Thursday 9 January 2020 12:01 am

BBC commercial arm ‘has more to do’ as streaming competition heats up

The BBC’s commercial division must up its game if it is to fend off fierce competition from deep-pocketed streaming rivals, according to the public spending watchdog.

In 2018 the broadcaster created BBC Studios by bringing together its commercial production and distribution arms into one distinct body.

Read more: BBC ‘may not be sustainable’ in current form, media watchdog warns

In a report published today, the National Audit Office (NAO) said the merger had gone well so far, but improvements were needed if it is to reach its full benefit.

The public service broadcaster has cited BBC Studios, which generates revenue from new content and its associated intellectual property, as a key way of fighting off streaming firms such as Netflix and Amazon Prime.

In its first financial year, BBC Studios’ profit surged more than 50 per cent to £159m, boosted by a bumper streaming deal for its natural history programming with US media giant Discovery.

The division has also cashed in on strong performance of its branded channels such as UKTV, and has secured more than 30 commissions for its content from firms including Netflix and Apple.

However, the NAO said it was too early to tell whether the merger had delivered value for money and warned there was still work to do to integrate the production and distribution units.

It added that while Studios had met the profit target set by the BBC board, there was a wide contrast in profitability between different business areas. 

“The way we watch TV is changing, and the BBC knows that it must move with the times. BBC Studios is one example of this, and the merger has got off to an encouraging start,” said Gareth Davies, head of the NAO.

“The BBC now needs to make sure that it understands the impact its largest commercial subsidiary is having, including its risks and weaknesses as well as its successes.”

The report comes in a trying time for the corporation, which is haemorrhaging younger viewers and is facing threats from Boris Johnson that his government could decriminalise non-payment of the licence fee.

However, execs at Broadcasting House have been buoyed by bumper viewing figures over the festive period.

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BBC iPlayer enjoyed its most successful Christmas catch-up period ever as viewers flocked to hit shows such as Gavin and Stacey and Dracula.

A BBC spokesperson said: “We welcome the report’s findings that we had a clear rationale for creating BBC Studios, we planned well and the merger has got off to a good start following the launch of the new BBC Studios in April 2018.

“In a time of unprecedented change across the global market, and with continued tough financial challenges, the success of BBC Studios is vital in helping the BBC deliver value for money for the licence fee payer.”