BBC Annual Report and Accounts 2003/2004

Annual Reportand Accounts
2003/2004

British Broadcasting Corporation
Broadcasting House
London W1A 1AA
bbc.co.uk© BBC 2004

Purpose, visionand values

PurposeOur purpose is to enrich people’s lives with
programmes and services that inform, educate
and entertain

VisionOur vision is to be the most creative organisationin the world

ValuesTrust is the foundation of the BBC: we are
independent, impartial and honest
Audiences are at the heart of everything we do
We take pride in delivering quality and value
for money
Creativity is the lifeblood of our organisation
We respect each other and celebrate ourdiversity so that everyone can give their best
We are one BBC: great things happen when
we work together

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Contents
2
Chairman’s statement
4
The Hutton Inquiry
6
How the BBC is run
8
Board of Governors
10
Executive Committee

58
Performance against Statementsof Programme Policy
commitments 2003/2004

Governors’ review ofcommercial activities
68
BBC Worldwide Limited
70
BBC Ventures Group Limited

12
Governors’ review
of objectives
72
BBC people and talent
Governors’ review
of services
24
Television
32
Radio
40
New media
42
News
46
Learning48
Nations & Regions

74
Being accountable andresponsible
82
Compliance
97
Financial review
99
Financial statements
136
Broadcasting facts and figures
147
Getting in touch with the BBC
148
Other information

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BBC World Service& Global NewsBBC Annual Report and Accounts 2003/2004

Chairman’s statement

This is a transitional document.
Traditionally the Annual Report and Accounts
has been as much about marketing the
BBC as holding it to account – and asmuch about management’s view of its own
performance as about the Governors’view of management’s performance.
This Annual Report is different. It is thefirst step in turning the BBC’s Annual
Report into a document owned by
the Governors, which evaluates theperformance of BBC management
against publicly stated objectives andcommitments. We intend to take thisprocess further in future years.
The reforms to the BBC’s systemof governance outlined in our Building
Public Value document make clear that
we mean to move rapidly to strengthen
the Governors’ clear independence frommanagement. Governors will provide
themselves with the resources tocommission independent advice to enable
us to carry out close and rigorous scrutinyof BBC programmes and services. Annual
Reports will be explicitly Governors’
reports and primarily concerned withassessing performance and holding
management to account.
This Annual Report is different in anotherway too. There is no Director-General’sreport, because the new Director-General,
Mark Thompson, did not work for the BBC
in the period under review.
Neither, of course, did I. I watched the
Hutton Inquiry and its aftermath unfold
as just another licence payer. And wellbefore I was appointed, the BBC had
begun to learn the lessons and – as the2section on Hutton in this report makes
clear – to make changes to some of theBBC’s editorial processes and to the way it
handles complaints. I am confident that theimplementation of these changes will allow
us to draw a line.
But I do want to make one thing clear.
The BBC is not worth having if it is noteditorially independent. I and the other
Governors will defend the BBC’s rightto do difficult and courageous journalism
about powerful people and powerful
institutions. That kind of journalism –set within a strengthened editorial
framework – must remain one of thehallmarks of the BBC.
The Hutton Inquiry made people reflect
on the enduring value of a strong andindependent BBC to Britain. When the BBC
lost both its Chairman and Director-Generalin the space of 24 hours it did feel likea watershed. At that moment it is not
surprising that some people began tocontemplate the prospect of Britain
without the BBC.
And the truth is that the BBC is notinevitable. It exists because it earns its
place in the affections of our audiencesby enriching lives through information,
education and entertainment. The BBC hasconstantly to renew and refresh the bondsthat link us to those audiences. We haveto listen, learn and respond – and thengo back and do it again. As Governors,
effective engagement with the British public
and responsiveness to their concerns mustlie at the heart of our role as trusteesof the public interest.

BBC Annual Report and Accounts 2003/2004

It is sometimes claimed that the BBC is
unaccountable and largely self-regulating.
But one of the surprising things I’ve
discovered since I started as Chairman
is the large number of regulations against
which the BBC is already measured.
Until recently the BBC had to deal withjust three externally imposed quotas.
As a result of the 2003 Communications
Act we now have another 52 to deal with.
And there are more to come next year.
It is right that we justify our privileged
position. But it is important that we havethe appropriate targets in place to ensure
the BBC’s programmes and services reflect
what really matters – the needs and interestsof our funders, the licence payers.
In future, the Governors will assess
performance against four key targets:reach, impact, value for money and quality.
In judging the outcomes we will take anoverall perspective.
The BBC delivers value well beyond its
programmes and services. The case weare making in the Charter Review process
is that the BBC is worth keeping becauseof the immense amount of public value
it delivers. Public value means not just theBBC’s value to people as individuals, butalso its value to people as citizens, andbeyond that, its value to the broadcasting
and creative industries as a whole.
For the individual, the BBC’s value is theinformation, education and entertainment
it provides. For the citizen, the BBC’svalue is its contribution to the widersocial, democratic and cultural healthof the UK. And for the broadcasting
and creative industries, the BBC’s valuelies in its investment in training andcreative production.

in steering the BBC through one of themost difficult periods in its history.

The aims of the BBC are to underpin
citizenship, enrich cultural life, contributeto education for all, make the UK a more
inclusive society, and to support the UK’srole in the world.

One final tribute – to Alistair Cooke whodied earlier this year aged 95, only a few
weeks after delivering his final Letter from
America on BBC Radio 4 and BBC World
Service. Cooke was a great reporterand a wonderful broadcaster – shrewd,
thoughtful and humane. He wrote like anangel and he could write with equal insightand vibrant detail about an extraordinary
range of topics: politics, history, space travel,
jazz, golf. He respected his listeners, andhis listeners loved him. The result was
the world’s longest running speech radio
programme. The BBC can learn from that.

This is the case we will be making overthe coming months as the debate over the
renewal of the BBC’s Charter gathers pace.
The strength of the BBC is its people.
And there are some people I want to
pay tribute to here.
The first is my predecessor as Chairman,
Gavyn Davies, who gave so much tosupport the ideals of the BBC and who
showed great courage and dignity in themanner of his departure. It is one of theironies of BBC history that a Chairman
resigned having defended the independenceof the BBC.
The next is Greg Dyke. As Director-General,
Greg did a huge amount to restore andbuild staff morale. And his championshipof Freeview was the crucial decision thathas made the switch-over to a fully digital
Britain a realistic prospect. Freeview
showed Greg’s vision and leadership andthe Governors were right to support him
in this initiative.

Michael Grade
Chairman
17 June 2004

On behalf of the Governors I would also
like to thank Richard Ryder for steppingin as Acting Chairman at a particularly
demanding moment. On behalf of theGovernors, too, I want to put on record
our thanks to Mark Byford. As Acting
Director-General he played a key role
BBC Annual Report and Accounts 2003/2004

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The Hutton Inquiry

Chronology
On 29 May 2003 Andrew Gilligan,
Defence Correspondent for Today,
broadcast a number of reports about
the dossier published by the Government
in September 2002 entitled Iraq’s Weaponsof Mass Destruction.
At 6.07am he did a live ‘two-way’ (a reportin the form of an interview with a presenter)
which raised serious questions about thedossier, in particular its claim that Iraq had
weapons of mass destruction ready for use
in 45 minutes. Andrew Gilligan said “one of
the senior officials in charge of drawing up
that dossier” had told him “the government
probably knew that the 45-minute figure waswrong even before it decided to put it in”.
Andrew Gilligan also reported his unnamed
source as saying that “Downing Street …
ordered it [the original draft of the dossier]to be sexed up, to be made more exciting
and ordered more facts to be discovered”;
and that the published dossier upset theIntelligence Services because “it didn’t
reflect the considered view they were
putting forward”.
That weekend, the Mail on Sunday publishedan article by Andrew Gilligan naming
Alastair Campbell, the Government’s thenDirector of Communications, as the person
identified by the source as responsible forincluding the 45-minute claim in the dossier.
The Government strongly denied thesestories. The BBC stood by its decision
to broadcast the Today item. There wasa private exchange of correspondence
between the Government and the BBC.
In late June, Alastair Campbell called for
an apology from the BBC during a televised
4hearing of the House of Commons Foreign
Affairs Committee, and released one of his
letters of complaint to the press. The BBC
in its reply again stood by its decision tobroadcast the report.
At the end of June, Andrew Gilligan’s
source, Dr David Kelly, a Ministry of
Defence (MoD) scientist, told his manager
that he had spoken to Andrew Gilligan andmight be a source for the Today report.
While the MoD was investigating this(and before Dr Kelly’s identity became
public) the BBC Chairman, Gavyn Davies,
called a special meeting of Governors
on 6 July. A statement afterwards said theBoard was “satisfied that it was in the public
interest to broadcast Mr Andrew Gilligan’s
story”. The Governors criticised two
aspects of Today’s handling of the story:
they said the production team “should have
kept a clearer account of its dealings with
the MoD”; and “could also have asked theNo 10 Press Office for a response prior
to broadcasting the story”. The Governors
also said they intended to look again at
the rules for BBC reporters and presenters
writing for newspapers.
On 9 July, Dr Kelly’s identity was made publicby the MoD. On 18 July, he was found deadnear his home in Oxfordshire. The BBC
made a statement expressing deep regret
for the death of Dr Kelly and confirmingthat he had been Andrew Gilligan’s source.
The Government asked Lord Hutton toinvestigate the circumstances surrounding
the death and he published his report inJanuary 2004.
During the inquiry the BBC accepted it
had made mistakes and Andrew Gilligan
BBC Annual Report and Accounts 2003/2004

accepted that some of his reporting had
been inaccurate. The BBC admissions were:the 6.07 broadcast should have been
scriptedthe 6.07 broadcast contained inaccuracies.
It did not distinguish sufficiently between
what Dr Kelly had said and Andrew
Gilligan’s interpretation of what he had
said. The BBC accepted that Dr Kelly did
not say the Government had put in the
45 minutes claim when they probably
knew it was wrong; nor did he say that
Downing Street ordered more facts tobe discovered
the BBC accepted that one of its replies
to Alastair Campbell contained two
factual errors
the BBC accepted that Andrew Gilligan’snotes should have been examined earlier
than they were
the BBC accepted that, although Alastair
Campbell had not taken up an invitation
to refer his complaint to independent
investigation, the BBC itself should havereferred his letter of 26 June to the
BBC Programme Complaints Unit forindependent investigation
In his conclusions, Lord Hutton exonerated
the Government of almost all blame for theirhandling of the events investigated. On thecentral issues, Lord Hutton’s view was: thewording of the dossier was consistent withthe available intelligence; the allegationthat the Government probably knew the
45-minute claim was wrong before it went
into the dossier was unfounded; theallegation of ‘sexing-up’ was also unfounded.
Lord Hutton’s main findings on the
BBC were:
the editorial system which the
BBC permitted was defective in that

Andrew Gilligan was allowed to broadcast
his report without editors having seen ascript and considered whether it should
be approved
BBC management was at fault for failingto investigate properly the Government’s
complaints in that Andrew Gilligan’s notes
should have been examined earlier, andthat when they were, there was a failure
to appreciate that they did not fully
support the 6.07am broadcast allegations
the BBC’s management system forconsidering complaints was defectivein that an email critical of Andrew Gilligan’sreporting from Kevin Marsh, Editorof Today to Stephen Mitchell, his line
manager, was not passed further
up the chain
the BBC Governors should havemade more detailed investigations
into the extent to which Andrew
Gilligan’s notes supported his report
In the 24 hours following publication,
Gavyn Davies resigned as Chairman
and Greg Dyke, the Director-General,offered his resignation to the remaining
Governors and it was agreed that hewould leave the BBC. Lord Ryder agreed
to become Acting Chairman while apermanent replacement was found, and
the Governors appointed Mark Byford
Acting Director-General.

executive, to lead a review on behalf of
the Director-General.
Shortly after Lord Hutton published his
report, Andrew Gilligan left the BBC of
his own volition. An internal disciplinary
process was conducted. No dismissals
resulted. A statement at the end of theprocess in May 2004, made two pointsof clarification.
Firstly a core script had been properly
prepared for the Today programme of
29 May 2003. This had been cleared in linewith normal production practices in placeat the time, but was then not followed
by Andrew Gilligan. The BBC’s evidence tothe Hutton Inquiry could have been clearer
in this respect.
Secondly it had not been necessary forthe email sent by the Editor of Today,
Kevin Marsh, to the Head of Radio News,
Stephen Mitchell, to have been passed
further up the chain. The impression givenby the BBC’s evidence to the Hutton
Inquiry was that this email did not reflect
the view of senior news management.
In fact it did and those views had been
the subject of recent discussion. Therefore
the implied criticism of Stephen Mitchelland Kevin Marsh was unjustified.

In September 2003 the Governors
had asked Greg Dyke to formulate
proposals for reform of key areas including
BBC complaints-handling, and the BBC
Producers’ Guidelines covering the breakingof controversial stories and the use ofanonymous sources. Mark Byford took
this work forward and commissioned
Ronald Neil, a former senior BBC editorial

Governors’ commentary
At the heart of this narrative lies the deathof Dr David Kelly. Lord Hutton’s report
made clear no one could have predicted
he would take his life. The BBC has
expressed its condolences to Dr Kelly’s
family, and we wish to do so again here.
We have no doubt Dr Kelly’s allegations
merited a place in BBC output as
information on a matter of clear public
interest from a credible source. But BBC
journalism values accuracy and impartiality.
The reporting here was neither sufficiently
accurate nor sufficiently impartial since theGovernment was not asked to respond
before broadcast.
We, and management, have apologised forthe mistakes the BBC admitted before andduring the Hutton Inquiry. We have taken
steps to improve some BBC processes:
BBC complaints-handling processes arebeing reformed to make them clearer,
fairer and more responsive
Management is implementing all
the proposals from the Neil Review,
including revised editorial guidelines andprocedures, and improvements in the
training of BBC journalists.
We have ensured that BBC staff, andregular freelance journalists whose main
profile or income comes from the BBC,are no longer allowed to write newspaper
or magazine columns on current affairs orother contentious issues
We are confident the right lessons havebeen learned and appropriate measures
are being implemented. The BBC, under its
new leadership, can now look to the future.

BBC Annual Report and Accounts 2003/2004

5How the BBC is run

Licence payers
Licence payers are the bedrock of the BBC.
Including concessions, there are 24.5 million,
and their licence fees provide the vast
majority of the money the BBC spends.
The BBC regularly consults licence payers
to ensure their views are taken into account.
Parliament
Parliament decides the legal framework inwhich the BBC operates and sets the levelof the licence fee. It scrutinises BBC affairs
through debates on the floors of bothHouses and through select committee
hearings, where Governors and membersof BBC management are called to accountfor the BBC’s performance. The BBC
also provides secretarial support for the
All-Party Parliamentary BBC Group which
encourages debate and discussion within
and outside Parliament about the futureof public service broadcasting, with special
emphasis on the BBC.

BBC Governors
BBC Governors are the trustees of the
public interest. They supervise the BBC
and ensure its independence from politicaland commercial interference. There are
twelve, appointed by the Queen on advice
from ministers in accordance with Nolan
principles that public appointments should
be made on merit. All are part-time. Theybring a broad range of experience andexpertise to the BBC Board.
The Board of Governors differs from theboard of a public company whose prime
accountability is to its shareholders. The
BBC Board is accountable to licence payers
and Parliament.
The Board of Governors does not manage
the day-to-day operations of the BBC(which is the role of the Executive
Committee). Instead it ensures that the
Executive Committee manages the BBC
in the public interest by:approving strategy and policy
setting objectives
monitoring performancemonitoring compliance with legal
obligations and policy guidelines
ensuring public accountability
appointing the Director-General andother Executive Committee members
determining the remuneration of the
Executive Committee

The national Governors for Scotland,
Wales, and Northern Ireland each chair
Broadcasting Councils; and the Governor
with special responsibility for the English
Regions chairs the English National Forum.
The views of people in the nations andregions on BBC programmes and services
are made known through these bodies.
The World Service Consultative Group,
chaired by the International Governor, gives
the Governors an independent reviewof the range and quality of the output
of BBC World Service and BBC World.
The BBC recently proposed changes to
its governance. These include measures
to increase the separation of Governors
from management. The proposals, outlined
in Building Public Value, will be implemented
over the coming year.
Ofcom, the communications regulator
which has been in operation since
December 2003, regulates some aspectsof the BBC. For example, the BBC has toabide by Ofcom’s standards and fairness
codes (except for due accuracy andimpartiality which remain the sole concernof the Governors). It must comply with
Ofcom quotas for various types of public
service television content – for example,
that a proportion of programmes must be
made outside the M25. However, Ofcom,
unlike the Governors, plays no role in theactual operations of the BBC.
For details of individual Governors see
pages 8 and 9.
For details of the objectives set for 2003/2004
and the Governors’ assessment of performancesee pages 12 to 22, and for 2004/2005 see
page 23.

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BBC Annual Report and Accounts 2003/2004

Executive Committee
Currently the Executive Committee is madeup of the directors of the BBC’s 16 divisions.
It is chaired by the Director-General, towhom all the divisional directors report.
The Executive Committee answers to theBoard of Governors.
The Director-General is the BBC’s
chief executive and editor-in-chief, incharge of all day-to-day operations. The
Director-General works with the Boardof Governors to appoint the directorsof the individual divisions.
The performance of each division
is assessed regularly by the Board ofGovernors. The BBC performance year
runs from April, with annual objectives
agreed in March. Performance against
these is reported in the following year’s
annual report in July.
For more details about the members of the
Executive Committee, see pages 10 and 11.

BBC
The BBC’s 16 divisions produce orcommission all BBC output. There arenine broadcasting divisions. They manage
the BBC networks and their programmecommissioning and production. These
divisions are:Television
Radio & Music
News
Nations & Regions
Sport
Factual & Learning
Drama, Entertainment & CBBCNew Media & Technology
BBC World Service & Global NewsIn addition, there are five divisions
providing professional support:
BBC People
Finance, Property & Business Affairs
Marketing, Communications & Audiences
Policy & Legal
Strategy & Distribution

Television, Radio, Online
Across the UK, the BBC operates eight
television channels and ten radio networks,
46 local and national radio stations, and theonline site bbc.co.uk.
Internationally, BBC World Service
broadcasts on radio in 43 languages; BBCWorld delivers a global television news
service, and the online site bbcnews.com
offers international news and audio. These
services are not supported by the licencefee but are paid for either by Grant-in-Aid
from the Government or by advertising.
In addition to broadcast and online
services, the BBC works in the community
in many different ways including through
BBC Children in Need which raises large
sums to help disadvantaged children in
the UK.

There are also two commercial divisions
selling goods and services around the world:
BBC Worldwide Limited
BBC Ventures Group Limited
The profits they produce help to support
the rest of the BBC.

BBC Annual Report and Accounts 2003/2004

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Board of Governors

The BBC Governors, led by the Chairman of the BBC, arethe trustees of the public interest. They supervise the BBC
and ensure its independence from political and commercial
interference. They are appointed by the Queen on advice fromministers in accordance with Nolan principles that public
appointments are made on merit. The Board of Governors does
not manage the day-to-day operations of the BBC (which is therole of the Executive Committee) but it ensures that the BBC
is managed in the public interest. The Governors are accountable
to licence payers and Parliament.

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1 Michael Grade CBE
Chairman
BBC Chairman since May 2004. Chairmanof Pinewood Shepperton and Chairmanof Hemscott Group both since 2000,
Director of Charlton Athletic FC since1997. Former journalist and theatricalagent. At LWT from 1973 to 1981, latterlyas Director of Programmes; President,
Embassy Television in Hollywood from1981 to 1984; at the BBC from 1984 to
1987, latterly as Managing Director of
Television Designate; Chief Executive
Channel 4 from 1988 to 1997; at First
Leisure Corporation from 1997 to 2000,
latterly as Chief Executive; Chairman
Camelot from 2002 to 2004; Director
SMG from 2003 to 2004; at The TelevisionCorporation, latterly as interim Chairman
from 2003 to 2004. Broadcasting Press
Guild Harvey Lee Award for outstanding
contribution to broadcasting 1997. Fellowof the RTS and BAFTA, and Vice-Presidentof BAFTA since June 2004. Born in 1943.
2 Rt Hon The Lord Ryder OBE
Vice-Chairman
Vice-Chairman since January 2002
and Acting Chairman from January to
May 2004. Chairman of the Fair Trading
Compliance Committee and memberof the Property Committee and theRemuneration Committee. Chairman of
the BBC Pension Scheme Trustees. Privy
Councillor since 1990. Created life peerin 1997. Conservative MP for mid-Norfolk
from 1983 to 1997. Parliamentary Under
Secretary at MAFF; Economic Secretary
to the Treasury; Paymaster General thenGovernment Chief Whip from 1988
to 1995. Political Secretary to Margaret
Thatcher from 1975 to 1981. Directorof Ipswich Town FC since 1999. Chairmanof Eastern Counties Radio until his
appointment to the BBC. Lord Ryder
retires from the Board on 1 July 2004.
Born in 1949.
3 Deborah Bull CBE
BBC Governor since August 2003.
Principal Dancer, Royal Ballet from 1991
to 2001. Director, Artists’ Development
Initiative, Royal Opera House from 1999
to 2001. Artistic Director, ROH2 since
2002. Member Arts Council Englandsince 1998. She has written and presented
programmes and series for BBC Television
and BBC Radio, including The Dancer’s
Body in 2002, and published books on thearts and nutrition. Born in 1963.
4 Dame Ruth Deech DBE
BBC Governor since October 2002.
Member of the Fair Trading Compliance
Committee. Independent Adjudicatorfor Higher Education since March 2004.
Principal of St Anne’s College, Oxford
from 1991 to 2004, having been a Fellow
and Tutor in Law there since 1970.
Honorary Bencher of the Inner Temple,
a Mandela Rhodes Trustee, and Fellowof the Royal Society of Medicine. Former
Chairman of the Human Fertilisation andEmbryology Authority. Born in 1943.

5 Dermot Gleeson
BBC Governor since November 2000.
Member of the Audit Committee and
the Property Committee. Alternate
Trustee of the BBC Pension Scheme.
Chairman of the M J Gleeson Group plc.
Chairman of Major Contractors Group
from 2003. A director of the Housing
Corporation from 1990 to 1995 and of theConstruction Industry Training Board from1995 to 2002. Former Head of the Home
Affairs Section of the Conservative
Research Department and a member ofChristopher Tugendhat’s cabinet in theEuropean Commission from 1977 to 1979.
Born in 1949.

9 Angela Sarkis CBE
BBC Governor since October 2002.
Member of the Programme Complaints
Committee. Independent consultant;non-executive director on the Correctional
Services Board at the Home Office; amember of the Interim House of Lords
Appointments Commission, and Adviser
to the Department for Education and
Skills on teacher workload management.
Chief Executive of the Church Urban
Fund from 1996 to January 2002. Chairof the NCVO Diversity Project andVice-President of the African Caribbean
Evangelical Alliance. A former trusteeof BBC Children in Need. Born in 1955.

6 Professor Merfyn Jones
The BBC’s National Governor for Wales
since January 2003. Member of theCouncils and Advisory Bodies Committee.
Historian and broadcaster. Professor of
Welsh History at the University of Wales,
Bangor, specialising in the modern andcontemporary history of society andpolitics in Wales. From 1998 he was
Pro-Vice Chancellor of the University.
In June 2004 he was appointed Vice
Chancellor and will take up this postin August. He is the author of a numberof books and articles. Born in 1948.

10 Sir Robert Smith
The BBC’s National Governor for Scotland
since August 1999 (appointed for a second
four-year term in July 2003). Chairmanof the Programme Complaints Committee
and member of the Audit Committee,
Property Committee, Remuneration
Committee, and Councils and Advisory
Bodies Committee. Chairman of theTrustees of BBC Children in Need.
Chairman of the Weir Group plc and
Deputy Chairman of Scottish andSouthern Energy plc. Member of the
Judicial Appointments Board for Scotland
and on the Board of Trustees of the British
Council. Past President of the Instituteof Chartered Accountants of Scotland.
In January 2003 he published the Smith
Report on Audit Committees on behalfof the Financial Reporting Council.
Born in 1944.

7 Professor Fabian Monds CBE
The BBC’s National Governor for
Northern Ireland since August 1999
(appointed for a second four-year
term from July 2003). Member of
the Programme Complaints Committee,
the Fair Trading Compliance Committee
and the Councils and Advisory Bodies
Committee. Specialist in communications
and information systems. Chairman of
Invest Northern Ireland, the economic
development agency, and of theNorthern Ireland Centre for Trauma
and Transformation in Omagh. Former
Pro-Vice Chancellor of the University
of Ulster. Founding partner of Medical
and Scientific Computer Services Limited
and WesternConnect Limited. Bornin 1940.
8 Dame Pauline Neville-Jones DCMG
BBC International Governor since
January 1998. Reappointed in January 2001
and December 2003 for a further two
years. Chairs the Audit Committee and
the Governors’ World Service Consultative
Group. Member of the Programme
Complaints Committee and theRemuneration Committee. Chairmanof QinetiQ Group plc and Chairmanof the Information Assurance Advisory
Council. From 1996 to 2000 she worked
for NatWest Markets and subsequently
the NatWest corporate advisory arm,
Hawkpoint Partners. A career memberof the Diplomatic Service from 1963 to
1996, including a five-year secondment
in Brussels, chairmanship of the Joint
Intelligence Committee in the Cabinet
Office and three years as Political Director
in the Foreign and Commonwealth Office.
Born in 1939.
BBC Annual Report and Accounts 2003/2004

11 Ranjit Sondhi CBE
BBC Governor since August 1998
(appointed for a second four-year termin July 2002) with special responsibility
for the English Regions. Chairman of the
English National Forum, the Councils andAdvisory Bodies Committee and memberof the Programme Complaints Committee.
Senior Lecturer at the University ofBirmingham’s Westhill College. Trusteeof the National Gallery and Chairman of
the Heart of Birmingham Primary Care
Trust. Previous positions include Deputy
Chairman of the Commission for Racial
Equality and member of the Independent
Broadcasting Authority and the Radio
Authority. Born in 1950.
Gavyn Davies OBE
Served as Chairman from October 2001
until his resignation in January 2004.
Sir Richard Eyre CBE
Served as a BBC Governor from November
1995 until his resignation in May 2003.
Baroness Hogg
Served as a BBC Governor from February
2000 until the expiry of her term of officein February 2004.

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Executive Committee

The Executive Committee manages the day-to-day businessof the BBC. It is made up of the heads of the 16 BBC divisions,which produce or commission all BBC output, and it is chairedby the Director-General. The Executive Committee answers to
the Board of Governors which appoints the Director-Generaland, in consultation with him, all the other members of the
Executive Committee.

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1 Mark Thompson
Director-General Designate from May
2004. Previously Chief Executive, Channel
4 from 2002. Former BBC positions
include Director of Television; Directorof National & Regional Broadcasting;Controller BBC Two; Head of Factual;
Head of Features; Editor, Panorama, andEditor, Nine O’Clock News.
2 Mark Byford
Acting Director-General and Deputy
Director-General since January 2004.
Also leads the Global News Division, withoverall responsibility for the BBC World
Service and BBC World. Trustee of the
BBC Pension Scheme. Former BBC
positions include Director of Regional
Broadcasting; Head of Centre, Leeds,and Home Editor, Television News.
3 Jenny Abramsky CBE
Director of Radio & Music since April 2000.
Responsible for BBC Radios 1, 2, 3, 4, Five
Live, BBC Asian Network, 6 Music,1Xtra,
Five Live Sports Extra, BBC 7, televisionclassical music, Music Live, the BBC Proms
and the three BBC orchestras based inEngland. Previously at the BBC Directorof Continuous News; Director of Radio;
Controller of BBC Radio Five Live; Editor,
Radio News & Current Affairs, and Editor,
Today programme.
4 Jana Bennett OBE
Director of Television since April 2002.
Responsible for the BBC’s television
channels: BBC One, BBC Two, BBC Threeand BBC Four; related interactive
programming; and for overseeing content
on the UKTV joint venture channels and
BBC America and BBC Prime. Previously
General Manager and Executive VicePresident at Discovery Communications
Inc. in the US; Director of Production at
BBC; Head of BBC Science; Editor,
Horizon, and Senior Producer onNewsnight and Panorama.
5 Stephen Dando
Director of BBC People (formerly Human
Resources & Internal Communications)since June 2001. Responsible for all BBC
people and organisation issues, including
staff communications. Trustee of the
BBC Pension Scheme. Previously Global
Human Resources Director at Guinness
Limited. Former positions include GroupManagement Development Director,
Diageo, and spells with UDV Europe,
United Distillers, Ferranti Internationaland Austin Rover.
6 Andy Duncan
Director of Marketing, Communications
and Audiences since June 2001.
Responsible for all the BBC’s marketing,publicity, press and PR, audience services,
and audience research activities. Chairmanof Freeview. Trustee of Children in Need.
Chartered Institute of Marketing‘Marketer of the Year’– 2003. Former
positions include European General
Manager, Global Board member andEuropean Marketing Director – Unilever’s

Food and Beverages division, UK
Marketing Director – Unilever UK,
and Chairman of UK Tea Council.
7 Carolyn Fairbairn
Director of Strategy & Distribution
since April 2001. Responsible for strategicplanning and the distribution of BBC
services. Previously Director of Strategy.
Former positions include Directorof Strategy, BBC Worldwide Limited,working in the Downing Street Policy
Unit and for McKinsey and Company.
8 Rupert Gavin
Chief Executive of BBC Worldwide
Limited since July 1998. Responsible forall the BBC’s commercial consumer
activities in home markets and aroundthe world. Previously Managing Directorof BT’s Consumer Division. Former
positions include Director of Information,
Communications and Entertainment for
BT and Deputy Managing Directorof Dixons Stores Group.
9 Ashley Highfield
Director of New Media & Technology
since October 2000. Responsible forbbc.co.uk, interactive television services,
new platforms (broadband, mobile etc),
the BBC’s technology portfolio, technicalinnovation, and research and development.
Previously Managing Director of Flextech
Interactive, the pay television company’s
new media division. Former positions
include Head of IT and New Mediafor NBC’s European Channels.
10 Pat Loughrey
Director of Nations & Regions since May
2000. Responsible for BBC programmes
and services in Scotland, Wales, Northern
Ireland and the English Regions. Previously
Controller, BBC Northern Ireland. Former
positions include Head of Programmesand Head of Educational Broadcasting for
BBC Northern Ireland, and teaching andbroadcasting in Ireland and Canada.
11 Peter Salmon
Director of Sport since November 2000.
Responsible for all BBC Sport activity
across television, radio and new media.
Previously Controller, BBC One. Former
positions include Director of Programmes
at Granada TV, Controller of Factual
Programmes at Channel 4, and Headof Features at BBC Bristol.
12 Richard Sambrook
Director of News since March 2001.
Responsible for broadcast news
operations and the provision of dailynews and current affairs programming
for all UK-wide BBC television, radio
and online services. Previously Deputy
Director, News. Former positions
include Acting Director of Sport;
Head of Newsgathering; News Editor,and Deputy Editor, Nine O’Clock News.

BBC Annual Report and Accounts 2003/2004

13 John Smith
Director of Finance, Property & Business
Affairs since April 2000. Responsible
for all BBC finances including television
licence collection, procurement andproperty strategy, and for oversight of
BBC Ventures Group since the resignationof Roger Flynn. Trustee of the BBC
Pension Scheme. AccountancyAge
Financial Director of the Year in 2001.
Non-executive director at Severn Trent Plc
and Chair of their Audit Committee.
Previously with British Rail Group,
overseeing demergers. Member of the
Accounting Standards Board.
14 Caroline Thomson
Director, Policy & Legal (formerly Public
Policy) since May 2000. Responsible
for Charter Review process, legal affairs,
government relations and corporate social
responsibility. Trustee of the BBC Pension
Scheme. Former positions include Directorof Strategy & Corporate Affairs, BBC
World Service; Commissioning Editor,
Science & Business at Channel 4, andpolitical assistant to Roy Jenkins.
15 John Willis
Director of Factual & Learning sinceJune 2003. Previously Vice-President
in charge of national programming at
WGBH Boston. Former positions include
Managing Director, LWT and United
Productions; Director of Programmes,
Channel 4; Controller of Documentaries
and Current Affairs, and Editor First
Tuesday, Yorkshire Television.
16 Alan Yentob
Director of Drama, Entertainment& CBBC since April 2000. Responsible
for all creative output in these areas,
including BBC Films, and for talentmanagement across the BBC. Presenterof the BBC One arts strand Imagine.
Chairman of the Institute ofContemporary Arts. Previously Directorof BBC Television; Controller of BBC One
and BBC Two; Head of Music & Arts,
and founder Editor, Arena.
Greg Dyke
Greg Dyke was Director-General fromJanuary 2000 until his resignation in
January 2004.
Glenwyn Benson
Glenwyn Benson was Director of Factual& Learning until June 2003 when she wasappointed to the new role of Controller,
Factual Television.
Roger Flynn
Roger Flynn was Chief Executive of BBC
Ventures Group Limited from June 2001
until his resignation in March 2004.

11

Governors’ review
of objectives

Overview
As Governors we are responsible for ensuringthat the BBC operates in the interests of viewers
and listeners. On their behalf, we assess how
effectively the BBC delivers its public purpose:to enrich people’s lives with programmes andservices that inform, educate and entertain.
To ensure that management focuses on deliveringthat public purpose, we set objectives each year
and monitor performance against them.
These objectives provide a strategic framework for
the BBC, but they are not the only measure we use
to assess performance. Each spring we also publish
the BBC Statements of Programme Policy which set
out the remit for each service, and commit the BBC
to providing a wide range of public service output.
In the BBC Annual Report, as well as assessing
performance against objectives, we also evaluate
the BBC’s performance against these remits and indelivering output commitments (see pages 24 to 57
and 58 to 67).
In this section we report on performance against
our 2003/2004 objectives. In order to inform ourjudgements, we regularly consult licence payers.
This section includes two case studies to show
the sort of work we have done. Our 2004/2005
objectives are set out on page 23.

12

BBC Annual Report and Accounts 2003/2004

1

2
3

4

1 Question Time
Recording an edition before
an invited audience in Newbury

2 The Big Read
Choosing the best-loved novel
generated huge interest in books

4 Imagine
Cuban dancer Carlos Acosta
profiled for the BBC One arts show

3 The Secret Policeman
BBC One’s documentary exposed
racism among some police recruits

Objective 1
Underpin the BBC’s public
service remit by extending
the range and quality of its
radio and television services,with a focus on broadcasting
more high-impact, memorable
programmes, particularly artsand current affairs.
The range of output has been extendedon radio and television, particularly in
our priority genres of arts and current
affairs and the BBC has had success inbroadcasting high-impact, memorable
programmes. However, there has beena decline in audience perception of theBBC’s quality and work needs to beundertaken to understand this.
Radio continues to perform strongly,
maintaining its commitment to a wide rangeof output unmatched by the commercial
sector. This is reflected in the age 15+ reachof BBC Radio which has remained relatively
stable, falling just 0.3 points to 66.4% in
2003/2004, despite increased competition.
The five new digital radio networks havegiven listeners access to increased hours ofdrama, factual and religion. On analogue, wenote the consistent quality and ambition of
long-running strands such as Face the Facts,
File on 4 and Beyond Belief.
There is evidence of an increased rangeof output on television in 2003/2004 withmore hours and investment in key genres
such as history, science, arts and current
affairs. We are pleased to note that theincrease in range appears to have beenrecognised by audiences, with a rise inreach for BBC Television. Research also
indicates that audiences rate BBC channels“best for range” in 17 out of 22 genres.
Television arts and current affairs havebeen priorities over recent years and theresults of new strategies are now comingon screen (see page 14). We will continue
to give these strategies high priority. We areencouraged that BBC One remains thebest rated channel for news and current
affairs, as does BBC Two for arts. We also
welcome the peak scheduling of the new
BBC Two arts strand, The Culture Show,
to be launched later this year.
On television, there is strong evidence
that the BBC has delivered a high number ofmemorable programmes across a range ofgenres. In 2003, 47% of the programmes thataudiences recalled unprompted in researchwere on BBC Television, well ahead of any
other channel. Some of this output has also
had wider political or social impact, suchas The Secret Policeman and The Big Read.

Total broadcasting spend 2003/2004 (£million)

2004
Television
1,400
Radio
212
bbc.co.uk
71
Local radio and regional television 345
Programme related spend
337
Overheads
326
Transmission and collection costs 303
Total
2,994

2003
1,429
211
80
340
343
322
288
3,013

For further explanation of these figures see Note 2b on
page 109

We are, however, concerned about adecline in perceptions of the quality of BBC
output over recent years, with people
marginally less inclined to agree withthe statement that: “the BBC maintains
high standards of quality” and that it:“sets the standard for programme making
in the UK”. This finding contrasts with boththe increased reach of BBC Television andaudience agreement that the BBC offers
the best quality in the majority of genres.
Work will be undertaken over the coming
year to understand audience perceptionsof quality better and in particular to findout whether the perceived decline inquality relates to the BBC in particularor broadcasting in general.
BBC Annual Report and Accounts 2003/2004

13

Governors’ review
of objectives

Objective 2
BBC arts programming
Objective 1 resulted in part fromour disquiet at the diminution of arts
broadcasting on BBC Television. As aresult a new strategy was put in place.
Much of the resulting new output was
first screened in 2003 and during theyear we set out to assess its success.
Our review included workshop sessions
in Bristol, Birmingham and Manchester
where we met local arts professionals.
We also commissioned an audience
research project carried out in Colwyn
Bay, Glasgow, Newcastle, Leicester,
Gillingham and London.
We found a consensus that audiences
expected more from the BBC thanfrom other broadcasters. Audiences
perceived arts were a low priority for
the BBC, as reflected in its unpredictableand often late scheduling and output.
Audiences felt that the BBC needed
to signpost its arts programmes better.
Event programming such as The Big
Read made a high impact – but fora limited time. What was needed was
a commitment to continuing series aswell as one-off, high-impact programmes.

14

Most people agreed that BBC One had
shown some highly successful massaudience art programmes such as Rolf
On Art and Leonardo. The BBC was,however, perceived as being less cuttingedge than other broadcasters with atendency to aim for the mainstream.
Audiences wanted the BBC to haveboth entry level programmes andoutput that went beyond popular taste
and set the agenda. In particular, BBC
Two was thought to lack a challenging
arts magazine programme.
The new BBC One programme Imagine
was thought to be successful in dealing
with a variety of subjects in an interestingand informative way. But it was too newa programme to have established itself
in audiences’ minds. BBC Radio’s output
was greatly valued by arts consumers. In
particular the commitment to comment,
expertise and arts news was appreciated.
We are pleased to note that following
this consultation the Director of
Television and the Controller, BBC Twoannounced a new topical arts journalism
unit to produce programmes for both
BBC Two and BBC Four. A new weekly
BBC Two peak-time programme
dedicated to UK arts and culture will
be launched later this year.

BBC Annual Report and Accounts 2003/2004

Strengthen the BBC’s digital
services, with the aim ofproviding something of value
for all digital audiences. In
particular, provide a wide
range of interactive learning
opportunities and help
to drive digital take-up byextending the availability ofthe services and focusing on
cross-channel commissioning
and scheduling.
Sound progress has been made in helping
to drive digital take-up and there isevidence that the digital services’ output
has been strengthened, but continued
scrutiny will be necessary for us to ensurethat the new services are offering goodvalue for money.
The BBC has continued to play animportant role in driving digital take-up
over the past year. The range of services
and content has been enhanced andmarketing effort has been directed atraising awareness of digital platforms andhow to access them. In March 2004,
18 months on from launch, Freeview sales
reached 3.5 million, making it the UK’s
fastest growing consumer electronic
device. The success of Freeview and theBBC’s decision to broadcast unencryptedon satellite are key factors behind growing
industry optimism that analogue switch-off
by 2010 is possible. On radio, the BBC’s

1

2
3

4

1 Human Senses
BBC One’s exploration of sight,
sound, taste and – here – smell

2 Paul Taylor Dance Company
Part of BBC Four’s contemporary
dance season

4 Art and the City
James Gooding investigated
the underground art scene
on BBC Three

3 bbc.co.uk
More than 10 million people amonth now use BBC internet pages

Objective 3
DAB transmission network has expanded
coverage from 65% to 75% of the UK
over the year. Research indicates that theBBC’s services have been critical for the
take-up of digital radio receivers, with
BBC 7 alone accounting for a significant
proportion of purchases. bbc.co.uk has
continued to play a significant role indriving online penetration.
Weekly reach data is now available forthe digital radio networks, indicating thatan average of 1.4 million listeners are tuningin. We note the particularly high approval
for these networks.
Reach and awareness of all the BBC’s digital
television services have increased during thepast year, with particularly strong growth by
CBBC. However, perception of the value of
BBC Three and BBC Four remains too low.
We have reviewed the digital channels overthe past year and steps have been taken tostrengthen them, including significant changes
to BBC Three’s schedule during the year
aimed at enhancing its distinctiveness. We
also approved a measured increase in BBC
Four’s budget for investment in originateddrama and comedy to help widen its appeal.

There has been increased investment ininteractive television-based services over
the year. The strong performance of these
services built around landmark factual output
such as Human Senses and stand-alone
offerings such as Bitesize, also available
on bbc.co.uk, indicates their potential todeliver learning output to a new audience.
Scrutiny of the strategies and performanceof all digital services will continue tobe a priority for us. Over the next year
we will commission our own qualitativeand quantitative research to judge theeffectiveness and distinctiveness of these
new services and to inform judgements
about the value for money they offer
licence payers. Extending the availabilityof the BBC’s digital services continues tobe a priority and is reflected in its inclusion
as an objective for 2004/2005 (see page 23).

Bring younger audiences to
BBC services by developing
bold and innovative
programmes and content,with a particular focus on
making the BBC’s news andcurrent affairs more relevant
and engaging for this group
without diminishing theBBC’s commitment toparliamentary reporting.
New services and programming are
helping to increase the BBC’s reachamong younger audiences but continued
effort and experimentation is needed toengage this audience in a range of output.
The BBC was successful in attracting younger
audiences in 2003/2004 with the BBC’s total
reach increasing among the 16–34 age groupby 1.5 points to 90.5%.
On television, drama and soaps wereparticularly successful at drawing younger
audiences to both BBC One and BBC
Three. We welcome continuing efforts toengage them in a wider range of output,
such as factual and arts.

An increase in co-commissions between
the digital and analogue channels this year
is helping to deliver value for money andenabling analogue viewers to benefit fromthe BBC’s digital investment. The best of
BBC Three and BBC Four output is being
showcased regularly on BBC One and
BBC Two, with the BBC Four Zone on
BBC Two proving particularly successful.
The challenge now is to reduce the digital
television channels’ reliance on analogue
content, particularly on BBC Three.

We are disappointed that the reach of
BBC Radio has fallen among 15–34 year
olds, mainly reflecting a fall in the reachof Radio 1. We approved a new strategy
for BBC Radio1 in May 2003 to ensurethat it continues to play an important role
in reaching this audience (see page 33).

BBC Annual Report and Accounts 2003/2004

15

Governors’ review
of objectives

Objective 4
Efforts have continued to engage younger
audiences with news and current affairs,with online proving particularly successful.
More than 10% of 15–34 year olds use
bbc.co.uk/news, up from 8% a year ago.
BBC Three has had critical success with its
current affairs output, and its short hourly
bulletin, 60seconds, continues to perform
well. Celebrity-focused Liquid News was
replaced with a longer main evening news
programme in May 2004 to capitalise on
the evident interest in longer-form analyticalcurrent affairs among BBC Three viewers.
There have been renewed efforts to engage
younger audiences in politics, particularly
with the Saturday 9am slot on BBC Two.
However, the two formats piloted delivered
only modest audiences – and older than
had been hoped for. Future strategy will
focus on reaching younger audiences
through mainstream bulletins and the web.
There are encouraging early results from theiCan online and interactive television project
launched as a pilot in November to engage
people in political issues that matter tothem. Use has grown rapidly, with the bulkof users under 45. The changes to political
output introduced over the past two years
have not diminished the BBC’s commitment
to parliamentary reporting which continues
to be supported by the BBC’s dedicatedparliamentary unit at Millbank.
Engaging with younger audiences across
television, radio and online remains acontinuing priority for us. A pan-BBC
project has been initiated over the past
year to understand this audience’s needs
better and how the BBC can meet them.

