Commercial activities: BBC Worldwide Limited 56 Annual Report and Accounts 2001/2002 Total sales across BBC Worldwide rose to £660million last year, with sales growth, including joint ventures, at 12% – in double figures for the third year running. A £106million cash flow contribution was invested back into the BBC – up from £96million last year. Cash flow growth remains ahead of projections and BBC Worldwide is on course to achieve its £210million target by 2006/2007. BBC Worldwide won a record 84 industry awards during the year, including the Queen’s Award for Enterprise in recognition of the success of its television export business, now the biggest outside the USA.This was measured over a three-year period from 1999 to 2001, during which BBCWorldwide grew this business by almost 35%, from £146million to £195million. Programme exports had been helped over the period by a run of major creative successes from different BBC departments, including The Weakest Link, Teletubbies, Tweenies, Walking with Dinosaurs,Walking with Beasts and The Blue Planet. Video and DVD sales and profits increased this year as BBC Worldwide grew its DVD business both in the UK and, through a deal with Warner Brothers, in the US. Delia’s How to Cook – Book Three and a range of children’s titles including Tweenies Annual 2002 delivered strong sales and the business consolidated its position in the audio book market with the successful acquisition of Chivers. In a year of difficult trading conditions in many domestic and overseas markets, BBC Worldwide Limited increased its sales, grew its business activities and delivered profits in excess of its plans. It contributed over £100million to the BBC for the first time. Left and below: Successful new book titles (left) and a range of merchandise for adults and children contributed to BBC Worldwide’s sales growth in 2001/2002. Annual Report and Accounts 2001/2002 57 BBC Worldwide retained its position as the UK’s third largest magazine publisher and outperformed its larger competitors with copy sales growing 2% overall in a flat market when the industry had been hit by declining advertising revenues. Tweenies was the biggest UK success for the children’s division and two new touring shows were launched during the year.The phenomenal success of Teletubbies continues overseas with a Mandarin version broadcast in China for the first time. BBC Worldwide is the largest UK-based provider of international television channels.These now reach more than 450 million homes across the globe – a steep rise from the 365 million achieved last year. The recommendations of a review of BBC Worldwide’s operations and relationship to the wider BBC were implemented during the year.A new Commercial Board, chaired by the Director-General, oversees the strategy and performance of BBC Worldwide and BBC Ventures on behalf of the Executive Committee. Collaboration and business transparency between BBC Worldwide and BBC output divisions have been strengthened. Distribution reports analysing the commercial performance on all investments made since 1997/1998 are now shared across the BBC on a quarterly basis and closer partnerships have been established on key talent contracts and marketing activities such as the annual BBC Showcase trade fair which licenses television programmes to overseas customers. In July 2001, BBC Worldwide’s internal organisation was streamlined to improve focus, increase efficiency and reflect the international reach of the business. As a result unnecessary duplication has been removed and there is closer integration of the Regional operations.The restructuring has helped contribute towards the £21million delivered in efficiency savings. Prompt action by BBC Worldwide senior management mitigated the impact of charges brought by the Hong Kong authorities against toy sourcing agent EMS for alleged fraud against BBC Worldwide.The Governors’ report on pages 60 to 69 confirms that action has been taken to address the issues raised by an independent investigation into the alleged fraud. BBC Worldwide achieved its diversity target, with just over 10% of its staff now from minority ethnic groups. Including overseas offices, the figure is 13%. A good read 20% of UK adults now read a BBC magazine every month The Weakest Link – Anne Robinson and other international presenters of a format that has become a global success story. BBC Worldwide Limited cash flow to the BBC £ millions 2001/2002 106 2000/2001 96 1999/2000 82 1998/1999 81 1997/1998 75 Commercial activities: BBC Ventures Group 58 Annual Report and Accounts 2001/2002 BBC Ventures Group was formed in February 2002 to exploit business-to-business opportunities and, like BBC Worldwide Limited, operates within the framework of the BBC’s Commercial Board. Above: Music Live attracted around 250,000 people in Leeds, Bradford and York to live music concerts and broadcasts supported by BBC Resources. Right: Internet streaming is a growth area for BBC Technology. BBC Ventures Group brings together BBC Resources Limited, a BBC subsidiary company providing production facilities and design services in-house and in external markets since 1998, and BBC Technology Limited, which