Annual Review 2011/12

Channels and Global BBC iPlayer

The Channels business is our biggest revenue generator, producing headline sales of £344.6m (2010/11: £303.1m), up 13.7%, with headline profits up 9.9% to £42.3m (2010/11: £38.5m). Revenue growth reflects three drivers. First, growth in distribution from 343m to 356m homes. Second, further growth in advertising sales on the back of strong ratings performances. And third, the launch of new channels, and a full year's contribution from the previous year's launches in Italy and New Zealand, as well as successful carriage renewals in multiple territories.

This year saw 10 launches for our channel brands. BBC HD launched as a full channel in Spanish-speaking Latin America and BBC Lifestyle debuted in Indonesia. BBC Knowledge, BBC Entertainment and BBC Lifestyle made their first appearance in Taiwan, and those same three channels launched in Thailand, along with CBeebies. CBeebies also debuted in the Nordic Region as a programming block on one of the region's largest commercial broadcasters. We continue to distribute BBC World News as part of our BBC-branded portfolio. The channel's distribution was significantly extended this year, including through a major deal with Comcast's Xfinity TV in the USA.

Subscription revenue for the business grew by 10%, including an 18% increase for our BBC-branded portfolio in EMEA. As well as growth in subscription revenue, we also saw strong growth in advertising revenue. It increased by 36% in South Africa, 34% in Latin America, and 25% in Poland. BBC America grew by 31% and at UKTV, our joint venture in the UK with Scripps Networks Interactive, it grew by 9%. These are all performing ahead of the TV advertising market in each territory.

BBC America achieved its highest ratings ever, up 23% for daytime viewing on the previous financial year with monthly reach averaging 24m, up 10% on last year's 22m. Doctor Who Series 6 was BBC America's best series ever, averaging more than 1.2m total viewers per episode.

This ratings success was mirrored at the Golden Globe awards, where the channel was one of the most nominated cable channels with three nominations for The Hour and a win for Idris Elba for Luther.

The rest of our portfolio experienced strong ratings as well; our factual and entertainment channels had their best ever start to a calendar year in 2012 in both Poland and New Zealand. BBC Knowledge in Singapore became the most effective channel for delivering upmarket homes in the Factual and Entertainment spaces, and BBC Lifestyle in South Africa maintained its number one spot in the Lifestyle category.

In Britain, the calendar year 2011 saw the highest ever share of commercial impacts for our joint venture UKTV. BBC content delivers the majority of commercial impressions for UKTV and this content has been supplemented with an increased investment in original commissions to drive overall ratings.

The Global BBC iPlayer, now managed in this business, has so far met the targets set for the pilot. The service was launched in July 2011 as a pilot, debuting in 11 Western European markets. It now reaches 16 markets around the world, including Canada and Australia, on iPad, iPhone and iPod Touch. As a commercial subscription service, aimed solely at the international market, it has a different business model and editorial proposition from the BBC iPlayer in the UK. The service provides a selection of contemporary and classic BBC and British content across all genres.

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Sales & Distribution

Sales & Distribution is our biggest profit centre, and this year increased headline profit by 13.0% to £72.3m (2010/11: £64.0m) on headline sales of £292.7m (2010/11: £260.6m). The continuation of a successful growth strategy, focusing on key client relationships, programme prioritisation, active catalogue management and digital, resulted in a fourth year of double-digit profit growth.

We have 100 salespeople in 11 offices serving over 200 markets. We are the UK's largest international distributor of finished television programming as demonstrated by a range of surveys in the year, including those from Televisual and Broadcast in the UK. We remain the biggest distributor outside the US studios. We represent over 200 independent producers, with international rights distribution now accounting for 25% of sector revenue, according to PACT.

Our single biggest growth area in the year was sales to digital services. The market has seen dramatic growth in digital services from both new OTT operators, and established platforms and broadcasters. Across our top five digital markets by revenue, we have licensed digital streaming rights (whether on-demand or catch-up) to over 140 customers. As a result, we have almost tripled our presence.

