Tuesday, October 11, 2016

Paying your way

The BBC Trust invited Ernst &Young to review how licence fee funding passes to the BBC's commercial subsidiaries and vice versa, and E&Y have found that, in general, everything in the garden is fine and dandy. This is important, ahead of the proposed move of BBC Studios to a commercial standing.

There are some moments in the 12 case studies when E&Y eyebrows were raised.

BBC Global News Limited, who bring us the BBC World news channel and bbc.com, pays a fee for using the BBC brand, based on benchmarking carried out back in 2002.  The deal, signed between the parties in 2003, agreed the fee would only be paid once GNL moved into profit. E&Y say "The fact that no payment has been made in the thirteen years since the original agreement was signed in 2003 does not align with market practice, as it is unusual for brand payments to continue to be based on share of profit when a company has not been profitable for a prolonged period."

For transactions between GNL and its supplier, BBC News, E&Y found different ways of calculating prices. For Our World and The Travel Show, the BBC says there are no suitable benchmarks, so there is a cost-plus approach to the re-charge. However, amusingly, E&Y noted that a discount is also applied, which removes the costs of overheads and margins charged to GNL.

Then E&Y looked at Hard Talk, charged back to GNL on an incremental basis. They say "on a strict interpretation of the Fair Trade Guidelines, this would imply that incremental cost pricing is not appropriate." The elephant in the room is that the Hard Talk deal is the way the vast majority of news content is paid for by Global News.

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