiasts. The objectives we have set for the BBC in 2002/2003, laid out in this Report, reflect these priorities. As has been the case throughout our history, it will be the job of the Governors to hold the organisation to these demanding objectives. The BBC has always been a mass market broadcaster, but one which seeks to serve the public in a way which is unique in the world. As we travel further down the path to a digital age, nothing in our core purpose has changed. Quality and distinctiveness in all of our output is our ultimate goal. Gavyn Davies Chairman Running the BBC 4 Annual Report and Accounts 2001/2002 Gavyn Davies OBE Chairman of the BBC since October 2001. Previously Vice-Chairman from January 2001. Also chairs the Commercial Committee and the Remuneration Committee. Born in 1950. Economic adviser to 10 Downing Street Policy Unit from 1976 to 1979 and economist with Phillips & Drew and Simon & Coates before joining Goldman Sachs in 1986 as Chief Economist. From 1991 to 1999 he was a member of HM Treasury’s independent forecasting panel; has also been an economic adviser to the House of Commons Treasury Select Committee and a visiting professor at the London School of Economics. In 1999 he chaired an independent inquiry into the future funding of the BBC. He is an Advisory Director at Goldman Sachs. Rt Hon The Lord Ryder Vice- Chairman of the BBC since January 2002. Chairman of the Fair Trading Compliance Committee and member of the Remuneration Committee. Born in 1949. Political Secretary to Margaret Thatcher from 1975 to 1981. MP for mid-Norfolk from 1983 to 1997. Parliamentary Under Secretary at MAFF; Economic Secretary to the Treasury; Paymaster General then Government Chief Whip from 1988 to 1995. Privy Councillor since 1990. Created life peer in 1997. Director of Ipswich Town FC since 1999. Chairman of Eastern Counties Radio until his appointment to the BBC. Sir Richard Eyre CBE BBC Governor since 1995 and member of the Programme Complaints Committee. Born in 1943. Freelance theatre, film and television director and writer. Directed and co-wrote the Oscarwinning film Iris. After ten years in regional theatre in Leicester, Edinburgh and Nottingham, was Director of the Royal National Theatre from 1988 to 1997, directing 27 productions and producing over 100 more. Series Producer of BBC TV’s Play for Today from 1978 to 1981. Dermot Gleeson BBC Governor since November 2000. Member of the Audit Committee and the Commercial Committee. Born in 1949. Executive Chairman of the M J Gleeson Group Limited. A director of the Housing Corporation from 1990 to 1995, and of the Construction Industry Training Board since 1995. Former Head of the Home Affairs Section of the Conservative Research Department and a member of Christopher Tugendhat’s cabinet in the European Commission from 1977 to 1979. Baroness Hogg BBC Governor since February 2000. Member of the Audit Committee, the Commercial Committee and the Remuneration Committee. Born in 1946. Economist with extensive experience of business, government and the media. Chairman of 3i Group and also of Frontier Economics. Director of P&O Princess and GKN. Sarah Hogg was Head of the Prime Minister’s Policy Unit from 1990 to 1995 and was made a life peer in 1995. Roger Jones OBE The BBC’s National Governor for Wales since December 1996 (retires December 2002). Member of the Audit Committee and Fair Trading Compliance Committee. Chairman of BBC Children in Need and the BBC’s Pension Fund Trustees. Born in 1943. Founded Penn Pharmaceuticals in the early 1980s and is also director of Agropharm Limited and Lansdales Pharmacies Limited. Chairman of the Cancer Research Campaign in Wales, the Industrial Trust in Wales and, since April 2002, of the Welsh Development Agency. Professor Fabian Monds CBE The BBC’s National Governor for Northern Ireland since August 1999. Member of the Programme Complaints Committee and Fair Trading Compliance Committee. Born in 1940. Specialist in communications and information systems. Chairman of Invest Northern Ireland and of the Northern Ireland Centre for Trauma and Transformation in Omagh. Former Pro-Vice Chancellor of the University of Ulster. Founding partner of Medical and Scientific Computer Services Limited and WesternConnect Limited. Dame Pauline Neville-Jones DCMG BBC International Governor since January 1998. Chairs the Audit Committee and the Governors’World Service Consultative Group and member of the Programme Complaints Committee and Remuneration Committee. Born in 1939. A career member of the Diplomatic Service from 1963 to 1996, including a five The BBC’s Board of Governors is responsible for ensuring that the BBC fulfils its public service obligations. It safeguards the BBC’s independence, sets key objectives, approves strategy and policy, monitors performance and compliance and ensures public accountability.The Governors appoint the Director- General and, with him, other members of the Executive Committee, and determine their remuneration. The Director-General is the BBC’s chief executive and editor-in-chief. BBC operations are run by the directors of ten programming and broadcasting divisions and five professional services, and by the chief executives of the BBC’s commercial services.They