We licensed over 100,000 hours of content globally in the year. Our top selling brands were all BBC commissions: Top Gear, Doctor Who, Frozen Planet, Torchwood, Spooks, Sherlock, Planet Earth, and Natural World, all of which sold in over 100 markets.

This year saw the move of our annual sales conference, BBC Worldwide Showcase, in its 36th year, to Liverpool. A new venue allowed us to accommodate more buyers, including new delegates from digital services and emerging markets, and client registrations increased by 19% to 640 buyers. We also hold annual sales and screening events under the BBC Showcase banner in both Rio de Janeiro and Beijing.

We continued to manage the catalogue actively, increasing programme viewing hours at Showcase from 1,400 to 2,800, and we made further progress in drama, a highly commercial genre, which we have cultivated in recent years. Drama now forms a greater proportion of frontlist hours and total sales, and overtook light entertainment for the first time in several years. Titles such as Sherlock, DCI Banks, Scott & Bailey and Luther have performed particularly well in the crime sub-genre. New series from the BBC, including Frozen Planet, Earthflight and Great Barrier Reef, underpinned a very successful year in Natural History. We completed the first phase of transition to a new asset and distribution platform with Sony DADC, delivering programmes to our clients digitally, and designed to equip us with an efficient and scalable supply chain to accommodate future growth.

We have had a strong year in the Americas with our digital strategy delivering very solid results. Major deals with SVOD platforms included Netflix and Amazon, and we have been successful in forming exclusive digital-first content partnerships for titles such as Misfits with Hulu.

Trading in EMEA was impacted by the Eurozone crisis, particularly in Southern Europe, but good growth in major markets such as Germany and Russia limited the impact.

Revenue growth in Asia Pacific was particularly strong in Australia and New Zealand, where we renewed our first option deal with public service broadcaster, ABC, signed a number of digital licensing deals, and had further benefit from favourable exchange rates. We had an excellent year in China, helped by digital growth and pre-sales on Science programming. Healthy growth in this region also reflects a strong SVOD performance and a highly effective windowing strategy, allowing us to place our content with a wider selection of clients, enabling more viewers to enjoy great British shows.

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Consumer Products

Our Consumer Products business faced a number of challenges in the year. These included the loss of much of our stock, and consequential business interruption, in a fire at a warehouse belonging to our UK DVD logistics partner, Sony, during the civil disturbances of last summer, a weak US video market (and our landmark US release delayed until next year), and continuing declines in consumers' discretionary spending. In view of this, the business held up well and remains the UK market leader in the TV genre with increased market shares in both volume and value. Headline sales of £211.4m (2010/11: £251.1m) declined 15.8%, with headline profit of £49.1m (2010/11: £51.2m) down 4.1%. Operating margin improved in the year and overall profit was resilient, reflecting a successful performance at retail in the UK and an ongoing focus on costs and efficiency across the business.

Consumer Products' focus is on extending fans' enjoyment of their favourite shows. Our aim is to publish outstanding products relating to all our brands across physical and digital video, music, licensed products and books. Our brand portfolio includes some of the biggest TV entertainment properties such as Doctor Who, Top Gear and Sherlock, as well as exclusive video releases from British talent including John Bishop and Davina McCall.

Despite the fire and resulting disruption, in the UK we had one of our best-ever Christmas trading periods, with Celebrity Juice, Idiot Abroad 2 and Frozen Planet performing particularly well. In stand-up comedy, John Bishop has now sold over 1m DVDs since our first release in 2010. We remain the largest distributor of TV content in the UK, increasing market share in 2011 to 32.1% of units sold, up from 29.7% in 2010.

Performance was also strong in our digital business. In the UK, the week after Christmas was our most profitable ever with revenue up 29% year on year due to strong sales of Sherlock, Frozen Planet and The Office. Our content also made up half of the most downloaded TV titles available via iTunes UK, with The Office at number three and Come Fly with Me at number six. Our best-selling title in the USA was Doctor Who Series 6, and in Australia it was Come Fly with Me.

