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4CC Main Case BBC submission to the BBC Trust 4CC process for BBC Studios 4CC Main Case August 2016 1 BBC submission to the BBC Trust 4CC process for BBC Studios Contents of BBC Studios 4CC Case Contents of BBC Studios 4CC Case .............................................................................................................................. 1 Why is the BBC proposing BBC Studios ...................................................................................................................... 4 1. Purpose of this document........................................................................................................................................... 6 1.1 The four commercial criteria ........................................................................................................................... 6 1.2 The consultation .................................................................................................................................................... 7 1.3 Structure of this document .............................................................................................................................. 7 2. Summary of this document ........................................................................................................................................ 9 3. Revisions to the BBC’s content supply arrangements .............................................................................. 11 3.1 The Commissioning Framework ................................................................................................................ 12 4. Commercial Criterion One: Fit with Public Purposes .............................................................................. 18 4.1 Purpose of this section .................................................................................................................................... 18 4.2 Approach to demonstrating Fit with Public Purposes .................................................................... 19 4.3 BBC Studios’ role in the BBC’s wider supply strategy .................................................................... 20 4.4 BBC Studios’ role in supporting the BBC’s Public Purposes ....................................................... 30 4.5 Summary ................................................................................................................................................................. 37 5. Commercial Criterion Two: Brand and Reputation .................................................................................. 39 5.1 Purpose of this section .................................................................................................................................... 39 5.2 Approach to demonstrating BBC Studios will uphold BBC’s brand and reputation ..... 40 5.3 Governance structures and policies ......................................................................................................... 42 5.4 Brand protection ................................................................................................................................................. 48 5.5 Conclusion ............................................................................................................................................................. 49 6. Commercial Criterion Three: Commercial Efficiency ............................................................................... 50 6.1 Purpose of this section .................................................................................................................................... 50 6.2 BBC Studios is an integral part of the BBC’s commercial strategy .......................................... 51 6.3 BBC Studios financial review ........................................................................................................................ 51 6.4 Separation from BBC Public Service ........................................................................................................ 52 6.5 BBC Studios’ business model ....................................................................................................................... 53 6.6 Governance and oversight ............................................................................................................................ 56 6.7 Conclusion ............................................................................................................................................................. 56 7. Commercial Criterion Four: Fair Trading and Market Distortion ....................................................... 58 7.1 Purpose of this section .................................................................................................................................... 58 2 BBC submission to the BBC Trust 4CC process for BBC Studios 7.2 Approach to demonstrating compliance with EU State Aid rules and the BBC Fair Trading Framework .......................................................................................................................................................... 59 7.3 Incorporation of BBC Studios ...................................................................................................................... 60 7.4 Ongoing operation of BBC Studios .......................................................................................................... 64 7.5 Avoiding market distortion ............................................................................................................................ 84 7.6 Conclusion ............................................................................................................................................................. 86 8. Appendix 1: Glossary of terms in this document ....................................................................................... 87 9. Appendix 2: list of confidential annexes provided to the BBC Trust ............................................... 91 3 BBC submission to the BBC Trust 4CC process for BBC Studios Why is the BBC proposing BBC Studios At its core the BBC is a programme-maker: for nearly one hundred years the BBC has made programmes that inform, educate and entertain. We want to keep on being one of the best programme-makers in the world, a creative powerhouse through the coming decades. The UK production sector has fundamentally changed in recent years. What was once a cottage industry is now an increasingly global, well-financed and structurally mature market. These changing dynamics mean that BBC in-house production has struggled to remain competitive within the existing regulatory framework and, in light of changes to that framework, it now needs to make changes to the way it operates. The BBC is proposing to transform its current in-house television production arm – BBC Studios - by seeking permission for it to become a wholly owned commercial subsidiary of the BBC, able to operate in the market. BBC Studios would be able to produce programmes for the BBC and other UK and international broadcasters to return value to the BBC, and would operate on a level playing field with other suppliers. Giving production teams the chance to work with more than one commissioner brings creatives more oxygen. This is the key step change that will enable the BBC to reinvent its production arm to better deliver to BBC audiences, create value and continue to play its unique, underpinning role in the UK’s production ecology. BBC Studios would be a unique and exciting business with a clear mission ‘To support the BBC Group by producing bold, British, creative content for customers and audiences around the world’. It would reflect and uphold the BBC’s values and support the BBC Group’s public service mission. It would seek to attract the most diverse, creative and collaborative talent, with teams working across the Nations and Regions of the UK, and be a place where they are inspired to do their best work. It would be distinctive in the market: delighting in range and specialism, and making the full range of genres: premium talent-led Drama; popular daily soaps; ground-breaking Comedy; hard-hitting Documentaries; in-depth explorations of specialist topics in, for example Science, Art and Religion; super landmark Natural History; live Events of national importance and Entertainment shows that bring the UK together. It would not limit itself to just those genres with the most commercial appeal. The BBC would remain by far its most important potential customer. Alongside BBC Studios, the BBC (in accordance with the Government’s White Paper on Charter Review) is opening up to competition millions of pounds of content spend to be creatively competed. Just as the Window of Creative Competition in the last Charter was a step change in content supply, the BBC's new arrangements will represent a watershed moment of creative meritocracy, bringing benefits to the wider sector. Diversity of supply produces a diversity of ideas and approaches for audiences. Both BBC Studios and the opening up of content spend across the BBC will maximise this diversity, enabling the BBC to choose the best ideas for its audiences from a market that includes a vibrant independent sector and a 4 BBC submission to the BBC Trust 4CC process for BBC Studios thriving BBC Studios. The BBC will maintain the 25% Independent Production Quota1 to protect smaller independents that are so vital to the UK creative sector’s unique character. The creation of a competitive
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