16

Continue to seek new waysof attracting audiences fromthe UK’s ethnic minorities,
through both mainstream
and targeted services.
There is some evidence that the BBC issucceeding in attracting ethnic minority
audiences to its output. Effort now needs
to focus on ensuring that commissioning
and development better reflects theneeds of these audiences.
Research indicates that there has been
an improvement in approval and in theperformance of BBC services among
ethnic minority audiences on all platforms.
Approval of the BBC among ethnic
minorities is now on a par with that ofthe population as a whole at 6.7 out of
10, and there is a growing perception thatthe BBC caters well for minority interests.
However, reach of both television andradio among ethnic minorities still remains
significantly lower than among the general
population, and particularly so on theanalogue radio networks.
The Connecting with Ethnic Minorities
Project aimed to provide a deeper
understanding of the interests and lifestylesof these audiences. It has now beencommunicated across the BBC and started
to influence commissioning and production
decisions. Notable successes include The
Canterbury Tales series on BBC One which
made extensive use of actors from ethnic
minorities and Top Gear whichis reflecting the particularly high interestin cars among Asian audiences.

BBC Annual Report and Accounts 2003/2004

There are early indications that 1Xtra and
BBC Asian Network, which were launched
to fill some gaps in the BBC’s offering, aredriving the increased reach of BBC Radio
among this audience. BBC Asian Network
already reaches more ethnic minorities
than any other BBC radio network withthe exception of BBC Radio 1. 1Xtra has
appeal to all fans of contemporary blackmusic, and not just black listeners.
The BBC has had some limited successwith writing initiatives to encourage ethnic
minority writers. We welcome BBC Asian
Network’s investment in fresh writing
talent to support its new Asian soap.
However, criticism of the African-Caribbean
sitcom The Crouches has highlighted theimportance of understanding the needsof ethnic minorities throughout all stagesof the commissioning, development andcreative process.
Overcoming the lower awareness among
ethnic minorities of what the mainstream
radio networks offer remains a key challenge.
Despite efforts to bring more ethnic
minority presenters to the airwaves andoffering more speech-based output toappeal to ethnic minorities, the reach of
the analogue radio networks, particularly
local radio, has continued to fall, and at agreater rate than the population as a whole.
We recognise the progress being madetowards this objective but note that moremust be achieved if the BBC is to makeprogrammes as relevant and appealing to
Britain’s diverse ethnic minorities as to the
population as a whole and so reflect today’ssociety. We will pay particular attention tothis area of need when reviewing futureplans for programmes and services.

1

2

4

3

5

1 Silver Street
Recording the new soap for
the BBC Asian Network

2 BBC bus Sheffield
Opening up the digital world
to new users

4 Canterbury Tales
Updated Chaucer for a 21st-century
audience on BBC One

3 Balamory
Pre-school drama from
BBC Scotland on CBeebies

5 bbc.co.uk/northernireland
One of the BBC’s websites tailored
for a local audience

Objective 5
Ensure that the BBC
is meeting the needs ofaudiences in all nations
and regions of the UK.
Following consultation with the
Broadcasting Councils of Scotland, Walesand Northern Ireland and the English
National Forum, we are satisfied withthe progress towards meeting audienceneeds with local output and services.
But effort is needed to increase further
the volume of BBC Nations’ production
for the networks to reflect the diversityof audiences across the UK more fully.
The BBC is now in the final year of athree-year strategy to invest an additional£50million a year in a wider range of
locally produced output, particularly on
television across the nations, and online
in England. Since the start of the initiative,
research indicates a steady increase acrossall nations in approval – and in agreementwith the statement: “the BBC plays animportant part in the local community.”
The additional funding has enabled
BBC Nations to invest in a wider range
of genres alongside news and current
affairs, including entertainment and sport,with the focus over the past year on factual
output. A significant part of this output isprogramming that would not be available
if the BBC did not provide or facilitate it,such as indigenous language output, or
content from audiences developed throughprojects such as Digital Storytelling whichbegan in Wales and is being rolled out
in England.

Objective 6
In England, the additional funding has
been targeted at developing local online
Where I Live sites offering local news,
weather and information. Across the UK
average monthly page impressions for
the Where I Live sites have nearly doubled
between 2002/2003 and 2003/2004, andhit 100 million in March 2004.
The BBC’s physical presence in cities andtowns across the UK spreads economic
benefit as well as enabling the BBC
to engage directly with segments of theaudience currently underserved by either
network or local broadcast offerings.
Through the connecting with communities
strategy new buses were launched in
2003/2004, bringing the total to 14 buses,
four Open Centres and four community
studios. These have brought the BBC into
contact with new audiences, such as theunder-45s and ethnic minorities.
While significant progress has been madetowards meeting the needs of audiences
across the UK through this local output andactivity, we are concerned that more needs
to be achieved in terms of network output.
UK network output produced in the BBC
Nations & Regions has both the potential
to reflect more accurately the diversityof audiences across the UK, and supporta healthy, devolved production base. Despite
notable successes such as children’s output
in Scotland, factual in Wales and drama
in Northern Ireland, network television
spend in the BBC Nations is still too low
as a proportion of total television network
spend. Improved strategic collaboration andplanning between network commissioners
and the BBC Nations & Regions is the key
to improving this and we will expect to see
evidence of this in the coming year.
BBC Annual Report and Accounts 2003/2004

Implement therecommendationsof Making it Happen,
particularly around values
and leadership, in orderto make the BBC a morecreative, collaborativeand exciting organisationin which all staff fully
understand its purpose
and shared values.
Good progress is being made in
implementing the recommendations of
the Making it Happen change programme,
and there are early indications of positive
results. It remains a priority to realise thepotential of the BBC staff as a creative
resource, particularly by improving
collaboration between divisions.
The Making it Happen initiative waslaunched in February 2002 to bringabout cultural change in the BBC withthe aim of making it the most creative
organisation in the world. After two years,
the programme is well established witha range of projects under way. The annual
staff survey, carried out by MORI, provides
the best evidence of its impact. Headline
findings for 2003 were that Making it
Happen was supported by nearly two-thirds
of BBC staff (a very high level for this kindof initiative) and that the vast majority of
BBC staff (85%) believed they understood
the purpose of the BBC, with 60% claiming
to live up to its values.

17Governors’ review
of objectives

Objective 7
However, the survey also showed that theBBC’s values are not always demonstrated
in the way staff actually behave. There wereparticular concerns about collaboration andtrust between staff in different divisions. Overthe last year the One BBC initiative, which isdesigned to tackle some of these problems,
has had noteworthy successes such as the
cross-divisional One BBC for One Million
campaign during which staff raised nearly£1million for BBC Children in Need.
There was also widespread feelingthat the creative potential of staff is not
being fully realised. The commissioning
process has been identified as a possible
contributory factor. Work is currently
under way to involve more people in thedevelopment of ideas and we will look forevidence over the coming year that this is
producing the desired results.
An early finding of Making it Happen wasthat leadership needed to be improved at alllevels. The BBC Leadership Programme waslaunched to address this in September 2003
(see page 72), and there are encouraging
early signs that staff perceptions arechanging for the better. Feedback remains
a key area of weakness and this will get
more attention over the coming year.
Given its potential to deliver benefits tothe audience, we have agreed that Making
it Happen should remain a focus of theBBC’s objectives in 2004/2005, with thewording changed to “Build on the recent
Making it Happen initiatives to make the
BBC a more creative, collaborative andaudience-focused organisation that isinclusive and reflects the diverse society
it serves.”

18

Ensure that the BBC
is more representativeof the audiences it serves.
In particular:
achieve the target of
10% of its total workforce
and 4% of senior
management comingfrom ethnic minorities
by December 2003
increase the proportionof people with disabilities
working for the BBC
The BBC has met the targets for ethnic
minority representation in its workforce,
including representation within senior
management. It has improved monitoringof disability among staff and is on a parwith the rest of the media industry in theemployment of disabled people.
The target of 10% of all staff comingfrom ethnic minorities was set in 2000.
The target is higher than the ethnic
minorities’ 7.9% representation among the
UK population as a whole as it takes into
account the BBC’s location in largely urban
areas, such as London, where minority
communities are concentrated.
During 2003, the recorded proportionof ethnic minority staff passed 10% for
the first time and the proportion of seniorstaff remained above 4%. This was achieved
through sustained recruitment efforts
as well as improved monitoring. We have
BBC Annual Report and Accounts 2003/2004

now established longer-term, morestretching targets of 12.5% across all staff
and 7% for senior staff by the end of 2007.
The BBC has improved its monitoringof disability – previously many staff did
not declare conditions which might countas disabilities. The proportion of staff withdisabilities now stands at 2.7%, close to the
3% recorded for the media industry as awhole by Skillset, the industry training body.
However, it must be the BBC’s ambition to
exceed the industry-wide figure in future.
The BBC also aims to reflect the audiences
it serves in terms of the age and genderof staff. Gender representation is a real
success story. Around 50% of staff and 37%
of senior management are women. Thisvaries considerably by division, however,with women represented at much lower
levels in Sport, New Media & Technology,
and BBC Technology and BBC Resources(BBC Ventures).
The staff of the BBC have a younger age
profile than the audience they serve andthan the UK workforce as a whole: 79%of staff are aged under 45 and 96% under
55. In light of this the BBC has undertakena research project over the past year
to improve its understanding of older
audiences. The insights from this are
now being communicated to programme
makers to help them serve the needsof this audience better. In pursuing theoverall goal of a workforce that is more
representative of the audience it serves,
the BBC must aim to create a working
environment that enables everyone tofulfil their potential and results in higher
levels of staff retention.

1

2
3

4

1 Proms in the Park
Taking the Proms to a broader
audience around the UK

2 Making it Happen
Poster campaigns tell BBC staff
more about their audience

4 Children in NeedBBC staff raised nearly £1million.
Stunts included abseiling down
Television Centre

3 Upfront
A taste of the studio for new
BBC staff during induction

Objective 8
Continue to increase
the amount of money
available to spend on the
BBC’s public services byenhancing the efficiency
and effectiveness of theway the BBC operates.
The BBC is making steady progress
towards the target of putting an additional£3.3billion into services through self-help
initiatives between 1999/2000 and2006/2007. However, we believe thatmuch more can be achieved, particularly
in terms of improved efficiency. Progresshas also been made this year in creatinga framework for understanding theeffectiveness of the BBC’s investmentin programmes and services.
The efficiency of licence fee collection
has continued to show improvement
this year. The evasion rate now stands
at 5.7% compared to a revised figureof 6.7% last year. The previous estimate for
evasion in March 2003 was 7.2% and has
been revised to reflect newly publishedhousehold estimates. The continued
reduction in the evasion rate represents
a considerable achievement.

Headline cash flow from the commercial
subsidiaries was £135million, up from lastyear’s £124million. Commercial borrowing
has increased significantly over the year
from just over £31million to £172million.
This reflects increased investment in
BBC Worldwide to secure rights for
future exploitation and BBC Broadcast’s
new play-out systems which are forecast
to generate £20million in savings by
2005/2006, as well as ongoing restructuringof the Company’s capital base so as tohave a more appropriate mix of debt
and equity.
Additional savings of £29.3million weremade in support costs, building on a good
performance in previous years. A new
programme of efficiency savings has
now been agreed which, together withthe sale of BBC Technology and associatedefficiencies, should enable the BBC toexceed its cumulative £3.3billion self-help
target by 2006/2007. We believe theBBC must now set itself more stretchingefficiency targets if it is to deliver licencepayers the best possible value for money.

Programme spend by genre 2003/2004 (£million)

Children’s
DramaEntertainment
Factual and learning
Music and arts
News and current affairs
Speech – local radio
Sport
Total

2004
114
435
296
352
233
459
155
321
2,365

2003
116
415
306
329
231
458
138
410
2,403

Education for children is included in Children’s; Filmis included in Drama; Religion is included in Factualand learning

The key challenge lies in improving theefficiency of production processes, andprogress here – particularly in terms ofbenchmarking production costs – has notbeen as rapid as we had expected. A new
Head of Value for Money has recently
been appointed who will lead a thoroughreview of these and other internal costs.
In assessing the proposals that arise
from this review we will be particularly
concerned to ensure that quality is
maintained or improved and that there
is no change in the overall programme
mix in favour of lower cost programming.

BBC Annual Report and Accounts 2003/2004

19

Governors’ review
of objectives

Objective 9
Solid progress has been made in developing
ways in which the effectiveness of the BBC’s
programmes and services can be judged.
A comprehensive piece of consumer
research has been carried out to assess themonetary value that consumers place on
what the BBC provides. Results indicate thatthe value licence payers place on the BBC’s
services comfortably exceeds their costs.
In addition to this, a new set of measures
is now being put in place which reflects
the BBC’s public purposes and which willattempt, for the first time, to describe thevalue that licence payers derive from the
BBC as citizens and not just consumers.
This ‘citizen value’ is difficult to assess, but theoverall aim of this work will be to generate
an easily understood public value test which
can be applied to all the BBC’s services inorder to demonstrate the value that the
BBC delivers to viewers and listeners by
virtue of its unique funding arrangements.

Earn greater appreciationfrom UK audiences for the
BBC as an open, creative
and trusted public service
organisation.
Public opinion of the BBC has remained
broadly positive, despite events surrounding
the Hutton Inquiry, but more work needs
to be done to enhance perceptionsof the BBC as both a creative and an
open organisation. To ensure that the
BBC retains a high level of public trust
we have overseen reviews of the BBC’s
editorial processes, impartiality andits system of governance.
The proportion of the public who believethat the BBC is trustworthy increased
significantly over the year, rising from 59%
to 72%. However, 18% of the general public
said that their perception of the BBC had
worsened as a result of the Hutton Inquiry,
and among opinion formers, including MPs,
this figure was 38%.
Given the importance of trust to theBBC’s reputation, we have focused on
two key issues over the past year. Firstly,
we have reviewed editorial processes
and procedures as a result of the Hutton
Inquiry and implemented changes (seepages 4 to 5). Secondly, we have enhanced
our monitoring of impartiality by introducing
two new mechanisms. One is a MORI
tracking survey of public perceptions ofimpartiality – we will see the first results

20

BBC Annual Report and Accounts 2003/2004

Audience approval of the BBC
6.4

6.5

6.8

6.8

6.7

1999/2000
2000/2001
2001/2002
2002/2003
2003/2004
Source: Pan-BBC Tracking Study
Note: Figures are a mean score out of ten

Combined monthly reach of BBC Television,
BBC Radio and bbc.co.uk
97% 96% 96% 97% 98%

March 2003
June 2003
September 2003
December 2003
March 2004
Source: Pan-BBC Tracking Study, claimed usage

1

2

4

3

5

1 BBC Information Belfast
BBC Information centres handle
contacts from the public roundthe clockin 2004/2005. The other is a series ofregular reviews of selected topics using
panels of independent experts and focus
groups. We will commission these reviews
twice a year. The topics for 2004/2005 arereligion, and European constitutional issues.
On the question of openness, the BBC
has worked hard in recent years to
improve its accessibility and accountability
to the public, but more needs to be done.
The system of dealing with complaints
is being reformed and strengthened witha clear code of practice. We have also
carried out a review of the BBC’s systemof governance and proposed significant
changes, as outlined in our Building Public
Value document. These are designed toreinforce the openness and accountabilityof the BBC.
The BBC still has some way to go toconvince audiences of its creativity. BBC
research indicates that audiences are more
likely to believe that BBC services are“safe and/or predictable” than “innovativewith fresh ideas”. This may reflect a general
criticism of television in general rather
than the BBC specifically, but the BBC
needs to find ways of changing perceptions
here. We look to the Making it Happen
programme of internal change to ensurethat the BBC serves licence payers betterwith more innovative programming.

2 The Archers
Radio 4’s long-running soap
drew praise for authenticity

4 BBC World Service
A listener has her say at a BBC
Hindi roadshow in Uttar Pradesh

3 Tom Heap
New correspondent improving
BBC rural affairs coverage

5 BBC World
Presenter Nik Gowing chaired the
BBC World debates from Davos

Impartiality in BBC reporting of rural affairs
About 25% of BBC audiences livein rural areas and there has beensome criticism that their concerns
are inadequately or inaccurately
represented by the BBC. As a result,in June 2003 we commissioned a review
of BBC coverage of rural affairs.
The review was in three parts: an
independent expert panel; focus groupresearch with audiences; and content
analysis carried out by the BBC. The
review reported in October 2003.
It found much that was good: the BBC
takes rural issues seriously; coverage isoften of high quality; and the appointmentof a Rural Affairs Correspondent waswelcomed. However, the great diversityof rural areas was not always understoodproperly by metropolitan-based
broadcasters, and this could lead to glib
generalisations and unintentional bias.
One example identified in the review
was that the concerns of those who livein accessible rural areas are not always
the same as those who live in remoteareas, but they are sometimes treatedas identical. Another is the fox-hunting
debate, where it was misleading torepresent the countryside as uniformly
pro-hunting – or to depict everyone whohunts as belonging to the landed gentry.
To counter this, the review
recommended that BBC News should
tap into existing expertise to build
authority. The review also recommended

BBC Annual Report and Accounts 2003/2004

that serious consideration should begiven to creating a dedicated ruralaffairs site on bbc.co.uk/news.
The review also considered therepresentation of rural affairs in
BBC drama. Some drama – particularly
The Archers – was praised for pursuingstrong and accurate rural storylines.
But not all were so successful.
A degree of stereotyping was felt to be
acceptable, particularly in comedy suchas The Vicar of Dibley, but it was feltthat there were missed opportunities.
The review recommended thattelevision drama should explore thepossibilities inherent in the grittierside of contemporary rural life.
The findings of the review were
presented to programme makers acrossthe BBC and distributed to editors in
BBC News. There has been progressin implementing its recommendations,although more remains to be done.
The appointment of a new Rural Affairs
Correspondent has had a positive effectin raising the profile of rural issues in
BBC News programmes. BBC News 24
is working more closely with the BBC
Nations & Regions to ensure that local
expertise on rural issues finds a placein national output. And there is greateruse made of the expertise of the
Rural Affairs Unit in Birmingham.
The possibility of a rural affairs website
remains under review.

21Governors’ review
of objectives

Objective 10
Build on the impact
made by the BBC’s global
news services through acoordinated global news
strategy across radio,
television and new media.
BBC World Service & Global News wasestablished at the end of 2002 to maximise
the performance and impact of the BBC’sinternational radio, television and online
services. Good progress has been madetowards greater editorial coordination.
Overall, research surveys suggest that the
impact of the Hutton Report on the BBC’sinternational reputation has been limited.
In its first year of operation the Global
News Division has facilitated some highimpact, cross-media editorial initiatives,
including the Aids season in 2003 which
generated a widespread positive response.
Other highlights include the tri-media
World Debate in Davos and a collaboration
between the Global News Division and
BBC News on the Islam and the Westproject. We look forward to further
collaboration between the different areasof the Global News Division as well aswith other parts of the BBC.

22

Despite increased competition aroundthe world, the BBC’s services continue toperform strongly. Reach of the BBC World
Service has fallen slightly this year from150 million to 146 million listeners, but
the decline is attributable to difficulties in
obtaining FM transmission or partnerships
to replace short-wave delivery. Efforts willcontinue in 2004/2005 to overcome thisand extend FM reach wherever possible.
On television, the reach of BBC Worldis growing in key markets such as the USA
and Europe. The Global News Division’s
online sites also continue to grow, recording
a 99% increase in page impressions
year-on-year in January 2004. We lookforward to increased efforts to exploit
the potential of interactivity to promoteinternational dialogue and debate among
different groups of audiences.
There is also good evidence that the
Global News Division is effective inreaching opinion formers and decision
makers. In the USA around 40% of thisgroup use one of the three BBC services
each week, while in Nigeria more than
60% of this group uses either the BBC’s
television or radio services.

BBC Annual Report and Accounts 2003/2004

We are pleased to note that, while reaction
to the Hutton Inquiry has been mixed
across the world, overall impact on the
BBC’s reputation appears to be limited.
While trust ratings have fallen in somemarkets, BBC World Service continues
to be more trusted than its leading
competitors in every market. At present,
BBC World remains less trusted than
CNN in some markets, but its trust rating
is higher in several Islamic countries andit scores well on objectivity.
The importance of the BBC’s internationalrole is reflected in the inclusion of an
objective for 2004/2005 for the BBC toenhance further the impact of its global
news services, with a particular focus
on their reputation for independence,
impartiality and honesty.

Governors’ objectives
for 2004/2005

The BBC’s Charter requires us to set
and report on annual objectives. Underthe 2003 Communications Act and therevised BBC Agreement we are now
also responsible for ensuring that the BBC
meets its overall public service remit byevaluating performance against each of
the channel and service remits publishedin the BBC Statements of Programme Policy.
To avoid duplication, annual objectives
will in future be restricted to those areas
not covered by the BBC Statements ofProgramme Policy which we publish eachspring and which deal exclusively with
content. The objectives for 2004/2005
focus either on major pan-BBC priorities;
divisional issues with wider impact on therest of the organisation or the BBC’s global
and commercial interests. They should beseen within the context of our overriding
priority – the provision of programmes
and services that meet audience need.

1. Journalism and impartiality
Ensure the BBC meets the highest
standards of independence, impartiality andhonesty in its journalism and implements
recommendations on training, editorial
control and complaints handling.
2. Creativity and ambition
Build on the recent Making it Happen
initiatives to make the BBC a morecreative, collaborative and audience-focusedorganisation that is inclusive and reflects
the diverse society it serves.
3. Charter Review
Contribute effectively to the public debate
on Charter Review ensuring it reflects theinterests of licence payers as a whole andbuilds on the concept of public value.

4. Driving digital
Drive the market for free-to-air digital
television, digital radio and new media,
focusing on improvements in awareness,availability and take-up.
5. Value for money
Ensure the BBC is delivering value formoney across the full range of its activities,
including production processes, licence feecollection and its central functions.
6. The BBC’s global role
Enhance further the impact of the BBC’s
global news services, with a particular focus
on their reputation for independence,
impartiality and honesty.

The Executive Committee has takencollective responsibility for the achievementof these objectives and we will report on
their performance against them in next
year’s BBC Annual Report and Accounts.

BBC Annual Report and Accounts 2003/200423

Governors’ review
of services
Television
Overview
We have taken action over the past few years
to clarify and strengthen the distinctive public
service purposes of BBC Television. This action,
the result of our consultation with licence payers,
has led to a wider range of output, increased
investment in distinctive public service genres
such as arts, current affairs, history and science,
and a corresponding decrease in less distinctive
genres such as makeover and reporting celebrities.
We note that the audience research informing
Ofcom’s recent review of public service television
supports this shift in emphasis.
This year was the first full year of the BBC’s
digital television channels and we are encouragedby the progress so far. Both children’s channels arenow solidly established; BBC Three’s risk-taking
approach is helping to refresh genres such as
comedy, factual and current affairs in a schedule
refocused to enhance its distinctiveness, and we havesupported BBC Four’s early success by approving amodest increase in funding for drama and comedy.
Against this background, we are concerned about
a decline in perceptions of quality of BBC output
in general, and that the perception of the value
placed on BBC Three and Four remains low. Workwill be done in the year ahead to understand theseperceptions better.
24

BBC Annual Report and Accounts 2003/2004

1

2

4

3

5

1 Pompeii
BBC One’s dramatic reconstructionof the Roman city’s final day

2 Michelangelo
Biography of the Renaissancegenius on BBC One

4 Born to Win
Searching for athletes with thetalent to make it to the top

3 Canterbury Tales
The Man of Law’s Tale retold
for the BBC One audience

5 Panorama
A special edition dealt with
the issue of asylum

BBC One396
thousand hours of BBC TV
and radio in 2003/2004

4.7p
cost per hour per homespent with the BBC
For more broadcasting facts andfigures, see pages 58 to 67 and136 to 146

Remit
BBC One aims to be the UK’s mostvalued television channel, with thebroadest range of quality programmesof any UK network. The channel iscommitted to widening the appeal of all
genres by offering the greatest breadthand depth within them. BBC One iscommitted to covering national eventsand issues, showcasing landmark
programmes and exploring new waysof presenting specialist subjects.
BBC One has a unique significance as it
accounts for approximately one-third of
BBC programme spending, has the widest
reach of any BBC service, and many people
use it as a measure of all BBC services.
Its public service role is to deliver breadthand depth across all genres and, as wehave set out in our review of objectives(pages 12 to 22), we have actively
encouraged management to reshape
the channel to make this public service
purpose clearer.
There is evidence that the strategy isdelivering results. This year BBC One
reached more of its potential audience
than last year and, in research, audiences
judged it to be the channel offering thebest quality output in 12 out of 22 genres,
including key genres such as news, current
affairs, comedy and period drama. However,audience perceptions that the quality of
BBC Television is declining are worrying,
and we need to do more to understandthis better.

BBC Annual Report and Accounts 2003/2004

Over the past year there has been
increased investment in serious factual
output – including history, science, natural
history and business. This has been visibleon screen both as increased hours in thesegenres and in higher-profile output.
BBC One has also endeavoured to makeserious subjects accessible to a wide rangeof audiences. This has been done throughnew technologies, for example, bringing
ancient Rome to life in programmes suchas Pompeii: The Last Day and Colosseum,Rome’s Arena of Death; and throughcomplementary scheduling, for example,
by broadcasting a documentary about
Charles II in the same week as the period
drama Charles II: The Power and the Passion.
As well as offering a range of genres,
BBC One aims to offer a breadth of output
within genres to cater for the audience’s
differing levels of knowledge and interest.
For example, a more challenging arts
strand, Imagine, was launched in 2003
to complement Rolf Harris’s Sunday
evening programme and one-offs suchas The Divine Michelangelo. Our initialaccountability work with audiences onarts output indicated that this had been
well received (see page 14).
We are pleased to note that during
2003/2004 it has been BBC One’s more
ambitious dramas, such as State of Play and
The Canterbury Tales that have made mostimpact. Audiences have scored these formemorability as highly as national sports
events such as Wimbledon.

25

Governors’ review
of services
Television

In a year when BBC journalism has been
under intense pressure, leading to fears
that it would step back from tacklingdifficult subjects, it was particularly pleasing
to note the impact made by The Secret
Policeman. This undercover investigationof racism among police recruits fromGreater Manchester, Cheshire and North
Wales came under strong attack from theHome Secretary before it was broadcast.
But after it had been shown he acceptedthat the BBC had been justified in its
methods. As a result of the programme,
police training methods were changed
and a number of police officers resigned.
During the year the channel provided
extended coverage and analysis of Iraq,
the Conservative Party leadership result
and the Hutton Inquiry. Four Panorama
specials in peak time examined topicalissues, and there were three ‘event days’
offering a range of output on the subjectsof asylum, consumer debt and the NHS. In
December, BBC One cleared its lunchtime
schedule to cover the England rugby team’s
victory parade through London.
In a relatively quiet year for sports
output, memorable coverage included
World Athletics, Six Nations Rugby andWimbledon. Grandstand was relaunchedwith a modernised format at the start of2004. This was a busy and largely successful
year for television sports rights: Match of
the Day will return on Saturday nights andlong-term contracts for Six Nations Rugby,
Wimbledon, horse racing and the FA Cup
were signed. The loss of the Boat Race wasdisappointing however.

26

BBC One continued to create entertainment
events that bring the UK together suchas Children in Need and the interactive
quiz Test the Nation. A notable new format
was Born to Win which searched for the
next generation of British sporting talent.
The winners were awarded sports
bursaries and the Department for Culture,
Media and Sport (DCMS) was sufficiently
impressed to add a bursary of its own.
The project produced a valuable spin-off byencouraging participation in sport – morethan 25,000 pupils took part in a Born
to Win activity.
Despite these successes, entertainment
continues to be a challenge for BBC One
as it balances priorities between
distinctiveness which implies innovation
and risk-taking, and the necessity to meetthe needs of a mainstream audience whichsuggests the familiar and trusted. Finding
successful original formats for Saturdaynights remains a particular challenge.
We particularly welcome BBC One’s
launch of a range of new comedy titles
in peak time this year. While the newcommissions have had varying degrees
of success they have made the channel
the UK’s biggest investor in this notoriously
risky genre, an investment which must
continue if BBC One is to live up to
its comedy heritage. Furthermore, tobe successful, the channel needs theconfidence to give its commissions time
to develop when initially faced withdisappointing ratings.

BBC Annual Report and Accounts 2003/2004

While BBC One met all the commitments
outlined in the Statements of Programme
Policy, we have a duty to ensure thatthe channel’s schedule, as well as its
programmes, best serves audience needs.
We have asked our team of advisers
to undertake an independent study
to assess whether or not the channel has
the best balance of output in peak time.
We will report on the outcome next year.
Consultation with our independent
advisory body, the Central Religious
Advisory Committee (see page 77), hasalready highlighted some disquiet over theplace of religion in the BBC One schedule.
Work will be undertaken over the next
year to assess the effectiveness of thereligion strategy we approved in 2002
which promised high-impact religious
programming on BBC One alongside
Songs of Praise and The Heaven and EarthShow. While research indicates that the
BBC remains the preferred channel for
religion, we are concerned that there
may not be enough landmark output
in peak time to make a regular impact
with viewers.

1

2
3

4

1 Later with Jools Holland
Music lovers at a recording of
the late-night BBC Two show

2 The OfficeFirst shown in BBC Two, this show
won an unprecedented two Golden
Globes in the US

4 Seven Wonders…
Celebrating Britain’s industrial
heritage

3 The Day Britain Stopped
Innovative drama-documentary
investigating transport issues

BBC TwoRemit
BBC Two sets out to be a mixed-genre
channel combining serious factual
subjects with comedy and drama tobring challenging, intelligent television toa wide audience. The channel identifies
ambition and innovation as its key values.
BBC Two aims to create programmesthat inspire and excite audiences.
We approved a new strategy for BBC Two
in March 2003 and the results have started
to show on screen this year.
The new strategy aims to underline BBC
Two’s distinctive public service role as achannel offering a more challenging mix
of output than BBC One. BBC Two’s broad
range of genres, with a strong, distinctive
factual core, appeals to a wider audience
than the digital networks BBC Three and
BBC Four.
The strategy commits the channel tooffering audiences greater variety acrossthe analogue channels by reducing thevolume of lifestyle programmes – especiallymakeover – between 8pm and 9pm, and toincreasing the presence of genres such asarts and current affairs in peak time, withmore serious documentary output at 9pm.
As a result of the strategy, funding has
shifted away from entertainment, and there
has been an increase in hours of factual
programming on the channel, including
history, science, business, current affairs,
learning and intelligent entertainment
such as Mastermind.

Effort has been put into attracting new
audiences to non-entertainment output
by developing new ways of presenting
traditional genres. In history, for example,
Seven Wonders of the Industrial World
looked at the Industrial Revolution throughseven engineering achievements of the era;
Restoration engaged the audience’s interestin local historic buildings through a national
vote which, with the Heritage Lottery
Fund, raised £3.5million to restore thewinner, the Turkish baths in Manchester.
BBC Two has also found ways of reinventing
aspects of its music, arts, and factual output
through the use of drama. In arts output,
the results have included memorable
accounts of the lives of great artists
including Beethoven and the poet Philip
Larkin. In factual output, The Day Britain
Stopped was an innovative ‘what if ?’ accountof a day when Britain’s transport systemcame to a catastrophic halt.

Despite increased competition, BBC Two
has managed to hold its reach over the
past year and approval of the channel isalso marginally up on last year with a higher
proportion of the audience perceiving thechannel as “up to date”. Research alsosuggests that audiences perceive BBC Two
as offering the best range in seven genresand quality in six.
However, the strategy is still in its infancy
and we will continue to monitor its
implementation and the success of the
new strands in delivering a distinctive
service that meets audience needs.

Drama is also central to BBC Two’s newpeak-time current affairs strand If… which
was launched in March. We welcome
BBC Two’s commitment to this new
scenario-based analysis programme which is
examining a wide range of issues and helping
to generate and inform political debate.
The work we have done with audiences
and with people working in the arts (seepage 14) has highlighted a perception thatthe arts are of low priority to the BBC
and that one factor in this has been thelack of a regular television arts strand.
We therefore welcome the planned launchof a new weekly peak-time arts and culture
programme on BBC Two.

BBC Annual Report and Accounts 2003/200427

Governors’ review
of services
Television

BBC Three
Remit
BBC Three aims to offer an intelligent,ambitious mix of programmes whichreflect the things that matter to young
British adults. The channel is committed
to a mixed schedule of news, current
affairs, education, music, arts, science andcoverage of international issues, as well as
to high-quality, innovative drama, comedy
and entertainment.
BBC Three was launched in February 2003
as a mixed-genre digital channel aimed
at young adults – a group relatively
underserved by traditional public service
broadcasting. It has had some early
successes and now regularly reaches overa fifth of its core audience of 25–34 year
olds each week. Genres that have madean early impact include current affairs(The Third Degree), comedy (3 Non-Blondes,
Little Britain and Nighty Night), animation(Monkey Dust) and science (Body Hits).
A selection of programming concernedwith parenting (Little Angels and Who Rules
the Roost?) also made a mark. Some of thisinnovative output has already successfullytransferred to the analogue channels,
benefiting their viewers.

ways that appeal to young adult audiences.
We see the channel as a bold attempt toreconnect these viewers with public service
broadcasting and, while it still has some way
to go, we will continue to support it so that
it is given the time it needs to prove itself.
The channel originates material but
also repeats – and premieres – some
programmes from BBC analogue channels.
This allows audiences to catch up, or viewat times that may be more convenient –and it also brings viewers to the channel
who can then be introduced to originatedprogrammes scheduled immediately after
these shows. As the channel matures,
one challenge is to reduce dependence on
output from other channels, and theconsequent audience perceptions that
it is a place to catch up on programmes
first shown on BBC One or BBC Two
rather than for original programming.
The channel must also focus on building
on its successes in comedy, current affairs
and science, and reap the benefit of its
investment in drama to bring a young
mainstream audience to this genre.

The channel set out to be innovative,
experimental and risk-taking. It has attracted
criticism because some of its output is
controversial. But this is inevitable, given thechannel’s ambition to present key aspectsof public service broadcasting in new

But a key challenge remains news. The
hourly 60seconds bulletins have proved
popular and regularly receive audiences
four or five times the channel average, but
the main peak-time news has found it hardto craft a format that will capture and keep
the attention of its target audience. The
success of current affairs on BBC Three(through The Third Degree strand) suggests
there may be an appetite for a longer
bulletin allowing a more analytical approach.
As a result, the original 15-minute evening
news has been replaced with a 30-minutenightly news analysis programme.

28

BBC Annual Report and Accounts 2003/2004

The channel’s factual output has tended to
be dominated by celebrity, relationship andlifestyle content that veered into competitor
territory. This is being addressed – forexample, the celebrity-focused Liquid Newshas been dropped from the schedule.

1,556
hours of news on BBC One

82%
of BBC Three programmes
were specially commissioned

1

2

4

3

5

1 Shakespeare’s Globe
Live: Richard II from thereconstruction of Shakespeare’s
theatre2 The Alan Clark Diaries
Dramatisation of his life and times
was a big hit for BBC Four

4 Gauguin: The Full Story
Waldemar Januszczak’s explorationof the French artist’s life and times

3 The Third Degree
Flagship current affairs from
BBC Three

5 Little Britain
Cutting-edge comedy from
BBC Three

BBC Four42%
of BBC Four was music
and arts

1,293
hours of factual programmes
on BBC Two
For more broadcasting facts andfigures, see pages 58 to 67 and136 to 146

Remit
BBC Four aims to serve audiences
in search of greater depth and range
in their viewing. Its ambition is to be
British television’s most intellectuallyand culturally enriching channel. BBC Four
offers a distinctive mix of documentary,
performance, music, film and topicalfeatures as a satisfying alternative tomore mainstream programming.
Since its launch in March 2002, BBC Four has
become the most watched channel of its
kind. The Alan Clark Diaries, co-commissioned
with BBC Two, averaged 856,000 viewers
during its first episode – one of thehighest-ever recorded audiences for an
original drama on a UK digital channel.
The channel has found a distinct audience –which tends to be a little younger than thatof the factual channels that are its closest
competitors. The output generates very
positive press reviews and focus group researchunderlines the value viewers place on it.
The channel has been a success anddeserves more investment. We haveapproved a measured increase in BBC
Four’s budget to enhance the channel’s
output of event drama and intelligent
comedy. There is good evidence that
this will enable BBC Four to appeal toa wider audience.
The channel’s distinctively public service
proposition lies partly in its international
outlook and intellectual ambition, partly
in the range of its schedule (competitor
channels offer highly specialised niche
programming) and partly in its highproportion of original commissionsof UK-originated output.

BBC Annual Report and Accounts 2003/2004

In addition the channel takes seriously
its vision of becoming strongly valued for
its contribution to the UK’s cultural life,
as well as to the landscape of broadcasting.
To this end it has worked with major
galleries to make exhibitions available
to a national audience, actively supported
the foreign-language film distributionsector in the UK, worked with theatre
producers to bring both commercial andsubsidised production to the screen, andmaintained its sponsorship of the SamuelJohnson Prize for Non-Fiction. Building
partnerships with other institutions is a
productive way for the channel to increase
its impact, promote its presence, and deliver
public value to the wider arts community.
BBC Four has real potential for growth.
Many people who would value its output
have not yet made the transition to digital
television. The channel needs to makefurther progress in appealing to that wider
audience. The channel has made good useof the potential of interactivity to build
awareness, for example the online Black
Flash vote to find the greatest British black
footballer prompted debate on BBC Radio
Five Live and 1Xtra and gave the channel
access to new and wider audiences.
But we are clear that maximising thechannel’s potential for growth must be
achieved without either diluting the key
elements of its unique proposition –or by lessening the commitment to morethoughtful, challenging programming on theanalogue channels, particularly BBC Two.

29

Governors’ review
of services
Television

The CBBC Channel
Remit
The CBBC Channel offers a distinctive
mixed schedule for children aged 6–12,
encouraging them to find out more
about existing interests or inspiringthem to develop new ones and helping
them to understand and embrace theworld around them. The channel puts
an emphasis on encouraging participation.
The CBBC Channel was launched in
February 2002 as a dedicated children’s
digital channel. Its distinctiveness rests on
the quality of its output, the range of its
schedule (with clear commitments in news,
education and drama), the low repeat level,
and the high proportion of UK-originatedmaterial in a market where children’schannels mostly show acquired and often
imported programming.
The CBBC Channel’s philosophy
is “learning through fun”. This means
introducing an element of learning andlife skills development across a large partof its output including drama and factual.
The schedule also includes Class TV,a four-hour block of schools programmes
transmitted every day during term time.
These programmes are designed primarily
for use in the classroom and are focusedon the school curriculum.

Experimentation has indicated that more
frequent but shorter news bulletins aremost effective at reaching and engaging
this audience in news output. While thenumber of bulletins has been increased
from two in 2002/2003 to seven a day in
2003/2004, the channel has failed to meetits commitment to 85 hours of news in
2003/2004. The strategy is to gradually
increase the overall volume of news in
the schedule.
Interactivity has been promoted by placing
live content at the core of the scheduleand by connecting with the audience via
mail, telephone, email, SMS and online.
The challenge going forward is to keep
up with the channel’s demanding andsometimes fickle audience by developing
innovative content across the entire range
of genres.

The target age range is difficult to reach.
Typically they are short of time and wanta channel that delivers something just forthem. The channel initially struggled tocommunicate its mixed-genre offering,but over the year it has improved its
performance and now reaches nearlya million viewers a week.

30

BBC Annual Report and Accounts 2003/2004

One
million watched CBeebies
each week

777
hours of children’s on
BBC One

1

2

4

3

5

1 Balamory
Pre-school series for CBeebies
made in Scotland

2 Tracy Beaker
Original children’s drama about
growing up in care for CBBC

4 NewsroundThe children’s news show, given
extra airtime on The CBBC Channel

3 Big Cook, Little CookChildren’s cookery show – a big hit
for CBeebies

5 bbc.co.uk/cbeebies
The pre-school website is oneof the BBC’s most popular

CBeebies

966
hours of drama on
The CBBC Channel

Six
new talent initiatives from
BBC Three
For more broadcasting facts andfigures, see pages 58 to 67 and136 to 146

Weekly reach of BBC Television services
2003/2004(% all homes)
88.2 83.7(87.1) (82.9)

67.0(67.0)

7.0 2.1 2.3 5.0 3.9(8.0) (1.0) (1.1) (4.1) (4.1) 0.2 *(n/a)

BBC Television
BBC One
BBC Two
BBC Three
BBC Four
The CBBC Channel
CBeebies
BBC News 24
BBC Parliament

Remit
CBeebies offers new, high-quality, mainly
UK-produced programmes to educate
and entertain the BBC’s youngest
audience. The service provides a rangeof pre-school programming designed
to encourage learning through playfor children aged five and under,
in a consistently safe environment.
CBeebies was launched in February 2002
as a dedicated pre-school digital channel.
Its philosophy is “learning through play”.
All the programming is linked to theGovernment’s Foundation Stage Curriculum.

However, an alternative model has been
adopted where the channel pre-buys
animated titles with third parties – thechannel investment usually does notexceed 25%. The same model has beenused for The CBBC Channel where similar
problems have been encountered. It has
proved a value-for-money way to buy
the channel an early editorial stake inthe content to ensure its suitability for
the CBeebies audience.

The channel has been a success from thestart. It is now the most watched children’schannel. It has received very positive press
comment and high praise from the viewing
public which places a high value on its
friendly, innocent and safe environment,
its educational content, and its high elementof UK programming. The CBeebies website
has proved a particularly valued resourceand has become one of the most popular
BBC sites.
One challenge facing the channel is todevelop new, high-quality, UK-originatedanimation suitable for the CBeebies
audience. The original aspiration to invest
directly in animation co-production has
proved hard to meet because of higher
than expected costs.

Source: BARB, TNS/Infosys, age 4+, average 15-minuteweekly reach for the year. * BBC Parliament has only beenmeasured since September 2003
Note: Figures for 2002/2003 appear in brackets

BBC Annual Report and Accounts 2003/200431

Governors’ review
of services
Radio
Overview
The radio landscape in Britain is changing
fundamentally. There are strong new national
digital stations. People are listening in new ways –via television, the internet or mobile phones.
Some young music-lovers are turning from radio
to downloading music online.
Against the landscape of change, how does BBC Radio
continue to make the case for its public service role?
The answer is that the BBC can make a difference:
to individuals by giving them unique access to things
they value; to citizenship and democracy by providing
independent information; and to society by investingin the cultural and creative life of the UK.This is astrue of BBC Radio’s music output as its speech
output.The BBC’s support for music at its roots andacross the board has helped public taste to grow –delivering value to individual listeners and to thewider music industry, both popular and classical.
Similarly, the speech component of our music stations
helps to push boundaries by tackling difficult issues.
The BBC’s national radio services are holding
up well. The BBC’s new digital services are
establishing valued and distinctive niches. BBCRadios 2, 3, 4 and Five Live all consolidated theirpositions. A new strategy has been put in place
to bolster BBC Radio 1’s long-term position.

32

BBC Annual Report and Accounts 2003/2004

1

2

4

3

5

1 Newsbeat
Derren Lawford in the Radio 1
Newsbeat studio

2 Glastonbury Festival
Coverage of live music events
makes Radio 1 distinctive

4 Radio 2 Folk Awards
Kate Rusby live at the awards
ceremony

3 The Green Room
Friday night arts with Mariella
Frostrup on Radio 2

5 The Jeremy Vine Show
Bringing newsmakers to
the Radio 2 audience

BBC Radio 1
Remit
BBC Radio 1 aims to offer an exciting,high-quality service for a young UK
audience. It is committed to playing
the best new music and delivering
a comprehensive range of live studiosessions, concerts and festival broadcasts.
The network aims to cover all young
music genres with a wide-ranging playlist
and a strong line-up of specialist DJs.
Music programming is augmented bytailored speech output – including news,
documentaries and advice campaigns.
Radio 1 is critical to the BBC commitment
to reaching young audiences – and its healthis central to the success of BBC Radiooverall. In December 2002 we requested
a review of Radio 1’s strategy, recognisingthat although Radio 1 already operated in an
intensely competitive market, technologicaland regulatory changes were likely tointensify this still further. A new strategy
was developed and we approved this in
May 2003.
Audience consultation played an
important part. Research showed thatsome aspects of the Radio 1 offer were
off-putting. For example, although nearly
half of 25 to 30 year olds have children,
the network was projecting a “relentlessly
single” image. There was evidence that
listeners wanted the network to be morerelaxed and less intense about its music –and they also wanted some older music.

However there was much that was
liked, and the BBC response has been
evolutionary not revolutionary.
In its mainstream programming, the network
is now focusing more clearly on its target
audience of 10–30 year olds. This has meant
making the daytime content more engaging
without diminishing the network’s public
service commitment to news and new
music. In the specialist programming, theaim is to bring listeners new talentand genres that meet the demands ofknowledgeable enthusiasts, but do it in a
way that is welcoming to the network’s
broader audience.
In 2003/2004, Radio 1 began to deliver themainstream component of this strategy
including changing some key presenters.
Chris Moyles took over the weekday
breakfast show in January 2004 when
Sara Cox moved to weekday afternoons,and Colin & Edith took over the weekday
1–3pm slot. Work has also been done
to ensure that DJs connect more widely.
The demand for older music has been met.

