Commercializing the BBC

Even by the standards of the digital age, it looks like a curious pairing. On one side is the venerable BBC, an 85-year-old broadcaster famous for its integrity. On the other is YouTube, the upstart video-sharing Web site. But who cares about age when the benefits are mutual? After a lightning courtship, the two companies signed a revenue-sharing deal last month that will bring BBC clips to the Internet site. The BBC will get a big-name partner in cyberspace and access to millions of young users worldwide. YouTube will gain legal accessto plenty of classy content, at a time when its owners at Google are locked in nasty copyright tussles. Says Luke Bradley-Jones, head of strategy at BBC Worldwide, the corporation's commercial arm: "It's a win-win situation."

Such victories have become especially important to the BBC these days. Since a radical policy rethink earlier in the decade, its bosses have become eager to stake out territory in new areas, especially cyberspace. Like every other global media player, the BBC is busily preparing for the coming age of downloadable entertainment on demand. Now a budget crunch has given the makeover added urgency. The solution: tap the full commercial potential of one of the world's best-known brands. Traditionalists may fret, but even advertising—within limits—is no longer taboo. Under plans announced last month, BBC Worldwide is aiming to raise £200 million a year for its parent company by 2012 with digital media contributing 10 percent, twice the current share. Says Bradley-Jones: "We are harnessing the value of the BBC brand in a way that has never been done before."

The first results of this new commercialization are already apparent. BBC Worldwide began as a modest side enterprise, reselling the corporation's products with little regard for profit. These days it's a £785 million business that more than doubled its profits in the last two years, reaching £89 million in 2006. And it's pushing hard into overseas markets, with 28 TV channels worldwide and an international magazine-publishing house with 60 titles. Demonstrating its commitment to take on the toughest challenges, the company last month enlisted veteran U.S. television executive Garth Ancier, a former head of entertainment at both Fox and NBC, to lead its operations in the hypercompetitive United States.

Now the pace of change is certain to accelerate, if only because the BBC needs that extra revenue more than ever. Under its quirky constitution, the corporation depends for most of its income on the annual license fee paid by every British TV owner. These fees are agreed on by the BBC and the British government, and the latest figure, finalized earlier this year, fell far short of the corporation's hopes—it won't even match inflation over the next six years. The result: a projected £2 billion hole in the BBC's spending plans. Now British politicians are hinting at future cuts. If the BBC wants to maintain quality and add new services, it's going to have to find some other way to pay for them.

Even before the financial crunch, the new realities of the digital age were forcing the broadcaster to rethink its tactics. Every media strategist knows that the future lies online, whether it's for television, movies, print or music. The BBC is not immune to these trends. "There is just so much entertainment out there—and so many ways for the consumers to access it—that in the long term the BBC has to improve its stance ... if it wants to survive," says Chris Khouri, a media analyst with Datamonitor, a London-based market-research company.

The BBC has bold plans to address the challenges. Topping the list: an expanded Web site that's pitched at overseas visitors and would be funded by discreet advertising (which wouldn't be shown to British users). The current site already attracts some 40 million users a month from outside the U.K., but strategists reckon that a broader offering could pull in many more. The plans, still awaiting approval, envisage a single gateway to a slew of new services, including a set of online fanzines dedicated to a range of interests—from cookery to motor sports. In the words of BBC Worldwide chief executive John Smith: "Think of a classy digital deli where you can find everything that you are passionate about, on demand, and nicely packaged."

It sounds good, but the BBC must keep its edge and also find a way to emphasize what it does best. Over the decades, the corporation has amassed 750,000 hours of audio and visual content ranging from light comedy to heavyweight documentaries, and the total is increasing by 30,000 hours a year. "The BBC," says Arash Amel of the London media-research company Screen Digest, is "sitting on one of the largest archives to be found anywhere in the world." A smart approach to new technology and partnerships—last year BBC boss Mark Thompson signed a memo on future collaboration with Microsoft's Bill Gates—is making these treasures easier to access. And this year should see the launch of the iPlayer, clever software that will permit the downloader to trawl the entire BBC archive at speed. The service could be available free by the end of the year to the British public, and for a fee in key markets such as America and Australia.

Trouble is, the special status and reputation of the BBC can prove both a help and a hindrance as it adjusts to the digital era. The recent wrangling over license fees has reopened a wider debate over the very nature of the corporation and its goals. Private-sector rivals in the U.K. resent what's seen as unfair competition from an enterprise that's free of standard commercial pressures. Traditionalists worry that the corporation is straying too far from its public-service remit and shouldn't be seeking extra cash for new projects. Much criticism has focused on the BBC's proposal to allow advertising on its Web site, a move that's tough to square with its traditional disregard for profit. After the plans were announced last year, more than 200 BBC journalists signed a petition expressing their concern.

As they see it, any deals with advertisers risk sullying the BBC's name and undermining its strengths. "This is a very special brand and there must be a temptation for any marketing man to flog it for all its worth," says Conservative M.P. and former broadcaster Roger Gale. "But it would be like using the royal family. The queen could sell a lot of chocolate bars, but she just wouldn't do it." Such logic is unlikely to sway the corporation's leaders, however, when they give a final ruling later this year. After all, advertising revenue already helps to fund the popular BBC World TV channel. And even the most venerable institutions must change with the times. Just ask the queen.