report to the Director-General and, together, make up the Executive Committee. The Executive Committee is responsible for running the BBC, proposing key objectives, developing strategy and policy in the light of set objectives, and operating all services within the strategic and policy framework approved by the Governors. The Board of Governors and the Executive Committee share the same overall ambition – to ensure that the BBC serves the public interest as effectively as possible within its remit and funding. Neither body has other interests, such as shareholder value, to distract them from this.They work with each other to achieve this fundamental aim. Board of Governors Annual Report and Accounts 2001/2002 5 year secondment in Brussels and three years as Political Director in the Foreign and Commonwealth Office. From 1996 to 2000 she worked for NatWest markets and its corporate advisory arm, Hawkpoint Partners. She is Chairman of Qinetiq Group plc and of the Information Assurance Advisory Council. Sir Robert Smith The BBC’s National Governor for Scotland since August 1999. Chairman of the Programme Complaints Committee and member of the Commercial Committee. Born in 1944. Chairman of the Weir Group from July 2002, member of the Board of the British Council and member of the Judicial Appointments Board for Scotland. Formerly Chief Executive and Vice-Chairman of Deutsche Asset Management, a director of the Financial Services Authority and Chairman of the Board of Trustees of the National Museums of Scotland. Ranjit Sondhi CBE BBC Governor since August 1998 with special responsibility for the English Regions. Chairman of the English National Forum and member of the Programme Complaints Committee. Born in 1950. Senior Lecturer at the University of Birmingham’s Westhill College.Trustee of the National Gallery and Chairman of the Heart of Birmingham Primary Care Trust. Former Deputy Chairman of the Commission for Racial Equality and former member of the Independent Broadcasting Authority and the Radio Authority. Sir Anthony Young BBC Governor since August 1998 (retires July 2002). Member of the Fair Trading Compliance Committee. Born in 1942. Current President of the TUC General Council. Senior Deputy General Secretary of the Communication Workers Union (CWU) since 1998. Formerly General Secretary of the National Communications Union until its merger with the Union of Communication Workers to form the CWU. European Co-President of the Union Network International. Member of the Employment Tribunal Steering Board. Sir Christopher Bland was Chairman of the BBC until September 2001 when he resigned to become Chairman of British Telecom plc. Heather Rabbatts CBE also served as a BBC Governor from March 1999 until her resignation in December 2001 to take up the post of Managing Director of 4Learning at Channel 4. The Board of Governors, from left Back: Lord Ryder, Professor Fabian Monds, Sir Robert Smith, Sir Richard Eyre, Baroness Hogg, Ranjit Sondhi Middle: Dame Pauline Neville-Jones, Gavyn Davies, Dermot Gleeson Front: Roger Jones Below: Sir Anthony Young. 6 Annual Report and Accounts 2001/2002 Director-General’s review By any standards it has been a remarkable year at all levels – global, national and local.And on each level the BBC has risen to major broadcasting challenges, demonstrating what it is capable of and why it remains one of the world’s most trusted and valued broadcasters. The BBC World Service’s role as a beacon of independence and integrity even in the most difficult and dangerous conditions has rarely shone more brightly. In the aftermath of 11 September the Afghan people turned in their millions to the Persian and Pashto services for unbiased reporting of what was happening to their country.The service, which won the Sony Radio Academy’s 2001 Award, remains a model of the BBC’s purpose and values. On the day that the conflict began, 35 million people in the UK tuned to the BBC for its coverage of the attacks on America – on television, on radio and on the web. For news of the Queen Mother’s death and coverage of her funeral, again the BBC was the broadcaster of choice for three-quarters of the audience. And on General Election night last June it was BBC radio and television to which the nation turned. When whole communities come under unprecedented threat, as happened in areas like Devon and Cumbria as the blight of foot-and-mouth disease destroyed thousands of livelihoods last year, the BBC again comes into its own. BBC local radio stations became the focal point around the clock for news, for information and for putting communities in touch. BBC Radio Cumbria, in particular, provided a quite extraordinary service to communities across the county for months on end and was, deservedly, Sony Station of the Year. These viewing and listening figures and these accolades do not come to us on a plate. None of them happens on the strength of the BBC’s past glories.They come about, each time and in each place, only because dedicated and inventive staff across the BBC constantly rise to new challenges, constantly deliver the strength and quality under pressure that distinguishes our news and events coverage. If there is a better demonstration of public service broadcasting, I