The distinctiveness of Radio 1 is sometimes
challenged by critics. In response to thisthe BBC has set up an independent
quantitative research programme to provide
data on the distinctiveness of the music
mix, including the amount of new music.
The analysis carried out in 2003/2004
demonstrated that Radio 1 plays a greaternumber of different songs across the week
than any of its nearest competitors. Morethan 460 tracks on Radio 1 were not heardon any competitor measured during asample week in each of May and October
2003. Radio 1 also played more live music
than its competitors. The network is now
committed to devoting at least 40% of its
mainstream programming to new music –defined as unreleased, or less than one
month since release.
Across Radio 1 the commitment to a
distinctive public service remit will continue,
including bespoke news (through theNewsbeat strand), documentaries, social
action programming and live music events.

It will take time to refresh the entire
schedule and at present it is too early tomake an informed assessment of its success.
We recognise that increased competitionis likely to impact on share but are anxious
to ensure that Radio 1 continues to deliver
its unique reach.

BBC Annual Report and Accounts 2003/2004

33

Governors’ review
of services
Radio

BBC Radio 2
Remit
BBC Radio 2 aims to bring a broad
range of popular and specialist music,
with particular support for new andestablished British artists; live music,
through concerts and studio sessions;and song-writing. The network also offers
news, current affairs, documentaries,
comedy, readings, religious output andsocial action, designed to appeal to abroad audience.
In a crowded marketplace, Radio 2 hasheld its audience, retaining its position as
the UK’s most listened to radio station withan average weekly reach in 2003/2004
of 12.9 million (13.0 million in 2002/2003).
The music played – including live music –continues to cover an extremely broad
range. As with Radio 1, the BBC now
collects quantitative data to monitor the
distinctiveness of the music content of the
network. The analysis was conducted twice
during 2003/2004 and shows that in eachsample week well over 1,000 songs playedon Radio 2 were not heard on any othercompetitor measured. In addition, Radio 2
played a broader range of genres and more
live music than its competitors.

BBC Radio 3
by a website containing comprehensive
information on topics ranging from thehistory of the key popular music genres toadvice on how to get started as a songwriter.
The network has maintained its commitment
to making news and current affairs a key
part of the mix. The Jeremy Vine Show,launched in 2003, continues to develop
well. The interactive second hour (1–2pm)
on topical subjects has been successful
in generating a large amount of listenerinteraction. Other notable speech output
included the music documentary on Stevie
Wonder, 40 Years of Wonder, and The JFKGeneration, marking the 40th anniversaryof President Kennedy’s assassination.
The network’s arts programme has beenrelaunched as The Green Room andextended from 90 minutes to two hours.

Radio 3’s audience has marginally increased,with an average weekly reach in 2003/2004
of 2.2 million (2.1 million in 2002/2003).
The summer Proms season attracted aparticularly strong audience and – following
schedule changes in the autumn informedby audience consultation and research –the network achieved a record reach in
the first quarter of 2004.
Notable output has included Berlioz day –a complete Radio 3 day devoted to the life
and influences of the composer; coverageof the Radio 3 Awards for World Music,
staged outside London for the first time;and an Arabian night, a special evening
featuring the cultural and political life of
the Arabian Peninsula.
We note that classical music remains at theheart of the schedule and the current remit
requires that core to be complemented withother serious music genres including jazz andworld music. We are aware some listeners
are unhappy with the share of output given
to non-classical music on Radio 3 andwill remain mindful of this in continuing
to assess the network’s performance.

Radio 2’s commitment to encourage songwriting in the UK has been delivered throughSold on Song. This imaginative initiative aims
to provide informed insight into the craft ofthe popular song through events including
masterclasses with established songwriters
such as Sir Paul McCartney and Elvis
Costello, and a competition for new
songwriters. Sold on Song is supported

34

Remit
BBC Radio 3 aims to provide a broad
spectrum of classical music, jazz, worldmusic, drama and arts discussions.
It focuses on presenting live and specially
recorded music from across the UK
and beyond, including contributions
from the BBC’s own performing groups.

BBC Annual Report and Accounts 2003/2004

1

2

4

3

1 Today
Presenter Sarah Montague getsahead of the day’s news

2 Adam and Jason Barron
Brothers collaborating on Radio 4’s
detective drama Shut Eye

4 Last Night of the Proms
Hope, glory, and real passion
for music

3 The Winter’s TaleCast members from Radio 3’s
Shakespeare production

BBC Radio 4

45%of Radio 1’s playlist was
UK artists last year
For more broadcasting facts andfigures, see pages 58 to 67 and136 to 146

Remit
BBC Radio 4’s remit is to use the powerof the spoken word to offer programmesof depth which are surprising, searching,revelatory and entertaining. The network
aims to offer in-depth and thoughtful
news and current affairs and seeks toengage and inspire its audience with arich mix of factual programmes, drama,
readings and comedy.

The network continues to deliver acrossa broad range of genres, including drama,
comedy and religion. The Archers has
maintained its strong grip on its audience
with storylines – sometimes controversial –that, as our recent study of impartiality(see page 21) indicates, fairly represent
a range of contemporary rural issues.

Audiences to Radio 4 are slightly down,with reach at 9.6 million in 2003/2004(9.8 million in 2002/2003). In London, themost competitive radio marketplace, thenetwork remains top for reach and share.

Weekly reach of BBC Radio services
2003/2004 (% all homes)
66.4(66.7)

26.7
20.2 (26.5)(21.6)
4.5
(4.3)

21.1
19.8
(20.1) 12.5 (21.6)(12.8)

0.7 0.6 0.3 0.6 0.9 2.9(n/a*)(n/a*)(n/a*)(n/a*)(n/a*)(n/a*)

BBC Radio
BBC Radio 1
BBC Radio 2
BBC Radio 3
BBC Radio 4
BBC Radio Five LiveBBC National/Local RadioBBC Five Live Sports Extra
1Xtra
6 Music
BBC 7
BBC Asian Network
BBC World Service

News and current affairs provide the spine
for Radio 4 and the network has maintained
its strong position in this genre. Audience
research shows that six out of ten radio
listeners consider BBC Radio to be thebest source of radio news – and Radio 4
leads the other BBC radio stations in being
considered the best provider of news.
These figures were not significantly affectedby the Hutton Inquiry, which stemmed froma report on Radio 4’s Today.
Notable pieces of journalism include thehour-long special marking the end of the Iraq
war, Edward Stourton’s series on the history
and future of the UN, and the interview
with ‘Witness Bromley’, the 12 year old
who was the main witness at the trial of
the boys accused of killing Damilola Taylor.

Source: RAJAR, age 15+, average 15-minute weekly reachfor 2003/2004 * BBC digital services have only beenmeasured since quarter three, 2003
Note: Figures for 2002/2003 appear in brackets
In quarter two 2003, RAJAR’s population was adjusted
in line with the latest Census figures

BBC Annual Report and Accounts 2003/2004

35

Governors’ review
of services
Radio

BBC Radio Five LiveBBC Five Live Sports ExtraRemit
BBC Radio Five Live broadcasts live
news and sport 24 hours a day, aiming topresent events as they happen in a modern,
dynamic and accessible style. It sets out
to cover national and international subjects
in depth, using wide-ranging analysis anddebate to inform, entertain and involve
news and sports fans of all ages, withparticular emphasis on 25–44 year olds.
The network also provides extensive live
events coverage, supported by the BBC’s
global newsgathering operations andportfolio of sports rights.

Remit
BBC Five Live Sports Extra is a part-time
extension of BBC Radio Five Live, aimed
at bringing a greater choice of action
to sports fans. It extracts more value forlicence payers from sports rights alreadyowned by the BBC by offering alternative
commentaries to those provided on
Five Live.

Five Live celebrated its tenth birthday
in 2004. Audiences remain broadly stable,with a small drop in average reach to
6.1 million in 2003/2004 (from 6.3 million
in 2002/2003 – which included the Football
World Cup). It reached 6.5 million inquarter one of 2004, and audience approvalscores remain well above the BBC average.
The network’s output in both its genresof news and sport has been strong. In
November, vivid commentary on England’s
victory over Australia in the Rugby World
Cup in Sydney was matched by memorable
coverage of the homecoming and thevictory parade the following week when
Five Live had exclusive access to the players’
bus. With news, good progress has been
made in refreshing Breakfast, Morning,and Julian Worricker’s Sunday morning
programme. The network did well incovering breaking stories such as thecapture of Saddam Hussein.

Five Live Sports Extra was launched in
February 2002 as par t of the BBC’s
portfolio of digital channels and it has rapidly
established itself as a valued sister station
to Five Live, delivering extra value to licencepayers from existing BBC sports rights.
It has enabled the BBC to continue tobroadcast radio sports commentaries
when – as happened during the Iraq war –sports coverage on Five Live is curtailed
to enable full coverage of big breaking news
stories. It also enables the BBC to offer
sports fans a greater choice of matches andevents. A good example came in Augustwhen Five Live majored on football, while
Five Live Sports Extra offered uninterrupted
coverage of the World Athletics
Championships in Paris.

We are pleased to note that Five Live has
secured Premiership football rights until theend of the 2006/2007 season.

36

BBC Annual Report and Accounts 2003/2004

38%
of Radio 2 was dedicatedto speech60
new classical music pieces
commissioned for Radio 3

1

2

4

3

1 Five LiveChildren interview the presenters
on Five Live’s tenth birthday

2 1XtraFirst birthday celebrations forthe black music station

4 Rugby World Cup
Commentary from England’s triumph

3 World Athletics Championship
Expert coverage from theParis event

2,123
hours of current affairs,
business and politics onRadio 42,106
hours of sport on Five LiveFor more broadcasting facts andfigures, see pages 58 to 67 and136 to 146

IXtra

BBC 6 Music

Remit
1Xtra aims to play the best ofcontemporary black music, with a strongemphasis on delivering high-quality live
music and supporting new British artists.
1Xtra also brings listeners a bespoke news
service, regular discussion programmes
and specially commissioned documentaries,
plus information and advice relevant to
the young target audience, particularly –although not exclusively – those fromethnic minorities.

Remit
BBC 6 Music offers lovers of popular
music current releases outside themainstream, new concert and session
tracks, and unique access to the work ofartists from the last 40 years through the
BBC Sound Archive. It aims to provide asocial and cultural context through music
news, documentaries and debate, and iscommitted to providing interactive content.

1Xtra was launched in August 2002 as partof the BBC portfolio of digital channels.
The station is building a following amonga young audience that had felt it got nothingfrom the BBC. It offers a service unavailable
elsewhere on UK network radio and gives
strong backing to the contemporary blackmusic industry in the UK across the fullrange of genres. It showcases important
black music events such as the Notting Hill
Carnival and Southport Weekender. It isalso finding and developing new black
African/Caribbean broadcasting talenton air and behind the scenes.
The main challenge ahead is engaging thetarget audience with speech programming.
Listeners come for music and the station
has to find innovative ways to capture theirattention for quality speech. In 2003/2004
1Xtra missed its commitment that around
10% of its output should cover news,
documentaries and social action programming.
However this will be achieved next year.

BBC 6 Music was launched in March 2002
as part of the BBC’s portfolio of digitalchannels. It targets 25–44-year-old musiclovers, previously underserved by the BBC.
In a crowded radio music market it hasestablished itself as a distinctive service
valued by listeners. The music output is
supported by news bulletins from a
dedicated team of journalists focusing
on issues relevant to the target audience,
and a music newsgathering team has
been established.
The next step is to heighten the levelof interactivity, develop use of the archiveand strengthen the station’s relationshipwith its audience. Initiatives will include
high-profile outside broadcasts and events.

We have underlined the importance weattach to the quality of the speech output,
not just the quantity, and will pay particularattention to this in future assessments.

BBC Annual Report and Accounts 2003/200437

Governors’ review
of services
Radio

BBC 7
Remit
BBC 7 is a speech-based service providing
pure entertainment to attract a newaudience to speech radio. The network
offers comedy, drama and readings, mainly
from the BBC archive. It also aims to be
the home of children’s speech radio, withdaily live programming for youngsters.
BBC 7 was launched in December 2002
as part of the BBC’s portfolio of digital
services. It has delivered on its commitments
and has found an appreciative audience,largely by exploiting the resources of the
BBC speech archive. In December 2003, in
response to many requests from listeners,
BBC 7 began broadcasting 24 hours a day.

A condition of the DCMS consent wasthat the service must not be developed at
the expense of programming on Radio 4.
This has been met by appointing theController of Radio 4 as the Controller ofBBC 7. Scheduling complements Radio 4
to avoid editorial clashes and, where
possible, joint events are promoted on
both stations. The two networks haveentirely separate budgets.
The next step is to further refine theoffering to make it more attractive tothe target audience and to find more
ways to provide information and context
around the archive.

The network has also provided a valuable
service by broadcasting four hours a dayof speech programming for children ofa kind unavailable for the past decade.
BBC 7 has played a significant role indeveloping the market for DAB Digitalradio. Research in the latter part of 2003
showed that 68% of people who hadbought a DAB Digital radio had done
so to receive new services, and when
asked if there was a particular service theywanted to receive, 26% – more than for
any other service – mentioned BBC 7.

38

BBC Annual Report and Accounts 2003/2004

2,852
hours of comedy on BBC 7

73
Proms concerts on Radio 3

1

2

4

3

1 BBC Asian Network
Adil Ray at Mega Mela in Leeds

2 BBC 7
Fun and games in the Big Toe studio

4 BBC 6 Music
Breakfast presenter Phill Jupitus
and producer Phil Wilding

3 Alan Bennett
His Last of the Sun for BBC 7 gave
Thora Hird her final role

BBC Asian Network

163
hours of religion on Radio 2
in peak time66%
of BBC Asian Network’s
output was speech-based
For more broadcasting facts andfigures, see pages 58 to 67 and136 to 146

Remit
BBC Asian Network offers music, news,
sport, debate, entertainment and dramafor British Asians. It broadcasts primarily
in English but also in a range of languages
spoken by UK Asians. It aims to be themain forum for debating issues concerning
British Asian communities.
As part of the launch of its portfolio
of digital services, BBC Asian Network
was relaunched as a national network in
October 2002. Research had shown that
the Asian community was more likely tolisten to speech radio than the rest of the
population, yet there was no national
speech-based service regularly addressing
issues of specific interest to British Asians.

There has already been significant
investment in a dedicated news service –the network has 45 journalists and its own
staff of sports journalists. The network
provided a valuable platform during the
war in Iraq for Muslim communities todebate the issues. We note the intention
to widen the network’s news agenda
to give a better sense of the importanceand involvement of the Asian communityin, for example, business.

The BBC’s commitment to a previously
underserved audience has proved justified.
The network tripled its audience by goingnational and now reaches one in five
British Asians.
The BBC’s continuing commitment has
been demonstrated by the investmentof more than £1million in a new daily
drama for the network, Silver Street.
The needs of first-generation Asians are
met through 2,730 hours of programmingin Punjabi, Mirpuri, Bengali, Gujurati and
Hindi-Urdu.

BBC Annual Report and Accounts 2003/2004

39

Governors’ review
of services
New media
Overview
The BBC is a tri-media organisation. Much ofits television and radio output is supported
and extended by online and interactive provision,and is reported on elsewhere in this document.
We are strongly committed to bringing the benefitsof digital technologies to everyone in the UK,
whether through the internet, radio, televisionor mobile devices.
The BBC’s role in developing a digital UK is both
direct – by encouraging media literacy, and indirect– by encouraging digital take-up through theprovision of attractive content.
The BBC’s new media services complement
and enrich our broadcast services, extend our
educational reach, and deliver public value by
enabling people to communicate with each otherin communities built around shared passions,interests and localities. We are working to ensurethat these communities – especially where they
involve the young or the vulnerable – operate
in a safe environment.

40

BBC Annual Report and Accounts 2003/2004

1

2

4

3

5

1 In the chatroom
Radio 1’s Zane Lowe responds
to listeners

2 Interactive sport
More information for FA Cup
viewers

4 WW2 People’s War
Website bringing new users to
the internet

3 News video
TV news reports now
available online

5 Mozart Uncovered
An interactive application allowed
audiences to analyse how thecomposer constructed his scoresbbc.co.uk
Remitbbc.co.uk: to use the internet tocomplement the full range of the BBC’s
broadcast output, extending the depth,
interactivity and ease of access to theinformation, education and entertainment
on offer; and to encourage participationin the digital world and to provide a safe
home on the internet.
In March 2004, for the first time, half the
British population aged over 15 used theinternet. Some 45% of them – more than
10 million – visited bbc.co.uk. This statistic
has added to the evidence that the rapid
growth of the internet in the UK has
been fuelled by the availability of BBC
content and by the efforts made by
the BBC to open up the digital world to
new users. A good example is the People’s
War World War Two site which has been
designed in partnership with Age Concern
to introduce over-60s to the internet.
It is attracting up to 140,000 users a month.
The overall growth in use has been achieved
despite a change in investment priorities
that shifted funding away from the internet
towards interactive television.
In 2003, as part of our review of bbc.co.uk,
we endorsed criteria which newbbc.co.uk sites have to meet. They include:
contributing to the BBC’s purpose andembodying BBC values; demonstrating
value for money; providing distinctive
content; and an assessment of potential
market impact. Existing sites were also
assessed. Some sites, such as Legacies,
Spy Watch and Science and Nature were
decommissioned or slimmed down over
the year. Others, such as the BBC Films
site, were charged with becoming more
editorially distinctive.

BBCi
The BBC has begun piloting iCan, whichattempts to engage people who feel
disconnected from current political processes
but who want to make a difference in civic
life. iCan puts people in touch with one
another and gives them tools to enable themto maximise their influence by working
and campaigning together. This is potentiallya very significant community initiative but
it does carry editorial risks and we aremonitoring developments to ensure thatrobust systems are in place to prevent theBBC’s impartiality being compromised.
We are also keeping under review thequestion of moderation of the BBC’scommunity sites. The BBC has traditionallyused pre-moderation (checking messages
before publication), and post-moderation(checking messages shortly after publication).
This year, in response to the rapid growthin use of message boards and chatrooms,
reactive moderation was introduced.
Here messages are checked only whenthe BBC is alerted by users. This increases
response times for users and reduces
cost but carries editorial risks and wehave asked management to ensure robust
risk-management systems are in place.
We are clear that BBC message boards
for children or vulnerable groups should
always be pre-moderated. The BBC
is continuing to work closely with theHome Office Task Force drafting guidanceon moderation for the industry. In 2003
the BBC launched Chatguide, which gives
guidance on using chatrooms.

Remit
BBCi: to offer all-day up-to-the-minutenews, weather, education, entertainmentand other information to all digital television
audiences via the red button on the remotecontrol; to enhance the value of the BBC’s
television proposition to all digital audiences
through video, audio, pictures and text.
Audiences to BBC interactive services
have grown strongly over the year and now
reach half the digital population monthly.
The BBC’s 24/7 interactive TV service wasrelaunched with a simpler user interface andthe number of new enhanced television(eTV) services was nearly doubled, to 190.
For example, the drama documentary
The Genius of Mozart was enhanced withan interactive application – an illustrationof how eTV can deepen and enrich theexperience for audiences.
However, we note that the growth inpeople using interactivity is not keeping up
with the growth in its availability. The BBC
needs to understand and change this trend
if eTV is to reach its full potential.
Monthly reach 2003/2004 of bbc.co.uk and BBCi
(millions)
8.9
7.0
5.3
3.3

bbc.co.uk 2002/2003*
bbc.co.uk 2003/2004*
BBCi 2002/2003**
BBCi 2003/2004**
Source: * BMRB Access (monthly reach)** Interactive Television Tracking Study (monthly reach)

BBC Annual Report and Accounts 2003/2004

41

Governors’ review
of services
News
Overview
Each hour, each day, the BBC transmits somethree hours of news on 14 of its national radio
and television networks. bbc.co.uk/news also puts
out several hundred stories each day.
On each medium, and for each outlet, the news
is tailored for its particular audience: children
watching Newsround on the CBBC Channel; British
Asians listening to BBC Asian Network; bbc.co.uk
users checking the latest sports stories on theirPCs; drivetime listeners catching up with Radio 4’s
PM on their car radio, or evening viewers watching
the Ten O’Clock News or Newsnight.
Although this output of news is huge, and hugely
diverse, what draws it together and makes it
distinctively BBC, is that it shares the sameunderlying core values. These are independence,
impartiality and honesty.
These values always come under intense scrutiny, butnever more so than in the year under review with the
Hutton Inquiry. Important lessons have been learnt
to ensure that journalism remains a key strengthof the BBC. And as this review shows, BBC News
displayed many strengths, not least the way BBC
journalists reported the Hutton Inquiry itself.

42

BBC Annual Report and Accounts 2003/2004

1

2

4

3

1 Six O’Clock News
George Alagiah and Sophie Raworth
prepare to go on air

2 BBC News 24
Continuous news 24 hours a day
3 If…
Innovative approach to serious
current affairs

4 Iraq
Big audiences watched thefall of Saddam Hussein’s statuein Baghdad

BBC News

423
million page impressions forbbc.co.uk/news in March

44
foreign BBC news bureaux
For more broadcasting facts andfigures, see pages 58 to 67 and136 to 146

Remit
BBC News aspires to be the world’s mosttrusted news organisation: independent,
impartial and honest. It aims to be truthfuland fair, offering journalism that explores
multiple viewpoints and gives voice to awide range of opinions. BBC News seeks
to act in the public interest and to resist
pressure from political parties, lobby
groups or commercial interests.
The major domestic story of the year –the Hutton Inquiry – posed particular
problems for the BBC. Day after day, BBC
journalists had to report – independently,
impartially and honestly – on the behaviourof other BBC journalists, their own managers,
the Director-General, the Chairman of the
BBC and indeed ourselves as Governors.
An edition of Panorama was commissioned
and to ensure it pulled no punches, the usualline of editorial management (through the
Director of News to the Director-General)
was changed to make the Deputy DirectorGeneral – who had played no part in the
Hutton narrative – the ultimate arbiter ofwhether the programme complied with
the BBC’s editorial guidelines.
It is clear – not least from widespreadfavourable press comment – that thepotentially acute problems posed by the BBC
reporting impartially on itself were dealt
with effectively across all BBC platforms.
There was some concern that the Hutton
Inquiry might weaken audience trust in theBBC, but survey evidence indicates that the
public’s trust in the BBC actually increased
post-Hutton. Public approval of BBC news
and current affairs in particular dippedslightly during the summer and autumn of2003 but recovered by the end of the year.
BBC Annual Report and Accounts 2003/2004

The main international story of the year
was the war in Iraq and its aftermath.
The conspicuous lack of national consensus
here meant that, once again, the BBC’s
impartiality came under intense scrutiny.
BBC News passed the test. An ICM poll in
April 2003 indicated that it had sustained
its position as the best and most trusted
provider of news.
The coverage of the war itself did havesome limitations. There were times whenmilitary sources (forecasting the imminent
fall of Basra, for example) were not treatedwith enough scepticism; other organisations
had made technological advances thatsometimes provided more vivid television
coverage, and current affairs special
programmes did not make the expected
impact. But there was much to be proudof too, both in the breadth and depthof the coverage. The BBC successfully
broadened the angle of vision to include
a good range of Arab and Muslim opinion,
and there was outstanding defence analysis
on Newsnight and The World at One fromMark Urban.
In the aftermath of the war, there has beenstrong coverage and analysis, with the BBCable to deploy its rich resource of foreign
bureaux to respond to the developing
international repercussions. John Simpson’s
Panorama, In the Line of Fire, deservedly
won an RTS award, and Peter Taylor’s
series, Third World War: Al Qaeda, andMaurice Walsh’s Pipeline Politics on BBC
Radio 4 valuably explored a broader
geopolitical struggle.

43

Governors’ review
of services
News

Away from Hutton and Iraq, there havebeen some notable innovations. Drama has
been strikingly used to support analysis(in If… on BBC Two) and to engage
audiences in public policy issues (in, forexample, The Day Britain Stopped, abouta fictional UK transport crisis).
On BBC One, the popular current affairs
strand, Real Story with Fiona Bruce, steadily
increased its audience through each of its
three runs and will extend its run this year;
and This World on BBC Two drew a larger
average audience for foreign affairs thanits predecessor, Correspondent.
There were some strong pieces ofinvestigative journalism including Panorama’s
Seroxat: Emails from the Edge, a follow-up
to its original investigation into possible
side-effects from the widely used antidepressant based on audience responseto the earlier programme; File on 4 has
had another strong run, and BBC Radio
Five Live’s documentaries have establishedthemselves as a muscular presence on
the network.

44

BBC News 24
Work to improve the quality of BBC News
24 bore fruit with the channel’s relaunchin December 2003. We wanted to see thedistinctiveness of the channel reinforced byoffering an agenda that is more analytical,
more international and more diverse thanits competitors, and which gives compellingand serious journalism a higher priority
than market leadership. It is too soon for
us to make a definitive assessment of thesuccess of the relaunch, but early signs
are encouraging.
Analysis on the channel has beenstrengthened, partly through theintroduction of a new feature, Fact File,supported by BBC News’ Analysis &Research team and presented by Nick
Higham, and partly through giving BBC
News 24 better access to senior BBC
correspondents who now appear regularlyon the channel to share their expertise.
Domestically, the breadth and diversity ofcoverage has been increased by building
a closer relationship with BBC newsrooms
outside London. This has brought to thenational audience strong stories that
previously had only been seen locally.
A similar process to increase the breadthof international coverage is under way
with the BBC’s network of 44 foreign
bureaux – though there is more work to
be done here. More time and prominencehas been given to business news.

BBC Annual Report and Accounts 2003/2004

Breaking news continues to pose difficult
challenges. An important aim of any 24-hourchannel is to be first with the news,
and BBC News 24, with access to theworld’s largest newsgathering resource,cannot escape the obligation to improve
its responsiveness to breaking stories overtime. But we are clear that it has to do
this without compromising its commitment
to accuracy and we recognise that a moredetailed checking process may sometimes
mean that BBC News 24 is not always
the first for breaking news. A new set of
guidelines and editorial processes recognise
this challenge and aim to support thechannel in delivering its commitment
to speed and accuracy.
Although market leadership is not the key
priority for BBC News 24, there are earlysigns that audiences are responding wellto the changes. In January 2004, the firstfull month since the changes were put into
effect, BBC News 24 outperformed Sky
News in both weekly and monthly reachin multichannel homes, and for the firsttime in two years BBC News 24 moved
ahead of Sky News in being perceived
as the channel best for news.

1

2

4

3

5

1 Radio 4 PM
Presenter Carolyn Quinn in theRadio 4 studio

5.1
million watch BBC One’s
Ten O’Clock News

2,072
hours of news on BBC One
and Two
For more broadcasting facts andfigures, see pages 58 to 67 and136 to 146

Average audience for network news bulletins
2003/2004 (millions)
5.1(5.3) 4.4
(4.6)
2.8
(2.9)

4.9
(5.1)
3.4
(3.4)

2 bbc.co.uk/news
One of the most popular BBC sites
3 BBC Parliament
Comprehensive coverage from
Westminster

4 60seconds
BBC Three’s successful hourly
bulletins
5 Five Live Drive
Peter Allen and Jane Garvey present
the drivetime news

BBC Parliament
BBC Parliament became a full-time service
in June 2003, broadcasting 24 hours a day(previously the channel broadcast only
exceptionally in parliamentary recesses andat night). The extra air time has enabled
the channel to offer additional coverageof debates and committees, plus further
opportunities to see analysis programmes.
Awareness of the channel has been
improved through trails on BBC One,
BBC Two and BBC News 24, and thesehave been effective in directing viewers
to live coverage of key debates – recent
examples include the Budget, and debates
on tuition fees and on the Hutton Inquiry.
We are disappointed that Freeview viewers
do not receive the service in full screen
and we will continue to make clear thisis a priority while recognising the capacity
constraints and the responsibilities of the
Freeview Board.
bbc.co.uk/news
Usage of bbc.co.uk/news and of the news
services on interactive television havecontinued to grow steadily. bbc.co.uk/news
is consistently the most widely used areaof bbc.co.uk (reaching 26% of the online
population) and generates the largest shareof page impressions.

1.6
(1.6)

BBC One O’Clock News
ITV1 lunchtime news
BBC Six O’Clock News
ITV1 early evening news
BBC Ten O’Clock News
ITV1 ten/nightly news
Source: BARB, TNS/Infosys
Note: Figures for 2002/2003 appear in brackets

BBC Annual Report and Accounts 2003/2004

45

Governors’ review
of services
Learning
Overview
The BBC was founded to inform, educate andentertain, and education remains central to theBBC’s public purpose.
Education itself is undergoing a revolution.
Technology is transforming people’s ability tolearn when and how they want. At the same time
there is an increasing desire for achievement andself-fulfilment. The last licence fee settlement laidparticular emphasis on the BBC’s commitment toeducation – in particular the provision of learning
support for schools and for encouraging lifelong
learning – and the exploitation of the new learning
possibilities opened up by interactivity.
As this review shows, progress has already been
made in this area, and in 2005 a very significant
further step will be taken with the piloting of theDigital Curriculum, a free online service covering
the key elements of the school curriculum.

46

BBC Annual
AnnualReport
ReportandandAccounts
Accounts2003/2004
2003/2004

1

2

4

3

69%
of 15–16 year olds used
GCSE Bitesize

575%
increase in sales of
The Big Read top titles
For more broadcasting facts andfigures, see pages 58 to 67 and136 to 146

1 Get Writing workshop
BBC Hustle scriptwriter Tony Jordan
shares tips of the trade

2 Bitesize
Revision tips for GCSE

4 BBC Learning Zone
Overnight factual programmes
on BBC Two

3 Taking Care
Breaking Out, part of the social
action campaign on children in care

The BBC continues to provide curriculumbased content and support to children,
parents and teachers via radio, televisionand online. The big success has been
the Bitesize revision service whichreached 69% of its target audience of
15–16 year olds in 2003. Some 400,000
users accessed the service via interactive
television in the 2003 exam period. BBC
Two continues to host the BBC Learning
Zone overnight, and the BBC’s long
partnership with the Open University(OU) is evolving productively, with the
OU now co-producing mainstream
BBC factual output such as Leonardo.
The next big step will be the Digital
Curriculum – a free online service providing
high-quality interactive resources for use
at school, at home or in the community,and covering key elements of the school
curricula of England, Scotland, Wales andNorthern Ireland for children aged fourto 16. It will offer a variety of resources
including video, animation, interactive
games, printable worksheets, text pages
and illustrations, allowing teachers to adapt
the material to the needs of their pupils.
All remaining regulatory hurdles have now
been passed. The material will be piloted
in schools in 2005, with a full launchplanned for early 2006.
bbc.co.uk/skillswise provides a valued
resource for people who want toimprove their literacy and numeracy skills.
The Skillswise newsletter reaches 9,000 basic
skills tutors and the site drew 2.8 million
page impressions in November 2003.
As IT literacy becomes the third basic skill
alongside numeracy and literacy, the service
provided by bbc.co.uk/webwise will become

BBC Annual Report and Accounts 2003/2004

increasingly important. Webwise teaches basic
internet skills and draws approximately
225,000 unique users monthly.
The BBC educational output goes muchwider than the provision of formal learningmaterials. Much factual output is supported
by online and interactive material that
extends learning. The BBC also mounts
a number of large cross-platform learning
events during the year. The Big Read –a vote to find the UK’s best-loved novel –made a real impact in 2003 throughprogramming on television and radio andthrough its website. But – just as importantly– it also generated enthusiasm for reading.
The BBC worked with three partners:
The Reading Agency, The National Literacy
Trust and The Book Trust. Feedback wasvery positive: library loans of the top titles
increased by 56%; sales of the top titles
increased by 575%; more than 2,000
reading groups signed up, and many schools
used the series to encourage reading.
A significant part of the BBC’s education
output is its regular social action campaigns.
This year’s main campaign was Taking
Care. This aimed to raise awarenessabout children in care and those leavingcare and to challenge perceptions about
the issues. The campaign was on television(including interactive television), radio
and online, and it did succeed in raisingawareness and drew a good level of
response. But in terms of changing
perceptions it lacked the impact of theprevious campaign, Hitting Home, which
dealt with domestic violence. The next
campaign will deal with obesity, and wewill want to see evidence that it delivers
enduring impact for this important initiative.

47

Governors’ review
of services
Nations & Regions
Overview
The strategy to invest an additional £50million
a year over three years in a wider range of
locally produced output has helped to raiseaudience approval in the nations. In 2003/2004
BBC Television reach grew everywhere except
in Northern Ireland (where the figure is still
higher than two years ago). The BBC Where I Livewebsites are meeting local needs, as evidenced
by the very rapid growth in use. Other initiatives
such as the Voices project are also helping tostrengthen the sense that the BBC takes local
concerns seriously.
We are concerned that not enough material
from the BBC Nations is shown on network
television. It is not clear if the problem is one of
supply or demand. We wish to see greater strategic
collaboration between network commissioners
and the BBC Nations & Regions to produce morecommissions that reflect the nation in which they
have been made.
The loss of some sports rights will pose difficult
challenges in the years ahead.

48

BBC Annual Report and Accounts 2003/2004

1

2

4

3

1 BBC Radio Sheffield
Presenter Bernie Clifton withstudio guest

2 Inside Out
Morland Sanders presents forYorkshire and Lincolnshire

4 The Politics Show
Peter Henley, Political Editor
BBC South

3 Midlands Today
Presenter Nick Owen in the studio

BBC English Regions

5.7

million people across theUK watch BBC regional
early evening news

228
thousand hours of
BBC Local RadioFor more broadcasting facts andfigures, see pages 58 to 67 and136 to 146

Remit
BBC English Regions’ aim is to be
the most trusted and creative local
broadcaster in England, serving a widely
diverse range of urban and ruralcommunities. It sets out to provide anaccessible yet authoritative service ofnews, current affairs, politics, arts andmusic, religion, sport and weather onregional television, local radio and online.
The 40 BBC Local Radio stations play a
key role in the English Regions, enabling the
BBC to meet the needs of large audiences
who would otherwise not be reached byour radio output. Three million BBC Local
Radio listeners do not listen to any other
BBC Radio and 1.7 million do not listen
to any other radio at all.
The stations provide more than 228,000
hours of programmes each year, most of it
original. The weighting of the programming
towards speech (60% speech, 40% music,
with speech at key times of the day such as
breakfast and drivetime) makes their output
distinctive in a highly competitive market
where the majority of independent local
radio stations offer a music-based service.
Average reach of BBC Local Radio acrossEngland was marginally down for thesecond year in a row to 20.9% in quarterone of 2004 (from 21.4% in quarter oneof 2003) although time spent by listeners
with BBC Local Radio was up. Programming
caters predominantly for an older (age 50plus) audience and we have encouraged
management to attract a slightly younger
audience. Services such as breakfast news
and travel have the potential to act as
entry points for younger listeners.

BBC Annual Report and Accounts 2003/2004

In broad terms, BBC early evening regional
television news maintained its significant
lead over ITV across England in 2003/2004,
ending the period with an average
4.8 million viewers per programme(ITV 3 million) and an average weekly
reach of 21.4%. This overall picture,
however, disguises large variations indifferent regions. Of the 12 BBC English
Regions, the BBC early evening news drew
larger audiences than ITV in ten regions,but in the relatively new South-East region,
ITV drew a share of 30%, compared with
the BBC’s 23%; and in the North East
region, the performance of the BBC and
ITV closely tracked one another, with ITV
ending the year slightly ahead.
The BBC English Regions’ current affairs
strand Inside Out performed well during
the year. Each television region has its
own edition and the combined audience
averaged 3.1 million. Inside Out Extra
showcased the best of the output fora national audience.
BBC English Regions’ local political coverage
has continued to benefit from its movefrom BBC Two to BBC One. The local
politics segment of The Politics Show,
incorporating national and regional
reporting, drew an average audience of
1 million over the year – more than double,
and in some places treble, the audiencethat used to watch on BBC Two.
Output from the BBC English Regions,particularly television, continues to beheavily concentrated in news, current affairs
and politics. Extending the range of genres
offered – for example in sport, the arts
and regional events – is an important issue
for the future.
49

Governors’ review
of services
Nations & Regions

BBC Scotland
Remit
BBC Scotland aims to produce a rich andbroad range of high-quality and distinctive
television and radio programmes for all
age groups, properly reflecting the diverse
nature of Scotland and celebrating all
aspects of Scottish culture and heritage.
BBC Scotland carried out an extensive
review of its journalism in 2003, consulting
licence payers, opinion formers, special
interest groups, MSPs and MPs. The
question of a ‘Scottish Six’ – an integrated
hour of Scottish, UK and international
news, produced in Scotland, on BBC One
from 6–7pm – was explored. Althougha sizeable minority was in favour, thebalance of opinion did not want to change
the current schedule – the Six O’Clock
News, followed by Reporting Scotland.
As a result BBC Scotland decided not
to recommend any changes.
Reporting Scotland remains the mostwatched news programme in Scotland
and increased its audience across the year.
Its average weekly reach in 2003/2004
was 24.1%. The programme delivered
strong coverage and analysis during theScottish election campaign.
A key finding from the journalism review
was a demand from some audiences for
the BBC to provide richer coverage of
local news, and some anxiety that theM8 corridor and the pull of Glasgow and
Edinburgh is dominating the Scottish news
agenda at the expense of other, distinctive
parts of Scotland. BBC Scotland is
examining ways of responding, possibly
through a combination of radio and online.

50

BBC Radio Scotland’s reach fell slightly to
23.4% in quarter one of 2004 (from 23.8%
in quarter one of 2003).The journalism
review indicated low levels of awarenessof BBC Radio Scotland, but very high levelsof appreciation among those who did listen– suggesting that more listeners could be
attracted by stronger promotion. This isa priority for the station.
The loss of television rights for Scottish
Premier League football was a severe
setback, although radio and online rights
were retained. Football coverage has playeda significant role in driving approval and BBC
Scotland faces the testing challenge ofdeveloping appropriate replacement output.
The twice-weekly television drama River
City, which had a slow start, has begun to
bed down in its second year, with stronger
storylines and characterisation. River City
represents a significant investment in
nurturing Scottish writing, performing andcraft talent, and continued improvement
in its performance remains a priority.
BBC Scotland delivered strong output
for the network including Monarch of
the Glen and Two Thousand Acres of Sky
for BBC One, Restoration for BBC Two,plus Restoration Secrets for BBC Four.
CBBC Scotland produced output for all
CBBC, including key programming suchas Balamory and Byker Grove.
Gaelic output from BBC Scotland has
included Air Ais air an Ran Dan – the first
Gaelic comedy to transmit for six years
and the successful Voices project with
Lews Castle College in Stornoway on
BBC Radio nan Gaidheal.

BBC Annual Report and Accounts 2003/2004

Where I Live
Where I Live is the name of a seriesof local websites created by BBC
Nations & Regions to provide
a local dimension for bbc.co.uk.
More than 50 sites are now live,with more planned, offering local
news, religion, sport, weather,travel, webcams, events guides andinteractive services. The Cymru’r
Byd website offers a unique online
news and information service in the
Welsh language. Local portals alsooffer tailored news, informationand interactivity to people in sevendifferent Scottish regions.

1

2

4

3

1 Monarch of the Glen
Filming the Highland drama from
BBC Scotland for BBC One network

2 Restoration
Griff Rhys Jones preserving thebuilt heritage

4 Carrie’s War
Network drama from BBC Wales

3 Capture Wales
Recording digital stories inworkshops throughout Wales

BBC Cymru Wales

662
hours of Welsh language
output made for S4C

976
hours of television
exclusively for Scotland
For more broadcasting facts andfigures, see pages 58 to 67 and136 to 146

Remit
BBC Cymru Wales aims to produce
high-quality, distinctive programming
which reflects the unique culture andhistory of Wales, and its social andpolitical landscape. Its key ambition is
to foster an inclusive and participatory
engagement with audiences in Wales
across its range of services.
BBC Wales’s news output, especially
Wales Today with an average weekly reach in2003/2004 of 25.8%, continued to perform
strongly. Political coverage included theregular political programmes Dragon’s Eye,The Politics Show and Maniffesto; and there
was comprehensive reporting and analysisof the National Assembly elections, as wellas coverage of the National Assembly
proceedings on S4C2.
BBC Wales’s strategy of developing fewer,
stronger brands for local television bore
fruit over the year as evidenced by thedrama series Belonging; the observational
documentary series, Hospital, on the workof the University of Wales Hospital in
Cardiff; and the post-war history series,
Wales in Our Time with John Humphrys.
BBC Wales provided network output
across a range of genres, including Stalin:
Inside the Terror and Carrie’s War. However,very few of these commissions reflected
contemporary Wales. This is a priority
for BBC Wales and the network toaddress together.

BBC Annual Report and Accounts 2003/2004

One of the objectives set for BBC Wales
last year was to increase awareness of
BBC 2W and progress has been made.
Viewing figures have increased and,significantly, research shows that more than
50% of viewers are under 45 – a muchyounger profile than for BBC One or
BBC Two. A new schedule was launchedin October, and output such as I Love Wales
and Combat Pilot brought new viewers
to the service. BBC 2W was a major
broadcaster of events throughout the year,
including BBC Singer of the World in
Cardiff and Brecon Jazz.
BBC Wales continues to be a verysignificant provider of programming for
S4C, the Welsh language television service.
BBC contributions including sport, news
and drama gained a 40% share, rather
greater than their contribution in termsof hours, and Pobol y Cwm (drama) and
Newyddion (news) are cornerstones of
the S4C schedule.
Reach of BBC Radio Wales fell slightly
to 20.8% in quarter one of 2004 (from21.8% in quarter one of 2003), but reachof BBC Radio Cymru rose significantly to
8.9% in quarter one of 2004 (from 6.0%
in quarter one of 2003).
Some challenges lie ahead for BBC Wales.
In particular, the loss of rights to theHeineken Cup Rugby and to the Football
Association of Wales’s fixtures is a setback.

51

Governors’ review
of services
Nations & Regions

BBC Northern Ireland
Remit
BBC Northern Ireland’s aim is to provide
something of value for everyone in thecommunity through a broad range ofprogrammes and services which informand stimulate debate, celebrate andsupport cultural and sporting life, andreflect local interests and experiences
for audiences within Northern Ireland
and across the rest of the UK.
Part of the distinctiveness of BBC
Northern Ireland lies in the range of genres
across which, uniquely among competitor
broadcasters, it operates. It is the only
producer of television and radio drama
in Northern Ireland, the only service that
regularly broadcasts Irish language andUlster Scots programmes, and the only
provider of schools programming for the
Northern Ireland curriculum. Its political
coverage is more extensive and morediverse than the competition, and BBC
Northern Ireland showcases arts andsports events of particular significancefor its audiences.

BBC Northern Ireland’s early evening news
programme Newsline held its share steadyat 24% in 2003/2004. Its average weekly
reach was 19.8%. The programme has
been enhanced during the year: additional
reporters have been appointed to coverissues affecting communities in Armagh
and South Down; and the interactive
feature Newsline Listens has been developed.
The current affairs programme Spotlight
won its fourth RTS award in five years for
its report Loyalists at War. BBC Northern
Ireland’s political programmes also attracted
strong audiences. BBC Northern Ireland’s
election coverage was widely praised anddrew large audiences.
One notable innovation was Would You
Pass the 11 Plus? This was the BBC Nations& Regions’ first entirely interactive local
programme in which the audience took
part in an 11-plus style test. It delivered
an audience share of 29%, and the results
sections, which ran in the late evening,achieved a share of 38%.
The volume of drama produced for the
networks was disappointing and improving
this is a key priority for the coming year.
That said, there was some memorable
output. Holy Cross, which told the storyof two fictional families caught up in thereal events of 2001 on the Ardoyne Road
in Belfast, made an impact, as did Murphy’sLaw, Messiah, and Gunpowder Treason
and Plot.

52

BBC Annual Report and Accounts 2003/2004

100

million page impressions
to Where I Live sites inMarch 2004

1

4

2
3

1 Let’s Talk
In the studio of BBC Northern
Ireland’s audience discussion
programme

2 Lynton Bay
New drama serial set on thesouth-east coast of Scotland

4 Brecon Jazz Festival
Part of the commitment to covermajor arts events in Wales

3 Testing Times
Denise Watson (left) and Christine
Bleakley: Would You Pass The 11 Plus?

Memorable network factual programmes
included Dinner With Portillo and Charles II:
The Boy Who Would be King.

39%

of people inNorthern Ireland regularly
listen to Radio Ulster
For more broadcasting facts andfigures, see pages 58 to 67 and136 to 146

In entertainment, Just for Laughs performed
well in a difficult Saturday night slot, andthe political satire, Folks on the Hill, ananimation series which originated as a BBC
Radio Ulster series, broke new ground. But
some entertainment is formulaic and a new
comedy unit is to be set up to develop
distinctive and innovative comedy content.
In radio, BBC Radio Ulster remains themarket leader by a significant margin witha reach of 39.6% in quarter one of 2004.
Progress has been made in refreshing theschedules. BBC Radio Foyle continues toperform well, with a reach of 23.5%.