began trading as a subsidiary on 31 March 2001 designing, building and operating systems for managing and distributing content on multimedia platforms. During the year BBC Broadcast Limited was incorporated as a third subsidiary, which commenced trading on 2 April 2002 providing a comprehensive range of playout and channel management services. Kingswood Warren Ventures Limited has been formed to exploit technological intellectual property rights. Approval for the incorporation of a holding company, BBC Ventures Group Limited, is awaiting a decision from DCMS.This would enable this group of companies to operate with higher borrowing levels, like BBC Worldwide, ring-fenced from the BBC’s Public Sector Borrowing Requirement limits. Market conditions in the past year were highly challenging, especially following the bursting of the ‘dot.com’ bubble and the financial difficulties of many media and technology companies. Despite this difficult environment, the group’s results were substantially improved over those of last year, with an overall trading loss of £5.4million (compared to a £9million loss in 2000/2001). Additionally, many of BBC Ventures Group’s businesses have contractual obligations to deliver BBC cost savings, ie lower prices for strategically purchased services. In 2001/2002, £12.6million was delivered back to the BBC – which was twice the target figure.The key task for the new Group in 2002/2003 will be to drive up the performance of the businesses through the agreed strategy for growth. Annual Report and Accounts 2001/2002 59 BBC Resources Limited Revenue performance has improved slowly but consistently over the past year, with more realistic business targets being set. Operating losses of £6.3million were recorded over the year, an improvement on last year’s figure of £12.8million, but £8million was returned in cash for the BBC to use in programme making.The 2001/2002 figures largely reflect losses of £4million by BBC Resources’ interactive design agency, MediaArc, which has now been significantly re-structured, including the transfer of the Belfast operation to BBC Technology. TV Studios had a good year, achieving profitability for the first time ever. So did Outside Broadcasts, winning contracts including Chrysalis’World Rally Championships and the TWI snooker contract, and providing the expertise behind the BBC’s much-acclaimed national events coverage. During the year total headcount fell to 1,605, as just over 1,000 staff who provide technical, editing and engineering support to BBC Nations & Regions’ operations were transferred back into their core business. BBC Technology Limited BBC Technology has successfully pitched for several high-profile contracts in the past year, most notably winning a five-year contract from Hutchison 3G for the provision of a media production facility for their third-generation mobile phone service in the UK.The cutting-edge technology this involves offers important prospects for further commercial success in new and emerging broadcast markets. The acquisition of Intel’s Reading-based media streaming and hosting operation during the year helped establish a new partnership with Real Networks as its Gold Pass streaming partner in Europe, which includes streaming Channel 4’s Big Brother. IXL’s consulting and systems integration business, based in San Francisco and Atlanta, was a further strategically important acquisition, adding considerable expertise in digital interactive television and a recognised presence in the US market. During the year BBC Technology contributed £16million in cash to the BBC. BBC Broadcast Limited The centre of excellence in broadcasting and presentation operations which existed within BBC Television was incorporated into a limited company structure on 2 April 2002.These skills are now being offered in the wider marketplace for the first time. In addition to its specialist services in playout, media planning and channel management, BBC Broadcast offers creative services such as channel branding, promotions and trails, and access services such as audio description and sign language. Broadcast currently supplies services for 17 public service and commercial television channels, all the BBC’s national and local radio services and BBCi. Potential customers include existing broadcasters, new media and telecommunications companies, and new contracts already won include the production of trailers for Discovery Network Europe. Kingswood Warren Ventures Limited Kingswood Warren Ventures Limited is a company within the BBC Ventures Group which aims to secure commercial returns for the BBC by exploiting opportunities arising from work undertaken by BBC Research and Development or other BBC departments. Opportunities will be developed through partnerships, joint ventures or by launching commercially successful products or services, where clear market opportunities can be identified. Above: BBC Four’s launch was supported by the creative skills of BBC Broadcast. Left:Wimbledon 2001 was supported by teams across all of BBC Ventures Group. Behind the scenes BBC Resources mounted the UK’s biggest-ever outside broadcast operation for the Queen Mother’s funeral