In Licensing we launched a range of new brands and saw continued success from established ones. The first Deadly 60 range launched at retail and Character Options' Deadly 60 construction range has proven a huge sales success, selling nearly 50,000 units in the first two months. Our successful relationship with Boots saw the range of Strictly Come Dancing cosmetics win a prestigious International Licensing Industry Merchandisers' Association award. Doctor Who now has around 100 separate licensees across a wide range of product categories, and was the fourth biggest licence in the market for boys aged 5-14.

Despite a music market that remained challenging, especially in compilation albums, the latest Live Lounge album reached number one in the compilation chart, the fifth time for the franchise. Demon Music Group, our catalogue marketing business, had a range of successful re-releases, including Suede and The Jesus and Mary Chain, along with successful new children's releases such as Justin Fletcher's Hands Up - The Album.

In books, all our associates performed well, with The Doctor Who Annual and The Great British Bake Off being the stand-out performers in the Children's and Adult categories respectively. AudioGo, publisher of BBC audio books, recorded strong profits in its first year under new ownership.

BBC Shop, our direct to consumer online retail site, dispatched over 200,000 products to customers' homes and rolled out a range of exclusive products. Its database now holds over a quarter of a million customers' details, who are among the BBC's most loyal fans.

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Global Brands

Headline sales of £146.6m (2010/11: £144.2m) were up 1.7%, with headline losses of £17.3m (2010/11: £12.9m). This reflects the combined results of businesses in an investment phase - Live Entertainment, Digital Entertainment and Games, BBC.com - as well as Lonely Planet and our residual interest in BBC Magazines. Performance overall was stable and the £4.4m movement in losses reflects further growth investment, the cyclical nature of some of the businesses and the cost of operating our new Magazines Unit.

This business also carries the total cost of managing BBC Worldwide's five key global brands. Revenue from these brands is recognised across our individual businesses on a memo-reported basis and represents 30% of the company's headline sales, growing by 4.2% to £321.1m. Corporate functions including Advertising Sales and Marketing are also managed by this division.

In Live Entertainment, we have significantly increased the number of events we are putting on, both in the UK and overseas. A fifth Strictly Come Dancing Live UK Tour sold 213,000 tickets, and in February, The Doctor Who Symphonic Spectacular debuted to sold-out houses in Melbourne and will tour globally in the year ahead.

In our Digital Entertainment and Games business, this year alone we launched 11 new titles across console, social, online and mobile and more information can be found on the Digital growth page.

BBC.com delivered another year of excellent revenue growth, and significant profit uplift on the back of the previous year's move towards profitability. Further details on BBC.com's activity and future plans can be found on the Digital growth page.

Lonely Planet once again performed creditably in the travel guidebook market, growing audiences across print and digital. Despite a challenging book retail market, in 2012 Lonely Planet became the number one brand in travel publishing in the USA, up from number three at the time of our first investment, taking us to leadership positions in all main markets. In emerging markets, we established operations in Delhi, creating and publishing travel guides by Indian authors, launched our first Portuguese language guides in Brazil and signed an agreement with a Russian publishing partner. Lonely Planet digital products continue to attract an avid following online and more information can be found on the Digital growth page.

In November 2011, following the sale and licensing agreement with Exponent, a Magazines Unit was established. This has two responsibilities. The first is to oversee the 17 licensed magazines with a BBC genre or programme connection, and to ensure, through an established process of editorial governance, that they remain the highest quality publications. The unit is also the publisher of the four magazine brands that remain wholly-owned by BBC Worldwide, produced under contract by Immediate Media Co - Top Gear, Good Food, Easy Cook and Lonely Planet.

The brand teams bring best practice brand management and commercial innovation to our five biggest brands, Top Gear, Doctor Who, Dancing with the Stars, BBC Earth and Lonely Planet. This includes a cohesive plan for fan engagement, as well as identifying and moving into new areas that deliver a financial return and delight fans.

Top Gear featured in the multi-million selling Forza 4 console driving game, took its live tour to Perth, Stockholm, Moscow, Copenhagen and Oslo for the first time, while Top Gear magazine's appeal continued to grow, increasing international versions to 31.