Average audience for regional news bulletins acrossthe UK 2003/2004 (millions)
5.7
(5.7)
3.7
(3.7)

2.9
(3.1)

Voices
Voices is an attempt to give
expression to those whose voices
are seldom heard. Producers from
BBC Nations & Regions worked withlocal communities across the UK in
2003/2004, many in disadvantaged or
remote areas, giving people the tools
and media skills to enable them to telltheir stories – and to act as a catalyst
for practical projects. In Burnley, anImam and an Anglican vicar swappedjobs to try to increase understanding
between faiths and recorded audio
diaries about their experiences;in Jersey, BBC staff helped people
with English as a second language toimprove their language skills and givethem basic computer training so thatthey could use the BBC Radio Jersey
website as a tool for improving theirEnglish; in Kent, the Romany Gypsy
community recorded theirexperience of prejudice.

4.7
(5.1)
2.9*
(n/a)

1.6
(1.7)

BBC One lunchtime regional news
ITV1 lunchtime regional news
BBC One early evening regional news
ITV1 early evening regional news
BBC One late evening regional news
ITV1 late evening regional news
Source: BARB, TNS/Infosys* ITV late evening news figures are for the period
2 February 2004 to end March 2004
Note: Figures for 2002/2003 appear in brackets

BBC Annual Report and Accounts 2003/2004

53

Governors’ review
of services
BBC World Service& Global News
Overview
BBC World Service & Global News, which brings
together BBC World Service radio, BBC World
television, and the BBC’s international-facing online
news services, now reaches 185 million homes
weekly. Independent surveys taken around theworld in 2003 indicate that the BBC’s reputation
remains strong overall, consolidating its position
as the world’s most trusted source of information.
The ability to coordinate international news
operations across radio, television and online paid
dividends editorially, resulting in more coherent
output with greater impact. An example was
the series of interviews with world leaders on
HIV/Aids, including Colin Powell and Kofi Annan,
which were carried on all three media.

54

BBC Annual Report and Accounts 2003/2004

1

2

4

3

1 BBC World Service
The news from Bush Housein London

2 BBC Hindi roadshow
Marketing the BBC World Service
to listeners in rural India

4 BBC World Service Trust
Bashir Al-Zaidi interviewing for
the Calling Iraq programme

3 Covering conflict
Colombo Correspondent Frances
Harrison in Sri Lanka

BBC World Service

139
capital cities receive
BBC World Service on FM

1.8
million people listen to
BBC World Service in Iraq
For more broadcasting facts andfigures, see pages 58 to 67 and136 to 146

Short-wave audiences of all international
broadcasters are in long-term decline, andthose of the BBC are no exception. BBCWorld Service lost an estimated 14 million
short-wave listeners in the last year. Thatloss was only partially offset by a rise in FM
listening, notably in Egypt and across Africa.
But overall the global radio audience to
BBC World Service fell slightly to 146 million
weekly listeners (from 150 million theprevious year). The decline has occurred
where it has not been possible to obtainan FM presence for regulatory or financial
reasons. Significant drops in audiences werenoted in Western Europe, Saudi Arabia andthe Ukraine. Efforts to overcome this andextend FM reach wherever possible area priority for 2004/2005.

But audiences have also reached 4.7 million
in the world’s most developed media
market – the United States. More than
one in five opinion formers in New Yorkand Washington listen each week, andone in four in Boston. In Britain too,
the availability of BBC World Service
on DAB Digital radio, Freeview digital
television, digital satellite and cable hashelped to push the audience up to arecord 1.3 million people.

In Russia, difficulties in distribution combinedwith a declining appetite for international
news led to a further decline in audiences.
A strategy has been put in place todeal with this, and we expect it to be
implemented speedily and effectively.

Editorially, BBC World Service provided
strong reporting and analysis of global events.
In Iraq, BBC News correspondents were able
to draw on the expertise of Arabic Service
reporters stationed in key cities. The Arabic
Service opened a production office in
Baghdad and a major new production
centre in Cairo.The month-long HIV/Aids
season which was broadcast across all
43 language services in December 2003
was a notable editorial achievement.

BBC World Service registered a creditable
1.8 million listeners in Iraq, in the BBC’s
first-ever survey there, and a reach of
60% in Kabul. BBC World Service’s biggest
audiences continue to be in Africa. In
Ghana, the BBC is the country’s leading
station. In Tanzania, six out of ten people
are regular listeners.

BBC Annual Report and Accounts 2003/2004

The increased availability of BBC World
Service radio programmes on FM has
helped to meet increasing competition
from local and national stations. By the endof the year, BBC World Service output was
being broadcast on FM in 139 capital cities.

Looking ahead, we have stressed theimportance of BBC World Service
securing a strong spending review
settlement in 2004 in order to achievesufficient investment to meet future FM
targets and develop new media initiatives.

55Governors’ review
of services
BBC World Service& Global News

BBC World
BBC World, the BBC’s commercially fundedinternational news and information television
channel, has seen continued improvement
in its reputation and audience reach during
the year.
The strengthening of its editorial reputation
was driven by ambitious coverage of the
Iraq war and its aftermath. During the year
the channel anchored programmes on theconflict from Baghdad, Amman, Kuwait and
Qatar, as well as London and Washington.
Audience surveys indicate that viewers
reacted positively. In Europe, for example,
respondents saw BBC World as the mosttrusted international news channel during
the Iraq war, while a survey of European
opinion leaders saw BBC World describedas more “authoritative” and “relevant” thanits major competitors. At present, however,
BBC World remains less trusted than CNN
in some markets – reflecting CNN’s wider
audience impact.

Despite the uncertain economic andpolitical climate in 2003/2004, BBC World’s
business performance reflects strong
underlying growth, but the continued
weakness of the US dollar has reduced
sterling revenues, resulting in a loss
before interest and tax for the yearof £16.5million.
We receive regular updates frommanagement on progress towards
24-hour distribution in the US market
and will continue to monitor thefinancial performance of the service.

The channel has increased its 24-hour
distribution base by 10% during theyear. The channel is now distributed to
112 million homes full-time (see graph).
Including part-time distribution, BBC World
is available in approximately 260 million
households (255 million in 2002/2003).
More than 1 million hotel rooms, 20 airlinesand 21 cruise ships also carry the channel.
From a number of studies conductedduring the year it can be estimated that
BBC World reaches 53 million individualglobal viewers weekly.

260
million homes have accessto BBC World43
language services from
BBC World Service

BBC World distribution to homes with 24-hour
reception (millions)
101

102

112

80
52
38

41

50

60

24

1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
Source: BBC World Distribution Department, various

56

BBC Annual Report and Accounts 2003/2004

1

2

1 BBC Monitoring
Gathering news and comment fromsources worldwide

4

3

2 Moscow Bureau
Chief Sub Editors Yevgeni Konovalov
and Yelena Daniliants at work in the
new combined HQ

4 Lyse Doucet
One of the news presenters
on BBC World

3 BBC news in Russian
BBC World Service offers news
in 43 languages

BBC international-facing
online news sites

279
million page impressions tointernational news websites

+

3,000

foreign media outlets
tracked by BBC Monitoring
For more broadcasting facts andfigures, see pages 58 to 67 and136 to 146

BBC World Service & Global News’
online sites continue to show strong
growth in audience usage. Monthly page
impressions rose to 279 million in March
2004 (228 million in March 2003). This
represents more than 16 million individual
monthly users.
Traffic to all language sites grew significantly
over the year, and nearly all have met or
exceeded their targets. Page impressions
to the Persian and Urdu interactive sites
have gone up more than five times, andtraffic to the Russian and Spanishinteractive sites has more than doubled.
However there are concerns about the
impact of the Chinese news site following
moves by the authorities in China to block
access to it.
The division’s interactive sites andprogrammes have demonstrated continued
vigour, for example, hosting global debateswith key figures including President Pervez
Musharraf of Pakistan, the Malaysian Prime
Minister Dr Mahathir Mohamad, President
Hamid Karzai of Afghanistan and Prince
El Hassan bin Talal of Jordan.
New interactive sites were launchedto give a voice to people in the Islamic
world and promote dialogue between
global communities who share a common
language or concern. Issue-focused websites
on the Aids debate, and on Islam and theWest have achieved strong recognition.
All the major language websites now hostregular debate forums – for example anaverage of two a week in December 2003.

BBC Monitoring
BBC Monitoring, based at Caversham,supplies news, information and comment
gathered from the mass media around theworld. It monitors more than 3,000 radio,
television, press, internet and news agency
sources, translating up to 100 languages,
to provide an authoritative view of world
events, 24 hours a day.
It provided key source material for
stakeholders including the Foreign Office,
the Cabinet Office, the Ministry of Defence
and the BBC. It responded to the highdemand for fast and accurate global media
monitoring over the past year, of particularvalue as events unfolded in Iraq, Afghanistan,
the Middle East and the whole of the Islamic
world. There is an increasing demand for
insight on global themes such as terrorism
and weapons proliferation.
BBC Monitoring achieved its best-eversatisfaction ratings from its stakeholders
at home and abroad, as measured in its
autumn 2003 customer survey. Alongsidehigh ratings for usefulness, range andselection, there was a notable rise in
ratings for timeliness and responsiveness.
The key challenge for BBC Monitoring is
to offer an increasing range of products,
including multimedia content, to customers
in the UK and overseas. We are keen
to ensure that the reputation of BBC
Monitoring continues to build and thatit secures a solid outcome in its funding
review, and maintains high satisfaction
ratings from stakeholders during 2004/2005.

The websites also served as a place where
people can express their opinions in timesof crisis or on key news stories.
BBC Annual Report and Accounts 2003/2004

57

Governors’ review
of services
Performance against
Statements ofProgramme Policy
commitments
2003/2004
Governors’ review of services
Performance against Statements of Programme Policy commitments 2003/2004

Overview
In line with the Communications Act 2003,
Governors are required to publish statements ofprogramme policy each year, setting out how theBBC will fulfil its public service remit, and to reporton performance against them in the Annual Report.
To prepare for this new responsibility, we publishedpilot statements in 2002 and 2003. The statementsfor 2003/2004 are set out in this section, withperformance data.
The BBC’s statements for 2004/2005 published in
April this year represent a significant step forward asa mechanism for holding the BBC to account. We willreport on performance against them in the next
Annual Report.

58

BBC Annual Report and Accounts 2003/2004

Commitment

Performance

BBC One570 hours of news, plus the overnight
BBC News 24 service

1,556 hours of news, plus overnight
BBC News 24 hours

80 hours of current affairs

134 hours of current affairs

45 hours of arts and music

66 hours of arts and music

650 hours of new factual programmes

945 hours of new factual programmes

260 hours of sport

496 hours of sport

80 hours of religious programmes aspart of a commitment to 112 hours
across BBC One and BBC Two

87 hours of religious programmes as partof a total of 124 hours of religion across
BBC One and BBC Two

400 hours of children’s programmes

777 hours of children’s programmes

Hold repeats below 10% of
peak-time hours

Repeats accounted for 9.99% of
peak-time hours

Offer three national and internationalbulletins on weekdays, with news at 10pm
six days a week and regional news integrated
with all major network bulletins

News bulletins at 1pm, 6pm and 10pm
have provided coverage of national andinternational issues, with regional news
integrated into the main bulletins

Panorama will have both a regular weekly
slot and four weekday specials in peak time

Panorama has a regular slot at 10.15pm
Sundays; in addition there were four
weekday specials at 9pm on topical issues
such as the war in Iraq and asylum

Three event days along the lines of
Cracking Crime day

Three event days focused on the issuesof consumer debt, asylum and the NHS

BBC Two
100 hours of news

516 hours of news

230 hours of current affairs

311 hours of current affairs

500 hours of factual programmes

1,293 hours of factual programmes

200 hours of arts and music

289 hours of arts and music

430 hours of sport

863 hours of sport

100 hours of new children’s programmes

177 hours of new children’s programmes

20 hours of religious programmes aspart of a commitment to 112 hours
across BBC One and BBC Two

37 hours of religious programmes as partof a total of 124 hours of religion across
BBC One and BBC Two

BBC Three
At least one 15-minute weekday news
bulletin in peak time, plus hourly bulletins(until midnight)

A 15-minute weekday bulletin at 7pm,
plus hourly 60seconds bulletins

At least 30 hours of education

46 hours of education

At least 15 hours of science, religion/ethics
and business29 hours of science, religion/ethics
and business

At least 50 hours of music and arts

56 hours of music and arts

At least 15 hours of current affairs

16 hours of current affairs

Around 15% of hours broadcast to be news,
current affairs, education, music and arts

Around 23% of hours broadcast were news,
current affairs, education, music and arts

BBC Annual Report and Accounts 2003/200459

Governors’ review of services
Performance against Statements of Programme Policy commitments 2003/2004

Commitment

Performance

25% of qualifying hours to be commissioned
from the independent sector, accounting forat least 25% of the programme budget

47% of qualifying hours were fromindependents, accounting for 41%
of programme budgets

80% of output must consist of programmes
specially commissioned for BBC Three*

82.3% of programming was speciallycommissioned for BBC Three

90% of programme hours and 90% of
expenditure must be allocated to programmes
made in the EU/EEA for first showing in the UK*

93.9% of programme hours were madein the EU/EEA for first showing in the UK,
representing 96.6% of the budget

33% of BBC Three’s eligible budget will be
produced from outside the M25 from2004/2005 with reasonable progress madetowards that target in the preceding years*

BBC Three almost achieved its 33% regional
production target a year early, with 32.2%
of eligible budget spent outside the M25
in 2003/2004

Six new talent initiatives will be launched by
BBC ThreeSix new talent initiatives in 2003/2004:
comedy, animation, urban music, filmmakers,
sitcom, presenters

20% of output will have interactive support

Around 55% of BBC Three programmes
were supported by interactive services, suchas bespoke content, messaging and voting

BBC FourAround 70% of production to be original

BBC Four originated 74.5% of its production

Around 70% to be made in the EU/EEA

88.4% was made in the EU/EEA

The main news bulletin to provide a
global perspective and in-depth reports
not widely featured in mainstream bulletins

The World relaunched in January 2004
and has increased the number of in-depthfeatures on global news

The best of contemporary and classic
international film

254 hours of cinema including weeklyclassic and foreign-language films

The most interesting theatre brought tothe screen

Productions included Richard II Live at
the Globe, and John Osborne’s A Hotelin Amsterdam from the Donmar

BBC Four will be supported with an online
service, and will mount special events withinteractive opportunities

Around 1,500 web pages support
BBC Four; the interactive service
provides text-based content as wellas programme-specific services

The CBBC Channel

60

Spend more than three-quarters of its
budget on new and original programmes
accounting for around a quarter of all air time

The CBBC Channel spent 92% of its
budget on new original programmes,
accounting for 24.3% of all air time

650 hours of drama

966 hours of drama

Around 20% of the schedule should be drama*

22.2% of output was drama

At least 85 hours of live news

75 hours of live news. The shortfall is due tothe channel’s decision to offer an increased
number of shorter bulletins in 2003/2004
as this proved the most effective means ofreaching and engaging its young audiencein news output (see page 30)

640 hours of schools programmes acrossthe curriculum

653 hours of schools programmes acrossthe curriculum, including presentation output

700 hours of entertainment shows

1,078 hours of entertainment

Around 75% of output to be made in
the EU/EEA

82% of output has been made in
the EU/EEA

BBC Annual Report and Accounts 2003/2004

Commitment

Performance

CBeebies
More than 4,500 hours of output across thegenres that matter to its young audience

4,717 hours of output, including music
and movement, storytelling, make-and-do,
simple science, natural history, puzzle
programmes, animation and drama

80% of output to be originally-produced
programming

87% of output has been originally produced

Around 90% of the output to be
UK/EU originated

96% has been UK/EU originatedJust over three-quarters of the channel’sinvestment will be in new British programming*

89% of investment has been in new
British programming

Invest directly in animation co-production far
more frequently, thereby increasing the numberof UK-based projects*

This commitment has proved hard tomeet due to higher than expected costs;
CBeebies has instead pre-bought titles
with third parties (see page 31)

An interactive television service growing astechnology develops

The interactive service for children has
developed, but bandwidth restrictions haveprecluded an equivalent service for parents
and carers. CBeebies has committed todeveloping this in 2004/2005

BBC Radio 1
At least 35% of the playlist to be UK artists

45% of the playlist were UK artists

2,700 hours of the output to be specialist music
covering all the appropriate youth genres

2,778 hours of the output was
specialist music

270 hours of news and current affairs

305 hours of news and current affairs

Commission features and documentaries ona wide range of subjects of importance to ayoung audience

Output included information and advice
programmes and a regular documentarystrand on Lamacq Live

Bring high-quality live music events to allparts of the UK

Events included One Big Weekend in
Manchester and Cardiff and One Big Sunday
in Leicester

BBC Radio 2
1,000 hours of specialist music

1,004 hours of specialist music, including
Bob Harris Country and The Organist
Entertains

More than 500 hours of news andcurrent affairs

991 hours of news and current affairs;
excluding The Jeremy Vine Show, BBCRadio 2 broadcast 693 hours of news
and current affairs

150 hours of religious output in peak time

163 hours of religious output in peak time

75 hours of arts coverage

88 hours of arts coverage

Around one-third of air time to be speech

38% of airtime was dedicated to speech

Support new musical talent by reflecting
new artists within popular music

Radio 2 has supported new, British artists
such as Jamie Cullum and Amy Winehousethrough music and performance output;
Radio 2 has also carried a number of events
supporting new talent, including The Young
Folk Awards and Chorister of the Year

BBC Annual Report and Accounts 2003/2004

61

Governors’ review of services
Performance against Statements of Programme Policy commitments 2003/2004

Commitment

Performance

BBC Radio 3
More than 50% of output to be live or
specially recorded music

54% of output was broadcast as live or
specially recorded music

Commission at least 60 new pieces

60 new pieces were commissioned

Broadcast every concert in the BBC Proms live

72 out of 73 concerts in the BBC Proms live
were broadcast (one was deferred by twodays for additional post-production work)

Invest substantially in UK cultural activity
including the five BBC orchestras and the
BBC Singers

BBC Radio 3 broadcasts the majority of theoutput of the BBC’s five orchestras and the
BBC Singers, and invests some £26.5million
in the BBC’s performing groups

Continue to support new young artists anddevelop a new range of voices for on-air
presentation

Investment in schemes such as New
Generation Artists is identifying andsupporting emerging talent

BBC Radio 4
700 hours of news bulletins

741 hours of news bulletins

1,300 hours of daily current affairs

1,663 hours of daily current affairs

440 hours of weekly current affairs, businessand politics

460 hours of weekly current affairs,
business and politics

800 hours of original drama and readings

1,079 hours of original drama and readings

300 hours of original comedy

333 hours of original comedy

180 hours of religious programming

182 hours of religious programming

BBC Radio Five Live6,000 hours of news including rolling coverageof big news stories as they break

6,486 hours of news including rolling
coverage of big news stories as they break,for example Saddam Hussein’s capture

2,000 hours of sport including live commentaries

2,106 hours of sport including livecommentaries from – among others –the Premiership, the Rugby World Cup
and the World Athletics Championship50 hours per year of documentaries

52 hours of documentary output,
including the relaunched Five Live Report

BBC Five Live Sports Extra
Extract greater value for licence payers fromsports rights already owned by the BBC

1,089 hours of additional sports commentary

IXtra

62

Broadcast 20% speech – about half of thisto be news, documentaries and social
action programming

Speech accounted for 28.5% of output;
news, documentaries and social action
accounted for 8.2% of output. The extension
of TX Unlimited from one to two hours(see page 37) will enable the channel tomeet the commitment in 2004/2005

Offer a daily discussion programme: 250 hours
per year of relevant topical debate

TX Unlimited was extended from one totwo hours each weekday from August 2003;
provided 366 hours of relevant
topical debate

BBC Annual Report and Accounts 2003/2004

Commitment

Performance

Cover all the popular ‘urban’ genres, concentratingon new music and new artists

Dancehall, hip-hop, UK garage, RnB anddrum & bass formed the backbone of themusic output; new music and new artists
featured strongly

Feature live performances from major artists

There have been weekly live performances,
but delivering high-profile international
artists has proved more difficult than
expected; this is expected to improveas the network establishes itself andbuilds audiences

Broadcast from important black music events

Events included Notting Hill Carnival andSouthport Weekender

BBC 6 Music
Support a 24-hour news and music news service

BBC 6 Music has continued to provide
a news and music service between 7.30am
and 10pm weekdays, 11.30am and 6.30pm
on Saturdays and 11.30am and 4.30pm on
Sundays, but has not extended to 24 hours
for funding reasons

Put music into context through a broad repertoire
including popular music from the 1970s to 1990s,
together with documentary features andauthoritative presenters

Nearly 50% of the music was from the1970s to the 1990s; presenters included
Phill Jupitus, Steve Lamacq and Tom Robinson

Broadcast exclusive musical moments from theBBC’s session archives

BBC archive session material was usedthroughout BBC 6 Music

Cover major music festivals

Festival coverage included Glastonbury,
Reading, Leeds, Summer Sundae in Leicester,and T in the Park from Perth

BBC 7
Broadcast 6,500 hours of speech radio drawing on
the best of current and archive programmes

Speech accounted for all of BBC 7’s
7,644 broadcast hours
The over-achievement reflects the move to
24-hour broadcasting in December 2003

Offer around 2,500 hours devoted to books
and drama

3,328 hours devoted to books and drama

Keep comedy at the heart of the schedule –over 2,500 hours throughout the year

2,852 hours of comedy

Provide around 1,400 hours of children’s
programming

1,464 hours of children’s programming

Commission and broadcast an estimated
40 hours of unabridged readings

60 hours of unabridged readings

BBC Asian Network
Broadcast approximately 50% music and50% speech

The network has exceeded its commitment
with speech accounting for 66% of hours

Continue to address the needs of first-generation
Asians through locally originated programmes ina range of South Asian languages, totalling over
2,000 hours per year

2,730 hours of South Asian language output

BBC Annual Report and Accounts 2003/2004

63Governors’ review of services
Performance against Statements of Programme Policy commitments 2003/2004

Commitment

Performance

Broadcast early morning devotional programmes
throughout the year and mark the major festivals
with specially commissioned programmes

Regular religious programming totalled
11 hours a week with special programming
marking major festivals

Give a strong focus to news and current affairs

Breakfast, lunchtime and drivetime carried
substantial news and current affairs reporting

Lead the way in broadcasting new British Asian
popular music, Bollywood and Lollywood,and promoting home-grown talent

A wide spectrum of Asian popular music
was played including new British Asian acts

bbc.co.uk

64

Continue to supply websites that complement thefull range of the BBC’s broadcasts and programmes.
Reducing investment does not mean giving theaudiences any less choice in the ways they engage
with BBC content

Range has been maintained despite thereduced funding in web-based content;
use of programme-related sites such as radio,
television, drama, entertainment and factualis up by, on average, 24% over the past year

Provide distinctive, original and high-quality
content in areas from news through GCSE
revision to Teletubbies

News and analysis updated every minute,and a wide range of educational output
including GCSE Bitesize for teenagers
and Skillswise for adults, underpins thedistinctiveness of bbc.co.uk

Provide on-demand access to previously
broadcast radio programmes and selectedvideo clips, as well as ways to listen to the BBC’s
new digital radio services

Use of the Radio Player has grown 85% year
on year. Listeners to the digital radio services
via Freeview now have access to a live text
broadcast providing, for example, track listings

Make it easier for users to find what they want.
An improved homepage and a universal toolbar
will aid users in navigating BBCi content

A new homepage and a universal toolbar
which sits across all pages of bbc.co.uk
have been launched

At all times maintain a high level of moderation
and regulation of content and family-safe web search

Reactive moderation has been introduced
on a number of message boards where
the community and subject matter wasdeemed low-risk; we have requested thatmanagement puts in place the necessary
processes to ensure that standards aremaintained (see page 41)

To act as an essential resource offering wide
ranging, unique content, as well as providing
access to and guidance around non-BBC sites
and user-focused navigation and site design*

Alongside its own content, bbc.co.uk
provides access to third-party content
via in-context links in the text and its own
search application

To use the internet to forge a new
relationship with licence fee payers andstrengthen accountability*

bbc.co.uk provides licence payers withinformation about the BBC and how it isrun, as well as its programmes and services.
Message boards and service websites enableaudiences to directly contribute to, orcomment on, output; use of these has grownby 25% over the past year

To provide a home for licence fee payers on
the internet and act as a trusted guide to thenew media environment*

bbc.co.uk continues to play a significant rolein driving online take-up through initiatives
such as Webwise (see page 47). Safety iskey, particularly on the children’s sites
where CBBC has launched a dedicatedsearch tool for 6–12s offering accessto only pre-approved BBC and external
websites, and offers a pre-moderated
message board

BBC Annual Report and Accounts 2003/2004

Commitment

Performance

BBCi
Interactive news and information service acrossall digital television platforms offering in-depth
content and opportunities for user contribution

Interactive services are now accessible
via a single button on all digital television
platforms. The range of content has been
extended on all platforms, but particularly
on digital satellite. Similar services for
Freeview and digital cable viewers will launchas more bandwidth becomes available

Create interactive enhancements to television
programmes in all genres from sports to factual,news to entertainment

The number of enhanced television (eTV)
services has almost doubled to 190 over the
past year (see page 41)

BBC News
Broadcast more current affairs in peak timeon BBC Two

Current affairs enjoyed greater prominenceon BBC Two; If…, a new current affairs
strand in peak time, launched on BBC Two

Launch a new political strand for the under-45s

Two new political strands for the under-45s
were piloted, but failed to attract the target
audience. Efforts are now focused on engaging
younger audiences via mainstream output

Broadcast all-day explorations of subjects ofmajor concern on BBC One

BBC One output included Asylum Day andDebt Day

Create innovative and ambitious programmes
to explain the big political issues facing society

Output included The Day Britain Stopped,using drama to illustrate transport issues

Panorama will offer hard-hitting investigations in
32 editions a year

32 editions of Panorama were broadcast
on BBC One, including four weekday specials

BBC News 24
On BBC News 24 make the channel more
analytical, more international and broader in
its outlook than other UK news channels

BBC News 24 was relaunched with a more
analytical, international and broader outlook,
and a greater emphasis on local andbusiness news (see page 44)

During peak hours the channel will provide: arolling news cycle containing coverage of breaking
news and major events as they unfold; headlines
on each quarter-hour and comprehensive hourly
bulletins; and in-depth business and personal
finance updates, sport and weather each hour

BBC News 24 provides news headlines
on the quarter-hour throughout the day
and night (not just in peak). Dedicatedbusiness and sports correspondents provide
regular updates tailored to the needs of theaudience. Breaking news is carried as it unfolds
and new editorial processes have been put
in place to help the channel deliver thesewith speed and accuracy

Increase our coverage of rolling news by: working
with BBC Nations & Regions to deliver more diverse
rolling news; illustrate stories with more examples
from outside South-East England; broadcast from
Scotland and Wales ahead of the parliamentary andassembly elections; indicate more effectively when
we are broadcasting from locations around the UK

Closer relationships have been built with
BBC correspondents across the UK toprovide improved coverage of emerging
stories outside London; themed days on
national issues use a wider range of more
local examples. A package of output wasprovided ahead of the elections in Scotland
and Wales

BBC Annual Report and Accounts 2003/2004

65

Governors’ review of services
Performance against Statements of Programme Policy commitments 2003/2004

Commitment

Performance

Explain international stories in more depth thanother UK channels with first-hand reporting andanalysis from more than 200 correspondents.
Cover the major general elections and internationalsummits and increase our investment in live
coverage from the rest of Europe

BBC News 24 has drawn on the BBC’sinternational correspondents to offer
a wider range of stories including theme
days covering major international stories,
such as Iraq. Major EU elections have been
covered, with BBC News 24’s chief politicalcorrespondent providing reports on all major
EU summits

Cover a wide range of business stories in
depth, taking advantage of the BBC’s expertisein business journalism

Business news has increased prominencein the schedule with a wider range ofstories during the day, including a stock
market report at 4.30pm. World Business
Report and Business Today are aimed ata more specialist audience

Offer viewers more ways to engage with
the news by offering increased interactivity

A video loop of business stories wasintroduced on digital satellite and Freeview
during the year, with an application for cable
television viewers planned. Increased use has
been made of email and text messaging toenable audiences to contribute to broadcasts

BBC Nations & Regions: News and current affairs
BBC English Regions: up to 3,470 hours of daily
television news, 240+ hours of other programming

3,408 hours of daily television news,
256 hours of other programming, including
current affairs

BBC Scotland: 530+ hours on television;
2,000+ hours on radio

504 hours on television; 2,260 hours on radio

BBC Wales: at least 750 hours on television**including political programmes; at least 18 hours
a day news and speech on radio

731 hours on television; 20 hours a day
news and speech on radio

BBC Northern Ireland: up to 440 hours
on television

382 hours on television
Shortfalls reflect the move of the afternoon
bulletin from BBC Two to a shorter format
on BBC One delivering larger audiences, atemporary shortening (now restored) of thelunchtime bulletins, and in Northern Ireland,suspension of the Assembly resulting in
reduced coverage

BBC English Regions

66

Continue to build on the strength of its multimedia
offering using as its base more than 225,600 hoursof local radio output

228,033 hours of local radio output

Bring more arts stories from minority ethnic
communities to air on local radio through apartnership with Arts Council England

The Roots partnership generated nearly
1,300 arts stories from African, Asian,
Caribbean and Chinese communities
on radio, television and online

BBC Annual Report and Accounts 2003/2004

Commitment

Performance

BBC Scotland
More than 950 hours of local television acrossa range of genres of which more than 230 hours
to be sport

976 hours of local television across a
range of genres of which 256 were sport

BBC Radio Scotland and BBC Radio nan
Gaidheal to broadcast more than 9,500 hoursof programmes

9,912 hours of programmes broadcast
on BBC Radio Scotland and BBC Radionan Gaidheal

BBC Wales
600 hours of Assembly coverage on S4C2548 hours of Assembly coverage
broadcast on S4C2 – the shortfall reflects
fewer Assembly sittings than expected

Make more than 300 hours of sport and morethan 370 of other mixed genre

322 hours of sport and 404 of othermixed genre

BBC Radio Wales and BBC Radio Cymru eachto broadcast a comprehensive news and speechservice at least 18 hours a day

A comprehensive news and speech service
for 20 hours a day broadcast on both
BBC Radio Wales and BBC Radio Cymru

Produce 640 hours of Welsh language
programmes for S4C

662 hours of Welsh language programmes
for S4C

BBC Northern Ireland
Up to 75 hours of factual programmes,
documentaries, music and arts

90 hours of factual programmes,
documentaries, music and arts

Up to 75 hours of television entertainment

91 hours of television entertainment

Up to 100 hours of sport on television

93 hours of sport on television –the shortfall was caused by the lossof the Heineken Cup rugby rights

BBC Radio Ulster/BBC Radio Foyle will
broadcast up to 8,500 hours of programmes

8,758 hours of programmes were broadcast
with new weekend shows and specials* These commitments are conditions of the new service approvals set by the Secretary of State for Culture, Media andSport but were not included in the BBC Statements of Programme Policy 2003/2004** Total includes output broadcast on S4C and the network

BBC Annual Report and Accounts 2003/2004

67

Governors’ review
of commercial activities
BBC Worldwide Limited
Overview
BBC Worldwide Limited is the commercial
subsidiary of the BBC that aims to maximise thevalue of the BBC’s content assets for the benefitof the licence payer, in order to reinvest its earnings
into public service broadcasting and to extend
the enjoyment of BBC programming among UK
audiences and around the world.
It does this by, for example, licensing programme
formats, selling rights, publishing books, magazines,
DVDs and CD-Roms linked to BBC programmes,and operating commercial television channels.
BBC Worldwide operated in a very difficult trading
environment in 2003/2004, but despite difficulties insome areas of its business, succeeded in returning£141million in cash to the BBC (up from £123million
in 2002/2003).
The BBC is launching a comprehensive review of
its commercial activities which will report by theend of 2004.

The commercial exploitation of assets
created for the licence payer is an
important part of the BBC’s response to
the challenge set by successive governments
for the BBC to make the most of financial
self-help measures. BBC Worldwide helps
to manage the BBC’s brands strategically,
thereby maximising their value – as well
as extending licence payers’ enjoyment
through books, magazines, digital media andcommercial television channels. Overseas,
BBC Worldwide’s growing presence raises
awareness of UK cultural values and acts
as a global platform for talent – helping
to deliver public value to the UK
creative community.
In tough global conditions, BBC Worldwide
increased its sales from continuing
operations, including BBC Worldwide’sshare of joint ventures, to £657million– up 3% on last year (£640million). The
difficult trading conditions were offset
by the success of BBC Worldwide’s
multiformat strategy which gives it a diverse
business base and some protection against
market volatility. BBC Worldwide’s profit
increased to £37million, up 13% on lastyear (£32million). Profit on continuing
operations declined to £37million from
£44million, primarily due to the erosionof the US dollar.
BBC Worldwide will only engage inactivities that fit BBC values. This year,
for example, BBC Worldwide introduced
an ethical food policy restricting the useof BBC children’s characters on licensed
products – this took account of growing
public concern over child obesity.
In 2003/2004, BBC Worldwide sold 40,000
hours of television programming. Strong

68

BBC Annual Report and Accounts 2003/2004

1

2

1 The Andy Pandy Roadshow
Puppets were turned into live
theatre for this roadshow

4

3

2 Global success
Colosseum, now licensed tobroadcasters in 35 countries

4 The Office
The second series broke the record
for the fastest-ever selling DVD ofa television programme

3 The Radio Times
Colin Baker as Dr Who showcasedby the Radio Timesdemand was evident at BBC Showcase
where programme buyers view BBC
productions. This year 480 buyers from80 countries screened 600 hours of
new television and initiated £50millionof business.

38
million homes in the US
can access BBC America

20
countries bought and adapted
the Great Britons format
For more broadcasting facts andfigures, see pages 58 to 67 and136 to 146

BBC Worldwide cash flow to the BBC(£million)
141

Alongside BBC content, BBC Worldwide
successfully exploits a wide range ofintellectual property rights on behalfof independent producers. In 2002 theDepartment for Culture, Media and Sport(DCMS) launched a review of television
programme production following claims
that the independent sector was being
disadvantaged. BBC Worldwide participatedfully in the review and, following the DCMS
response to the report in January 2003, has
now enhanced its separation from the BBC
in its dealings with the independent sector.
BBC Worldwide is a market-leader inthe sale of television formats – programme
concepts adapted for use in overseas
markets. Last year’s big success was theinteractive Great Britons format. This was
successfully remade as Great Germans
for the ZDF network and versions areunder way in 20 other countries.

123
96
75

81

82

53

1996/1997
1997/1998
1998/1999
1999/2000
2000/2001
2001/2002
2002/2003
2003/2004
Source: BBC Finance

106

BBC Worldwide operates television
channels in the UK and abroad. Overseas,
over 340 million homes now have accessto BBC Worldwide’s channels and the digitalchannel BBC America can be seen in
38 million US homes. In the UK, BBC
Worldwide operates UKTV as a joint
venture with Telewest. This year, UKTV
Documentary, UKTV People and UKTV G2
were launched as additional niche networks.
BBC Worldwide’s other main partnershipis a joint venture with Discovery
Communications Inc. The joint venture
BBC Annual Report and Accounts 2003/2004

channel Animal Planet is now available in 193
million homes and has secured distribution
in the competitive German market.
BBC Magazines saw copy sales pass
100 million. Radio Times had its mostprofitable year, and there were strong
debuts for Songs of Praise, Easy Gardening
and BBC Parenting.
BBC Worldwide Consumer Publishingsold 26 million books, videos, DVDs andaudio products. The big DVD success
was The Office series two which broke therecord for the fastest-ever selling DVD
of a television series. BBC Worldwide isa leading UK publisher of adult non-fiction
books – retaining number one positionin cookery, gardening and natural history.
BBC Audiobooks is the UK’s leading
spoken word publisher.
It was a difficult year for children’s
properties, given increased competition in
the sector. But BBC Worldwide consolidated
its position as the UK’s leading pre-school
video and DVD distributor – with the
CBeebies pre-school series Balamory doing
well on DVD and CD-Rom, and recently
launching as a magazine.
BBC Worldwide Learning’s major
development was the launch of
TeachandLearn.net – a partnership with
the Open University to create the UK’s first
online development service for teachers.
BBC Worldwide is active in digital media.
This year it launched BBC News on
RealNetworks’ broadband SuperPass
service. It was also a strong year for theinternet service provider beeb.net which
saw 31% year-on-year growth in users.
69

Governors’ review
of commercial activities
BBC Ventures Group
LimitedOverview
BBC Ventures Group Limited is the umbrella
company for four commercial companies providing
broadcast services in the UK and internationally,
including to the BBC. The group, which has some
4,000 staff, was originally tasked to deliver cash andcost savings of £300million to the BBC over five
years as part of the self-help programme asked forby the Government as part of the last licence fee
settlement. After a strategic review of the business,
the BBC decided to sell one of the companies, BBC
Technology, which would enable the BBC to realise
larger savings than planned, and take them earlier.

BBC Resources
BBC Resources is the largest production
facilities business in Europe and supplies
outside broadcasts, studios and postproduction as well as costumes and wigs.

In a year when markets remained difficult, BBC
Ventures Group delivered cash of £7million for the
BBC (2002/2003 £6million) and cumulative cost
reductions in the supply of facilities of £27million(2002/2003 £23million). Revenues were £432million(excluding trading between BBC Ventures Group
companies of £36million) and profit before interestand tax (PBIT) was £15million.

The company had some notable successes,
including supplying at very short notice
the facilities for the memorable coverageof the Rugby World Cup celebrations incentral London when half a million people
were on the streets. With less than aweek to prepare, BBC Resources supplied
38 cameras, 31 vehicles and a helicopter.
For the World Rally Championship, thecompany supplied the first live coverage
from inside cars travelling at high speeds
in hostile terrain. Developments ofspecial cameras and wireless solutions
also facilitated innovative coverage ofWimbledon and the London Marathon.

The BBC is launching a comprehensive review of
its commercial activities which will report by theend of 2004.

70

BBC Annual Report and Accounts 2003/2004

The business is dependent on supplying
facilities for sports coverage, and last year
was the trough of the four-year sport cycle.
This, combined with tougher conditions
in all markets, led to reduced volumes ofwork and pressures on margins. However,
BBC Resources delivered revenues of£128million, finished the year in profit(PBIT £4million), generated £7million in
cash for the BBC and is positioned to takeadvantage of the cyclical upturn in events
over the next year.

BBC Technology
BBC Technology provides products andservices for managing and distributing richmedia content across multiple platforms
including digital media, telecoms, broadcast
and interactive television.

1

2

4

3

1 Rugby World Cup welcome
BBC Outside Broadcasts supplied
38 cameras to cover the event

2 Wi-Cam technology
New development frees
cameras from cables

4 The Broadcast Centre
New state-of-the-art television
play-out centre in west London

3 Colledia
BBC Technology’s new producthelps broadcasters manage media

750
thousand costumes available
from BBC Resources81%
of programming on
BBC One subtitled
For more broadcasting facts andfigures, see pages 58 to 67 and136 to 146

In 2003 the company launched its
Colledia set of products which enables
broadcasters, film companies and othermedia organisations of all sizes to produce
high-quality content more efficiently.
Colledia has been bought by the US
sports broadcaster ESPN.
The Governors’ decision to approve
the sale of the company was taken after
an internal strategic review of the BBC’s
technology requirements for the next
decade which identified potential annual
savings of between £20million and£30million through outsourcing technology
services. The buyer will take on the current
staff of 1,400 and provide the BBC withtechnology support, including web-hosting,broadcast technology services and desktop
support for the duration of a ten-year
contract. The new contract is expected
to begin in 2004/2005. The sale remains
subject to the approval of the Department
for Culture, Media and Sport (DCMS).
BBC Technology delivered revenues of£230million, finished the year in profit(PBIT £10million) but was a net consumerof cash in the year (an £11million outflow).
The business passed cumulative savingsto the BBC of £25million.
BBC Broadcast
BBC Broadcast aims to provide
broadcasters with everything they needto launch, promote, manage and play-out
content for television, the internet andmobile devices. The range of services
includes new channel launches, play-out andchannel management, channel branding andpromotion, and subtitling, audio describing,signing and other media access provision.

BBC Annual Report and Accounts 2003/2004

The most significant development for thecompany in 2003/2004 was the completionof its new HQ, the Broadcast Centre, partof the newly developed Media Village close
to Television Centre that is planned to
become home to a number of other media
companies. Over the course of 2004/2005
all the channels and interactive streams
played out from Television Centre will
migrate to the Broadcast Centre in oneof the biggest operations of its kind inbroadcast history. The new HQ will
significantly increase BBC Broadcast’s
capacity to service new channels.
Despite the investment in the Broadcast
Centre, BBC Broadcast delivered revenuesof £109million, finished the year in profit(PBIT £7million) and generated £15million
in cash for the BBC. In addition, cumulativesavings delivered to the BBC were £2million.
BBC Vecta
BBC Vecta was launched in 2003 to exploit
commercially technical innovations generated
by the BBC’s Research & Development
team. BBC Vecta works with Research &Development teams in the BBC, including
the Kingswood Warren research labs, andwith other strategic partners.
BBC Vecta delivered revenues of £1million,
finished the year having made a loss
(loss before interest and tax £3million)
and consumed £4million in cash.

71BBC people
and talent

Overview
The main strategic business of BBC People(the new name for Human Resources & InternalCommunications) has been continuing to develop
and implement the Making it Happen culturechange process designed to transform the BBC
into the world’s most creative organisation.
There have been new initiatives to improve
the quality of leadership, succession planning,
recruitment and induction.
As well as training its own staff, the BBC acts as
a trainer to the wider broadcasting industry and it
has continued to develop its free online courses.
An important part of the BBC’s role is to find anddevelop new talent, on and off air. BBC Talent is the
key project in this area.

72

BBC Annual Report and Accounts 2003/2004

Leadership
In April 2003 the Governors approved asignificant new Making it Happen initiative,
the BBC Leadership Programme, designed
to improve the quality of leadership andmanagement in the BBC. This followed
a widespread staff consultation in 2002
which revealed a strong desire by staff for“a better relationship with our managers
and … consistent leadership at all levels of
the BBC”. The BBC Leadership Programme,
based at Ashridge, was developed as aresult and launched in September 2003.
Over the next five years almost 7,000
managers, from leaders of small teams
to senior managers, will complete theprogramme. The Governors have asked forthe success of the training to be measured.
Succession planning
Alongside the BBC Leadership Programme,a succession-planning framework has beendeveloped to identify and develop a poolof talent ready for senior leadership roles
across the BBC – and to help identify
gaps in the talent pool to inform external
searches. A valuable by-product should be
more movement of the most talented andbest-trained individuals across the BBC.
However, sharing and moving talent aroundthe BBC has traditionally been very difficult
to achieve. The Governors will view successin this area as a litmus test of a morepositive attitude towards collaboration
between divisions.

1

2

Feedback
The BBC carries out a staff survey eachyear as a way of identifying areas thatneed work. One such area is insufficient
feedback to staff. The 2003 survey
indicated that only 40% of staff receive
regular feedback on how they are doing
and only 35% of managers have regularconversations with staff about theirdevelopment. Measures are being taken
to improve performance through a new
feedback and development process.
Recruitment
A new approach to recruitment is being
introduced, with a new advertising style,website and literature – and usefulexperiments have been made in placing
advertisements in a broader spreadof media.
Induction
This year has seen the first full year of
the new induction programme, Upfront.
All eligible new staff are expected to attend
this four-day programme, whatever job
they do in the BBC. In the last quarterof 2003 attendance across the BBC stoodat 97% with most divisions achieving full
attendance. All new BBC Governors attend
Upfront sessions.

1 Breaking through
Holby City’s Jaye Jacobs – got
her break through BBC TalentIndustry training
As well as training its own staff, the BBC
continues to play an important role as a
trainer to the wider broadcasting industry.
BBC Training & Development now provides
free online training modules for freelances
covering aspects of television and radio
production, editing and journalism. This is
the first stage in building a learning portal
for the broadcast industry providing
a range of free online courses.

2 Upfront induction
New BBC staff get a tasteof programme making

AwardsIn 2003/2004 the BBC received over
250 programme-related awards across
television, radio and new media. These
included 28 BAFTAs, two Golden Globes,
22 Sonys and 54 RTS awards.
Outside of programme making, theBBC has received awards for a rangeof other activities such as property
design, environmental schemes andgood customer services.

BBC Talent
BBC Talent was launched in 2000 andit continues to provide an important way
for the BBC to find and nurture new talentthroughout the UK. Nearly 600 people havebeen talent-spotted so far. New schemesin 2003/2004 included finding radio DJs
for 1Xtra, writers for BBC Wales, sitcom
writers for BBC Three, specialist classicalpresenters for BBC Radio 3 and young
singers for a BBC Two children’s opera, Little
Prince. Little Prince attracted some 25,000
applicants for the nationwide auditions ofwhom 6,000 were seen.