haven’t found it. In the past year we have launched BBC interactive television services, which have achieved a reach of more than eight million viewers from a standing start, and three new digital television channels and two new digital radio services. By the end of 2002 three more digital radio channels will be on air and we remain hopeful of winning Government consent for the launch of BBC Three. In April 2000 as part of the One BBC initiative we set ourselves the target of reducing the proportion of our income spent on running the BBC from 24% to 15% within four years. By March 2002 we had already achieved it, two years early. Partially as a result of this, we have been able to increase programme spend in the past year by a record £270million, and this has started to make a real difference to the quality and ambition of what we have produced.We plan to increase programme spend by a further £180million in 2002/2003. BBC One has begun to develop the richer mix of programmes we promised, with more drama and landmark factual programmes.The channel also overtook ITV in audience share for the first time in 2001 – a lead it has held and indeed increased in 2002. BBC Two’s audience share also rose – a remarkable achievement as more and more homes switch to digital. BBC Radio has had a sensational year in terms of audience figures, with records broken by BBC Radio 4, BBC Radio Five Above: The Flowerpot Men. Left:The Xchange crew. The BBC launched five new digital channels in 2001/2002. Above: Rugby Sevens from Hong Kong. 7 Live and above all by BBC Radio 2.The BBC’s Nations & Regions, marooned for too long on the outer edges of the organisation, have come in from the cold and are spearheading a closer relationship between the whole BBC and the distinctive and diverse communities which make up our audience across the UK.The north of England has also been better reflected with dramas such as Merseybeat, Linda Green and, more recently, Cutting It and Auf Wiedersehen, Pet. We have refocused our marketing and communications activities in the past year and achieved a step change in the way we talk and listen to our audiences, and we have modernised our approach to human resources and the way we talk and listen to our staff. But our vision of One BBC hasn’t yet been achieved.That is why in February we launched Making it Happen, to help us reach our long-term goal of making the BBC the most creative organisation in the world.We have shown over the past year what a resourceful, inventive and dynamic organisation we are. Imagine what still greater heights we can scale if we can release all the innate creativity of every individual who works for us. Greg Dyke Director-General Liz Kershaw Township Opera, seen here performing Carmen, followed conductor Charles Hazlewood as he auditioned untapped talent in South African townships. The Executive Committee, from left Standing: Peter Salmon, Mark Byford, Caroline Thomson, John Smith, Rupert Gavin, Alan Yentob, Carolyn Fairbairn, Pat Loughrey, Michael Stevenson, Andy Duncan. Seated: Glenwyn Benson, Ashley Highfield, Roger Flynn, Stephen Dando, Jenny Abramsky, Greg Dyke, Jana Bennett (appointed April 2002), Richard Sambrook. Executive Committee 8 Annual Report and Accounts 2001/2002 Greg Dyke Director-General since January 2000, having joined the BBC as D-G Designate in November 1999. Previously Chairman and Chief Executive of Pearson Television from 1995 to 1999. Former posts include Editor in Chief of TV-am (1983), Director of Programmes for TVS (1984) and Director of Programmes (1987), Managing Director (1990) and Group Chief Executive (1991) at London Weekend Television. He has also been Chairman of Channel 5, Chairman of the ITA, a director of ITN, Channel 4 and BSkyB and a non-executive director of Manchester United FC. Jenny Abramsky CBE Director of Radio & Music since April 2000. Responsible for BBC Radios 1, 2, 3, 4, Five Live, the Asian Network, new digital radio services,TV classical music, Music Live, the BBC Proms and the three BBC orchestras based in England. Previously Director of Continuous News. Former posts include Controller of BBC Radio Five Live, Editor, Radio News & Current Affairs and Editor, Today programme. Glenwyn Benson Joint Director, Factual & Learning since March 2001. Responsible (with Michael Stevenson) for all general and specialist factual programmes and content, and learning for both adults and children, across TV, radio and interactive media. Previously Controller of Specialist Factual programmes. Former positions include Head of BBC Science and Editor, Panorama. Mark Byford Director of World Service and Global News since October 2001. Responsible for BBC World Service (since 1998) and will lead all international news and information services across radio, television and new media. Previously Director of Regional Broadcasting. Former positions include Head of Centre, Leeds and Home Editor, TV News. Stephen Dando Director of Human Resources & Internal Communications since June 2001 (replaced Gareth Jones, who left in June 2001). Responsible for all BBC people and organisation issues, including staff communications. Previously global Human Resources Director at Guinness Limited. Former positions include Group Management