Strictly Come Dancing announced branded cruises with P&O, which will feature TV judge Craig Revel Horwood. In the US, a new Dancing with the Stars live show was developed and opened in Las Vegas in April 2012.

Doctor Who also had a busy year. The interactive Doctor Who Experience was seen by almost a quarter of a million visitors in London, and will open in Cardiff Bay later this year. Three thousand fans attended our first Official Doctor Who Convention in Cardiff over two days in March.

BBC Earth and SEGA agreed a partnership for a new multi-sensory adventure, opening in Japan in 2013. We joined forces with Emmy-winning composer George Fenton for Planet Earth Live in Concert, an orchestral performance set against cinematic scenes from the hit series. The first of BBC Earth Films' three title package, One Life, launched in the UK to critical acclaim, and in Japan was the highest grossing film in its opening weekend, with gross box office takings of $15.7m.

Looking forward, we are nurturing two new brands. The Deadly 60 series has been a major success, premiering in the USA in 2011 on National Geographic Wild and launching its first licensed product range. We also plan to use the second film, a major 4-quadrant 3D family film of Walking with Dinosaurs, to launch a number of products and experiences in 2013. The third film, Enchanted Kingdom 3D, is also in production.

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Content & Production

Headline sales rose by 31.8% to £135.5m (2010/11: £102.8m) and headline profit grew by nearly a third to £10.5m (2010/11: £7.9m).

Sales growth reflects a strong US performance, with continued success for ABC's Dancing with the Stars and delivery of scripted drama Torchwood: Miracle Day, a Starz, BBC Cymru Wales and BBC Worldwide co-production. This year also saw new US shows such as Hairy Bikers and a successful second series of Top Gear produced for HISTORY Channel, contributing to our growth. Headline profit is up due to the US growth detailed above, our production office in France and our talent rights management business.

There were many highlights from our BBC Worldwide Productions business in Los Angeles. These included a fantastic 14th season for Dancing with the Stars US, attracting 18.5m viewers, the recommission of the US format of Top Gear by HISTORY for a third season and a deal with Starz for the production of two scripted series. During 2011/12, they produced eight original series for channels including BBC America, ABC, TLC, HISTORY, Starz and OWN.

Our French production office had a record year, delivering revenue growth of 60% and producing a second series of Danse Avec Les Stars, seen by over 5m viewers with a 25.2% market share for the final. Other successful shows included Star Report 2 and a commission for When Romeo Met Juliet. Another BBC format, The Week the Women Went, attracted 3.7m viewers, outperforming France 2's slot and prime time average. On the back of that success, France 2 commissioned two specials: The Week the Women Went on Holiday and The Week Without Electricity.

In India, Jhalak Dikhla Jaa (the Iocal version of Dancing with the Stars) was commissioned by local entertainment channel Colors for two years and season four won the Best General Entertainment Programme at the Asian Television Awards. The My Big Decision format has been commissioned for Indian youth-focused Channel [v].

Our associate in Germany, Tower Productions GmbH, has seen a raft of new formats commissioned. These include Generation Gap, Clever vs Stupid, Food Factory and Junior Doctors.

Other format successes included sales of Dancing with the Stars to Panama and Georgia, bringing the total number of territories where the show has been licensed to 40. In Australia, the show's eleventh season continued to grow audience and share up by 12% and 11% respectively series on series. BBC formats proved to be extremely successful with BBC Worldwide's top five in terms of revenue developed in-house: respectively Dancing with the Stars, Torchwood, Top Gear, What Not to Wear, and The Week the Women Went.

2011/12 also saw Lonely Planet TV joining Content & Production for the first time and securing two commissions. BBC Worldwide Channels commissioned Year of Adventures and US cable's Travel Channel greenlit Best Parks Ever. Our Talent Rights team also enjoyed success working with core British talent including Steve Backshall on Deadly 60, and Kirstie Allsopp on Kirstie's Book of Crafts.