BBC Annual Report and Accounts 2003/2004

73

Being accountable
and responsible

Overview
The Governors are responsible for holding
BBC management to account and, as trusteesof the public interest, they work to understandthe needs and concerns of licence payers so thatthey can take them into account when questioning
management about the quality of BBC services.
Governors’ accountability activities in 2003/2004
have included launching and facilitating independent
research to learn from licence payers what they
think about aspects of BBC services (see pages
14 and 21), continuing to work with BBC advisory
bodies, and reviewing the BBC’s processes forhandling complaints.
The Governors also take seriously the BBC’s
responsibility to be a good corporate citizen – it is
one of the ways that the BBC delivers public value.
Initiatives here range from charitable fundraising
to measures to reduce the BBC’s negative impact
on the environment. The BBC now submits itself
to external verification of its progress in these areas
and this year’s results are reported in this section.

Public consultation on the futureof the BBC
The BBC actively consulted the public
and opinion-formers on its future in
the context of the Charter Review
process launched by the Department
for Culture, Media and Sport (DCMS)
in December 2003.
The DCMS set out eight key questions
about the BBC’s role and structure. They
included: “What do you value about the
BBC?”, “How should we pay for the BBC?”and “How should the BBC be governed
and regulated?” The DCMS solicited
responses through leaflets, websites andpublic meetings.
The BBC both promoted this consultationand commissioned its own audience
research using focus groups and survey
work. The BBC also undertook researchamong active users of BBC services on theinternet and local radio. A questionnaire
placed on the bbc.co.uk homepage drew
3,200 responses. A series of 32 local radio
phone-in programmes was mounted
across the country.
In February 2004, the BBC sponsoreda Westminster Media Forum seminaron the future of the BBC, attended bybroadcasting industry figures, regulators andpolicy makers. In March 2004 an edition ofPanorama debated the future of the BBC.
The findings from all these consultative
exercises mounted by the BBC have been
passed to the DCMS to help inform theirdeliberations. Some of the findings are set
out below.

74

BBC Annual Report and Accounts 2003/2004

1

1 Held to accountPanorama special: What’s the pointof the BBC?

2

On the question of what people valued
about the BBC, the views expressed wereon the whole positive. In particular, people
valued the quality of BBC programming –‘quality’ being defined both as settinghigh standards and as representing a highstandard of impartiality and independenceof news reporting. The genres most often
applauded were news and current affairs,
and other factual programming suchas documentaries and natural history
programming. Entertainment was alsomentioned by many, although someexamples were criticised as too populist.

£9.67
the cost of the licence fee
per month in 2003/2004
For more broadcasting facts andfigures, see pages 58 to 67 and136 to 146
Average monthly licence fee spend

BBC One
BBC Two
Digital television channels
Transmission and collection costs
BBC Radio 1, 2, 3, 4 and Five Live
Digital radio stations
Nations & English Regions television
Local radio
bbc.co.uk
Total

£3.37
£1.45
£0.98
£0.98
£0.99
£0.08
£0.90
£0.61
£0.31
£9.67

Note: Programme related costs such as marketing,and all overheads have been fully apportioned against
channels/networks to show the total cost of BBC output

Many people thought the BBC presented
sport in the best manner and without theinterruption of commercials – but there
was regret that the BBC had lost someprime sporting events on television.
There was a perceived lack of comedy
on television, compounded by repeatsof older series – although, when prompted,
people could think of new BBC comedies
that were good, current and relevant.
On the question of how the BBC should be
funded, the majority thought the licence fee
was an important and acceptable funding
tool which offered value for money – butthere was a group who were vociferous
in their dislike of the licence fee which they
saw as a compulsory tax.
On the question of how the BBC should
be regulated, the general public had little
awareness of the BBC’s present structure.
In the discussions with industry figures
the main concern was what was seen as
the difficulties surrounding the role of theGovernors. Their tasks were seen as being
split in a way that made it more difficult
for them to operate efficiently.
BBC Annual Report and Accounts 2003/2004

2 Listening in
BBC Governor Ranjit Sondhi
listening to audiences in Birmingham

BBC advisory bodies, Broadcasting
Councils and the English National ForumThe BBC draws on a network of morethan 500 licence payers around the UK
for advice on programmes and services.
Broadcasting Councils for Scotland,
Wales and Northern Ireland represent
the interests of people in the nations. In
England, Regional Advisory Councils advise
the Governors through the English National
Forum (ENF) and are informed in their turnby a network of Local Advisory Councils.
The Councils’ most important task is
to advise the Governors on programmeand service objectives for BBC Nations &Regions and to monitor, through a processof regular review, the extent to which the
BBC delivers them. Overall, they felt thatsignificant progress had been made against
the year’s objectives. There were, however,a number of key issues of concern.
The Broadcasting Council for Scotland
noted that the review of BBC Scotland’s
news journalism had raised two key
issues: audiences had an appetite formore localised news services and there
was a need to explore new ways ofengaging audiences in political issues.
However, although a sizeable minority
wanted an integrated early evening news
programme for Scotland (the ‘Scottish Six’)
there was not sufficient support to change
the existing schedule. The loss of the
television rights for Scottish Premier
League (SPL) football was of concern as
football coverage helped to drive approval
among viewers. BBC Scotland should
capitalise on coverage of non-SPL games
and look to provide programming
appealing to the same demographic
group. Council also raised issues about75

Being accountable
and responsible

Community partnerships
All Together Now
All Together Now is a community
media project based in Leeds. It
teaches people in one of Britain’s
most socially-deprived and diverse
areas how to make radio, video andonline pages. It gives them skills, butalso builds confidence by allowing
them to decide what is important,and to showcase the things theywant to celebrate.
Their work goes out on BBC Radio
Leeds, Look North, and the Leeds
Where I Live website, capturingpersonal stories that journalists
would find it hard to get to by
traditional means. The project allows
contributors to find a voice beyond
their own community – and it helps
to build trust between local people
and the BBC.
The project is a partnership between
the BBC, Education Leeds, Leeds City
Council and Arts Council England,
Yorkshire. Since March 2003 morethan 100 adults have been producing
material for All Together Now.
Local schools, including parents,
are involved too. In the longer term
it is hoped to create a media centre
in a newly built academy to act asa centre of excellence from which
the concept can be developed inother areas of the country.

76

the portrayal of Scotland and the Scottish
people in network programming.
Portrayal was a matter of concern
for all Councils. It was felt that network
commissioning was still too London-focused,
resulting in programmes that did not fullyreflect the diversity of life in the nations
and English regions. The Broadcasting
Council for Northern Ireland, in particular,
noted a significant reduction in network
commissions and expressed concern.
The Broadcasting Council for Northern
Ireland also felt that the growing demandfor increased language coverage for Irish
and Ulster Scots would be a key issue
for the BBC in Northern Ireland during
the coming year. Council also highlighted
the low coverage of both Digital Audio
Broadcasting, for radio, and Freeview,for television. As a result the Governors
have asked management to pursue theimplications of extending digital coveragein Northern Ireland.
The Broadcasting Council for Wales noted
the success of two ongoing strategies. The
strategy of fewer but stronger brands had
resulted in the strengthening of programmes
and services. The community strategy had
proved to be a very successful way ofworking closely with audiences throughout
Wales and had led to a real feeling ofownership and involvement for licencepayers. There were, however, concerns
about the loss of some sports rights.

BBC Annual Report and Accounts 2003/2004

The ENF noted that, in addition toexpressing concerns about the level of
network production around the English
regions, there was demand for moreregional non-news television output.
This would enable the BBC to engage
with a wider local and regional audience
than at present and to ensure that lifein the English regions was accurately
represented. The ENF also suggested thatthe current accountability framework in
the English regions could be put to better
use by network programme makers andcommissioners. As a result, the Governors
have asked management to raise awarenessamong commissioners and controllers of
the role of the Broadcasting Councils andthe ENF.
The ENF was pleased to note that
their concerns of last year about local
government coverage had led to the BBC
carrying out a full scale review. In March
2004 the results were presented to theGovernors who approved a programmeof improved training for BBC journalists
covering local government, as well as
measures to strengthen relations withlocal councils. The Governors also
approved a follow-up study to explore
and improve coverage of local unelectedbodies or quangos.
The views of the Broadcasting Councils
and the ENF are published in more detailin the Annual Reviews of BBC Scotland,
Wales, Northern Ireland and theEnglish Regions. These are available
at bbc.co.uk/annualreport.

1

2

Central Religious Advisory Committee
The Central Religious Advisory Committee
advises the BBC on religious broadcasting
policy and programmes.
This year the Committee praised radio forthe range, quality and vitality of its religious
programming. BBC Radio 4’s Beyond
Belief was particularly commended forthe intelligence of its approach and its
commitment to diversity not only between
faiths but within them. The Committee
also noted with appreciation the rangeof high quality religious programming on
BBC Radio 2 and BBC World Service.
On television the picture was more
mixed. The Committee found muchgood programming, with observational
documentaries, such as When the God
Squad Came to Town, praised for theirpresentation of religious themes andsubjects in an accessible and engaging
way. There was concern however
at what the Committee perceived
to be a lack of understanding of religious
faith on the part of some programme
makers. There was a widespread view, forinstance, that Noah’s Ark had proceededon the incorrect assumption that mostChristians hold a literal belief in the flood
story and that such false assumptions
are too frequently in evidence.
The Committee raised other concerns
such as the late and variable schedulingof religious programming on television andis yet to be convinced that the correctbalance has been struck between thecommitment to regular, continuing series

1 All Together Now
The Leeds-based project teaching
local people media skills

and one-off documentaries. The Committee
will keep these questions under review
over the coming year while also reviewing
its own role and workings with a view toplaying a more proactive, supporting rolefor programme makers.
As outlined in the review of BBC One(pages 25 to 26) the Governors will be
undertaking work in the coming year
to assess the effectiveness of the religion
strategy they approved in 2002.
BBC World Service and Global News
Consultative GroupThe Governors’ World Service and Global
News Consultative Group provides theGovernors with an independent external
assessment of the range and quality of
BBC World Service output.
Editorial standards in the context
of the Iraq war
In 2003/2004 the Group decided toassess the continuing quality and integrityof BBC World Service editorial control andprocesses, at a time of extraordinary world
events which polarised opinion in the UK
and internationally. The Group also wishedto assess the reliability, balance, objectivity
and impartiality of the BBC’s programmes
in time of war, including comparison
with competitors.

2 BBC World Service Trust
Jihan El Alayly explores theconcerns of families in Iraq

After listening retrospectively to a selectionof programmes on the English and Arabic
radio networks and watching the BBC
World television channel during 2003,
it concludes that the BBC’s coverage,
in relation to the Iraq war and Middle
East affairs, is impartial.
It is pleased to note that an independent
assessment by specialists, the Royal Instituteof International Affairs (Chatham House),
supports the view that the BBC’s output tothe Middle East is accurate, balanced andobjective. It is also pleased to note positive
results from a specially commissioned focus
group study conducted in the Middle East,
which indicate that the BBC’s output israted highly in the Arab world for trust,reliability, objectivity and impartiality.
Review of language service output
The Consultative Group also reviewed
output in English, Arabic, Russian, Ukrainian,
Czech and Serbian.
It is satisfied that all BBC World Service
output reviewed this year attracted highscores from independent assessors for
authority and accuracy. While there isroom for improvement in certain aspects,
such as style and audibility, the overall
picture is reassuringly positive.

Having considered a range of sources andevidence, it is confident that the editorial
process in World Service and Global Newsis robust, and that content is underconstant scrutiny.

BBC Annual Report and Accounts 2003/2004

77

Being accountable
and responsible

Community partnerships
The Community Channel
The Community Channel is a
not-for-profit digital television
station owned by the Media Trust,a charity that helps all charities tocommunicate better. The BBC hasdeveloped a strategic relationshipwith The Community Channel.
BBC support takes various forms.
One is the free supply of archive
material – for example, the channel
has rebroadcast programmes madeby the BBC World Service Trust
about HIV/Aids and about leprosy.
There have been a number oftraining initiatives. BBC Training &Development, in partnership with
The Community Channel and the
University of Westminster, madea documentary about the Charity
Times Awards. A plan is being
developed to allow BBC trainees
to help community projects – forexample, by helping charities create
content for The Community Channel.
The BBC allows The Community
Channel access to three hours a dayof its Freeview multiplex to enable
the channel to be seen in digitalterrestrial television homes.
BBC Broadcast, which has acommercial arrangement to playout the channel, is developing CSR
initiatives including subtitling support
and on-air promotions production.

78

Responding to complaints
The Governors’ Programme Complaints
Committee (GPCC) is responsible for
ensuring that complaints are properly
handled by the BBC.
In June 2003, GPCC agreed withmanagement the terms of reference for an
external audit of BBC complaints-handlingprocesses by the Office for Public
Management. The outcomes were reported
to the GPCC in September and when
Mark Byford was appointed Deputy
Director-General in December he was
asked to take this work forward. Proposals
for change were accepted by theGovernors in June 2004 and are now
being implemented. They are designed
to make the system easy to access, clear,
speedy, fair and independent. We willreport on the outcomes next year.
In this Annual Report we are reporting on
the system in place in 2003/2004. During
this period, BBC Information was a key
avenue for people wishing to lodge acomplaint. The service operates round theclock and can be contacted by telephone,email or letter. In 2003/2004 it received
approximately 2.5 million contacts in total,of which 8% were complaints. A daily log,
published on the BBC intranet site, enabled
programme makers to discover what theaudience said about their work. Digestsof the information were also circulated
to management and Governors.
Where people believed there had beena serious breach of the BBC Producers’
Guidelines, they could make their caseto the Programme Complaints Unit (PCU).
The PCU investigated complaints impartiallyand recommended appropriate redress.
BBC Annual Report and Accounts 2003/2004

In 2003/2004, the PCU dealt with
1,640 complaints (1,596 in 2002/2003)
concerning 875 items. Of these, 389
individual complaints were wholly or partiallyupheld concerning 102 items – 11.6% of thetotal number of items investigated. Upheld
findings were published quarterly, together
with a note of the action taken ineach case.
In 2003/2004 there was a serious
deterioration in the response time for
dealing with complaints by the PCU.
Only 35.5% of complaints were answered
within the target times (20 days, or 35 days
for more complex cases) compared with49.5% in 2002/2003. This deteriorationreflected the continuing impact of the email
complaint facility – this was introduced in
2002 and led to a doubling of the numberof complaints.
The GPCC undertook its third annual
review of BBC complaints handlingprocesses in April 2004, assessing theoperations of BBC Information and the
PCU against best practice criteria. It
concluded that BBC Information provided
an excellent service to audiences. The
Committee noted that the PCU fulfilled akey role in investigating serious complaints,
but that urgent action was needed to
improve PCU response times.
The GPCC also considered appeals frompeople who had made a serious editorial
complaint to BBC management and were
not satisfied with the response.
The Committee considered 27 appeals
this year, and upheld 11 in full or in part.
It received quarterly complaint reportingfrom management, and maintained its

1

2

2.5
million people contacted
BBC Information last year

£30m
raised by Children in Need
For more broadcasting facts andfigures, see pages 58 to 67 and136 to 146

1 Learn for RealNew media workshop, a community
mentoring project in London

active oversight of the BBC’s strategic
approach to complaints handling.
The Programme Complaints Unit also
liaised with Ofcom (and previously with the
Broadcasting Standards Commission (BSC))
on complaints about BBC programmes. In
the year to 31 March 2004, the BSC/Ofcom
upheld 12 complaints of unfair treatment
or unwarranted infringement of privacy,
in whole or in part. In the same period,
the BSC/Ofcom partly or wholly upheld
standards complaints about 25 broadcast
items. The BBC complied with all statutory
directions given by the BSC/Ofcom.
Corporate social responsibility
The BBC sets out to deliver public value
primarily through its programmes andservices. But the BBC also extends its
public value through activities that reachout directly into society through acommitment to corporate social
responsibility (CSR).
For the BBC, CSR means acting in the public
interest to strengthen and enrich communities
across the UK and through international
charitable action. It means behaving withintegrity and ethical consistency towards its
own staff, audiences and suppliers, andtowards the communities in which the BBC
operates, to maintain their faith in the BBC
as a trusted creative institution.
Business in the Community, the organisationthat works to improve the positive impact
of business in society, publishes a CSR index
each year. In 2004 the BBC’s score was
87% (71% in 2003) placing it 42nd in the
top 100 UK companies for CSR. Public
expectations of the BBC are rightly very
high in this area and in 2003, the BBC set
BBC Annual Report and Accounts 2003/2004

2 Blue Peter
The 2003 Blue Peter appeal raised
money for Mencap

up a dedicated CSR centre to lead andcoordinate activity. Later this year, it will
publish the BBC’s first full CSR report.
That report will give a comprehensive
picture. The emerging themes so far fromthe BBC’s CSR activities in 2003/2004 are
as follows.
BBC charitable appeals
BBC broadcast appeals are an important
public service which enable a wide rangeof charities to raise money – and awarenessof their work. The BBC tracks public
attitudes to major fundraising appeals and
86% of respondents say broadcast appeals
are a good way of raising money and 76%
expressed high levels of trust in the BBC toensure that the money raised is wisely spent.
The BBC Governors are advised onbroadcast appeals by the Appeals Advisory
Committee (AAC), 12 specialist external
advisers representing a broad range ofinterests across the charitable field. Stuart
Etherington (Chair of the National Councilof Voluntary Organisations) was appointed
Chair in July 2003.
The AAC provides advice on the BBC
appeals policy and has undertaken astrategic review of broadcast appealsthat will report to the Governors in
the autumn. The AAC also assists theGovernors with their oversight of major
fundraising projects such as BBC Children
in Need, and on the allocation of the BBCRadio 4 and BBC One Lifeline appeals.
Last year the weekly BBC Radio 4 appeal
raised more than £970,000 and themonthly Lifeline on BBC One raised
more than £204,000.

79Being accountable
and responsible

Community partnerships
Media on the ParkMedia on the Park is a partnership
between BBC South and thecommunity of Leigh Park near
Havant in Hampshire. The area isacutely deprived and the community
has little confidence in the media.
Park Community School is a local
school that until recently was failingacademically. The school was awarded
official Arts Status in 2003, and usedpart of the funding this generated
to plan a Broadcast Media Suite foruse by schools in the area and thewider community.
The school approached BBC Southfor technical advice. BBC South
responded with much more. Theyarranged for BBC Technology toequip the suite at cost; they placed
two radio producers in the school
and they offered support and airtime
for the project.
Benefits for the children range fromincreased oral and literacy skills toincreased motivation and confidence.
And there are benefits for the BBC
too. Staff have got to know thissection of their audience better –sometimes having their views ofwhat makes relevant news challenged
along the way. And the perceptionof the BBC is slowly changing too –gradually it is coming to be seen as
more accessible and trustworthy.

80

In November 2003 BBC Children in Needraised more than £15million on the night– and more than £30million in total. This is
the highest amount ever raised, and will be
distributed in grants to help children acrossthe UK. In the same month, Blue Peterlaunched its Get Together Appeal with
Mencap, and has raised £530,000 so far.
BBC Fame Academy bursaries
The talent show Fame Academy raised£2.7million through phone votes andrecord sales. The money has been used
to set up the BBC Fame Academy bursaries
to support young musical talent. Five young
musicians have each been awarded grantsof £37,500 towards their musical educationand hundreds of grants have been madeto school children to help them buy
instruments or musical equipment.
BBC World Service Trust
The BBC World Service Trust, the BBC’sinternational development charity, aims topromote development through innovativeuse of the media in the developing world.
It is a registered charity, not paid for by theBBC, and raises funds from governments,
international agencies and other partnerorganisations. In 2003/2004 a record£10.2million was raised.
Trust projects include building capacityof local and national media, providing
training in media skills, and developing
health and educational campaigns inmany of the world’s poorest countries.
The Trust now has 400 staff working on
projects in 23 countries in partnership with
NGOs, broadcasters and governments.

BBC Annual Report and Accounts 2003/2004

Connecting with Communities
Connecting with Communities waslaunched in October 2003 to promoteand facilitate volunteering opportunities
for BBC staff. The BBC is partnered with
30 national charitable organisations whooffer more than 200 types of volunteeringexperiences across a range of sectors
including education, the arts, disability anddiversity. During the first six months morethan 400 staff registered their interest.
BBC payroll giving
Payroll giving enables employees to makecharitable donations straight from their salary.
In the course of 2003/2004 an initiative waslaunched to increase take-up and as a result,payroll giving more than doubled to 9%
of staff. Their contributions total morethan £500,000 annually, which puts the
BBC among the top 25 payroll givers.
Community partnerships
The BBC operates a number ofcommunity partnerships, actively seeking
out opportunities to join with other localorganisations to improve conditions in
the communities in which they operate.
Three case studies are set out in theboxes in this section.
Open Centres and BBC buses
The first BBC Open Centre was launchedin 2001 in Blackburn to strengthen andextend BBC Radio Lancashire’s connection
with its local audience by offering
opportunities to learn about the media,
acquire IT skills and become involved incommunity broadcasting. The project wasvery successful and there are now similarcentres in Stoke, Sheffield and Liverpool.
BBC Wales also has four community
studios which carry out a similar role.

1

2

A BBC bus was also piloted in 2001 to
take the local radio station out on theroad, to put listeners on air, and again
to create opportunities for media andIT training. It proved a success and there
are now buses operating in Lancashire,
Humberside, Sheffield, Derbyshire,
Lincolnshire, Cleveland, Newcastle,
Manchester, Cumbria, Merseyside, Devon
and York. Buses for BBC Wales and BBC
Northern Ireland were launched in 2003.
The Open Centres and the BBC buses
are wholly dependent on partnerships
to provide expertise, funds and resources
which the BBC does not have on its
own. The projects were established withBlackburn with Darwen Council as theprimary Open Centre partner and
Lancashire County Council as the primarypartner on the bus project, together witha number of local arts organisations, job
centres and business link organisations as
secondary partners. This model has been
followed in each of the subsequent projects.
The success of the initiative can be measured
in various ways. The target set for enrolment
on basic IT training at the Blackburn OpenCentre for the first year – 600 people – wasexceeded inside six months. The centre isalso attracting a notably younger and more
ethnically diverse audience than the local
radio station’s average listenership, bringing
potential new audiences onto the BBC’s
websites and airwaves.

1 BBC buses
Providing IT and media training
in the community

The BBC and the environment
The BBC acts to ensure that it complies
with environmental legislation, but it has
a responsibility to go further than this – toreduce its environmental impacts and to
manage its business risks. A comprehensive
review of the legislation has been
undertaken, taking into account newlegislation in the areas of waste and energy.
The BBC’s management systems arebeing strengthened to ensure proper
responsibilities and risks are identified
and procedures put in place.
The BBC has had a corporate environmental
policy in place since 2001, supported bya system of performance monitoring andtargets for waste, greenhouse gas emissions,energy, transport and sustainable buildings.
Environmental performance is benchmarked
against leading UK companies and media
companies. The Business in the Environment
Index places the BBC 2nd in the media andentertainment sector, and 77th overall
in comparison with 176 of the FTSE350
leading companies.
During 2003 the BBC collected morethan 520 tonnes of paper in London
and Scotland for recycling.
The BBC aims to reduce greenhousegas emissions per broadcast hour by 8%
between 2002 and 2010. The reduction
in greenhouse gases (measured as carbon
dioxide CO2) is being achieved throughbuying green electricity, implementing
energy efficiency schemes, switching to
low emission vehicles, and through on-site
power generation using a combined
heat and power (CHP) scheme.

BBC Annual Report and Accounts 2003/2004

2 Children in Need
Pudsey and friends turn out
in Belfast

The proportion of ‘green’ electricity
used by the BBC has now reached 88%.
The electricity comes from renewablesources such as hydroelectric power
stations, wind farms and gas from landfill
sites based in the UK.
The BBC has a range of schemes topromote energy-efficient business travel
and help reduce road congestion andassociated pollution. The BBC has set
targets with its London suppliers toconvert 40% of the business cab fleet
to alternative/dual fuel such as LPG,
LPG-diesel and electric.
Performance data on greenhouse gas
emissions and waste recycling will
be published in the CSR report in
the autumn.
Sustainability is a key priority in the BBC’s
programme of building and refurbishment.
The Media Village, the BBC’s major new
development in White City, London, hasbeen awarded an ‘excellent’ environmental
rating under the BREEAM (Building Research
Establishment Environmental Assessment
Method). This measures the environmental
impact associated with buildings, assessedagainst performance criteria such asenergy efficiency, transport emissions
and ecological impact.

81

Compliance
The Board of Governors has clear
responsibilities under the BBC’s Charterto ensure that the BBC behaves responsibly
and follows all applicable regulation andcodes of practice.
They must satisfy themselves that the BBC:
complies with all legal obligations
has an appropriate management structure
maintains sensible controls to protect
its assets
adheres to its own guidelines and codesof practiceOn the following pages the Board ofGovernors and independent auditors
report formally on the BBC’s policies,
procedures and compliance as follows:
1 Fair trading
2 Financial statements
3 Risk and control processes
4 Other corporate governanceresponsibilities
5 Governors’ remuneration report
6 Programmes, channels and promotions
7 Cost of compliance
8 Donations and acknowledgements

82
85
86
90
91
94
96
96

1 Fair trading
Governors’ Fair Trading Compliance Committee (FTCC)
During the year the FTCC was comprised exclusively of
Governors of the BBC: Rt Hon The Lord Ryder (Chair),
Professor Fabian Monds, Dame Ruth Deech and Baroness Hogg
(retired February 2004).
The key responsibilities of the FTCC are to:agree and keep under review the BBC’s Fair Trading
Commitment
agree and keep under review the BBC’s Fair Trading Guidelines
through the Governance & Accountability department, appoint
independent auditors to test the BBC’s compliance with its
Fair Trading Commitment
consider reports from the independent auditors or otherindependent experts as appropriate, the Head of Fair Trading,Head of Business Assurance and Senior Executives on mattersrelating to compliance with the BBC’s Fair Trading Commitment
consider significant external challenges to the BBC’s Fair Trading
Commitment
consider the Governors’ and independent auditors’ annual
reports and opinions on Fair Trading
consider the Governors’ annual report and independent
auditors’ opinion in respect of the World Service Trading
Protocols
report to the Board of Governors on the work of theCommittee
Governors’ statement on fair trading
Commercial activities and fair trading
The BBC’s core purpose is to provide public service broadcasting
funded by the licence fee. Licence payers’ investments, built up
over many years, have produced a critical mass of talent andproduction capability for the BBC, together with an unparalleledarchive of past programming. These assets have a secondary value,
over and above their use on public service channels and outlets.
The BBC has a responsibility to ensure that this value is properly
developed commercially, and used to the benefit of licence payers.
In pursuing commercial activities the BBC is, like other organisations,fully subject to both domestic and European competition law.
However, unlike other organisations, the BBC’s responsibility to
trade fairly is reflected in further and more demanding requirements
arising from its Royal Charter. In particular, the Charter requires
the avoidance of cross-subsidy between the BBC’s publicly funded
and commercial activities.
Fair trading compliance procedures
The BBC’s fair trading obligations are embodied in its Fair Trading
Commitment, compliance with which is scrutinised throughout
the year by a standing committee of the Board of Governors,
the FTCC. Compliance with the Fair Trading Commitment isunderpinned by the BBC’s Fair Trading Guidelines which werereviewed and updated during the year, and were previously called
the Commercial Policy Guidelines.

82

BBC Annual Report and Accounts 2003/2004

The Committee is advised directly by independent auditorscommissioned and managed by the Governance & Accountability
department, and by the BBC’s Head of Fair Trading and Headof Business Assurance, if necessary without the mediation of BBC
management. All subsidiaries and commercial operations reportto the Committee on their activities, and relevant staff withcommercial responsibilities are required by the Committee to be
trained in the BBC’s fair trading policies.
The FTCC regularly reviews the independence of its external
auditors with advice from the Head of Business Assurance.
The Committee holds discussions with the external auditors,
PricewaterhouseCoopers LLP, without management being present
and reviews the level of non-audit fees paid to its external auditors.
Any significant work is put out to competitive tender.
The management of the BBC’s fair trading arrangements is regularly
tested by the British Standards Institute and these arrangements
have been accredited with the ISO 9001:2000 quality standard.
The last assessment conducted in December 2003 confirmed thatthe procedures are continuing to operate effectively.
By their nature, fair trading judgements are complex, reflecting
the constantly developing environment in which the media
industry operates. Through the FTCC, the BBC’s Board ofGovernors brings informed scrutiny and balanced judgement tobear on the important issues of policy that arise from the BBC’s
engagement in commercial ventures.
In its response to the Richard Lambert Review of BBC News 24
against the conditions of its approval, the BBC offered to consider
on fair trading grounds the relationship between BBC News and
BBC World every year. This would include commissioning atriennial benchmarking exercise for independent consultants toconfirm that marginal cost pricing remains market practice, andannual verification by external auditors that the marginal costprinciple is appropriately applied in dealings between BBC Newsand BBC World. A benchmarking exercise was completed in April
2004 by independent consultants which confirmed that marginal
cost pricing remains market practice. In addition, following a reportfrom external auditors, the Board of Governors is satisfied that themarginal cost principle has been applied appropriately.
Fair trading complaints
Among the responsibilities of the Head of Fair Trading is advising
the FTCC and the Executive Committee on any fair trading
complaints which have been laid against the BBC. He may becontacted at BBC, Media Centre, 201 Wood Lane, London
W12 7TQ. The FTCC publishes a quarterly bulletin of theBBC’s response to any allegations of breaches of the Fair
Trading Commitment.

Events of the year
External challenges
During the year there were no formal investigations of the BBC’scommercial activities by external bodies eg, the Office of Fair
Trading (OFT) or the European Commission. However, a numberof complaints were made to the Board of Governors or to the
Head of Fair Trading alleging that the BBC was in breach of its
guidelines. These included the following:
Faces Casting Agency, which supplies artists, extras and otherparts to productions, wrote alleging that the BBC appeared
to be operating a “closed-shop in terms of artists obtaining
employment”.
The BBC responded explaining that the selection process
had been refined to make it more transparent and is overseenby the BBC’s Procurement department. The selection criteria
are available for public inspection and will be subject toperiodic review. Provided agents meet the criteria, they will
be able to apply to be included on the list of agents that the
BBC may use.
BAB Copying, a stationery and office furniture supplier to a local
BBC office, wrote to the Board of Governors raising concerns
about the manner in which the BBC undertook its selectionof a UK-wide stationery supplier.
BAB Copying claimed that it had been supplying stationery
locally through the Birmingham BBC office for over 30 years
but had now become aware that their contract would not
be renewed as, following a procurement exercise, a national
contract had been awarded to another company.
The BBC responded explaining that as a publicly fundedorganisation, the BBC is subject to the EU Public Procurement
Regulations. The BBC had complied with these Regulations and,as required by the Regulations, an advertisement was placed in
the Official Journal of European Communities (OJEC). There is
no requirement to notify companies that an advertisement has
been placed.
The letter also confirmed that pre-existing contracts withBAB Copying would, of course, be honoured.
The Chairman of the FTCC received a letter from IPC tx
Limited challenging the BBC’s decision not to agree to IPC’s
request for trailing two of its magazines.
Following consideration by the Committee, a response wassent to IPC confirming that in the Committee’s view BBC
management had been correct to refuse to trail these two
magazines as they did not comply with the BBC’s guidelines.
The Committee however recognised that the guidelines would
benefit from review to ensure clarity and an internal review
was therefore commissioned with advice from the Fair Trading
auditors. This review has now been completed and the guidelines
have been updated.

BBC Annual Report and Accounts 2003/2004

83Compliance

The Head of Fair Trading received a letter from ntl:Broadcast
which raised a number of concerns relating to the tender
process by BBC Sport for the production of horse racingfor Grandstand. The letter expressed concern about thetransparency of BBC Resources’ costs and its level of pricing
in bidding for this tender. The letter also alleged that BBC
Resources was implying to independent producers that any
bids which included BBC Resources would be treated morefavourably by BBC Sport.

Respective responsibilities of Governors, management and auditors
The Governors are responsible for ensuring that the BBC meets
all the requirements of competition law and trades fairly. They haveestablished its Fair Trading Commitment, determine the objectivesof the system of internal controls designed to ensure compliancewith this Commitment and monitor the outcomes of those controls.
They are also responsible for preparing the Governors’ statement
on fair trading compliance, as included in this Annual Report andAccounts, which includes a statement on fair trading.

The Head of Fair Trading wrote to ntl:Broadcast confirming that
he was satisfied that both BBC Sport and BBC Resources acted
fairly and in a manner consistent with the BBC’s fair trading
requirements. The selection of a partner by BBC Sport was
based on fair, objective criteria. The investigation also confirmedthat BBC Resources’ prices were fairly based and consistent
with the BBC’s Commercial Policy Guidelines.

The BBC’s management is charged by the Governors with operatinga system of internal controls designed to ensure compliance with
the Fair Trading Commitment, including identifying and assessing risks
that could threaten fair trading and designing and implementing
responses to such risks.

ntl:Broadcast subsequently wrote again alleging, inter alia, that the
BBC does not appear to operate a level playing field and that
there appeared to be a policy of keeping revenues in-house in
the BBC. The letter also raised a number of specific instances
which purported to support this.
The Head of Fair Trading undertook a detailed investigationof all the points raised and confirmed, inter alia, that the BBC
does not have a policy of keeping revenue “in-house”, nor has
it unfairly tilted the competitive playing field to the detrimentof ntl:Broadcast as alleged.
All external challenges are reported in the BBC’s Fair Trading
Bulletin which is available online at bbc.co.uk/info.
Governors’ opinion
The Governors consider that the policies contained in the BBC’s
Fair Trading Commitment are consistent with the requirements of
the Royal Charter and the accompanying Agreement. Through the
FTCC, they have gained reasonable assurance that the frameworkof controls and procedures designed to ensure that these policies
are applied throughout the BBC has been operating effectively
throughout the year.
Independent Fair Trading Auditors’ report to theGovernors of the BBC for the year ended 31 March 2004
We have audited, in our role as the BBC’s Fair Trading Auditors,
the system of internal controls established within the BBC toprovide the Governors with reasonable assurance that the BBC
has complied with its published Fair Trading Commitment for
the year ended 31 March 2004.
Our instructions for this audit, which included the scope of work
to be undertaken, were agreed with the FTCC. These instructions
include agreement that our audit should be conducted in accordancewith relevant auditing standards, agreement on the limit of ourliability in respect of this work and agreement that our duty ofcare in respect of this work is solely to the BBC. We are satisfied
that the agreed scope of our audit was sufficient to enable us toexpress the opinion set out below.

84

As the BBC’s Fair Trading Auditors, it is our responsibility to form
an independent view, based on our audit work, as to the extent towhich the BBC has established, and applied, a system of internal
controls which provide reasonable assurance that it has compliedwith its Fair Trading Commitment during the year. We havereviewed specific decisions reached by the BBC on fair trading issues
only in so far as this is necessary to form an opinion on the system
of internal controls. Our audit was not designed to express an opinion
on the quality of the specific decisions taken by the BBC with regards
to fair trading. We have also reviewed whether the Governors’
statement on fair trading reflects our findings of the BBC’s compliancewith its system of internal controls, and we report if it does not.
This opinion has been prepared for, and only for, the BBC inaccordance with our instructions which were agreed with theSecretary of the BBC on behalf of the FTCC. We do not, in giving
this opinion, accept or assume responsibility for any other purposeor to any other person to whom this report is shown or into
whose hands it may come save where expressly agreed by ourprior consent in writing.
Basis of audit opinion
We have carried out a programme of procedures and tests
designed to provide us with the assurance that we were seeking.
Our work consisted of enquiry and assessment to enable us
to form a view as to whether an appropriate system of internal
controls was in place. We also reviewed the processing of asample of material transactions to provide us with reasonableassurance that the system of internal controls had been applied.
As with any system of control, however effective, it is notpracticable to ensure that no errors or irregularities have occurred
without being detected. Our audit work was therefore designed
to give the Governors reasonable assurance, but not certainty, as
to the adequacy of the system of internal controls which were inplace and being applied to deliver compliance with the Fair Trading
Commitment during the year. Further, because fair trading issues
require judgements which ultimately might be tested in a courtof law, competition authority or elsewhere, there is always a riskof challenge even where the system of internal controls has been
followed and decisions have been taken with the greatest care.

BBC Annual Report and Accounts 2003/2004

Opinion
In our opinion the BBC has established and has applied a system
of internal controls which provide reasonable assurance that it hascomplied with its Fair Trading Commitment for the year ended
31 March 2004.
PricewaterhouseCoopers LLP
Chartered Accountants

London17 June 2004

Governors’ report on BBC World Service Trading Protocols
BBC World Service is responsible for commissioning andscheduling its own programmes and for making programmes for
its language services, but purchases English language programme
making and technical and support services from other divisions of
the BBC (the Supplier Divisions). BBC World Service also receives
services from and supplies services to the BBC’s commercial
subsidiaries (the Subsidiaries).
It was agreed by a joint Foreign and Commonwealth Office(FCO)/BBC World Service Working Group that the BBC would
draw up guidelines to govern the trading relationship between
BBC World Service and other parts of the BBC, in order toensure that BBC World Service maintains its distinctive voiceand to preserve the clear separation between Grant-in-Aid andlicence fee income. These Trading Protocols were approvedby the FTCC in 1997. Each of the Supplier Divisions then drew
up detailed agreements with BBC World Service, specifying:
the services to be provided
criteria to ensure the quality of the services
the cost of the services
The FTCC is responsible for monitoring and reviewing compliancewith the Trading Protocols. The FTCC receives regular reports frommanagement on the effectiveness of the systems and proceduresin place to ensure compliance with the Trading Protocols.
KPMG LLP (the external auditors) has reviewed a summary of
the value of transactions and the related cash flows which havetaken place during the year between BBC World Service andthe Supplier Divisions and the Subsidiaries. KPMG LLP has
reported to the Governors that, in their opinion, the information
contained in the summary of transactions for the year ended
31 March 2004 has been accurately extracted from the books
and records of BBC World Service and the Supplier Divisions
and the Subsidiaries and has been properly prepared on thebases of cost allocation and apportionment methods set out
in the agreements between BBC World Service and the Supplier
Divisions and the Subsidiaries and, on this basis, there has been nomaterial cross-subsidy between Grant-in-Aid and licence fee funds
or between Grant-in-Aid and the BBC’s commercial subsidiaries.
Governors’ statement on BBC World Service Trading Protocols
Following regular reports to the FTCC by the Head of Fair
Trading and internal and external auditors, the Governors
are satisfied that:
the Trading Protocols reflect the requirements of the FCO/BBCWorld Service Working Groupagreements are in place which are consistent with the
Trading Protocols
there has been no material cross-subsidy between Grant-in-Aid
and licence fee funds or between Grant-in-Aid and the BBC’scommercial subsidiaries

2 Financial statements
Statement of the Board of Governors’ andExecutive Committee’s responsibilities for the
preparation of the financial statements
The Governors and Executive Committee are required by theBBC’s Charter to prepare financial statements for each financial
year which give a true and fair view of the state of affairs of
the BBC and of its income and expenditure for that period.
In preparing those financial statements, the Governors andExecutive Committee are required to:
select suitable accounting policies and then apply them consistently
make judgements and estimates that are reasonable and prudent
state whether applicable accounting standards have been
followed and disclose and explain any material departures in thefinancial statements
prepare the financial statements on a going concern basis unless
it is inappropriate to do so
In addition, the Governors and Executive Committee havevoluntarily decided to comply with the accounting and disclosure
provisions of the Companies Act 1985 and, where applicable,of the Financial Services Authority Listing Rules. They are also
responsible for keeping adequate accounting records and taking such
steps as are reasonably open to them to safeguard the assets of
the BBC and to prevent and detect fraud and other irregularities.
Report of the independent auditors to the Governorsof the British Broadcasting Corporation (BBC)We have audited the financial statements on pages 99 to 135.
In addition to our audit of the financial statements, the Governors
have engaged us to audit the information in the Governors’
remuneration report that is described as having been audited,which the Governors have prepared as if the BBC were a listedcompany and which is thus compliant with Schedule 7A to theCompanies Act 1985.
This report is made solely to the BBC’s Governors, as a body,in accordance with the Royal Charter for the continuance of
the BBC which came into force on 1 May 1996 (the Charter).
Our audit work has been undertaken so that we might state
to the BBC’s Governors those matters we are required to state
to them in an auditor’s report and for no other purpose. To thefullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the BBC and the BBC’s
Governors as a body, for our audit work, for this report, or forthe opinions we have formed.
Respective responsibilities of the Governors
and Executive Committee and Auditors
The Governors and Executive Committee are responsible
for preparing the BBC Annual Report and the Governors’
remuneration report. As described earlier on this page, thisincludes responsibility for preparing the financial statements inaccordance with applicable United Kingdom law and accounting
standards. Our responsibilities as independent auditors are
established in the United Kingdom by statute, by the Auditing
Practices Board, our profession’s ethical guidance and, in
accordance with the terms of our appointment, the Companies
Act 1985 and the Charter.

BBC Annual Report and Accounts 2003/2004

85

Compliance

We report to you our opinion as to whether the financial
statements give a true and fair view and whether the financial
statements and the part of the Governors’ remuneration report
to be audited have been properly prepared in accordance with
the Companies Act as if that Act had applied to these financial
statements. We also report to you if, in our opinion, the BBC has
not kept proper accounting records, if we have not received
all the information and explanations we require for our audit,
or if information specified by law regarding the Governors’ andExecutive Committee remuneration and transactions with the
BBC is not disclosed.
In addition to our audit of the financial statements, theGovernors have engaged us to review their corporate
governance statement as if the BBC were required to comply
with the Listing Rules of the Financial Services Authority inrelation to these matters. We review whether the statementon pages 86 to 90 reflects the BBC’s compliance with the sevenprovisions of the Combined Code specified for audit review
by those rules and we report if it does not. We are not required
to form an opinion on the effectiveness of the BBC’s corporate
governance procedures or its internal controls.
We read the other information contained in the Annual Report,
including the corporate governance statement, and the unauditedpart of the Governors’ remuneration report and consider
whether it is consistent with the audited financial statements.
We consider the implications for our report if we become awareof any apparent misstatements or material inconsistencies withthe financial statements.
Basis of audit opinion
We conducted our audit in accordance with Auditing Standards
issued by the Auditing Practices Board. An audit includes
examination, on a test basis, of evidence relevant to the amounts
and disclosures in the financial statements and the part of theGovernors’ remuneration report to be audited. It also includes
an assessment of the significant estimates and judgements madeby the Governors and Executive Committee in the preparationof the financial statements, and of whether the accounting policies
are appropriate to the BBC’s circumstances, consistently appliedand adequately disclosed.
We planned and performed our audit so as to obtain all theinformation and explanations which we considered necessary
in order to provide us with sufficient evidence to give reasonableassurance that the financial statements and the part of theGovernors’ remuneration report to be audited are free frommaterial misstatement, whether caused by fraud or otherirregularity or error. In forming our opinion we also evaluatedthe overall adequacy of the presentation of information in thefinancial statements and the part of the Governors’ remuneration
report to be audited.

86

OpinionIn our opinion the financial statements give a true and fairview of the state of affairs of UK Public Service Broadcasting(the ‘Home Services’ in the Charter) and the BBC as at
31 March 2004 and of the deficit of the BBC for the year
then ended and the financial statements and the part of theGovernors’ remuneration report to be audited have been
properly prepared in accordance with the provisions of theBBC’s Charter and the Companies Act 1985 as if that Act
had applied to these financial statements.
KPMG LLP
Chartered Accountants
Registered Auditor

London17 June 2004

3 Risk and control processes
The Governors are appointed as trustees for the public interest
to ensure that the BBC is properly accountable to Parliament
and the public. Part of this role requires the Governors to satisfy
themselves that the BBC is applying the highest standards ofcorporate governance.
The BBC has complied throughout the year ended 31 March
2004 with the Combined Code, issued by the London Stock
Exchange in June 1998, which sets out the principles of good
governance. During 2003 the Code was revised to include therecommendations arising from two reviews which sought toimprove the effectiveness of boardrooms and strengthen thecorporate governance framework. The Higgs Report reviewed
the role and effectiveness of non-executive directors andthe Smith Report, set up by the Financial Reporting Council,
developed the existing code provisions for audit committees.
The BBC recognises the importance of, and is committed to,applying the highest standards of corporate governance andvoluntarily complies with the Combined Code to the extent
that it is applicable. Although the Revised Code is not applicablefor the financial year under review, the BBC has made significant
progress in formalising and revising existing policies, procedures
and documentation in response to the revisions. Overall, therequirements of the Combined Code apply to the BBC with two
exceptions. Firstly, those requirements relating to the appointmentof non-executive directors are inapplicable as the Governors areappointed by the Queen in Council and their remuneration is set
by the Secretary of State for Culture, Media and Sport. Secondly,
those requirements relating to shareholders can only be applied
to the licence-paying public, rather than shareholders through thestewardship of the Board of Governors.
The BBC follows the seven principles of public life set out in the
Nolan Committee reports on Standards in Public Life.
How the BBC has applied the remuneration principles is detailed
within the remuneration report on pages 91 to 94.

