Analysis of Research and Development Investment

A DotEcon Report for BBC R&D

January 2018

DotEcon Ltd 17 Welbeck Street London W1G 9XJ

www.dotecon.com

Contents

Contents

1 Introduction and background ...... 14 1.1 Terms of Reference ...... 14 1.2 Overview of our approach ...... 15 1.3 Structure of this report ...... 20 2 The BBC R&D department ...... 21 2.1 Overview of BBC R&D activities, focus and approach ...... 21 2.2 R&D Projects over the most recent Charter Period ...... 25 3 Case study methodology ...... 27 3.1 Choice of case studies ...... 27 3.2 Assessing costs and benefits ...... 29 4 Case study findings ...... 38 4.1 Piero sports graphics system ...... 39 4.2 Redux and Snippets ...... 45 4.3 Free-to-Air connected platforms ...... 52 4.4 DVB-T2 ...... 60 4.5 Subtitles ...... 65 4.6 BBC Internet Distribution Infrastructure (BIDI) ...... 73 4.7 AS-11 specification for file-based delivery of air ready programming ...... 79 5 Calculating overall benefits of R&D work ...... 85 5.1 Benefit to cost ratios ...... 85 5.2 Grossing up ...... 87 5.3 Results ...... 92 6 Conclusions ...... 97

i Tables & Figures

Tables & Figures

Table 1: Benefit-cost ratios for each case study project ...... vii Table 2: Categorising the selected case studies ...... 29 Table 3: Costs benefit ratios for each case study project...... 86 Table 4: Total value of R&D estimates based on most expensive 'unsuccessful' project approach...... 92 Table 5: Total benefit of R&D activity (lower bound estimate) ...... 95 Table 6: Total benefit of R&D activity (upper bound estimate) ...... 95

Figure 1: Finding the 'productive spend' cut-off point ...... ix Figure 2: Illustrative example of demand curve and consumer surplus ...... 34 Figure 3: Piero development timeline ...... 40 Figure 4: Linear broadcast viewing share data for BBC on a platform-by-platform basis ...... 56 Figure 5: The plotted probability density functions of project sizes (costs) for each 'value chain' category...... 89 Figure 6: Project size cumulative distribution function for all projects...... 89 Figure 7: Project size versus success ...... 91

ii Glossary

Glossary

AMWA Advanced Media Workflow Association AR Augmented Reality AS-11 A specification for file-based delivery of air-ready programming BAU Business as Usual BFI British Film Institute BIDI BBC Internet Distribution Infrastructure BoB Box of Broadcast CDN Content Distribution Network DPP Digital Production Partnership. DTT Digital Terrestrial Television DVB-T2 Digital Video Broadcasting – Second Generation Terrestrial FTA Free-to-air HD High Definition HLS HTTP Live Streaming traffic IRFS Internet Research and Future Service ISP Internet Service Provider MOTD Match of the Day NABA North American Broadcasters Association NFB National Federation of the Blind NIST National Institute of Standards and Technology NPV Net Present Value OTG BBC Online Technology Group QC Quality Control R&D BBC Research and Development department UHD Ultra High Definition WCAG Web Content Accessibility Guidelines WHP White Paper

iii Executive Summary

Executive Summary

We have been asked DotEcon has been commissioned by the BBC Research and to conduct a cost Development department (R&D) to prepare an independent benefit analysis of evaluation of its activity over the previous Charter Period.1 We have the work of the BBC R&D department been asked to evaluate the costs and benefits of R&D’s work. over the previous The assessment presented in this report is based on interviews with Charter Period staff in the R&D department, the wider BBC and in the broadcasting sector, and our independent analysis of data provided by BBC finance and R&D. The views expressed in this report are our own, formed as a result of this research and data gathering, and do not necessarily represent the views of the BBC or R&D. As part of our assessment, we have identified all the projects conducted by the department over the last Charter Period. Within this