The BBC is set to be investigated for breaking its commitment to report separate financials for its production business and distribution division.
British regulator Ofcom, which monitors the public broadcaster, has warned that the BBC has “reduced the granularity of reporting” and only provided a “superficial” explanation of the change.
This comes 18 months after the BBC merged its production arm, BBC Studios, which produces series such as Strictly Come Dancing and Planet Earth, and international distribution unit BBC Worldwide.
Ofcom revealed that the BBC made some changes to the lines of business for the newly merged BBC Studios including combining five previous lines of business into two. It was notified in April 2019 of the changes and the BBC withdrew this “voluntary” commitment to keep this reporting separate last month.
“This has had the effect of combining the previous five lines of business into two (including merging production and distribution activities), reducing the granularity of reporting for BBC Studios. The BBC did not engage with stakeholders about the effect of the removal of its commitment and only published a superficial explanation of the reasons for the change,” Ofcom noted in its second annual report on the BBC.
It is now set to start a review and will determine whether BBC Studios provides “sufficient transparency” to Ofcom and other stakeholders on the performance of the different activities within the group. “This will include whether there should be any changes to the trading and separation requirements and we will publish our views, to give stakeholders an opportunity to comment, as a priority within this review,” it added.
It is aiming to publish the terms of reference by the end of the year and expect the work to continue into 2020/21.
In July, BBC Studios reported its first financial results since the merger. Overall revenue fell slightly to £1.37B but profit from its production and distribution group more than doubled from £34M to £81M. This came as it scored 15 commissions from third party broadcasters – the first time that BBC Studios was allowed to produce for non-BBC channels. These include The Red List for Discovery, Royal Wedding Watch for PBS, Fatberg Autopsy for Channel 4, The Bermuda Triangle Enigma for Channel 5 and Sex, Knives and Liposuction for UKTV’s W.
It has subsequently won greenlights from Netflix, for a medical documentary series, and a wildlife series from Apple as well as a number of international projects such as its first fully funded series in China via China Mobile’s digital content subsidiary Migu.