BBC Annual Report and Accounts 2003/2004

Board structure
The Governors are members of the Corporation and act astrustees for the public interest while the Executive Committee
takes responsibility for day-to-day operations. Details of the Boardof Governors and Executive Committee are summarised on pages
8 to 9 and 10 to 11. A register of interests for both Governors
and Executive Committee is maintained and may be inspectedby written application to the Secretary of the BBC, BBC Media
Centre, 201 Wood Lane, London W12 7TQ.
The Board of Governors refer some matters to sub-committees.
The main responsibilities of these sub-committees are explained
elsewhere in this Annual Report and Accounts.

The BBC lays its Annual Report and Accounts before Parliament.
Governors or BBC Executives may be, and frequently are, called
before a Parliamentary Select Committee to answer MPs’ questions
about the BBC’s activities and plans. The Annual Report and Accounts
is also available to any member of the public.

The attendance record of individual Governors at full Boardand sub-committee meetings is detailed below:

Number ofmeetings in the year

Deborah Bull1
Gavyn Davies2
Dame Ruth Deech
Dermot Gleeson
Baroness Hogg3
Professor Merfyn Jones
Professor Fabian Monds
Dame Pauline
Neville-JonesRt Hon The Lord Ryder
Angela Sarkis
Sir Robert Smith
Ranjit Sondhi

10
6*
8**
9
10
7**
9
10
10
10
8
7
10

Programme Fair Trading
Complaints Compliance
Audit Remuneration
Property
Committee Committee Committee
Committee Committee

11

5

5

5

7

5

6*

5
1†
10

5
3***

7
3††

Approval for new channels and services, public or commercial,must be sought from the Secretary of State for Culture, Mediaand Sport.
BBC World Service is funded by Grant-in-Aid and is accountableto Parliament through the Foreign and Commonwealth Office(FCO). Although it is editorially independent, its aims and priorities
are agreed with the FCO.

4

9

5
5

9
9
10

Relationship and communication with licence payers
and Parliament
The BBC seeks to keep the public informed about its services and theway in which it operates, and to be open and candid about successes
and failures. The BBC will withhold information only where there is agenuine matter of copyright, contractual or commercial confidentiality
at stake or where legitimate considerations of privacy apply.
Information is made available, and audience views obtained, ina variety of ways, many of which are discussed on pages 74 to 81.
These include the BBC Statements of Programme Policy and otherpublications, internet services and public events.

Governors’ Programme Complaints Committee (page 78)
Governors’ Fair Trading Compliance Committee (page 82)
Governors’ Audit Committee (page 89)
Governors’ Remuneration Committee (page 91 to 92)
Governors’ Property Committee (page 90)

Board ofGovernors

provide administrative support for the Board of Governors
in conjunction with the Executive Committee
facilitate the Board of Governors’ public accountability
and responsibility

5
4

4

6
3

1

Started 1 August 2003
Resigned 28 January 2004
3
Retired 9 February 20042

* out of a possible 6** out of a possible 8*** out of a possible 4† out of a possible 3†† out of a possible 5

The Board of Governors have continued to evaluate theireffectiveness and have initiated a programme of review including
the consideration of different aspects of the Board and its
sub-committees’ performance and operational administration.
The Governance & Accountability department support anddevelop the relationship of the Board of Governors with theorganisation. The key responsibilities of Governance & Accountability
in this respect are to:provide independent advice to the Board of Governors, with afocus on the performance of the BBC’s public services including
performance against objectives and the BBC Statements ofProgramme Policy

Accountability and internal control
The responsibilities in relation to internal control are clearly defined.
The Board of Governors is ultimately responsible for the properuse of public money whilst the Executive Committee is responsible
for maintaining an adequate system of internal control and forreviewing its effectiveness. The respective responsibilities of theBoard of Governors and Executive Committee and the external
auditors are set out on pages 85 to 86. Such a system isdesigned to manage rather than eliminate the risk of failure toachieve business objectives and can provide only reasonable, andnot absolute, assurance against material misstatement or loss.
The Board of Governors and Executive Committee consider
that there is an ongoing process for identifying, evaluating andmanaging significant risks faced by the BBC. The process has beenin place for the year ended 31 March 2004 and up to the date of
approval of this Annual Report and Accounts.
Financial reporting and going concern
A review of the financial position of the BBC is included on pages
97 to 98. This provides an assessment of the BBC’s performanceand current position.
The going concern basis has been adopted in the preparationof the financial statements as the Board of Governors and the
Executive Committee believe that the BBC has adequate resources
to continue its operations for the foreseeable future.

BBC Annual Report and Accounts 2003/2004

87

Compliance

The key aspects of the control environment operating throughout
the year are described below under the following headings:
Risk management
The management of risk within the BBC is considered to be
most effectively managed through the engagement of the entire
Executive Committee. For that reason, risk management is notdelegated to a sub-committee.
Each of the BBC’s top risks has a nominated owner on the
Executive Committee who is responsible for ensuring that
progress on the management of their given risk is reported to allof the Executive Committee. The BBC’s top risks and associatedaction plans have been reviewed during the year. An annual updateon each of these key risks is provided to the Executive Committeewith a progress report every six months. The Audit Committee,
on behalf of the Board of Governors, considers the operation of
the risk management process including the management of theBBC’s top risks.
The director of each division has a clear responsibility for theidentification and management of risks facing their business.
Divisional management has reviewed the risks associated with theachievement of its divisional objectives. Consideration of these risks
includes a review in each division of the impact of the BBC’s top
risks and reporting on the management of those risks via reports
to the Executive Committee. The risks identified, and the actions
planned in response, are maintained in a risk register in each division
which is verified by the Risk and Internal Control Managers.
Internal Audit
The BBC has an Internal Audit department of 27 staff incorporating
Operational Audit, Systems Audit and Occupational Risk Audit.
Internal Audit’s authority is derived from its joint independent
reporting relationship to the Audit Committee and to the DirectorGeneral. The scope of Internal Audit includes the examination andevaluation of the adequacy and effectiveness of the BBC’s systems
of internal control and the quality of performance in carrying out
assigned responsibilities. The work programme of Internal Audit isunrestricted, covering all BBC public service activities and, in addition,
BBC Commercial Businesses, BBC World Service & Global News,
BBC pension schemes and BBC charities. Internal Audit exercises
the BBC’s right of audit, where such right is provided by contract,over external parties including independent production companies
and other key suppliers of outsourced services.
Internal Audit undertakes regular testing of control systems
and core business processes under a plan agreed with the Audit
Committee. The audit plan, which is reported twice a year, is basedon a continuing assessment of key risks, monitoring complianceof key systems and processes, and ensuring value for money to thelicence payer. The results of testing are reported at each meetingof the Audit Committee which scrutinises the operation of theBBC’s controls throughout the year.
Divisional controls
The divisions’ management has responsibility for ensuring thatexisting controls and procedures are followed. Key controls overmajor business risks include maintaining and regularly updating risk
registers, performance review and exception reporting. Reviewsby Internal Audit monitor the operation of divisional and subsidiary
controls, to ensure that they are consistently applied and as aminimum meet the BBC-wide control policy.
88

BBC business and broadcast continuity
The BBC Business & Broadcast Continuity team work with the
BBC divisions and partnering companies to protect and to mitigate
risk to the various business areas in the BBC. This is achieved
through the implementation of a robust system of business continuity
planning, rehearsal and disaster recovery preparedness. In someinstances specific projects are initiated to improve operational
resilience where the risk is deemed high. The BBC’s businessdemands that it is positioned to not only broadcast and inform in
virtually any circumstance, but that other lines of business continue
with a minimum of disruption. This is particularly important inlight of current geopolitical events. The safety and security of BBC
people and assets remain the priority in contingency planning.
Computer systems
The BBC has established controls and procedures over the
security of data held on computer systems. Arrangements arein place for computer processing to continue and data to beprotected and retained in the event of the failure of the BBC’s
own systems for whatever reason. The Internal Audit function
includes a specialist Systems Audit team who review thecontinuing integrity of all systems within the BBC including
computer and broadcast critical systems.
Controls over outsourced transaction processing
The majority of the BBC’s finance transaction processing is
outsourced to a service company, Media Accounting Services
Limited (Medas), a wholly owned subsidiary of EDS which is
independent of the BBC.
The collection of the licence fee is outsourced to Capita.
The BBC monitors the provisions that Capita have put in place
to ensure the collection of the licence fee in the event ofbusiness interruption.
Safeguards are in place to ensure the integrity of the BBC’stransaction processing and collection data and to provide alternative
methods in the event of a failure of the core processes.
The Director of Finance, Property & Business Affairs has establishedmonitoring procedures to review the performance of key suppliersof outsourced services on a regular basis. These include review
by Internal Audit through a programme of work informed bycontinuing assessment of key risks and issues. Performance data,
financial reporting and compliance statistics are reported to the
BBC on a monthly basis.
Whistle-blowing
The BBC has a ‘whistle-blowing’ or ‘protected disclosure’ policy.
The policy facilitates the anonymous communication to the BBCof any incident in which there is a suspicion that there has beena breach of the BBC’s codes. The process is administered byan independent external company to ensure anonymity. Eachreported incident is notified to the Head of Business Assurance
who ensures that every incident is investigated, a response
communicated and action taken as appropriate.
Financial reporting and business performance
Individual divisions are responsible for ensuring compliancewith the BBC’s financial reporting system.

BBC Annual Report and Accounts 2003/2004

The BBC has a comprehensive system for reporting financial
results and business performance. During the year each division
prepares monthly reports and accounts. These results arereviewed locally and are scrutinised by Group Financial Control.
The consolidated results of the BBC are reviewed at the Executive
Committee and the Board of Governors’ meetings each month.
Each financial year the divisions prepare detailed budgets for thefollowing financial year and update long-term plans. The annual
budget of each division is reviewed by the Director of Finance,
Property & Business Affairs. The overall BBC budget is submitted
by the Director-General and the Executive Committee to theBoard of Governors for approval. The performance of each division
is subject to continuous monthly monitoring and at the end of every
year each division is subject to a rigorous performance review
to verify how effectively they have met their objectives.
Fraud awareness
Although incidents of fraud are rare, the BBC takes its responsibilities
to minimise the risk of fraud, and the consequential loss to thelicence payer, very seriously. During the year the BBC has completed
a substantial external review of its anti-fraud measures. The anti-fraud
policy, clarifying overall and ultimate responsibility for ensuring thatthe appropriate controls are in place to minimise the risk of
fraudulent activity, and the fraud response plan have been updated.
An anti-fraud group has been set up, chaired by the Headof Business Assurance and includes representatives from Policy& Legal, BBC People and operational and financial input fromacross the divisions. The key objectives of the group are to embedmeasures to minimise the risk of fraud and raise overall fraud
awareness across the BBC. Divisions are responsible for reporting
any suspicions of fraudulent activity to the Investigations Unit andultimately to the Head of Business Assurance.
Governors’ Audit Committee
During the year the Audit Committee comprised exclusively of
Governors: Dame Pauline Neville-Jones (Chair), Dermot Gleeson,
Sir Robert Smith and Baroness Hogg (retired February 2004).
The Audit Committee complies with the recommendations
within the Smith Report that at least one member of the
Audit Committee has significant, recent and relevant financial
experience. Members of executive management attend meetings
by request of the Audit Committee.
The key responsibilities of the Audit Committee are to:review management’s and Internal Audit’s reports on theeffectiveness of systems for internal financial control, financial
reporting and risk management
review the Internal Audit work programme and ensure thatthe internal audit and risk management function is adequately
resourced and has appropriate standing
approve the appointment or dismissal of the Head ofBusiness Assurance
consider management’s response to any major external
or internal audit recommendations
consider the appointment of the external auditors and assess
independence, ensuring that key partners are rotated regularly
oversee the process for selecting the external auditors

recommend the audit fee to the Board and approve any fees inrespect of non-audit services provided by the external auditorsand ensure that the provision of non-audit services does
not impair the external auditors’ independence or objectivity
discuss with the external auditors the nature and scope of theaudit and review the auditors’ quality control procedures andsteps taken by the auditors to respond to changes in regulatory
and other requirements
review the external auditors’ management letter andmanagement response
review the performance and effectiveness of the external
auditors
review and challenge, where necessary, the actions andjudgements of management in relation to the annual
financial statements and financial review
satisfy itself that all regulatory compliance matters have been
considered in the preparation of the Annual Report and Accounts
review the BBC’s procedures for handling allegations from
whistle-blowers
review the Audit Committee’s terms of reference andeffectiveness on an annual basis
In reviewing the financial statements of the BBC the Audit
Committee considers any significant issues and the appropriatenessof accounting policies adopted in relation to significant or unusualtransactions where more than one policy may apply.
The Chair of the Audit Committee reports to the full Boardof Governors after each meeting of the Committee.
Independence of external auditors
The BBC complies with the guidance governing the conduct ofexternal audit set out in the Combined Code and recommendations
from the Smith Report for audit committees. The external auditors
appointed by the BBC are KPMG LLP as financial auditors andPricewaterhouseCoopers LLP act as the fair trading auditors(see pages 82 to 86). Both the Audit Committee and KPMG LLPthemselves have safeguards in place to avoid the possibility of theauditors’ objectivity and independence being compromised.
The Audit Committee regularly reviews the independence of its
external auditors ensuring that key partners are rotated regularly.
The Audit Committee holds discussions with the external auditors
without management being present. The Audit Committee reviews
the level of non-audit fees paid to KPMG LLP. Any significant
consulting work is put out to competitive tender. Recruitment
from KPMG LLP into any senior management position in the
BBC requires the prior approval of the Audit Committee.
The BBC’s policies in relation to services procured from theexternal auditors are:all non-audit services proposed to be commissioned from theexternal auditors must be notified to, and approved by, theAudit Committee
above an established de minimus level the planned work mustbe submitted to competitive tender and, in the event that theexternal auditors are to be awarded the contract, the priorapproval of the Audit Committee must be obtained
the external auditors are specifically excluded from being
considered for certain types of work where the effect could
be to prejudice their ability to express an independent andobjective opinion

BBC Annual Report and Accounts 2003/2004

89Compliance

Value for money reviews
During the year the BBC has extended its programme of reviews to
include a greater focus on value for money (VFM) reviews acrossthe BBC. The key focus of these reviews is value for money andscrutiny over public expenditure. The Audit Committee has put inplace a rolling programme of VFM reviews to be performed byInternal Audit and external agencies including the National Audit
Office (NAO). The first of the VFM reviews commissioned fromexternal agencies by the Audit Committee is the NAO’s review of
the BBC’s investment in Freeview. The Board of Governors will
lay before Parliament the NAO’s findings and the BBC’s response
this summer.

The objective of the CHAC is to ensure that the BBC Commercial
Businesses meet the highest standards of corporate governanceparticularly with respect to internal control and risk management
and operate within the framework of the Governors’ Audit
Committee. The Chair of CHAC reports to each Governors’
Audit Committee meeting.

Governors’ Property Committee
The Governors’ Property Committee was formally established
as a sub-committee of the Board of Governors in October 2003.

The Hutton Inquiry
The BBC’s response to the Hutton Inquiry is covered in detailon pages 4 to 5.

The Property Committee supervises management’s implementationof the BBC’s property strategy including monitoring the progressof the redevelopment of Broadcasting House, London. However,the Audit Committee remains the authority by which the
Corporation determines satisfactory compliance with internaland external controls including property projects.

4 Other corporate governance responsibilities
Human resources
The BBC continues to hold the Investors in People (IiP)
accreditation across the whole BBC which it regards as one of the
key processes for evaluating progress in people management anddevelopment. It is taking active steps to improve its performancein all areas by a programme of rigorous self-assessment every
year. The BBC invests a considerable amount of money and timein training and developing its staff as detailed on pages 72 to 73.

During the year the Property Committee was comprised
exclusively of Governors of the BBC: Gavyn Davies (resigned
January 2004), Rt Hon The Lord Ryder, Sir Robert Smith andDermot Gleeson. The Property Committee meets as required.
The key responsibilities of the Property Committee are to:satisfy itself that major property projects within the agreed
property strategy are progressing according to plan and budget
be informed of any significant variances or changes in advanceof requests by management to the full Board of Governors forapproval of increased expenditure (in line with the investment
guidelines covering approval levels)
be informed in advance of any proposal by management
to dispose of property assets
be informed of any significant issues and ensure, where
necessary, these are referred to the Audit Committee forfurther scrutiny
Governance arrangements for Commercial Businesses
In July 2002 the Secretary of State for Culture, Media and Sport
approved the establishment of a new subsidiary, BBC Commercial
Holdings Limited, to coordinate and manage the activity and financing
needs of the principal commercial subsidiaries. The BBC’s public service
aims are enshrined in the company’s Memorandum of Associationand many of its powers, including the power to appoint directors,
are exercisable subject to prior approval of the Board of Governors.
The Board of Commercial Holdings Limited Audit Committee(CHAC) was established in September 2003 with the
responsibility to consider all Audit Committee papers relating to
the Commercial Businesses. The CHAC members are independentof the operational management of the Commercial Businesses.
Matters of significance are taken and discussed by the Governors’
Audit Committee.

90

Events of the year
The BBC’s system of controls, as stated above, is designed to
manage risks rather than eliminate them entirely. During the year
the BBC has reviewed lessons learnt from the following incident
and has updated controls where considered appropriate.

The BBC monitors staff views through an annual staff survey.
It also has various consultation mechanisms including, at corporate
level, the BBC Forum. Regular meetings are also held withthe recognised unions: BECTU (Broadcasting Entertainment
Cinematograph and Theatre Union), the NUJ (National Union
of Journalists) and AMICUS (formerly the AEEU).
Internal communication
Progress in improving internal communication is measured byan annual survey of staff opinion conducted by MORI. The latestof these, conducted in December 2003, showed that the BBC
continues to make further progress in the key areas of internal
dialogue, understanding, attitude and behaviours. The BBC is now
very firmly in MORI’s group of top ten organisations in the UK
for internal communications and the BBC’s practice has attracted
international interest in this area during 2003/2004.
Occupational risk management
The BBC has continued to seek continuous improvement in its
delivery of risk management performance, including health andsafety, and has reinforced its professional support structure andcompetencies to reflect the wider occupational risk managementrole. BBC Occupational Risk Management will focus more strongly
on the delivery of policy and associated guidance, the deliveryof enabling projects, and the monitoring and management oflegislative and BBC policy compliance.
The principles of good risk management and the health and safetymeasures developed to deliver them have led to an improving
statistical trend in health and safety performance. UK reportable
accidents for the past 12 months decreased from 47 to 38 as
defined by the UK Reporting of Injuries, Diseases and Dangerous
Occurrence Regulations 1995 – RIDDOR. Sadly, in April 2003,
during the coverage of the war in Iraq, where at its height the
BBC deployed 329 people, there were two major incidents leading
to two fatalities and a major injury. Following the hostilities and

BBC Annual Report and Accounts 2003/2004

due to the heightened terrorist threats the BBC has put in place
additional measures in support of its health and safety policies
including a specific, professional support team for high risk areas,
standard operating procedures for overseas bureaux in hostileenvironments, security advice for new build projects and thecommissioning of a review of the Corporation’s security strategy.
Of the above RIDDOR reportable events, the BBC reported one
fatality as a result of an asbestos related occupational disease andtwo major injuries. Taking the accidents which occurred to BBC
employees in the UK, the accident incident rate per 100,000
employees for 2003/2004 was 134, representing a 29% reduction
from the incident rate in the previous year of 188.
Suspected cases of occupational related ill health of staff referringand seen by BBC medical officers also continued the downward
trend from the previous year. In 2003/2004, the incidence rate ofsuspected cases of occupational illness (of all types) was 17.51 per
1,000 employees per annum. This compares with 17.78 per 1,000
employees per annum in 2002/2003.
The UK Health and Safety Executive (HSE) served an Improvement
Notice in respect of insufficient corporate arrangements under theConstruction (Design and Management) Regulations 1994. This areaof the Corporation’s policy and arrangements were consequently
enhanced to comply with the enforcement notice. The BBC had
no convictions for health and safety offences.
An Executive sub-committee has been established to review
progress on achieving consistency and compliance on all
occupational risk areas and to champion issues across the BBC.
In addition, an independent Occupational Risk Audit team wasestablished within Internal Audit.
As part of the BBC’s compliance programme a number of reviews
and audits have been undertaken including a review of policy,organisation and arrangements for the property vehicle (the legal
entity which is the mechanism for management of the BBC/Land
Securities Trillium Partnership) to ensure clarity of responsibilities,
and that monitoring and review processes are in place andadequate to the risks. These will continue to be a part of thecommitment to improved health and safety and ensures that the
BBC continually reviews progress against the recommendations
arising from monitoring and audit activities.
The HSE undertook a series of planned inspection visits to theBBC’s television production and broadcasting activities in London,
focusing on the Government’s Revitalising Health and Safety
strategy. The HSE’s report confirming their observations andrecommendations was formally presented to the BBC at theend of May 2004.
Several major initiatives were launched during the year including theuse of web-based Display Screen Equipment training and assessment
tools, an events management system, integration of health and safetycontent and Safety Adviser attendance within the BBC-wide
Leadership Programme and the establishment of a Learning Boardfor health and safety. Greater emphasis has been placed on seeking
improvements to the procurement processes, for example in the
management of pre-vetted contractors and the development ofergonomic guidelines and advice to BBC Property and departmental
managers on furniture selection and procurement. Work also
continues on projects to improve the effectiveness of internalmonitoring mechanisms through the increased use of database
and web technology.
Good progress was made on the action plans following completionof fire risk assessments for all BBC buildings and, as part of a majorrisk reduction project for our key properties, on means of escapefor disabled people. Work is already underway to prepare for thechanges to the Noise at Work Regulations. Although the changes
will become law in 2006, the broadcast and entertainment industry
will have until 2008 to comply. The Electrical Safety Project continued
with the publication of five of 21 Electrical Safety Guidance Notes(a further eight are in the drafting stages) covering all aspects ofelectrical safety in the BBC.
The BBC continues to promote knowledge of, and contributeto, the development of safe practices within the broadcast andproduction industries through joint industry bodies as wellas publication of health and safety material on the internet.
5 Governors’ remuneration report
This report sets out the BBC’s policy on the remuneration of theBoard of Governors and of members of the Executive Committee.
Although the BBC is exempt from the requirements introducedby the Directors’ Remuneration Report Regulations 2002 and thoseof the Financial Services Authority, the report has been prepared asif those requirements did apply wherever the disclosure provisions
are relevant and applicable. Only the following sections of theGovernors’ remuneration report are subject to audit: Remuneration
received and Governors and Executive Committee pensions.
Governors’ Remuneration Committee: constitution
and operation
The remuneration policy for members of the Executive Committee
is set by the Remuneration Committee, a sub-committee of theBoard of Governors. This Committee deals with all matters relating
to the remuneration of members of the Executive Committee andis accountable to the Board of Governors for the determinationand maintenance of overall remuneration policy and review andagreement of Executive Committee basic salaries, bonus awards
and benefits, including pension arrangements. The Committee
considers the performance of individual members of the Executive
Committee before recommending their annual remuneration andbonus awards to the full Board of Governors.
The members of the Committee during the year were Gavyn Davies(Chairman, resigned January 2004), Baroness Hogg (retired February2004), Dame Pauline Neville-Jones and Rt Hon The Lord Ryder.
Michael Grade has been a member of the Committee since his
appointment as BBC Chairman. Sir Robert Smith also becamea member of the Committee in May 2004. In addition, meetings
are attended by the Director-General who advises on mattersrelating to the other members of the Executive Committee andthe overall performance of the BBC and by the Director of BBC
People. Neither is present when matters concerning their own
remuneration are considered.
In its constitution and operation the Committee complies with
the Combined Code on Corporate Governance. The Committee
places high value on the independence of its decision-making
processes. In consultation with the Director of BBC People, theCommittee takes specialist advice from external professional
advisers on particular remuneration matters, particularly externalmarket practice. During the year, the Committee nominated

BBC Annual Report and Accounts 2003/2004

91

Complianceand received independent advice from the Hay Group on
comparative market data to assist in the determination of pay
and benefits for the Executive Committee.
Governors: remuneration policy
The Governors receive a fee determined by the Secretary of State
for Culture, Media and Sport. They are additionally reimbursed
for expenses incurred on BBC business. Expenses regarded by the
Inland Revenue as taxable are settled in full by the BBC, including
any related tax payments, and reported as benefits in the tableon page 93. The increase in annual remuneration notified for2003/2004 was 2.25% (2002/2003 2.5%).
Executive Committee: remuneration policy
The remuneration policy for Executive Committee members
tries to balance the BBC’s status as a public corporation (and the
expectation that all areas of spend, including executive remuneration,must deliver value to the licence payer), with the fact that the BBC
operates in a competitive, commercial environment and needs tooffer remuneration that enables it to attract, retain and motivate
high calibre individuals with the skills and abilities required to leadthe BBC.
In doing so, the remuneration policy seeks to:
remunerate individuals fairly for individual responsibility andcontribution, while providing an element of performance-related
pay, reflecting the underlying performance of the BBC
take into account wider salary policy and employment conditions
within the rest of the BBC and the relationship that should exist
between the remuneration of Executive Committee members
and that of other employees
have regard to the market median levels of total cash reward of
relevant comparator organisations in both public and private sectors
The Committee’s approach to policy going forward will continue
to reflect these principles, underpinned by regular review andmonitoring of remuneration policy and practice in organisations
outside the BBC.
External data reviewed by the Committee shows that salaries
paid at main board level across the private sector as a whole,and in the media industry in particular, are significantly higher
than in the BBC for organisations of similar size and complexity,
while the opportunities for annual and long-term bonus payments
are also much greater. Conversely, the pay levels for senior civil
servants and other public sector managers are generally lower.
The remuneration levels set by the Governors fall between thepay of the most senior managers in the public sector and thosein comparable commercial businesses to reflect the BBC’s uniqueposition as a publicly-funded organisation operating and competingin a commercial industry.
Elements of remuneration
Basic salary
Basic salaries are reviewed in August each year, taking into accountexternal market levels and internal comparisons as well as theindividual’s responsibilities and performance. The basic salary is paid
as a fixed sum monthly in cash.

92

Annual bonus
The Committee recognises the importance of maintaining
a balance between basic salary and an annual bonus scheme
reflecting individual performance and contribution. Annual bonuses
continue to have a maximum level of 30% of base salary andindividual awards are based on a mix of qualitative and quantitative
targets and measures.
The achievement of BBC-wide objectives accounts for up
to 30% of the maximum bonus, with the same level of award
applying to all members of the Executive Committee, thereby
reinforcing the value and importance of collective performance.
Achievement of divisional objectives accounts for up to 40%
and individual performance and contribution for the remaining
30% of any award. For the year under review the targets related
primarily to objectives which were set by the Board ofGovernors and published in the BBC Annual Report and Accounts
2002/2003.
In the case of the Commercial Businesses (BBC Worldwide
Limited and BBC Ventures Group Limited), the annual bonus
plan is directly linked to the achievement of specific financial
performance targets relating to sales, cash flow and profit before
interest and tax (PBIT). Whilst the maximum annual bonus
opportunity is 30% in common with other members of the
Executive Committee, the framework is based on:
for the Chief Executive of BBC Ventures Group Limited, up to
80% of any award for the achievement of PBIT and cash flow
targets and up to 20% for individual performancefor the Chief Executive of BBC Worldwide Limited, up to 67%
of any award for the achievement of sales, cash, and PBIT targets
and up to 33% for individual performance
Bonuses are reflected in the financial statements on an accruals
basis for the performance period under review. Actual payments
are made in July each year.
A long-term incentive plan is also in place for the Chief
Executive of BBC Worldwide Limited which provides for a bonusof up to a maximum 20% of salary based on the achievementof headline BBC cash flow targets over a three-year period.
The three-year plan period in the scheme which commenced
in April 2001 ended on 31 March 2004 and generated a payment
to Rupert Gavin of 13.53% of salary. Any awards under the plan
are reflected in the financial statements on an accruals basis.
Benefits
In addition to salary and bonus, the main contractual benefits
provided are a car and fuel allowance, private health insurance,
pension and life insurance. With the exception of the post of the
Director of Nations & Regions, it has been the policy for some years
that new appointees to the Executive Committee are not eligible forprovision of a chauffeur-driven car. The Director-General’s contract
provides for a chauffeur-driven car, but no additional entitlement
to a personal car or fuel allowance.

BBC Annual Report and Accounts 2003/2004

Pensions
All members of the Executive Committee are eligible to participate
in the BBC Pension Scheme which provides salary-related pension
benefits on a defined benefit basis, with an accrual rate of 1/60thof the final salary per year of service, subject to the Inland Revenue
earnings cap where appropriate. Only basic salary is pensionable.
The Scheme provides for early retirement on medical grounds andlife insurance cover of four times salary.
A variety of special arrangements have been made for thoseindividuals who have joined the BBC late in their careers whose
earnings exceed Inland Revenue limits, including funded andunfunded arrangements outside the BBC Pension Scheme.
Employment contracts
The policy of the Remuneration Committee is for the contractsof employment of Executive Committee members to contain amaximum notice period of one year. Each contract expires on the
60th birthday of the director which is the normal BBC retirementage, but is subject to earlier termination for cause or if notice isgiven under the contract. There is no entitlement to any additional
remuneration in the event of early termination other than in thecase of termination on grounds of redundancy.

Salary£000

Annualbonus£000

Taxablebenefits
£000

Total
2004
£000

Total
2003
£000

Jenny Abramsky
Jana Bennett1
Glenwyn Benson (resigned 8 June 2003)
Mark Byford
Stephen Dando
Andy Duncan2
Greg Dyke (resigned 29 January 2004)
Carolyn Fairbairn2,3
Roger Flynn (resigned 31 March 2004)
Rupert Gavin
Ashley Highfield
Pat LoughreyPeter Salmon
Richard Sambrook
John Smith
Caroline Thomson
John Willis4 (appointed 9 June 2003)
Alan Yentob5

218
235
36
270
231
239
316
202
239
287
238
205
212
235
238
187
183
235

40
43
–
100
61
55
–
53
61
59
53
46
49
43
63
48
47
45

18
27
3
14
2
15
5
16
15
27
17
36
28
14
26
15
91
21

276
305
39
384
294
309
321
271
315
373
308
287
289
292
327
250
321
301

274
444*
238
306
272
301
464
169
314
362
294
280
279
287
300
236
–
321

4,006

866

390

5,262

5,141

39

45

Payments under long-term
incentive plans6
Members who resigned
during 2002/2003

Payments to former directors7,8

–

175

5,301

5,361

910

130

* Appointed to the Committee part-way through 2002/2003

Outside interests
Where there is no potential for conflict of interest and withthe prior agreement of the Board of Governors, membersof the Executive Committee may hold external directorships.
In principle, no more than two external directorships can beheld at the same time, of which only one should be in acommercial organisation. Governors assess such requests
against rigorous criteria to ensure that conflicts of interest do
not arise. Remuneration which arises from directorships agreed
since the introduction of this policy in 1997, or subsequent
to appointment, is paid to the BBC. During the year only two
Executive Committee members held appointments as executive
director of an external organisation.

1) Included in the remuneration for Jana Bennett is £11,887 being thefinal balance of relocation costs incurred during the year (2003 £167,000)
2) The 2003 bonus figures for Andy Duncan and Carolyn Fairbairn include
a payment of £5,000 each reflecting their contribution to securing the Digital
Terrestrial Television (DTT) licences
3) Carolyn Fairbairn took a period of unpaid leave in 2003
4) Included in the benefits for John Willis is £72,440 in respect of payments
made in connection with his relocation from the USA in order to take up his
appointment with the BBC5) The 2003 bonus figure of Alan Yentob includes an additional paymentof £20,000 in respect of his on-screen presentation activity during that year6) The long-term incentive plan is in respect of Rupert Gavin
7) Greg Dyke resigned from the Executive Committee on 29 January 2004
but remained a member of BBC staff until 29 February 2004. He was paid
£488,416 in line with his contractual entitlement, including £384,000 in lieu
of notice8) Roger Flynn resigned from the Executive Committee on 31 March 2004.
His current contract expires on 30 September 2004 when he is due to be
paid £301,625 in line with his contractual entitlement, including £241,325
in lieu of notice

Remuneration received
The remuneration of the Board of Governors or the Executive
Committee members appointed or leaving during the year isincluded in respect of their period of membership only.
Fees
£000

Benefits
£000

Total
2004
£000

Total
2003
£000

Deborah Bull (appointed 1 August 2003)
Gavyn Davies (resigned 28 January 2004)
Dame Ruth Deech
Sir Richard Eyre (retired 31 May 2003)
Dermot Gleeson
Baroness Hogg (retired 9 February 2004)
Professor Merfyn Jones
Professor Fabian Monds
Dame Pauline Neville-JonesRt Hon The Lord Ryder
Angela Sarkis
Sir Robert Smith
Ranjit Sondhi

10
68
16
3
16
13
28
28
28
37
16
28
24

3
22
5
1
2
3
6
2
6
2
9
1
1

13
90
21
4
18
16
34
30
34
39
25
29
25

–
99
9*
17
23
18
7*
28
34
30
9*
28
21

Governors who retired during 2002/2003

315
–

63
–

378
–

323
28

315

63

378

351

Governors

Executive Committee

Governors and Executive Committee pensions
The BBC provides pension benefits to the Chairman of theGovernors and to Executive Committee members. Details ofdefined benefit entitlements to Executive Committee members
who served during the year are shown in the first five columnsof the following table. The BBC also makes contributions
to money purchase schemes in respect of certain members
as shown in the last two columns. Gavyn Davies waived his
entitlement to pension benefits.

* Appointed Governor part-way through 2002/2003

BBC Annual Report and Accounts 2003/2004

93Compliance

Defined benefit schemes
Annual values

Executive
Committee
member(age at
31 March 2004)

Jenny Abramsky (57)Jana Bennett (48)
Glenwyn Benson1 (56)Mark Byford (45)Stephen Dando (42)Andy Duncan (41)Greg Dyke2 (56)
Carolyn Fairbairn (43)
Roger Flynn (41)
Rupert Gavin (49)Ashley Highfield (38)
Pat Loughrey (48)Peter Salmon (47)
Richard Sambrook (47)John Smith (46)
Caroline Thomson (49)John Willis3,4 (57)
Alan Yentob (57)Definedcontribution
schemes

Transfer values5

Accruedpension
at 31
March
2004
£000paIncreasein
accruedpensionover
year£000paTransfervalue ofaccruedpension
at 31
March
2004
£000

Increase inTransfer transfer
value of value lessaccrued directors’
pension contribat 31
utions
March
over
2003
year
£000
£000

135
3
28
99
5
5
7
11
5
9
6
93
36
100
97
47
1
127

9
2
4
12
2
2
2
2
2
2
2
10
3
10
11
3
1
14

2,719
36
570
1,154
37
36
122
95
36
112
39
1,229
462
1,303
1,183
687
24
2,566

2,566
14
497
774
18
18
92
61
18
75
21
888
337
936
814
543
–
2,294

Members who resigned
in 2002/2003

140
18
60
369
15
14
26
30
14
33
14
330
121
352
352
139
20
257

BBC
contributions
to moneypurchase
schemes
2004
£000

2003
£000

–
41
28
–
52
42
56
31
42
52
42
–
34
–
–
26
31
–

–
37*
26
–
50
40
59
18
40
36
40
–
32
–
–
24
–
–

477

402

–

22

477

424

* Appointed part-way through 2002/2003
1) Glenwyn Benson resigned as a director on 8 June 2003, but was still an active
member of the pension scheme as at 31 March 2004. The accrued pension has
been calculated and valued as at 31 March 2004
2) Greg Dyke left the BBC and the scheme on 29 February 2004. The accrued
pension on leaving the scheme has been valued as at 31 March 2004
3) John Willis was appointed during the year. The increase in transfer values
and in accrued pension in the above table is in respect of the period from his
appointment on 9 June 2003
4) The accrued benefits shown for John Willis assume that he will complete
the two-year service period required before benefits can be claimed5) The transfer value of accrued pension benefits represents the estimatedcost to the pension scheme of providing the pension benefit accrued to date.
The value is affected by a number of factors, which include age of individual,
pensionable salary, years of pensionable service and investment market conditions
at the date of calculation (in accordance with Actuarial Guidance Note GN11).
It is not a sum paid or due to the individual and therefore cannot be meaningfully
added to remuneration. The effect of the investment market conditions on thetransfer value varies according to the person’s age. For older members thecalculation reflects the yields on index-linked gilts, while for younger members
the calculation reflects the dividend yield on the FTSE All-Share Index

6 Programmes, channels and promotions
Governors’ Programme Complaints Committee
During the year the Governors’ Programme Complaints
Committee (GPCC) was comprised exclusively of Governors:
Sir Robert Smith (Chair), Professor Fabian Monds, Dame Pauline
Neville-Jones, Angela Sarkis and Ranjit Sondhi.
The GPCC is responsible for fulfilling the Charter requirementthat the Board of Governors ensures that complaints are properly
handled by the BBC. This remit is fulfilled by the independent
oversight of both the strategic approach to complaints handling,
and monitoring the effectiveness of its processes, to ensure bothserve the public interest and reflect best practice. In particular
this involves:an understanding of good practice in complaints handlingan annual review of the BBC’s complaints-handling processes
and performance, with the periodic review of the complaintshandling strategy resulting from issues raised in the annual review
94

review of a quarterly complaints report from BBC Information
review of the quarterly Complaints Bulletin published by the
Programme Complaints Unit
In line with the GPCC’s responsibility for monitoring theeffectiveness of complaints handling by BBC management, it is also
the specific function of the GPCC to consider appeals against
decisions and actions of the Programme Complaints Unit (PCU)
or of the Directors of BBC Divisions in dealing with serious
editorial complaints. In considering appeals, it receives independent
advice on editorial matters from an external adviser.
The GPCC reports its activities to the full Board of Governors.
For further information on complaints handling during 2003/2004,
see pages 78 to 79.
Upholding editorial standards
The Governors ensure that the BBC maintains high editorial
standards, monitoring its compliance with the BBC Producers’
Guidelines and with the Code of Impartiality and Accuracy
included in them.
The issues raised by Andrew Gilligan’s report at 6.07am on the
Today programme on 29 May 2003 are covered in the section on
the Hutton Inquiry on pages 4 to 5. Likewise, the lessons learned
by the BBC and the steps it has taken since to strengthen its editorial
controls are also covered in the same section.
Outside the Hutton Inquiry, the Governors were satisfied thatin 2003/2004 overall the BBC met the standards expected of it.
During their annual review of editorial issues in April this year they
noted a range of matters that had tested the BBC’s editorial
standards over the year.
In July last year, the Governors requested a review of the BBC’s
guidelines for staff writing in external publications and new rules
were approved by the Board of Governors and implemented in
November last year. Details of these new rules can be found on
page 5.
The Governors noted action taken by management to safeguard
the BBC’s impartiality following an article by Robert Kilroy-Silkin the Sunday Express. Management judged that the views expressed
undermined the perception of Robert Kilroy-Silk as an impartial
presenter of a daily discussion programme dealing with topicalissues. The programme was suspended and subsequently Robert
Kilroy-Silk stood down as presenter.
In 2003 the Governors strengthened their oversight of impartiality
across the BBC’s output. New measures included commissioning an
independent monthly tracking survey of public perceptions of BBC
impartiality and independent reviews of editorial output on specificissues. The monthly tracking survey has been in operation since
February 2004 and will report to the Board of Governors quarterly.
The survey will help inform the Governors in their assessmentof the BBC’s performance in this area. The Board of Governors
commissioned independent reviews of editorial output on two
separate issues over the year. In April 2003, Chatham House
conducted an independent review of the BBC’s coverage of Israel
and Palestinian issues. The findings concluded that BBC coverageachieved impartiality and balance and was informative and reliable.
The second editorial review, of rural affairs, was in three parts:
independent panel review; focus group research; and content

BBC Annual Report and Accounts 2003/2004

analysis. This format has been approved by the Board ofGovernors as the template for future reviews. The independent
panel reviewing rural affairs output concluded that the BBC took
rural affairs seriously but that the diversity of rural areas was
not always understood by metropolitan-based broadcasters(for further information see page 21). The report’s findings andits recommendations have been communicated to production
areas across the BBC, not just BBC News, and steps have beentaken to improve the BBC’s coverage. A progress report of
implementation was presented by management to the Boardof Governors in May 2004.
The Governors noted the importance of careful observationof the watershed, and the trust which audiences placed in the
BBC to schedule appropriately. They were concerned, therefore,
about a serious breach of standards in relation to an EastEnders
storyline featuring rape. In particular, an intense interaction
between one character who had been a victim of rape, andanother recalling her memories of her mother being raped, hadbeen inappropriate for pre-watershed viewing. Complaints to
the Programme Complaints Unit about the episode were upheld.
The Board of Governors learned that discussions between Editorial
Policy, the programme and the Channel Controller took place
only very close to broadcast and that action was being taken
to improve the mechanisms for discussion between the relevant
departments at an early stage when contentious subjects areproposed for programmes scheduled for broadcast pre-watershed.
More broadly, the Governors noted that a BBC project group is
considering how the BBC might better label challenging content
in a context where the use of video recorders would erode thecurrent effectiveness of the watershed.
New service approvals
All new BBC public services launched since 1 January 1997
require the approval of the Secretary of State for Culture,
Media and Sport. The key terms of the approval are also
contained in the Statement of Programme Policy for eachof these services.
The BBC Statements of Programme Policy 2003/2004 included a large
number of measurable commitments. The table on pages 58 to 67
shows how the BBC met these and details any exceptions. The
Digital Curriculum service is separately reported below as it is
yet to be launched.
In 2003, the Secretary of State for Culture, Media and Sport
launched an independent review of BBC Online, led by PhilipGraf. The BBC awaits publication of the review.
In 2004, the Secretary of State for Culture, Media and Sport
launched two independent reviews, one of the BBC’s digital
television services and the other of the BBC’s digital radio
services. The consultation process closed on 11 June 2004.
Digital Curriculum
In approving the Digital Curriculum service in January 2003,
the Secretary of State for Culture, Media and Sport set the
BBC a number of conditions, including meeting the undertakingsgiven by the BBC itself. Each year, the BBC will report on its
compliance with those conditions that are relevant to activity
during the year. Work on developing the service began in
2003/2004 (leading up to the planned launch in 2006) andduring the year the BBC took the following steps to comply
with specific conditions of the approval or undertakings:
In October, the BBC agreed with the Government’s education
technology agency, BECTA, the approach to defining the broad
areas for each subject to be covered, and published this on the
BBC’s website.
In October, after a competitive EU tender, the BBC signeda managed service contract with Microsoft for the provisionof the technical platform for the service.
The BBC is developing content in compliance with theconditions set by the Secretary of State for Culture, Mediaand Sport. Fifty per cent of the content will be commissioned
from external suppliers. During the year, a selection process was
carried out under EU Public Procurement Regulations and a listof preferred suppliers is being published this summer.
The BBC has started to work with the Government’s CurriculumContent Online Advisory Board in developing the service. The
Board includes representation from others in the industry.
UK programme quotas
Under the Communications Act 2003 the BBC has a duty to securethat not less than 25% of the amount of time allocated to thebroadcasting of qualifying television programmes is allocated to thebroadcasting of a range and diversity of independent productions.
This provision was formerly contained in the Broadcasting Act 1990
which required the Director-General of Fair Trading to report to theSecretary of State periodically on the extent to which the BBC had,in his opinion, performed that duty. Following the Communications
Act 2003, Ofcom has assumed this duty and will report on
performance for the period 2003/2004 onwards.
The Director-General of Fair Trading’s report for the period
1 April 2002 to 31 March 2003 was published in October 2003.
It concluded that while the BBC has achieved a satisfactory range
and diversity of independent productions, it had not met the quota,
achieving only 21%.
As noted in last year’s legal compliance report, the numberof takeovers by broadcasters of major independent producers
has the effect of removing their status as independents for the
purposes of UK legislation and makes it increasingly difficult for
the BBC to meet the quota. If such production companies had
been counted towards the 2002/2003 total, the BBC would
have met its quota. The relevant secondary legislation has been
amended to reinstate such companies. The BBC fully expects
to exceed its quota for 2003/2004 although Ofcom has yet
to report on the BBC’s performance for the year. Producers(such as Planet 24) owned by UK broadcasters are still unable
to claim independent status.
EU programme quotas in the calendar year 2003
European Community legislation requires Member States toensure that broadcasters reserve for European works a majority
proportion of their television transmission time excluding the time
devoted to news, sports events, games, adverts, teletext services
and teleshopping. The legislation also requires broadcasters toreserve at least 10% of their transmission time for European
works (excluding works of the kind described above) made byindependent producers.

