BBC Studios review
Ofcom’s role in regard to the BBC’s commercial activities is set out in the Charter and Framework Agreement. Our regulation aims to make sure the BBC’s commercial activities do not gain an unfair advantage over competitors by virtue of their relationship with the BBC. To ensure that this is the case, we have put trading and separation requirements in place through a set of requirements and guidance. The BBC must put in place appropriate, robust controls and procedures to make sure it follows the regulation, particularly as the market changes and BBC Studios continues to evolve.
In this review we have sought to better understand how the BBC has implemented the rules we have put in place.
Our key finding is that there are two significant areas where we are not currently satisfied that the BBC has appropriate controls and procedures in place to ensure that it is operating in line with our regulation.
Secondary content sales
For certain categories of content that BBC Studios distributes, where the BBC public service owns the intellectual property, co-production arrangements are in place. Under these arrangements BBC Studios is entitled to the entirety of the profit related to the distribution of the associated secondary content rights. This is a long-established practice and it does not appear to us that the BBC has fully reviewed and updated it in the light of our rules.
We have not seen evidence that the public service has undertaken objective tests to ensure that its co-production arrangements with BBC Studios are at arm’s length and on commercial terms, and therefore it is not clear to us how the BBC is satisfying itself that it is achieving compliance.
Supply and pricing of goods and services
The public service sells a range of goods and services to its commercial subsidiaries and to the market (including BBC Studios). To better understand the way the BBC does this, we looked at a small sample of transactions and found some issues with the administrative processes in place.
In the other areas considered in our Review, we are broadly satisfied with the BBC’s approach to the exchange of information, its commercial governance structure and its reporting arrangements that ensure that there is appropriate separation between the public service and BBC Studios, and its approach to charging BBC Studios for the use of the BBC brand.
You can read the findings of our review (PDF, 760.9 KB) in full.
In November 2023, the BBC updated us (PDF, 98.1 KB) on the action it is taking on its approach to secondary content sales where the Public Service owns the intellectual property to ensure that its co-production arrangements with BBC Studios are at arm’s length and on commercial terms.
We have now published a further consultation on how we regulate the BBC’s impact on competition. Our consultation sets out the changes that the BBC is making to its processes to address the concerns raised in our review of BBC Studios. The consultation also proposes some small changes to the Trading and Separation requirements and guidance, to ensure that they are clear. The consultation is open for responses and closes on 6 February 2023.
In our call for evidence (PDF, 380.8 KB), we invited stakeholder views on three key areas including: operational separation between BBC Studios and the Public Service; the supply and pricing of goods and services between BBC Studios and the Public Service; and the commercial rate of return earned by BBC Studios.
We also published a report by Mediatique (PDF, 1.7 MB) which sets out how the sectors BBC Studios operates in have developed and considers how they might evolve.
As part of our review, we also assessed the changes BBC Studios made to its lines of business.
We consider BBC Studios’ reduction of its lines of business from five to two – which involved combining its production and distribution activities – is consistent with other production companies of a similar size and scope. We therefore concluded that the revised lines of business are appropriate.