Development Director, Diageo, and spells with UDV Europe, United Distillers, Ferranti International and Austin Rover. Andy Duncan Director of Marketing & Communications since June 2001. Responsible for all the BBC’s marketing, publicity, press and PR, customer services and audience research activities. Previously European Director for Unilever’s Food and Beverages division. Former positions include UK Marketing Director then European Marketing Director with Unilever’s UK Food and Beverages division and Chairman of the Tea Council. Carolyn Fairbairn Director of Strategy & Distribution since April 2001. Responsible for strategic planning and the distribution of all BBC services. Previously Director of Strategy. Former positions include Director of Strategy, BBC Worldwide Limited, working in the Downing Street Policy Unit and for McKinsey and Company. Roger Flynn Chief Executive of BBC Ventures Group since June 2001. Responsible for the BBC’s commercial media services divisions: BBC Broadcast Limited, BBC Technology Holdings Limited, BBC Resources Limited and KingswoodWarren Ventures Limited. Previously Managing Director of Prudential Retail. Former positions include General Manager, World Sales and Distribution, British Airways, and Commercial Director, Virgin Communications Group. Rupert Gavin Chief Executive of BBC Worldwide Limited since July 1998. Responsible for all of the BBC’s commercial consumer activities in home markets and around the world. Previously Managing Director of BT’s Consumer Division. Former positions include Director of Information, Communications and Entertainment for BT, and Deputy Managing Director of Dixon’s Stores Group. Annual Report and Accounts 2001/2002 9 Ashley Highfield Director of New Media & Technology since October 2000. Responsible for BBC internet output, interactive TV and new platforms (broadband, mobile etc), the BBC’s technology portfolio, technical innovation, and research and development. Previously Managing Director of Flextech Interactive, the pay TV company’s new media division. Former positions include Head of IT and New Media for NBC’s European Channels. Pat Loughrey Director of Nations & Regions since May 2000. Responsible for BBC programmes and services in Scotland,Wales, Northern Ireland and the English Regions. Previously Controller, BBC Northern Ireland. Former positions include Head of Programmes and Head of Educational Broadcasting for BBC Northern Ireland and teaching and broadcasting in Ireland and Canada. Peter Salmon Director of Sport since November 2000. Responsible for all BBC Sport activity across TV, radio and new media. Previously Controller, BBC One for three years. Former positions include Director of Programmes at Granada TV, Controller of Factual Programmes at Channel 4 and Head of Features at BBC Bristol. Richard Sambrook Director of News since March 2001. Responsible for the BBC’s broadcast news operations and the provision of daily news and current affairs programming for all UK-wide BBC TV, radio and online services. Previously Deputy Director, News. Former positions include Acting Director of Sport, Head of Newsgathering, News Editor and Deputy Editor, Nine O’Clock News. John Smith Director of Finance, Property & Business Affairs since April 2000. Responsible for all BBC finances including TV licence collection and property strategy.Won the Accountancy Age Financial Director of the Year Award in 2001. Previously with British Rail, overseeing de-mergers. Non-executive Director of Vickers plc until December 1999. Member of the Accounting Standards Board. Michael Stevenson Joint Director, Factual & Learning since April 2000. Responsible (with Glenwyn Benson) for all general and specialist factual programmes and content, and learning for both adults and children, across TV, radio and interactive media. Previously Director of BBC Education. Former positions include Deputy Director of Nations & Regions, BBC Secretary and Deputy Editor, On The Record. Caroline Thomson Director of Public Policy since July 2000. Responsible for the BBC’s main policies in editorial, regulatory and compliance areas, legal affairs and government relations. Previously Deputy Director, BBC World Service. Former positions include Director of Strategy & Corporate Affairs, BBC World Service, Commissioning Editor, Science & Business at Channel 4 and political assistant to Roy Jenkins in 1983. Alan Yentob Director of the Drama, Entertainment & CBBC division since April 2000. Responsible for all creative output in these areas, including BBC Films, and for talent management across the BBC. Previously Director of Television. Former positions include Controller of BBC One and BBC Two, Head of Music & Arts and founder Editor, Arena. Mark Thompson was Director of Television from April 2000 until his resignation in December 2001 to take up the post of Chief Executive of Channel 4. Jana Bennett OBE became Director of Television in April 2002. Responsible for the BBC’s output on BBC One, BBC Two, BBC Choice and BBC Four. Previously General Manager and Executive Vice President at Discovery Communications Inc. in the US. Former positions include Director of Production at BBC, Head of BBC Science, Editor of Horizon and Senior Producer on Newsnight and Panorama.