BBC Annual Report and Accounts 2003/2004

95

Compliance

The BBC exceeded EU quotas in the calendar year 2003.
Of the relevant BBC One and BBC Two output, 83% was ofEuropean origin (81% in 2002) and 15% was made by European
independent producers (13% in 2002). Of the relevant output
of all BBC channels (including BBC Choice, now BBC Three,
BBC Four, CBeebies, the CBBC Channel and BBC News 24),
86% was of European origin and 21% was made by European
independent producers.
European channel broadcasting regulation
The BBC broadcasts two television channels in Europe,
BBC Prime and BBC World. Both channels were originallyoperated by European Channel Broadcasting Limited but on
1 December 2002 the Secretary of State for Culture, Media andSport approved the transfer of the business and assets of the
BBC World channel to a new company, BBC World Limited,which became a wholly-owned subsidiary of BBC Commercial
Holdings Limited. BBC Prime continues to be operated by
European Channel Broadcasting Limited, a wholly-owned
subsidiary of BBC Worldwide Limited. Both channels are now
licensed by Ofcom as television licensable content services.
In accordance with the principles on which the Secretary of State
for Culture, Media and Sport’s approval was originally granted:
arm’s length trading relationships were maintained between
the BBC on the one hand and companies responsible for the
BBC World and BBC Prime channels on the otherthe companies concerned with operating the two channels
complied fully with the BBC’s Fair Trading Guidelines and withapplicable provisions of EU law
the programmes shown on the two channels complied, whereapplicable, with the relevant Ofcom (formerly ITC) codes andthe BBC-made programmes shown on those channels were
produced in accordance with BBC Producers’ Guidelines
On-air promotions: Office of Fair Trading undertaking
Following the 1992 report of the Monopolies and Mergers
Commission (on the publicising in the course of broadcasting,of goods supplied by the broadcaster), the BBC gave an
undertaking to the Office of Fair Trading (OFT) to use only still
trails to give information about BBC magazines. The terms of theundertaking also commit the BBC not to exceed more than sevenminutes as an aggregate across a seven day period in relation
to on-air promotions of BBC magazines on its television services.
Although the legal obligation applies only to BBC magazines,
the Governors’ Fair Trading Commitment commits to apply
the spirit of the undertaking to all on-air promotions ofcommercial products.

Trails for non-BBC products have also been tracked. In the same
period as above, there was 20 minutes and 50 seconds worthof promotion for independent products. This averages out to
24 seconds per seven day period on the BBC’s television services.
The BBC continues to anticipate a review of the OFT undertaking,although no date has yet been announced.
7 Cost of compliance
Historically the BBC’s cost of compliance has not been significant.
However, one impact of the Communications Act 2003 will be
to increase these costs. We will be reporting on these costs infuture years.
8 Donations and acknowledgements
BBC policy is not to make political donations.
The UK Public Service Broadcasting policy is not to makedonations to charities. In addition to broadcast appeals detailedon pages 79 to 80, donations to charities by BBC Commercial
Businesses amounted to approximately £1,000 during the year
(2003 £9,000). A total of £0.1million (2003 £1.1million) in
copyright royalties was paid to Golden Jubilee Events Limited
in respect of an agreement between the BBC, Golden Jubilee
Events Limited and BBC Worldwide Limited in regard to
producing, staging and broadcasting the Golden Jubilee musicalconcerts at Buckingham Palace in June 2002. Golden Jubilee
Events Limited is a subsidiary of the Queen’s Golden Jubilee Trust,to which all of its profits are donated.
The BBC acknowledges financial grants from the European
Commission for various technical research projects.

Board of Governors
17 June 2004

From 1 April 2003 to 31 March 2004 the total on the BBC’s
television services for all BBC magazines (including Radio Times)
was 2 hours, 27 minutes and 10 seconds of transmission, which
averages out at 2 minutes, 50 seconds in a seven day period.
The total for all commercial products (including BBC Worldwide
Limited and independent products) was 4 hours, 2 minutes and
20 seconds of transmission, which averages out at 4 minutes
and 40 seconds in a seven day period.

96

BBC Annual Report and Accounts 2003/2004

Financial review
In the summer of 2000 a strategy was laid out which involved
a significant boost to spending in order to launch new digitalchannels, drive digital take-up and improve the performance of
the analogue channels. This strategy was to be financed by steadyincreases in licence fee income from reductions in evasion,
household growth, inflation and the RPI + 1.5% premium on
the licence fee (announced by Chris Smith as Secretary of State
for Culture, Media and Sport in February 2000).
It would also make use of the public services cash balance built up
prior to the licence fee settlement and of temporary bank financefor a few years with the intention that this is all paid off by theend of the current Charter period in December 2006. This is still
the plan.
In this financial year the public services cash position
improved compared to 2002/2003. There were net cash fundsof £3million at the end of the year. The public services also
make use of television licence fee payments in advance under
the licence savings stamps and direct debit instalment schemes.
These amounted to £109million at the year end and althoughthese do not represent bank debt, they do count against the£200million borrowing ceiling defined in the Charter.
IncomeLicence fee
Licence fee revenues of £2,798million were £140million higher
than last year. £52million was due to inflation, £46million to theabove inflation increase in the licence fee and £42million fromcollection improvements.
Despite this growth, collection costs only rose £4million to£151million in the year. Capita Business Services and the AMV
consortium have, in their second year, introduced online system
improvements to streamline processing and improve efficiency.
The evasion rate fell from 6.3% at March 2003 to 5.7%
at March 2004. The previous reported estimate for evasion atMarch 2003 was 7.2%, with the revision to 6.3% reflecting the
new household and Census data.
Continuing success in reducing evasion and controlling collection
costs mean that their combined cost has now fallen to 11.1%
of total licence fee income, from 18.9% in 1991/1992 when the
BBC took direct responsibility for licence fee collection fromthe Home Office.
Combined cost of collection and evasion as a percentage of total
licence fee income (%)
18.9 18.1
17.6 17.1
16.6 16.5 16.1
12.7 12.3
15.3
12.3 11.9
14.1 14.4
11.4 11.3 10.8
12.5 11.8
9.7
11.1
9.1 8.8
7.9 6.3
5.7

6.2

5.8

5.3

5.2

5.2

5.2

5.3

5.6

5.0

5.6

4.6

5.5

5.4

91/92 92/93 93/94 94/95 95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04

EvasionCollection costs

This year we have run a series of intensive campaigns in ninemajor conurbations in England, including London, major citiesin Scotland and the whole of Northern Ireland, all areas whereevasion is higher than the national average. In the latter half of theyear we also increased significantly the number of enquiry officers
across the UK focusing particularly in urban areas where evasion
is higher and populations transient. This year also saw the launchacross the UK of our new detection vans which have multiple
detection methods, and are significantly more precise and fasterin detecting televisions in use.
The useful recommendations made in last year’s NAO report,
Collecting the Television Licence Fee, in which Sir John Bourn,
Comptroller and Auditor General, praised the BBC’s successin reducing evasion have now been fully implemented.
Commercial businesses
The key purpose of the commercial businesses is to exploit
the BBC’s physical assets, capabilities and intellectual properties
for profit, to provide a growing source of supplementary
cash for public service broadcasting. In addition, some of thecommercial businesses are expected to reduce the price ofthe support services they provide generating cost savings forthe public services.
In 2003/2004 commercial businesses generated a cash contributionof £135million which was £11million better than the previous
year. Savings for the BBC from these businesses also increasedto £27million in the year. So in total the contribution from thesebusinesses in 2003/2004 was £162million compared to£147million in the previous year.
These businesses continued to invest in programme rights, newtechnology and other assets to support future business growth.
The businesses operated well within their bank covenants andtheir separate borrowing ceiling of £350million granted by the
Secretary of State. At the year end their net debt was £172million
and gearing was 48%.
BBC Worldwide Limited
BBC Worldwide Limited is the largest of the BBC commercial
businesses and has had a steady year of trading in the faceof adverse conditions in some of its markets. It contributed£141million in cash to the BBC during 2003/2004. This represents
an increase of £18million over the year, £9million of which is theresult of BBC World and its associated losses no longer being
part of the BBC Worldwide Group, and £9million is throughimproved performance.
BBC World Limited
BBC World Limited has had another difficult year in a toughglobal advertising market further depressed by the Iraq war.
Together with rising US dollar exchange rates these factors
resulted in a cash outflow of £13million compared to £14million
in the previous year.
BBC Ventures Group Limited
BBC Ventures Group Limited comprises four separate businesses,
BBC Resources, BBC Broadcast, BBC Technology and BBC Vecta,
and has had a year of consolidation following last year’s restructuring.
There have been successes in gaining more external business
which have offset the cyclical reduction in large events that
boosted revenue the previous year. Cost savings delivered to the
BBC have also risen by £4million. This year also saw BBC Broadcast
investing in their move to the new Broadcast Centre at the Media
Village in White City.

BBC Annual Report and Accounts 2003/2004

97

Financial review

Following a price benchmarking exercise covering the cost of
the BBC’s public services technology requirements, a decision
was made to competitively tender the contract for the provisionof technology services for the next decade. This process is welladvanced and is expected to produce further savings for the
BBC of £20–30million a year. The successful bidder will alsopurchase the company, BBC Technology Holdings Limited.
This process is due to complete in September 2004.
Public service expenditure
Overall spending on programmes fell in the year by £38million –this was mainly due to 2003/2004 being a year low on major
sporting events. Otherwise programme spend on analogue
channels stayed level.
Within that, total spending on digital services increased by£20million to £312million, which is 15% of transmitted programme
spend. The new digital services BBC Three, 1Xtra and BBC 7 hadtheir first full year of broadcasting and accordingly saw increases
in expenditure. Spend on bbc.co.uk reduced during the year inorder to allow more investment in interactive television (BBCi).
Expenditure on overheads in the year was £326million, a small
increase of £4million. This increase is due to the acceleration andearly completion of a major IT project and short-term migration
costs as the new Media Village buildings are occupied. Overheads
are now down to 12% of spending which is 3% better than thetarget of 15% set in the summer of 2000 following the licencefee settlement.
Results for the year
The BBC does not have shareholders and does not aim to makea profit. Operating surpluses and deficits represent short-term
timing differences between income and expenditure which
will reverse in subsequent years. The result for 2003/2004 is a
deficit of £249million, £66million better than the previous year.
This is in line with the BBC’s five-year plan in which the large
improvement in spending on programmes and services is achieved
by making use of the BBC’s historic high cash balances andtemporary bank finance within the overall aim of breaking evenover the Charter period.
Assets and liabilities
Property
During 2003/2004, work has continued on the BBC’s programme
to revitalise its real estate portfolio.
The redevelopment of Broadcasting House, the BBC’s flagshipheadquarters in central London, was secured through an AAA rated£813million bond. This award-winning deal took advantage of a48-year low in bond yields. When complete in 2008, Broadcasting
House will be the largest live broadcasting centre in the world
and will offer the public unparalleled access into the heart of theBBC’s operations.
In west London, 1,600 staff moved into the newly completed
Media Village buildings which included new offices and television
channel play-out facilities, with an ongoing migration programmethat should see full occupation by the end of 2004. Also at theMedia Village, the shape of the new music centre was unveiled,designed by Foreign Office Architects and called The Music Box.
This building, due to open in 2006, will be the home of the BBC

98

Symphony Orchestra, the BBC Symphony Chorus, the BBC
Concert Orchestra and the BBC Singers, bringing them together
in one place for the first time.
In Glasgow, work has continued on the plans to develop a new
broadcasting centre for BBC Scotland at Pacific Quay and work
should start on site in July 2004.
Across England real estate projects completed in the year include
space in the Mailbox shopping centre in Birmingham, and newbuildings in Leicester, Hull and Jersey.
All of these property developments are being carried out in orderto reduce and rationalise the 395 premises in the BBC’s estate
whilst updating the spaces and technology they provide and,particularly, providing significant opportunities for licence payers
to visit the BBC’s operations. As part of this increased accessibility
strategy the BBC has four Open Centres and four community
studios where local people can learn more about both their local
BBC services and new media technologies.
Pensions
The BBC, unlike many other organisations, has committed to
keeping its defined benefit pension scheme to which the majorityof employees belong. The net deficit of the pension scheme,
based on market values on 31 March 2004 as dictated by FRS 17,
has improved by £638million to £436million. This reflects short-term
movements in equity values over the past 12 months and changes
in interest rates but does not accurately reflect the underlying
long-term health of the scheme which remains over funded onan actuarial basis.
In order to give a truer picture of the health of the scheme,
we have voluntarily provided extra information about its assets
and liabilities. Note 8b (pages 113 to 115) outlines additional
information on the BBC Pension Scheme over and above that
required by FRS 17.
International Financial Reporting Standards
The BBC voluntarily prepares its financial statements in linewith applicable United Kingdom accounting standards. From 2005
those standards will be required to come into line with the new
International Financial Reporting Standards (IFRS) designed toharmonise international standards. These new standards will
require changes to a number of accounting policies.
In line with other organisations the BBC has embarked ona process to review the impact of the adoption of IFRS. We
anticipate completing this work over the summer of 2004 whenthe International Accounting Standards Board is expected toconfirm its full requirements. The BBC will continue to adopt
standards early, in line with corporate best practice.

John Smith
Director of Finance, Property & Business Affairs
17 June 2004

BBC Annual Report and Accounts 2003/2004

Financial statements
Consolidated statement of income and expenditure
for the year ended 31 March
Note

The BBC does not aim to makea surplus. Surpluses and deficits
represent short-term timing
differences between income andexpenditure which will reversein subsequent years.

Group income
Operating expenditure

12Group operating deficit
Share of operating surplus of associates and joint ventures

2004
£m

2003
£m

3,705.9 3,532.0(4,001.6) (3,938.6)(295.7)2.0(406.6)
2.9

Operating deficit
Loss on sale and termination of operations
Profit/(loss) on disposal of fixed assets

35
6(293.7)–41.8(403.7)(0.4)(14.3)

Deficit before interest and taxation
Net interest (payable)/receivable and other similar items
Other finance income (from defined benefit pension scheme)

78c(251.9)(3.1)
21.0(418.4)5.1
114.3(234.0)(299.0)

Deficit before taxation and minority interest
Taxation
Minority interest

9(15.2)
0.3(15.7)
0.1

Deficit for the financial year

19

(248.9)(314.6)The BBC has entered into certain joint ventures with Flextech and Discovery Communications Inc.
but has no obligation to make good its share of their cumulative operating losses (see Note 14d).
The above results are derived from continuing operations in both the current and previous
financial periods.
There is no difference between the results as disclosed above and the results on a historical cost basis.

BBC Annual Report and Accounts 2003/2004

99

Financial statements
Balance sheetsat 31 March

Fixed assets
Intangible fixed assets
Tangible fixed assets
Investment in programmes for future sale
Other investments

Note

Group
2004
£m

UK Public
UK Public
Service
Service
Group Broadcasting Broadcasting
2003
2004
2003
£m
£m
£m

10
12
13
14

19.9
791.5
107.5
16.1

15.7
802.9
108.3
17.8

–
519.0
–
286.6

–
554.2
–
318.3

935.0

944.7

805.6

872.5

Current assets
Stocks

15

433.0

468.9

400.4

437.7

Long-term debtors
Current debtors

16
16

142.0
672.7

158.6
605.5

118.1
537.7

131.8
487.3

Total debtors
Short-term investments
Cash at bank and in hand

21
21

814.7
12.6
39.3

764.1
64.9
69.5

655.8
12.6
8.2

619.1
32.9
7.9

1,299.6

1,367.4

1,077.0

1,097.6(891.6)(920.5)(792.0)(782.9)

408.0

446.9

285.0

314.7

1,343.0

1,391.6

1,090.6

1,187.2

Creditors – amounts falling due
within one year

17b

Net current assets
Total assets less current liabilities
Creditors – amounts falling due after
more than one year
Provisions for liabilities and charges

17c
18(216.3)(77.5)(159.4)(72.0)(39.3)(64.7)(56.2)(64.3)Net assets excluding pension liability
Pension liability

8c1,049.2 1,160.2(436.3) (1,074.5)

986.6
–

1,066.7
–

85.7

986.6

1,066.7

Net assets

612.9

Represented byOperating reserve excluding pension liability
Pension reserve

19
19

255.4
296.0
(436.3) (1,074.5)

193.0
–

203.0
–

Operating reserve
Capital reserve
Revaluation reserve1919(180.9)788.8
4.8(778.5)
858.1
5.6

193.0
788.8
4.8

203.0
858.1
5.6

612.7
0.2

85.2
0.5

986.6
–

1,066.7
–

612.9

85.7

986.6

1,066.7

Minority interest

The BBC has entered into certain joint ventures with Flextech and Discovery Communications Inc.
but has no obligation to make good its share of the net liabilities which at 31 March 2004 amounted
to £57.6million (2003 £62.9million).These liabilities have not been included in the financial statements(see Note 14d).
The financial statements were approved by the Board of Governors and Executive Committee on
17 June 2004 and signed on their behalf by:
Michael Grade Chairman
Mark Byford Acting Director-General
John Smith
Director of Finance, Property & Business Affairs

100

BBC Annual Report and Accounts 2003/2004

Financial statements
Consolidated cash flow statement
for the year ended 31 March

Reconciliation of Group operating deficit to net cash flow from operating activities
2004
£m

2003
£m

(295.7)
229.0
161.3
2.4
35.9
(50.6)(17.2)
5.5(406.6)
230.2
136.5
4.5
(19.5)
37.3(36.0)(14.7)

70.6(68.3)

2004
£m

2003
£m

Net cash inflow/(outflow) from operating activities

70.6(68.3)

Dividends received from joint ventures and associates

1.3

1.3

Return on investments and servicing of financeInterest received
Interest paid
Interest paid on finance leases

5.0
(7.5)
(0.3)

11.5
(2.0)
(0.2)

Net cash (outflow)/inflow from return on investments and servicing of finance

(2.8)

9.3

Taxation
Taxation paid

(9.7)

(12.9)

Capital expenditure and financial investments
Purchase of tangible fixed assets
Investment in programmes for future sale
Investment in intangible fixed assets
Decrease in loan to associate undertaking
Capital repayment from joint ventures
Proceeds from the sale of investment in programmes
Proceeds from the sale of tangible fixed assets(243.9)(90.6)
(0.6)
0.2
1.0
–
143.8

(179.9)(85.5)
(2.7)
–
–
0.4
5.4

Net cash outflow from capital expenditure and financial investments(190.1)(262.3)Acquisitions and disposals
Purchase of a subsidiary
Cash acquired with subsidiary
Investments in joint ventures
Proceeds from sale of operations
Proceeds from disposal of interests in joint ventures and associates

(9.9)
0.6
–
–
–

–
–
(1.2)
3.2
0.1

Net cash (outflow)/inflow from acquisitions and disposals

(9.3)

2.1

(140.0)(330.8)

52.3

291.9

Net cash inflow from management of liquid resources

52.3

291.9

Financing
Increase in loans
Repayment of loans
Repayment of finance leases
Repayment of loan notes

135.0(42.6)
(1.8)
(0.6)

85.0
(25.9)(21.2)
(0.5)

90.0

37.4

2.3

(1.5)

Group operating deficit
Depreciation and amortisation
Pension schemes operating costs (non-cash)
Loss on disposal of tangible fixed assets
Decrease/(increase) in stocks(Increase)/decrease in debtors
Decrease in creditors
Increase/(decrease) in provisions
Net cash inflow/(outflow) from operating activities
Cash flow statement
Note

Net cash outflow before use of liquid resources and financing
Management of liquid resources
Sale of other liquid resources

20, 2121
21

Net cash inflow from financing
Increase/(decrease) in cash in the year

BBC Annual Report and Accounts 2003/2004

20, 21101

Financial statements
Consolidated statement of total recognised gains and losses
for the year ended 31 March

NoteGroup deficit for the financial year
Exchange differences on retranslation of overseas subsidiaries
Actuarial gain/(loss) on defined benefit pension schemes

8c

Total recognised gains and losses relating to the year

2004
£m

2003
£m

(248.9) (314.6)
(2.1)
(3.1)
778.5 (2,013.4)
527.5 (2,331.1)

Reconciliations of movement in reserves
for the year ended 31 March

Group
2004
£m

102

UK Public
UK Public
Service
Service
Group Broadcasting Broadcasting
2003
2004
2003
£m
£m
£m

Deficit for the financial year
Other recognised gains and losses relating to the year (net)(248.9) (314.6)
776.4 (2,016.5)(80.1)–(303.4)–

Increase/(decrease) in reserves during the year
Opening reserves

527.5 (2,331.1)(80.1)
85.2 2,416.3 1,066.7(303.4)
1,370.1

Closing reserves

612.7

1,066.7

BBC Annual Report and Accounts 2003/2004

85.2

986.6

Financial statements
Statement of accounting policies

This section explains the BBC’s main accounting policies, whichhave been applied consistently throughout the year and in thepreceding year except where stated. A footnote in italics follows
some policies to explain technical aspects of the accounting
treatment in plain English.
The financial statements have been prepared in accordance withthe provisions of the BBC’s Charter and Agreement. Although
not mandatory, the BBC has chosen to follow the accounting anddisclosure provisions of the Companies Act 1985, applicable UK
accounting standards and the Financial Services Authority Listing
Rules to ensure that its financial statements are prepared on abasis which is consistent with that of UK public limited companies.
In line with other companies, the BBC files with Companies House
audited financial statements for all its subsidiary companies.
Basis of accounting
The financial statements are presented under the historical costaccounting convention as modified by the revaluation of certain
plant, machinery, furniture and fittings.
Basis of consolidation
The Group comprises:
UK Public Service Broadcasting and those subsidiaries
incorporated to act solely on its behalf (notably Centre House
Productions Limited, BBC Property Limited and BBC Property
Investments Limited)
BBC World Service (and its subsidiaries)
Commercial subsidiary companies comprising BBC Commercial
Holdings Limited and its various subsidiaries (notably BBC
Worldwide Group, BBC World Group and BBC Ventures Group)
Unless otherwise stated, the acquisition method of accounting
has been adopted. Under this method, the results of subsidiaries
acquired or disposed of in the year are included in the consolidated
statement of income and expenditure from the date of acquisition
or up to the date of disposal.
An associate is an undertaking in which the Group has along-term interest, usually between 20% and 50% of the equity
voting rights, and over which it exercises significant influence.
A joint venture is an undertaking in which the Group has along-term interest and over which it exercises joint control.
The Group’s share of profits less losses of associates and joint
ventures is included in the consolidated statement of income
and expenditure and its interest in their net assets is includedin the consolidated balance sheet.
A separate statement of income and expenditure reflecting theresults of UK Public Service Broadcasting has not been presented,
as permitted by Section 230 of the Companies Act 1985, as if itwere a company.
These accounts of the Group include the results of UK Public Service
Broadcasting, BBC World Service and all businesses controlled by
the BBC (subsidiaries) together with the BBC’s share of the resultsof businesses over which the BBC has influence but not control(associates) and those which the BBC jointly controls (joint ventures).

Investments
Investments are recorded on the balance sheet of UK PublicService Broadcasting at cost less provision for any impairment
in value.The funding of UK Public Service Broadcasting and of BBC
World Service is legally separate and cross-subsidisation is not
permissible. Accordingly, for the purposes of preparing UK PublicService Broadcasting’s balance sheet, UK Public Service Broadcastingis considered to have an investment in BBC World Service equal
to the net assets of BBC World Service.
IncomeIncome, which excludes value added tax, trade discounts and sales
between Group companies, is comprised of the following keyclasses of revenue, which are recognised as follows:
Television licences
Income derived from television licences is recognised when
receivable from the Department for Culture, Media and Sport.
This represents the value of licences issued in the year.The
amount which can be paid in cash to the BBC for any year
cannot exceed the total amount voted by Parliament for thatyear. Any difference between the value of licences issued andthe amount voted is adjusted in the amount of cash received
in the following year. Any amounts which have not been paid
to the BBC are included within debtors.
Grant-in-Aid from the Foreign and Commonwealth Office
BBC World Service income is primarily derived from a
Grant-in-Aid which is recognised when received from the Foreign
and Commonwealth Office. It is intended to meet estimatedexpenditure in the year but unexpended receipts for the year,
within predetermined limits, are not liable to surrender.
Provision of equipment, facilities and services
With the exception of long-term contracts, income isrecognised when the equipment, facilities and services areprovided to customers.
For long-term contracts, the amount of profit attributable tothe stage of completion is recognised when the outcome of
the contract can be foreseen with reasonable certainty.Turnover
for such contracts is stated at the cost appropriate to their stageof completion plus attributable profits, less amounts recognised
in prior years. Provision is made for any future losses as they
are foreseen.
Provision of programme making facilities and services – recognised
on provision of service
Licence fees from distribution of joint productions – recognised
on delivery of rights or the start of the licence period, whicheveris the later
Programme distribution and channel income – recognised onprovision of service
Sale of promotional merchandise – recognised on delivery orprovision of service
The distinction between the various income sources is important.
The BBC is careful not to cross-subsidise commercial, UK Public Service
Broadcasting or BBC World Service activities. More informationon these BBC fair trading requirements and policies can be foundon pages 82 to 85 of this report.

BBC Annual Report and Accounts 2003/2004

103

Financial statements
Statement of accounting policies

Foreign currency translation
Transactions in foreign currencies are translated into sterling at therates of exchange ruling at the date of the transactions.
Monetary assets and liabilities denominated in foreign currencies
are translated into sterling at the rates of exchange ruling at
31 March or at forward rates where related hedging contracts arein place. Surpluses and deficits arising from the translation of assets
and liabilities at these rates of exchange, together with exchange
differences arising from trading, are included in the statement ofincome and expenditure.
The profit and loss accounts and cash flows of overseas subsidiaries
are translated into sterling at average rates for the year. Exchange
differences arising on consolidation from the retranslation of
the opening net assets of overseas subsidiaries and any related
long-term foreign currency borrowings are taken directly to theoperating reserve, together with the differences arising when the
profit and loss accounts are retranslated at the rates ruling at theyear end. Other exchange differences are taken to the statementof income and expenditure.
As these financial statements are prepared in sterling, the BBC’s
foreign currency transactions and balances must be translated,
at appropriate exchange rates, into sterling. This policy states how
those retranslations are included in the financial statements andis consistent with the methods used by many companies.
Pension costs
The BBC operates both defined benefit and defined contribution
schemes for the benefit of employees.
The amounts charged as expenditure for the defined contribution
scheme represent the contributions payable by the BBC for theaccounting periods in respect of this scheme.
The defined benefit schemes, of which the majority of staff
are members, provide benefits based on final pensionable pay.
Amounts are charged to expenditure so as to spread the cost ofpensions over employees’ working lives with the BBC.The assets of
the BBC’s main scheme are held separately from those of the Group.
UK Public Service Broadcasting and its subsidiary undertakings
have taken advantage of the provisions included within FRS 17,
Retirement benefits, and account for the scheme as if it werea defined contribution scheme.This is because the pension scheme
is managed centrally across the Group and it is not possible toallocate the underlying assets and liabilities of the scheme on areasonable and consistent basis.The expenditure charge under
FRS 17 for UK Public Service Broadcasting and its subsidiary
undertakings therefore represents the contributions payablein the year.
On retirement, members of the BBC’s main pension scheme are paid
their pensions from a fund which is kept separate from the Group.
The BBC makes cash contributions to that fund in advance ofmembers’ retirement.

104

Research and development
Research and development expenditure is written off as incurred.
Intangible fixed assets
Goodwill
Purchased goodwill (representing the excess of the fair value of thepurchase consideration plus any related costs of acquisition over thefair value attributable to the separable net assets acquired) arisingon acquisition of a subsidiary or business, is capitalised and amortisedover its useful economic life. On the subsequent disposal or
termination of a business, the surplus or deficit is calculated after
charging the unamortised amount of any related goodwill. As ispermitted by FRS 10, Goodwill and intangible assets, goodwill arisingin periods up to 1 April 1998 remains offset against the operating
reserve. On disposal, goodwill previously written off against reserves istransferred to the statement of income and expenditure for the year.
Other intangibles
Other intangibles are capitalised and amortised on a straight line
basis over the expected useful life of the assets.
Tangible fixed assets
Expenditure on fixed assets is capitalised together with incremental
and internal direct labour costs incurred on capital projects.
Depreciation is calculated so as to write off the cost or valuation,less estimated residual value, of fixed assets on a straight line basis
over their expected useful lives. Depreciation commences fromthe date an asset is brought into service.
The BBC’s useful lives for depreciation purposes for the principal
categories of assets are:Land and buildings
Freehold land
– not depreciatedFreehold and long-leasehold buildings – fifty years
Short-leasehold land and buildings– unexpired lease term
Plant and machinery
Computer equipment– three to five years
Electrical and mechanical infrastructure – ten to twenty-five years
Other– three to ten years
Furniture and fittings– three to ten years

UK Public Service Broadcasting’s plant and machinery is statedat the estimated current replacement cost of the assets, as at
31 March 1993, adjusted for remaining service potential, or cost
if acquired later, less accumulated depreciation.
BBC World Service’s plant and machinery and furniture and fittings
are stated at the estimated current replacement cost of the assets,
as at 1 April 1996, as adjusted for remaining service potential, or
cost if acquired later, less accumulated depreciation.
There is no material difference between the net book value ofthese tangible fixed assets and their value as determined on ahistorical cost basis.

BBC Annual Report and Accounts 2003/2004

The BBC has revalued its tangible assets once, when the internalmarket was introduced, but has chosen not to revalue them on an
ongoing basis.This reflects the fact that they are used within the BBC
rather than being held for resale or their investment potential. Assets
are therefore included at the amount they cost when purchasedor constructed (in either case less subsequent depreciation).
Investment in programmes for future sale
Investment in programmes for future sale is stated at cost,
after writing off the costs of programmes that are consideredirrecoverable, less accumulated amortisation. Amortisation of
investment in programmes for future sale is charged to the income
and expenditure account over the estimated average marketable
life of the programme genre which is generally between two andten years.The cost and accumulated amortisation of investmentin programmes for future sale are reduced by programmes which
are fully written off.
The cost of programmes for sale is charged to the income andexpenditure account to match the expected timing of income fromfuture sales.
Originated programme stocks and work in progress
Originated programme stocks and work in progress, including
those commissioned from independent producers, are statedat the lower of cost and net realisable value. With the exceptionof the costs of prepaid repeats of independent programmes,
the full stock value is written off on first transmission.
Cost includes all direct costs, production overheads and a proportionof other attributable overheads.
Net realisable value is based upon arm’s length contract prices
negotiated between the channel controllers and programme makers.
Acquired programmes and film stocks
The costs of acquired programmes and film stocks are written
off on first transmission except to the extent that further showings
are likely in the foreseeable future, when they are written off
according to their expected transmission profile. Assets andliabilities relating to acquired programmes are recognised at
the point of payment or commencement of the licence period,
whichever is earlier. Agreements for the future purchase of
programmes whose licence period has not commenced andwhere there has been no payment by the balance sheet dateare disclosed as purchase commitments.
Other stocks
Raw materials and other physical stocks are stated at the lowerof cost and net realisable value.
Deferred tax
Deferred tax is computed under the liability method. Fullprovision, without discounting, is made in respect of timing
differences between certain items in the financial statements andtheir treatment for taxation purposes at the balance sheet date
except as otherwise required by FRS 19, Deferred tax. Deferred
tax assets are recognised to the extent that it is regarded as more
likely than not that they will be recovered.

Operating leases
Operating lease rentals are written off on a straight line basis over
the term of the lease.
An operating lease is a lease in which the lessee has not taken on therisks and rewards of owning and operating the asset.The lessee – theBBC – has not acquired an asset but is hiring it, so the hire charge
is included in the BBC’s costs.
Finance leases
Assets acquired under finance leases are included within fixed assets
at the total of the lease payments due over the life of the lease
discounted at the rate of interest inherent in the lease.The sameamount is included in creditors. Rental payments are apportioned
between the finance element, which is charged against the income
and expenditure account, and the capital element which reduces
the lease creditor.
A finance lease is a lease that transfers substantially all the risks andrewards of owning and operating an asset to the lessee. Effectively thelessee owns the asset and has financed it by borrowing, so the asset
and borrowing are included separately in the balance sheet.
Reserves
The value of the capital reserve is equal to the combined net
book value of fixed assets of UK Public Service Broadcasting(less the investment in BBC World Service) and BBC World
Service at historic cost less its dilapidations provision.
The revaluation reserve reflects the difference between the
net book value of fixed assets of UK Public Service Broadcasting
and BBC World Service at historic cost compared with theirrevalued amount.
The operating reserve is the accumulated surplus of the income
and expenditure account to date.
The BBC is careful not to mix UK Public Service Broadcasting and
BBC World Service reserves. Hence BBC World Service reserves areshown separately in the notes to the financial statements.
Cash and liquid resources
Cash, for the purposes of the cash flow statement, comprises cashin hand and deposits repayable on demand, less overdrafts payable
on demand. Liquid resources are current asset investments which
are either readily convertible into known amounts of cash at orclose to their carrying values or traded in an active market. Liquid
resources comprise bank deposits not repayable on demand andother short-term investments which include gilts, certificates ofdeposit and commercial paper.
Financial instruments
The Group does not enter into speculative derivative contracts.
Some hedging contracts are undertaken in order to limit theGroup’s exposure to foreign exchange fluctuations (the accounting
treatment for these contracts is explained in the foreign currencytranslation accounting policy).
Disclosure of the Group’s loans and other financial assets andliabilities is provided within Note 23 to the financial statements.

Deferred tax is corporation tax which is not payable at a specific time
but which is expected to become payable in the future.

BBC Annual Report and Accounts 2003/2004

105

Financial statements
Notes to the financial statements

Note 1 provides analysis of thedifferent business areas within the BBC.
UK Public Service BroadcastingGroup (referred to as ‘Home
Services’ within the BBC Charter)
comprises the UK Public Service
Broadcasting operations and thosesubsidiary companies incorporated
to act solely on behalf of those public
service operations.
BBC World Service is separately
funded from the UK PublicServices Broadcasting Group.
It comprises broadcasting andmedia monitoring activities.
Commercial Businesses comprisebusinesses which generate external
income from exploitation of theBBC’s programmes, other assets
and skill base.

1 Analysis of income, (deficit)/surplus and net assets
1a Analysis of income, (deficit)/surplus and net assets by activity
UK Public
Service
Broadcasting
Group
Note
£m

2004
Total income
Less: Intra-Group income
Less: Share of joint ventures

BBCWorld Commercial
Service Businesses
£m
£m

Total
£m

2,940.0(121.5)(1.3)

243.7 1,150.5 4,334.2(0.6) (417.6) (539.7)–(87.3)(88.6)

Group external income

1b,d,g2,817.2

243.1

645.6

3,705.9(Deficit)/surplus before interest and taxation
Defined benefit pension scheme– additional operating costs*†– other finance income*Net interest payable

1e,h(136.0)9.2

36.2(90.6)(161.3)21.0(3.1)

Deficit before taxation and minority interest
Net assets (excluding pension liability)(234.0)
1f,h

710.3

152.5

186.4

1,049.2

Pension liability*†(436.3)

Net assets

612.9

2003
Total income
Less: Intra-Group income
Less: Share of joint ventures

2,797.3(116.1)–224.2 1,144.0 4,165.5(0.5) (437.4) (554.0)–(79.5)(79.5)

Group external income

1b,d,g2,681.2

223.7

627.1

3,532.0(Deficit)/surplus before interest and taxation
Defined benefit pension scheme– additional operating costs*†– other finance income*Net interest receivable

1e,h(331.1)

7.9

41.3(281.9)(136.5)114.3
5.1

Deficit before taxation and minority interest
Net assets (excluding pension liability)
Pension liability*†
Net assets(299.0)
1f,h

771.6

142.8

245.8

1,160.2(1,074.5)
85.7* As permitted by FRS 17 these items are not split between business classes because they are managed centrally acrossthe Group and it is not possible to allocate them on a reasonable and consistent basis.
† The actual employer cash contribution to the defined benefit pension scheme is included in the (deficit)/surplus before
interest and tax of each entity.The additional operating cost is the cost to the Group over and above these cash
contributions.

106

BBC Annual Report and Accounts 2003/2004

1b UK Public Service Broadcasting income
The income from licences represents
the value of all licences issued in
the year.
Other licence fee income andadjustments include the year-on-year
impact of licences issued in the year
but not in force at 31 March either
through late or early renewals or
through refunds.

Other income includes the provisionof content and services to overseas
broadcasters, concert ticket sales andexploitation of the programme archive.

2004
£m

2003
£m

Colour
Monochrome
Concessionary
Over 75s
Quarterly payment scheme premium
Other licence fee income and adjustments

2,364.2
2.5
0.9
407.8
15.7
7.0

2,271.3
2.8
0.9
370.9
15.9
(3.3)

Total licence fee income
Open University
Other income

2,798.1–
19.1

2,658.5
0.1
22.6

Total external income

2,817.2

2,681.2

Licence fee income

During the year 3.1 million (2003 3.2 million) colour licences were issued under the quarterly payment
scheme at a premium of £5 each (2003 £5).
Households in which one or more persons over the age of 75 reside, as their primary residence, areentitled to a free licence.The BBC is reimbursed for these free licences by the Department for Workand Pensions.

Licences in force are those which arestill valid as at 31 March each year.

Licence fees are set by the Department
for Culture, Media and Sport.

Licences in force

2004
Numberm

2003
NumbermColour
Monochrome
Over 75s
Concessionary

20.4
0.1
3.8
0.2

20.1
0.1
3.7
0.2

24.5

24.1

2004
£

2003
£

116.0038.50
5.00

112.0037.50
5.00

Licence fees

Colour
Monochrome
Concessionary

From 1 April 2004 the colour and monochrome licence fees were increased to £121.00 and £40.50
respectively.The concessionary licence remained at £5.
1c Geographical analysis of UK Public Service Broadcasting GroupUK Public Service Broadcasting Group income and deficit arise in the UK.The net assets used by these
operations are located in the UK.
1d BBC World Service income

Other income is generated from thesale of programmes, co-production
deals, publishing activities and theprovision of media monitoring services.

2004
£m

2003
£m

Grant-in-Aid
Subscriptions
Other income

220.1
16.7
6.3

201.0
16.1
6.6

Total external income

243.1

223.7

2004
£m

2003
£m

Broadcasting
BBC Monitoring

9.7
(0.5)

6.5
1.4

Total surplus before interest and taxation

9.2

7.9

1e BBC World Service surplus before interest and taxation by activity

BBC Annual Report and Accounts 2003/2004

107Financial statements
Notes to the financial statements

1f Geographical analysis of BBC World Service
BBC World Service income, operating expenditure and surplus arises primarily in the UK.
Location of BBC World Service net assets

2004
£m

2003
£m

UK
Overseas

59.0
93.5

56.1
86.7

Net assets

152.5

142.8

2004
£m

2003
£m

Publishing and new media
Programme distribution
Channels
Provision of playout and channel management services
Provision of programme making facilities and services
Provision of technology services
beeb Ventures Limited
Less intra-Group income

341.2
175.3
78.7
108.8
128.0
231.2
–
(417.6)

338.0
168.8
79.0
98.3
157.7
222.1
0.6
(437.4)

Total external income

645.6

627.1

1g Analysis of Commercial Businesses’ income by activity

1h Geographical analysis of Commercial Businesses

This table shows where thecustomers of BBC Commercial
Businesses are based.

UnitedKingdom£mAmericas£mRest ofthe world
£m

Total
£m

2004
External income by destination

375.2

121.9

148.5

645.6

Surplus/(deficit) before interest and taxation

20.0

2.0

14.2

36.2

Net assets

151.8

33.9

0.7

186.4

2003
External income by destination

370.0

112.0

145.1

627.1

Surplus/(deficit) before interest and taxation

31.6

(2.5)

12.2

41.3

Net assets

208.1

37.4

0.3

245.8

All commercial income arises in the UK as this is where rights for exploitation and the skills andservices of the Commercial Businesses are developed.
2 Operating expenditure
2a Analysis of operating expenditure by activity
Note

UK Public Service Broadcasting GroupBBC World Service*
Commercial Businesses
Non-cash pension scheme operating costs**

2b
2c
2d

Total
2004
£m

Total
2003
£m

2,993.6
233.9
612.8
161.3

2,999.4
215.8
586.9
136.5

4,001.6

3,938.6* BBC World Service expenditure of £233.9million (2003 £215.8million) excludes £0.6million (2003 £0.5million)of expenditure on the provision of services to other BBC Group companies.
** As permitted by FRS 17 the non-cash operating costs are not split between the business activities as it is not possible
to do this on a reasonable and consistent basis.

108

BBC Annual Report and Accounts 2003/2004

2b UK Public Service Broadcasting Group expenditure
Note

Analogue services
BBC One
BBC Two
National and regional television
National, regional and local radio
BBC Radio 1
BBC Radio 2
BBC Radio 3
BBC Radio 4
BBC Radio Five Live

Digital services
The CBBC Channel, CBeebies
BBC Three (formerly BBC Choice)
BBC Four
BBC News 24
BBC ParliamentInteractive television (BBCi)
1Xtra
BBC Five Live Sports Extra
BBC 6 MusicBBC 7
BBC Asian Network
bbc.co.uk
Digital Curriculum

(i)
(i)

(ii)
(iii)

(iv)
(v)

(v)
(iv)

Transmitted programme spend
Programme related spend
Newsgathering
Collecting societies
Orchestras and performing groupsMarketing, press and publicity
On-air trailsMarket research and audience services
Libraries, helplines, development and one-off events(vi)

Total programme spend
Overheads(vii)

Total output spend
Percentage of output spend on programmes
Licence fee collection costs
Transmission costs

Total broadcasting expenditure**(viii)

2004
£m

2003*
£m

812.3
365.2
212.3
133.4
17.6
21.7
32.1
69.9
51.5

859.4
372.2
209.9
130.0
17.1
21.5
32.8
70.5
53.8

1,716.0

1,767.2

46.2
99.4
35.2
23.5
2.5
15.3
5.1
1.7
4.1
4.3
4.1
66.7
4.1

44.7
75.3
41.0
23.8
2.7
9.5
4.0
1.7
4.0
2.8
3.0
75.0
5.2

312.2

292.7

2,028.2

2,059.9

92.5
54.4
18.3
53.3
23.1
14.4
80.8

94.2
52.0
16.1
63.5
25.5
12.7
78.6

336.8

342.6

2,365.0

2,402.5

325.8

321.8

2,690.8
88%2,724.3
88%

150.8
152.0

146.4
141.7

302.8

288.1

2,993.6

3,012.4* In 2003 £24.2million was misallocated to overheads.The 2003 figures have been reanalysed and the percentage
of output spend on programmes has been adjusted accordingly.
** Total broadcasting expenditure in 2003 includes an exceptional loss on disposal of fixed assets within overheadsof £13.0million.

BBC Annual Report and Accounts 2003/2004

109

Financial statements
Notes to the financial statements(i)

Spend on BBC One and BBC Two was higher in 2003 due to coverage of major sporting events
such as the Football World Cup and the Commonwealth Games.

(ii) Increased costs were incurred by BBC Three in 2004, representing the first full year of service
following its launch in February 2003.
(iii) BBC Four incurred costs in 2003 associated with the launch of the channel in March 2002.
(iv) Reduced costs of bbc.co.uk in 2004 reflect the BBC New Media strategy of diverting spend fromonline to interactive television services (BBCi).
(v) 1Xtra was launched in August 2002 and BBC 7 was launched in December 2002. Increased costs
in 2004 reflect the first full year of service for both channels.
(vi) Marketing spend was higher in 2003 to support the launch of digital channels and Freeview.
(vii) Overheads include the central costs of accommodation, technology, finance and human resources.
Within 2004 overheads is £14.9million of costs incurred due to early completion of a technology
upgrade.These costs were originally planned over the next two financial years.
(viii) Of the transmission costs, £75.1million relate to analogue services (2003 £73.2million) and£76.9million to digital services (2003 £68.5million).
BBC World Service expenditureexcludes expenditure on
intra-Group activities.

2c BBC World Service expenditure
2004
£m

2003*
£m

Radio
Monitoring
Transmission and distribution costs
Internet activity

153.9
25.3
41.7
13.0

142.7
22.4
40.3
10.4

Total

233.9

215.8

*2003 costs have been restated to reclassify distribution costs from radio to transmission and distribution costs.
The expenditure shown forCommercial Businesses relates only
to external income and excludes
expenditure relating to sales within
the BBC.

110

2d Commercial Businesses’ expenditure

Cost of sales
Distribution costs
Administrative and other costs
Amortisation of programme investment

BBC Annual Report and Accounts 2003/2004

Note

2004
£m

2003
£m

13

342.6
131.3
49.4
89.5

314.8
133.4
50.3
88.4

612.8

586.9

3 Operating deficit
The operating deficit is stated after charging the following items:

Payments under operating leases– land and buildings– plant and machinery– other
Research and development
Programme development
Depreciation– owned assets– leased assets
Loss on disposal of tangible fixed assets
Fixed asset impairment
Amortisation of investment in programmes for future sale
Amortisation of intangible fixed assets
Intangible fixed asset impairment
Auditors’ remuneration (KPMG LLP)
– financial audit – UK Public Service Broadcasting– other– further assurance services– tax advisory services– other non-audit services
Fair trading auditors’ remuneration (PricewaterhouseCoopers LLP)

2004
£m

2003
£m

43.6
9.8
9.5
20.9
29.7

28.8
6.5
14.0
17.0
30.6

125.5
5.2
2.4
2.9
89.5
5.1
0.8

126.5
10.8
4.5
–
88.4
4.5
–

0.6
0.5
0.6
0.3
0.3
0.3

0.6
0.5
0.6
0.2
0.3
0.3

In addition to the £0.6million (2003 £0.6million) of further assurance services charged to the income
and expenditure statement, a further £0.2million (2003 £nil) was paid to the auditors for due diligence
services. Such costs are included within the cost of the related investment.
4 Employees and remuneration
4a Persons employed
The average number of persons employed in the year was:Average for the year
2004
Number

2003
NumberUK Public Service Broadcasting
BBC World Service
Commercial Businesses

19,5792,224
5,829

19,2062,057
5,885Group total

27,632

27,148Within the averages above, 3,027 (2003 2,628) part-time employees have been included at theirfull-time equivalent of 1,470 (2003 1,324).
In addition to the above, the Group employed an average full-time equivalent of 857 (2003 1,117)
persons on a casual basis and the BBC Orchestra and BBC Singers, employed on programme
contracts, numbered 384 (2003 385) full-time equivalents.

BBC Annual Report and Accounts 2003/2004

111

Financial statements
Notes to the financial statements

4b Staff costs
Note

Salaries and wages
Social security costs
Pension costs– main scheme (defined benefit)– other schemes
Redundancy costs

Comprising:
UK Public Service Broadcasting
BBC World Service
Commercial Businesses
Main pension scheme additional operating cost (defined benefit)*

8c
8c

2004
£m

2003
£m

1,030.3
95.0

988.4
83.0

196.5
1.7
22.5

169.7
2.0
22.6

1,346.0

1,265.7

844.4
79.6
260.7
161.3

804.2
73.2
251.8
136.5

1,346.0

1,265.7* The actual employer cash contributions to the defined benefit pension scheme are borne by each business.The additional
operating cost is the cost to the Group over and above these contributions. It is not possible to allocate this to eachbusiness on a reasonable and consistent basis.

4c Remuneration of the Board of Governors and Executive Committee
The emoluments of the Governors and of the Executive Committee members are disclosed on
pages 91 to 94 in the Governors’ remuneration report.
5 Loss on sale and termination of operations

beeb Ventures Limited termination cost
Wood Norton Hall and Conference Centre

2004
£m

2003
£m

–
–

(1.5)
1.1

–

(0.4)

During the year ended 31 March 2003, BBC Worldwide restructured the beeb.com business. Certain
beeb.com websites together with beeb.net have now been integrated into BBC Worldwide’s core
operations. Redundancy and other closure costs totalling £1.5million were charged to the income
and expenditure account.
On 31 May 2002, the Group sold its Wood Norton Hall and Conference Centre business to a third
party for a consideration of £5.1million.The profit on sale was £1.1million after deducting the costsof the disposal.
6 Profit/(loss) on disposal of fixed assets

Profit/(loss) on disposal of tangible fixed assets

2004
£m

2003
£m

41.8

(14.3)In July 2003, the Group granted a 150-year head lease on the Broadcasting House site to
Daunus Limited (see Note 14d) and Morgan Stanley Gamma Investments, resulting in a profitof £40.4million. Daunus Limited will redevelop the site which the Group will lease back.
Preparatory work on the Broadcasting House site completed prior to the sale included work on
Broadcasting House and the demolition of adjacent properties.The net book value of assets taken out
of use, totalling £13.0million, was charged to the income and expenditure account in the prior year.
BBC Technology disposed of fixed assets under finance leases resulting in a profit of £1.4million.
Prior year disposals by BBC Technology resulted in a loss of £1.3million.

112

BBC Annual Report and Accounts 2003/2004

7 Net interest (payable)/receivable and other similar items
2004
£m

2003
£m

Interest receivable
Interest payable on bank and other loans
Finance charges payable in respect of finance leases

5.0
(7.8)
(0.3)

7.5
(2.0)
(0.4)

Net interest (payable)/receivable

(3.1)

5.1

8 Pensions
8a Group pension schemes
The Group operates several pension schemes.The BBC Pension Scheme (the BBC’s most significant
scheme) and a small unfunded scheme (which is closed to new members) are contributory defined
benefit schemes. Additionally the Group Personal Pension Scheme and other small schemes aredefined contribution schemes. Note 8b describes the BBC Pension Scheme and Note 8c explains thenumbers in the financial statements.
8b BBC Pension Scheme
The BBC Pension Scheme is the main pension scheme of the Group and covers the majority of
employees.This scheme provides salary related benefits on a defined benefit basis funded fromassets held in separate trustee-administered funds.
The maturity of a scheme provides
an indication of the cash requirementsof the scheme and the likely attitudeof the trustees to risk within theirinvestment policy.

8b i Scheme maturity profile
The number of active contributors exceeds the number of members receiving pensions:Contributors
Pensioners
Dependants
Deferred pensioners

2004
Number

2003
Number

2002
Number

21,426
16,302
3,555
14,864

20,361
16,116
3,498
14,531

18,57815,866
3,428
14,2678b ii Scheme external cash flows (day-to-day liquidity)
External cash inflows to the pension scheme continue to exceed its external cash outgoings each year
and this is expected to remain the case for the foreseeable future.
2004
£m

2003
£m

2002
£m

Contributions (employer and employee)
Investment income

90
167

88
194

72
198

External cash inflows
Payments of pensions and transfers out
Expenses

257
(220)
(20)

282
(212)
(15)

270
(213)
(18)

17

55

39

Net external cash inflow
An actuarial valuation assumes
the scheme will continue for theforeseeable future and considers
whether the expected returns
on the scheme’s assets exceed
the future liabilities of the pension
scheme, smoothing the short-term
volatility brought about by market
valuations of assets.

8b iii Ability to meet long-term commitments
The pension scheme trustees manage the scheme in the short-, medium- and long-term.They agree
funding decisions based on valuations which take a longer-term view of the assets required to fundthe scheme’s liabilities (actuarial valuations).
The actuarial valuations of the scheme are performed by Watson Wyatt, consulting actuaries, using
the projected unit method.The most recent formal actuarial valuation (April 2002) shows a surplus of£441million with assets sufficient to cover 109% of the benefits due to members.The 2003 and 2004
figures are from an interim update of this 2002 valuation.
Actuarial valuation

1 April2004£m

1 October2003£m

1 April
2003£m

1 April
2002£m

Scheme assets (Note 8b v)
Scheme liabilities (Note 8b vi)

5,668(5,525)5,591(5,354)

5,496(5,229)5,392(4,951)

Surplus

143

237

267

441

Percentage by which scheme assets cover scheme liabilities

103%

104%

105%

109%

BBC Annual Report and Accounts 2003/2004

113

Financial statements
Notes to the financial statements

8b iv Funding the scheme
The scheme has shown an actuarial surplus for many years which has allowed both the BBC and themembers to pay contributions at a reduced rate (4.5%).
In 2003 it was agreed with the trustees that employer contributions will rise to 6.0% by 2006 with
employee contributions rising to 6.0% by 2007.The position will be reviewed again in 2005 after a
new formal actuarial valuation by Watson Wyatt is produced.
Projections
Contribution rates

2007
%

2006
%

2005
%

2004
%

2003
%

2002
%

Employer
Employee

6.0
6.0

6.0
5.5

5.5
5.0

5.0
4.5

4.5
4.5

4.5
4.5

19.5

20.4

21.0

Underlying cost of scheme to BBC
as % of pensionable salaries** excludes the cost effectively paid for by the employee

Where market values are higher thanactuarial values it means the market isanticipating greater future investment
returns than are being assumed infunding the scheme’s liabilities.

8b v Scheme assets
The allocation of assets by the scheme trustees is governed by a need to manage risk against thedesire for high returns and any liquidity needs. A high percentage of assets are held in equities which
the trustees expect will produce higher returns in the long term.The target allocation, based on market
values, for equities is 60%, bonds and gilts 30% and property 10%.

Type of asset

Long-term
rate of return
expected formarket value

£m

%

£m

%

7.9%
4.8%
6.3%
3.9%

4,118
1,048
597
117

70
18
10
2

4,109
902
556
101

72
16
10
2

2004
Equities
Bonds and gilts
Property
Cash
Total assets
2003
Equities
Bonds and gilts
Property
CashMarket value

Actuarial value*

5,880
8.3%
4.5%
6.4%
4.0%

Total assets

3,032
1,021
620
230

5,668
62
21
13
4

4,903

2002
Equities
Bonds and gilts
Property
Cash
Total assets

7.5%
5.2%
6.3%
4.7%

4,421
908
606
284
6,219

3,778
853
632
233

69
16
11
4

5,496
71
15
10
4

3,784
827
532
249

70
15
10
5

5,392

* The last formal actuarial valuation was undertaken in 2002.The 2003 and 2004 figures are from an interim update ofthis valuation

114

BBC Annual Report and Accounts 2003/2004

8b vi Scheme liabilities
The calculation of the scheme liabilities requires a number of assumptions, both demographic andfinancial, to be made.The key financial assumptions made by the actuaries were:
Key financial assumptions

The discount rate used in theactuarial valuation of liabilities is thatof the expected return on assets heldby the scheme and is considered
to be a prudent long-term average.
A higher discount rate means a lower
value for the liabilities.

The discount rate for the market
value is taken as the rate for
an AA rated corporate bond.

Actuarial valuation
Rate of increase in salaries
Rate of increase in pension payments
Inflation assumption
Discount rate for actuarial valuation
Market valuation
Rate of increase in salaries
Rate of increase in pension payments
Inflation assumption
Discount rate for market valuation

Scheme liabilities at present value

Actuarial valuation
Market valuation

2004
%

2003
%

2002
%

4.5
2.5
2.5
6.25

4.5
2.5
2.5
6.25

4.5
2.5
2.5
6.25

4.7
2.7
2.7
5.6

4.5
2.5
2.5
5.4

4.7
2.7
2.7
6.0

2004
£m

2003
£m

2002
£m

5,525
6,312

5,229
5,973

4,951
5,254

8b vii Scheme financial position
Market valuation

The actuarial valuation provides
a long-term view and assumes
the scheme will continue for theforeseeable future.The market
valuation provides a snapshot
position of the status of thescheme at that time.

2004
2003
2002
2001

Actuarial valuation

Assets£m

Liabilities£mNet
position£m

Assets£m

Liabilities£mNet
position
£m

5,880
4,903
6,219
6,479

(6,312)(5,973)(5,254)(4,771)(432)(1,070)
965
1,708

5,668
5,496
5,392
5,341

(5,525)(5,229)(4,951)(4,669)

143
267
441
672

A deferred tax asset or liability will not arise on the above market valuation for the Group because
most of the Group’s public service activity is not subject to taxation.

BBC Annual Report and Accounts 2003/2004

115

Financial statements
Notes to the financial statements

8c Pension charges and balances within financial statements
8c i Pension charges in income statement
Definedbenefit schemes
BBC Pension
Scheme£m

The current service cost is theunderlying cost to the BBC ofpension rights earned by employees
during the year.
The past service cost arises frommembers of the scheme becoming
entitled to improved defined
retirement benefits, resulting in acharge for years of service before
the award of the improvement.

All
schemes£m

2004
Current service cost
Past service cost
Gain on settlements and curtailments(189.5)
(9.0)
2.0

(0.1)
–
–

(1.6)
–
–

(191.2)(9.0)
2.0

Operating cost

(196.5)

(0.1)

(1.6)

(198.2)

Expected return on pension scheme assets
Interest on pension scheme liabilities

338.4(317.2)

–
(0.2)

n/a
n/a

338.4
(317.4)

21.2

(0.2)

–

21.0

Net cost in income statement(175.3)

(0.3)

(1.6)

(177.2)

2003
Current service cost
Past service cost(155.7)(14.0)

(0.2)
–

(1.8)
–

(157.7)(14.0)

Operating cost

(169.7)

(0.2)

(1.8)

(171.7)

Expected return on pension scheme assets
Interest on pension scheme liabilities

424.0(309.4)

–
(0.3)

n/a
n/a

424.0
(309.7)

Net finance income/(cost)

114.6

(0.3)

–

114.3

Net cost in income statement(55.1)

(0.5)

(1.8)

(57.4)

2004
£m

2003
£m

Net finance income/(cost)
The finance return comprises
estimates based on predictionsof future performance andeconomic conditions.

DefinedUnfunded contribution
schemeschemes£m£m

8c ii Pension costs in statement of total recognised gains and losses (STRGL)
These gains and losses arise from
actual performance being different
from that predicted – for example
changes in economic conditionsor the demographic profile of
BBC employees.

Actual return less expected return on pension scheme assets
Experience gains/(losses) arising on scheme liabilities
Changes in assumptions underlying present value of scheme liabilities

778.4 (1,607.9)
0.1(12.4)–(393.1)

Net gain/(loss) recognised in STRGL

778.5 (2,013.4)

Only defined benefit schemes give rise to gains and losses in the STRGL.
8c iii Movement in pension liability during year
BBC
PensionScheme2004£m

The defined contribution schemes do
not give rise to balance sheet pension
assets/liabilities as there is no ongoing
liability to the employer from theseschemes once the contributions due
for the year have been settled.

116

Net pension (liability)/asset
at start of year
Contributions (from employer)
Operating charge for year
Net finance income/(cost)
Net gain/(loss) recognised in STRGL
Closing net pension liability(1,070.1)
35.3(196.5)21.2
778.5(431.6)

BBC Annual Report and Accounts 2003/2004

Unfundedscheme
2004
£m

Total
2004
£m

BBC
PensionScheme2003£m

Unfundedscheme
2003
£m

Total
2003
£m

(4.4) (1,074.5)
965.0
n/a
35.3
33.4
(0.1) (196.6) (169.7)
(0.2)
21.0
114.6
–
778.5 (2,013.4)

(3.9)
961.1
n/a
33.4
(0.2) (169.9)
(0.3)
114.3
– (2,013.4)(4.7)(4.4) (1,074.5)(436.3) (1,070.1)

This note is designed to show trends
over several years. Only four years
are currently available since theadoption of FRS 17.

8c iv History of experience gains and losses
2004

2003

2002

2001

Amount by which the expected return on scheme assets
is (higher)/lower than the actual return:
Amount (£million)
Percentage of scheme assets

778.4 (1,607.9)
13.2%
32.8%

(532.0)8.6%(950.9)14.7%

Experience gains and (losses) on scheme liabilities:
Amount (£million)
Percentage of present value of scheme liabilities

0.1
0.0%

(12.4)
0.2%

26.6
0.5%

35.7
0.7%

Total amount (gain/(loss)) recognised in STRGL:
Amount (£million)
Percentage of present value of scheme liabilities

778.5 (2,013.4)
12.3%
33.7%

(725.4)13.8%(708.2)14.8%

8d UK Public Service Broadcasting pension charge
UK Public Service Broadcasting has taken advantage of the provision within FRS 17 and accounts
for the scheme as if it were a defined contribution scheme.This is because it is not possible to identify
its share of the underlying assets and liabilities of the scheme on a reasonable and consistent basis.
The expenditure for UK Public Service Broadcasting therefore represents the contributions payable inthe year.These contributions are set based on the funding needs identified from the actuarial valuation
and benefit from the actuarial surplus (see Note 8b vii).They are therefore lower than the regular cost.
9 Taxation
9a Analysis of charges for the period
The charge for the year, based on the rate of corporation tax of 30% (2003 30%) comprised:
2004
£m

2003
£m

Current tax
UK corporation tax
Deduct: double tax relief

9.8
(2.9)

17.7
(3.5)

Adjustments in respect of prior years

6.9
(0.4)

14.2
(3.0)

Foreign tax
Share of associates tax

6.5
9.2
0.5

11.2
5.4
1.1

16.2

17.7

(2.1)
1.1

–
(2.0)

(1.0)

(2.0)

15.2

15.7

Note

Total current tax

9b

Deferred tax
Origination and reversal of timing differences
Adjustments in respect of previous years
Total deferred tax
Total charge for the year

BBC Annual Report and Accounts 2003/2004

9d

117

Financial statements
Notes to the financial statements

9b Factors affecting the tax charge
The Group is only liable to taxation on those activities carried out with a view to making a profit andon rent, royalties and interest receivable.The BBC does not therefore receive relief for all its expenditure,and the tax assessed for the year consequently differs from the standard rate of corporation tax in the
UK.The differences are explained below:
Note

Deficit before tax
Deficit before tax multiplied by standard rateof corporation tax in the UK of 30% (2003 30%)
Effects of
Public services taxable external income
Non-taxable deficit in Public Services
FRS 17 element of net Group pension charge
Commercial activities
Non-taxable income
Disallowed expenditure
Depreciation less than capital allowances
Tax differential re overseas earnings
Other
Adjustments in respect of previous periods
Current tax charge for the year

9a

2004
£m

2003
£m

(234.0)(299.0)(70.2)(89.7)

3.5
37.0
42.1

5.7
95.4
6.7

(0.4)
1.1
(0.5)
4.5
(0.5)
(0.4)

(0.4)
1.6
–
1.8
(0.4)
(3.0)

16.2

17.7

9c Factors that may affect future tax charges
The Group anticipates that the future tax charge will not alter materially since all licence fee income
is free of tax.
9d Deferred tax analysis
Movement on deferred tax asset in the year

Asset at start of year
Exchange adjustment
Deferred tax credit
Deferred tax asset at end of year

Note

2004
£m

2003
£m

9a

(1.5)
0.6
(1.0)

–
0.5
(2.0)

(1.9)

(1.5)

5.7
(0.1)
(7.5)

4.1
–
(5.6)

(1.9)

(1.5)

Analysis of deferred tax asset at end of year

Accelerated capital allowances
Other timing differences
US timing differences

118

BBC Annual Report and Accounts 2003/2004

10 Intangible fixed assets

Goodwill is the difference between
the value paid for a business and thefair value of its net assets. It represents
the amount the purchaser is preparedto pay for the name and reputationof the business and its expected
future profit streams.

Goodwill£m

Otherintangibles
£m

Total
£m

Cost
At 1 April 2003
Additions

8.2
9.5

13.4
0.6

21.6
10.1

At 31 March 2004

17.7

14.0

31.7

Amortisation
At 1 April 2003
Charge for the year
Impairment losses

0.8
0.4
–

5.1
4.7
0.8

5.9
5.1
0.8

At 31 March 2004

1.2

10.6

11.8

Net book value
At 31 March 2004

16.5

3.4

19.9

At 31 March 2003

7.4

8.3

15.7

On 20 February 2004 BBC Worldwide acquired 100% of the share capital of Origin Publishing Limitedand £9.5million of goodwill arose on the acquisition (see Note 11).
All goodwill is amortised on a straight line basis over 20 years reflecting the useful economic life,
subject to reviews for impairment.
Included within other intangibles are software licences. An additional £0.2million was acquired during
the year.These are amortised on a straight line basis over the life of the licence.
In July 2003, BBC Worldwide Americas Inc. acquired the Britannia Video and Gifts catalogue businessand customer list of names and transactional histories for a cash consideration of £0.4million.This
other intangible will be amortised on a straight line basis over five years.
11 Acquisitions
On 20 February 2004 BBC Worldwide acquired 100% of the share capital of Origin Publishing Limitedfor £10.2million. Goodwill arose in respect of this transaction as follows:

In order to achieve consistency,
accounting standards require theaccounting policies of an acquired
entity to be aligned with those of
the Group at the date of acquisition.

Book
value
£m

Accounting
policyalignment
£m

Fair
value
£m

0.2
0.1
0.6

–
(0.2)
–

0.2
(0.1)
0.6

0.9

(0.2)

Goodwill

0.7
9.5

Total consideration

10.2

Satisfied by:
Cash consideration
Deferred consideration – loan notes

9.9
0.3

Total consideration

10.2

The net outflow of cash in respect of the purchase of subsidiary
undertakings is as follows:
Cash consideration
Cash balance of subsidiary undertakings purchased

9.9
(0.6)

Tangible fixed assets
Net current assets (excluding cash)
Cash

9.3

BBC Annual Report and Accounts 2003/2004

119Financial statements
Notes to the financial statements

Origin Publishing Limited contributed turnover of £1.5million and operating profit of £0.1million to theresults for the year ended 31 March 2004.The company made a profit after taxation of £nil from the
beginning of its financial year, 1 October 2003, to the date of acquisition. In its previous financial year
the profit after taxation was £0.3million.
Other than an adjustment to reduce net assets by £0.2million in order to align Origin Publishing
Limited’s accounting policies with those of the Group, no difference has been recorded between thebook value and the fair value of the assets acquired. However, due to the proximity of the acquisition
to the year end, certain fair values may require revision during 2004.
Contingent consideration of up to £4.3million may be payable, based on the short-term financial
performance of the acquired business in the period to 30 September 2006. Based on the applicablefinancial targets and the management’s expectation of the short-term financial performance of thebusiness during the period to 30 September 2006, no contingent consideration has been recognisedin the calculation of goodwill at 31 March 2004.
12 Tangible fixed assets
12a Group
Land andbuildings£mPlant andmachinery£m

Furniture Assets underand fittings construction£m£m

Cost or valuation
At 1 April 2003
Additions
Brought into service
Disposals

454.6
12.3
4.5
(39.6)

980.7
67.6
45.9
(92.7)

126.1
23.9
2.6
(26.4)

145.1 1,706.5
138.6
242.4
(53.0)–(47.7) (206.4)

At 31 March 2004

431.8

1,001.5

126.2

183.0

1,742.5

Depreciation
At 1 April 2003
Charge for the year
Impairments
Elimination in respect of disposals

208.5
14.2
–
(5.8)

624.7
106.3
–
(66.0)

70.4
10.2–(14.4)

–
–
2.9
–

903.6
130.7
2.9
(86.2)At 31 March 2004

216.9

665.0

66.2

2.9

951.0

Net book value
At 31 March 2004

214.9

336.5

60.0

180.1

791.5

At 31 March 2003

246.1

356.0

55.7

145.1

802.9

Total
£m

During the year, the Group disposed of all plant and machinery held under finance leases. As a result
the net book value of assets held under finance leases at 31 March 2004 is £nil (2003 £16.4million).
One of the BBC’s joint venture partners, Crown Castle UK Limited, has a charge of £3.0million over
the assets of BBC Technology Group.
Included within fixed assets is £28million at cost relating to a relay station in Thailand used by
BBC World Service. These assets are transferable to the Royal Thai Government in return for thepayment of a nominal sum. BBC World Service will retain the right to repurchase the assets, should
the operation cease, for a similar nominal sum.The use of these assets is not affected by this transaction
and therefore they will continue to be carried at cost less attributable depreciation in the balance sheet.

120

BBC Annual Report and Accounts 2003/2004

12b UK Public Service Broadcasting
Land andbuildings£mPlant andmachinery£m

Furniture Assets underand fittings construction£m£m

Cost or valuation
At 1 April 2003
Additions
Brought into service
Transfers from subsidiaries
Disposals

390.3
11.0
3.8
–
(39.6)

448.6
27.5
24.1
3.0
(42.7)

97.0
22.8
1.8
0.1
(19.8)

105.9
83.7(29.7)–(47.7)

1,041.8
145.0–
3.1(149.8)At 31 March 2004

365.5

460.5

101.9

112.2

1,040.1

Depreciation
At 1 April 2003
Charge for the year
Transfers from subsidiaries
Impairments
Elimination in respect of disposals

174.7
11.6
–
–
(5.7)

265.4
48.3
1.8
–
(25.4)

47.5
7.8
0.1
–
(7.9)

–
–
–
2.9
–

487.6
67.7
1.9
2.9
(39.0)At 31 March 2004

180.6

290.1

47.5

2.9

521.1

Net book value
At 31 March 2004

184.9

170.4

54.4

109.3

519.0

At 31 March 2003

215.6

183.2

49.5

105.9

554.2

Total
£m

During the year UK Public Service Broadcasting disposed of plant and machinery held under financeleases with another Group company. As a result the net book value of assets held under finance leases
with another Group company at 31 March 2004 is £nil (2003 £6.7million).
12c Land and building at net book value comprise:
Group
2004
£m

UK Public
UK Public
Service
Service
Group* Broadcasting Broadcasting
2003
2004
2003
£m
£m
£m

Undepreciated land
Freehold buildings

25.4
139.7

30.9
173.9

25.1
128.4

30.8
162.6

Total freeholds
Long leaseholds
Short leaseholds

165.1
17.7
32.1

204.8
9.9
31.4

153.5
17.7
13.7

193.4
9.9
12.3

214.9

246.1

184.9

215.6

* Following a review in the year within BBC World Service, it was concluded that land and buildings with a net bookvalue of £4.1million previously classified as freehold should be classified as short leasehold. The 2003 figures havebeen reanalysed accordingly

BBC Annual Report and Accounts 2003/2004

121

Financial statements
Notes to the financial statements

13 Investment in programmes for future sale
Group
£m

Cost
At 1 April 2003
Exchange adjustment
AdditionsElimination of programmes fully amortised

321.4(16.8)
90.6(64.8)At 31 March 2004

330.4

Amortisation
At 1 April 2003
Exchange adjustment
Charge for the year
Elimination of programmes fully amortised

213.1(14.9)
89.5(64.8)At 31 March 2004

222.9

Net book value
At 31 March 2004

107.5

At 31 March 2003

108.3

Investment by BBC Worldwide in programmes for future sale relates to programmes provided by
the BBC and external producers.The additions figure above includes £88.6million direct investment
in BBC programmes (2003 £82.7million).
Included in the net book value is £3.5million (2003 £4.5million) relating to investments held undera licence agreement.
14 Other investments (including BBC World Service net assets)
14a Movements in the year for the GroupInterests injoint ventures
Note 14d£m

Interests inassociates
Note 14e
£m

Total
Group
£m

At 1 April 2003
Exchange adjustments
Disposals
Share of profits/(losses) after tax
Dividend received
Amortisation
Repayment of capital
Adjustment to reflect effective obligations

13.1
–
–
5.8
(0.5)
(0.7)
(1.0)
(5.4)

4.7
0.1
(0.2)
(18.3)
(0.8)
–
–
19.3

17.8
0.1
(0.2)
(12.5)
(1.3)
(0.7)
(1.0)
13.9

At 31 March 2004

11.3

4.8

16.1

Interest in BBC
World Service
net assets£mShares in
subsidiaries£mInterests inin joint
ventures
£m

Total
£m

At 1 April 2003
Accumulated surplus
Additions
Capital reduction
Disposals
Amortisation
Repayment of capital

142.8
9.7
–
–
–
–
–

165.3
–
51.0
(40.0)(51.0)
–
–

10.2
–
–
–
–
(0.7)
(0.7)

318.3
9.7
51.0
(40.0)(51.0)(0.7)(0.7)

At 31 March 2004

152.5

125.3

8.8

286.6

14b Movements in the year for UK Public Service Broadcasting

Capital reduction represents a share buy-back by BBC Resources Limited of £40.0million. Disposalsof shares in subsidiaries relates to the transfer of investments in BBC Resources Limited of £51.0million
to BBC Ventures Limited, another BBC subsidiary company. In consideration BBC Ventures Limited issued
51,000,001 ordinary shares at £1 each to BBC Commercial Holdings Limited. In turn, BBC Commercial
Holdings Limited issued 51,000,001 ordinary shares at £1 each to UK Public Service Broadcasting.
122

BBC Annual Report and Accounts 2003/2004

Subsidiary undertakings arebusinesses the BBC controls.

14c Subsidiary undertakings
The principal subsidiary undertakings of the BBC at 31 March 2004 are listed below. All are wholly
owned (directly and indirectly) and incorporated in Great Britain and registered in England and Wales
except where stated. A full list of subsidiaries is available at bbc.co.uk or from the BBC Secretary at
BBC Media Centre, 201 Wood Lane, London W12 7TQ.
Name of entity

Activity

BBC Commercial Holdings Limited
BBC Worldwide Limited
BBC World Limited
BBC Ventures Limited
BBC Technology Holdings Limited
BBC Broadcast Limited
BBC Resources Limited
BBC Vecta Limited
BBC Free To View Limited
BBC Property Limited
BBC Property Development Limited
Centre House Productions Limited
Joint ventures are businesses the BBC
jointly controls with other parties.

Holding company
Publishing, channels and programme distribution
Channels
Holding company
Technology services
Playout and channel management services
Programme making facilities and services
Technology services
Holding company for digital licence
Property
Property
Production financing

14d Interests in joint ventures
The Group has a 50% equity interest in the following joint ventures which are all incorporated in
Great Britain and registered in England and Wales, unless otherwise stated:
Name of entity

Activity

Partner

Accounting date

UK Channel Management Limited
UK Gold Holdings Limited
UKTV New Ventures Limited
UKTV Interactive Limited
JV Programmes LLC*

Channels
Channels
Channels
Channels
Channels

BBC Haymarket Exhibitions Limited

Publishing

DTV Services Limited**Marketing

Insight Property Partnership
Daunus Limited***

Property
Property

Flextech
31 December 2003
Flextech
31 December 2003
Flextech
31 December 2003
Flextech
31 December 2003
Discovery
31 December 2003
Communications Inc.
Haymarket Exhibitions
31 December 2003
LimitedCrown Castle UK Limited,
31 March 2004
British Sky Broadcasting Limited
Land Securities Trillium Limited
31 March 2004
Land Securities Trillium****(BH) Limited,
Morgan Stanley Delta LLC,
Structured FinanceManagement Limited* Incorporated in the USA** 33% equity interest*** 100% holding of ‘A’ class shares representing 10% of the total issued shares of Daunus Limited.The rest of the shares
in Daunus Limited are held by the other partners.The BBC holds its investment in Daunus Limited through a subsidiary,
BBC Property Development Limited**** Daunus Limited will prepare its first set of financial statements as at 30 June 2004

For a number of years the BBC, through its subsidiary BBC Worldwide, has had major partnership deals
with Flextech, the content division of Telewest Communications plc, for the production and marketingof subscription channels in the UK and with Discovery Communications Inc. for incorporating newchannels around the world and providing new co-production funding for programmes.These alliances
operate the joint ventures listed above.
The BBC is part of a joint venture, DTV Services Limited, to provide marketing services for
digital channels on a terrestrial platform in the UK.The BBC’s subsidiary BBC Free to View Limited(see Note 14c) holds the BBC’s digital terrestrial multiplex licence and its equity interest in
the joint venture to ensure the costs of this joint venture are managed separately from licencefee-funded activities.

BBC Annual Report and Accounts 2003/2004

123

Financial statements
Notes to the financial statements

The joint venture with Land Securities Trillium Limited, the Insight Property Partnership, provides
a range of property and development services to the BBC. Related joint ventures and associatecompanies have been set up to develop particular BBC properties.
During the year the Group entered into arrangements with Daunus Limited, to redevelop the
Broadcasting House site. Under these arrangements the Group granted a 150-year head lease on
Broadcasting House to Daunus Limited and Morgan Stanley Gamma Investments in July 2003. Land
Securities Trillium Limited has entered into a contract with Daunus Limited to redevelop the site.
The Group will lease back the redeveloped site from Daunus Limited.
The following disclosures represent the Group’s equity shares of the assets and liabilities of its joint
ventures based on the results for the latest accounting periods as shown above.

Group share of:

UK Gold UK Channel
Holdings Management Other joint
Limited*Limited*ventures£m£m£m

Total joint
ventures£m

2004
Turnover

32.7

29.4

26.5

88.6

Profit/(loss) before tax
Taxation

9.5
(2.4)

6.2
(1.9)

(5.4)
(0.2)

10.3
(4.5)

Profit/(loss) after tax

7.1

4.3

(5.6)

5.8

–
–
14.7
(13.2)(28.9)
27.4

0.2
–
33.4
(6.6)
(45.5)
18.5

2.0
8.8
20.7
(18.3)(13.6)
11.7

2.2
8.8
68.8
(38.1)(88.0)
57.6

–

–

11.3

11.3

2003
Turnover

31.7

28.6

19.7

80.0

Profit/(loss) before tax
Taxation

9.5
(2.7)

0.3
–

(1.0)
(0.9)

8.8
(3.6)

Profit/(loss) after tax

6.8

0.3

(1.9)

5.2

–
–
14.3
(10.3)(38.5)
34.5

–
–
27.6
(3.5)
(46.8)
22.7

2.3
10.2
19.4
(13.0)(11.5)
5.7

2.3
10.2
61.3
(26.8)(96.8)
62.9

–

–

13.1

13.1

Fixed assets
Goodwill
Current assets
Liabilities less than one year
Liabilities more than one year
Adjustment to reflect effective obligations
Net book value

Fixed assets
Goodwill
Current assets
Liabilities less than one year
Liabilities more than one year
Adjustment to reflect effective obligations
Net book value* The figures are based on unaudited financial statements

Under the terms of the agreement with Flextech and Discovery, the Group has no obligation to fundlosses incurred by the entities nor to make good their net liabilities. As a result, the Group does notshare in losses of the relevant entities and accordingly no share of losses is included in the financial
statements for the year ended 31 March 2004 (2003 £nil).The Group is entitled to its share of any
profits or net assets once the ventures’ cumulative profits exceed cumulative losses since incorporation.

124

BBC Annual Report and Accounts 2003/2004

Associates are businesses over which
the BBC exerts significant influence
but does not have overall control.

14e Interests in associates
The Group holds (directly and indirectly) significant interests in the principal associates listed below which,except where otherwise stated, are incorporated in Great Britain and registered in England and Wales.
A full list of associates is available at bbc.co.uk, or from the BBC Secretary (see Note 14c for the address).
Holdingof issued
ordinaryshares%Activity

Parliamentary Broadcasting Unit Limited
33
Broadcasters Audience Research Board Limited (BARB)*The Commonwealth Broadcasting Association*
Radio Joint Audience Research Limited (RAJAR)
50
Frontline Limited
23
UKTV Pty Limited (incorporated in Australia)
20
People and Arts (Latin America) LLC (incorporated in the USA)** 50
Animal Planet LLC (incorporated in the USA)**20
The Animal Planet Europe Partnership**
50
Animal Planet Japan KK (incorporated in Japan)**33
Jasper Broadcasting Inc. (incorporated in Canada)
20
Jasper Junior Broadcasting Inc. (incorporated in Canada)
20
3sixtymedia Limited
10
White City Development Partnership***

Content provider
Audience research
Broadcasting forum
Audience research
Publishing
Channels
Channels
Channels
Channels
Channels
Channels
Channels
Production
Property* Broadcasters Audience Research Board Limited and The Commonwealth Broadcasting Association are companies
limited by guarantee, of which the BBC is a joint member with other broadcasters** Discovery associate*** 50% partnership share

The following additional disclosures are based on the results of the Discovery associates for the year
ended 31 December 2003 and the remaining associates’ disclosures are based on the results at thedate of their individual financial statements.These additional disclosures represent the Group’s equity
share of assets and liabilities of those entities.
Group interests in associates

2004
£m

2003
£m

Share of turnover

38.6

37.5

43.1
12.6
(7.2)
(118.9)
75.2

51.0
14.7
(16.4)(114.5)
69.9

4.8

4.7

Share of fixed assets
Share of current assets
Share of liabilities due within one year
Share of liabilities due after more than one year
Adjustment to reflect effective obligation
Net interests in associates

The results include the Group share of the operating profit of UKTV Pty Limited of £0.3million(2003 £0.2million) and Frontline Limited of £1.1million (2003 £2.0million).The Group’s share of theremaining associates, including Jasper Broadcasting Inc. and Jasper Junior Broadcasting Inc., operated inpartnership with Alliance Atlantis, was £nil (2003 £nil).
Under the terms of the agreements with Discovery and Alliance Atlantis, the Group has no obligation
to fund losses incurred by the entities nor to make good their net liabilities. As a result, the Group does
not share in losses of the relevant entities and accordingly no share of losses is included in the financial
statements for the year ended 31 March 2004 (2003 £nil).The Group is entitled to its share of any
profits or net assets once the ventures’ cumulative profits exceed cumulative losses since incorporation,with the exception of JV Network LLC. JV Network LLC was formed for the purpose of providing debt
funding from Discovery to the other Discovery joint ventures and BBC Worldwide is not entitled to any
profits arising within this entity.

BBC Annual Report and Accounts 2003/2004

125

Financial statements
Notes to the financial statements

15 Stocks
Group
2004
£m

Raw materials
Work in progress– originated programmes– other
Finished programmes– acquired programmes and films– originated programmes
Other
Total

UK Public
UK Public
Service
Service
Group Broadcasting Broadcasting
2003
2004
2003
£m
£m
£m

5.1

4.2

0.7

–

273.1
6.0

245.2
7.3

272.7
0.2

245.1
–

82.3
44.5
22.0

97.2
94.9
20.1

82.3
44.5
–

97.2
94.9
0.5

433.0

468.9

400.4

437.7

Group
2004
£m

UK Public
UK Public
Service
Service
Group Broadcasting Broadcasting
2003
2004
2003
£m
£m
£m

135.7

142.6

18.1

21.9

275.4
–
3.1
40.3
21.9
196.3

254.3
–
4.9
38.0
22.7
143.0

275.4
30.6
3.1
35.9
4.8
169.8

254.3
56.0
–
34.1
5.6
115.4

672.7

605.5

537.7

487.3

5.7
136.3

6.9
151.7

–
118.1

–
131.8

142.0

158.6

118.1

131.8

814.7

764.1

655.8

619.1

16 Debtors

Receivable within one year
Trade debtors
Department for Culture, Media and Sport– licence fee debtors
Amounts owed by subsidiaries
Amounts owed by associates and joint ventures
VAT recoverable
Other debtors
Prepayments

Receivable after more than one year
Other debtors
Prepayments

Total

The prepayments receivable after more than one year include £52.5million (2003 £54.5million) in
respect of the White City site which is leased from the partnership between the BBC and Land
Securities Trillium Limited.This is being released over the term of the lease.
17 Creditors
17a Prompt payment policy
It is the BBC’s policy to comply with the CBI prompt payment code in relation to the paymentof suppliers, provided that the supplier is complying with the relevant terms and conditions of theircontracts.The BBC monitors compliance against the terms of this code. Payments for programmeacquisitions are made in accordance with contractual terms.The Group’s number of creditor days
outstanding in respect of other trade creditors at 31 March 2004 was 45 days (2003 44 days).

126

BBC Annual Report and Accounts 2003/2004

17b Amounts falling due within one year

Note

Group
2004
£m

UK Public
UK Public
Service
Service
Group Broadcasting Broadcasting
2003
2004
2003
£m
£m
£m

23
23
23

38.2
–
1.6

70.7
0.9
1.7

31.3
–
–

70.7
–
–

39.8

73.3

31.3

70.7

78.7
24.6
50.5
34.2
162.9

76.2
35.4
48.6
41.8
164.5

77.2
23.9
30.6
–
111.1

72.6
35.0
27.2
–
104.5

350.9

366.5

242.8

239.3

–
–
–
1.2
8.5
32.8

8.8
–
–
0.7
3.1
32.6

–
–
92.6
–
6.4
28.2

–
1.9
69.2
–
1.3
25.8

42.5

45.2

127.2

98.2

349.3
109.1

327.4
108.1

281.6
109.1

266.6
108.1

458.4

435.5

390.7

374.7

891.6

920.5

792.0

782.9

Note

Group
2004
£m

UK Public
UK Public
Service
Service
Group Broadcasting Broadcasting
2003
2004
2003
£m
£m
£m

23

180.0

87.2

–

–

6.0

33.1

6.0

33.1

23
23

30.3
–

39.1
–

–
33.3

–
18.3

23

–

–

–

4.8

30.3

39.1

33.3

23.1

216.3

159.4

39.3

56.2

Bank overdrafts and other loans
Bank overdrafts
Bank and other loans
Unsecured loan notes

Trade creditors
Programme creditors
Programme acquisitions
Salaries and wages
Residual copyright payments
Other trade creditors

Other creditors
Obligations under finance leases
Amounts owed to subsidiaries in respect of finance leases
Amounts owed to subsidiaries
Amounts owed to associates and joint ventures
Corporation tax
Other taxation and social security

Accruals and deferred income
Accruals and deferred income
Licence savings stamps deposits and direct debit instalments

Total
17c Amounts falling due after more than one year

Bank and other loans
Trade creditors
Programme acquisitions
Other creditors
Obligations under finance leases
Amounts owed to subsidiaries
Amounts owed to subsidiaries in respectof finance leases

Total

BBC Annual Report and Accounts 2003/2004

127

Financial statements
Notes to the financial statements

18 Provisions for liabilities and charges
At 1 April
2003£m

Utilisedduringthe year£m

Releasedduringthe year£m

Charge forthe year£m

At
31 March
2004£m

Licence fee
Restructuring
Litigation and insurance
Property
Other

22.3
7.1
14.8
12.9
14.9

(20.0)
(5.1)
(4.6)
(0.4)
(8.2)

–
(1.5)
(4.6)
(2.4)
(14.8)

19.8
15.2
5.6
1.8
24.7

22.1
15.7
11.2
11.9
16.6

Total

72.0

(38.3)(23.3)

67.1

77.5

Group

Property provisions include BBC World Service’s liability of £3.6million (2003 £3.6million) to restore
Bush House to its original condition, together with amounts relating to other dilapidations and relocations.
Other provisions consist of a number of balances arising across the BBC in the normal course of business.
At 1 April
2003£m

Utilisedduringthe year£m

Releasedduringthe year£m

Charge forthe year£m

At
31 March
2004£m

Licence fee
Restructuring
Litigation and insurance
Property
Other

22.3
5.9
14.8
9.3
12.0

(20.0)
(4.2)
(4.6)
(0.4)
(8.2)

–
(1.2)
(4.6)
(2.4)
(15.3)

19.8
11.9
5.6
1.8
22.2

22.1
12.4
11.2
8.3
10.7

Total

64.3

(37.4)(23.5)

61.3

64.7

Pensionreserve£m

Total
operatingreserve£m

Capital Revaluation
reserve
reserve
£m
£m

Total
£m

At 1 April 2003
Exchange adjustments
Deficit for financial year
Actuarial gain on defined
benefit pension schemes
Revaluation reserve transfer
Pension reserve transfer
Capital reserve transfer

296.0 (1,074.5)(2.1)–(248.9)–(778.5)(2.1)(248.9)

858.1
–
–

5.6
–
–

85.2
(2.1)
(248.9)

–
0.8
140.3
69.3

778.5
–
(140.3)
–

778.5
0.8
–
69.3

–
–
–
(69.3)

–
(0.8)
–
–

778.5
–
–
–

At 31 March 2004

255.4

(436.3)(180.9)

788.8

4.8

612.7

Represented by:General Group reserves
BBC World Service reserves

243.4
12.0

(436.3)–(192.9)
12.0

653.1
135.7

–
4.8

460.2
152.5

255.4

(436.3)(180.9)

788.8

4.8

612.7

UK Public Service Broadcasting

19 Reserves
The UK Public Service Broadcasting
operations and BBC World Service
are funded from different sources.
As such, the reserves relating to
BBC World Service are maintained
separately from the rest of theGroup and are restricted for use
solely on BBC World Service activities.

Operatingreserveexcludingpensionreserve£m

Group

Under the accounting standard FRS 10, Goodwill and intangible assets, any newly arising goodwill must
be capitalised and amortised over its useful life. As is permitted by the standard, goodwill arising inperiods prior to 1999 of £6.8million (2003 £6.8million) remains offset against the operating reserve.
The £3.6million dilapidations provision relating to BBC World Service is included in the transfer between
the capital reserve and the operating reserve in the year. This is because during the year it was
concluded that the provision will be funded from capital Grant-in-Aid when it crystallises.

128

BBC Annual Report and Accounts 2003/2004

UK Public Service Broadcasting

Operatingreserve£m

Capital Revaluation
reserve
reserve
£m
£m

Total
£m

At 1 April 2003
Deficit for financial year
Revaluation reserve transfer
Capital reserve transfer

203.0(80.1)
0.8
69.3

858.1
–
–
(69.3)

5.6 1,066.7–(80.1)(0.8)–––

At 31 March 2004

193.0

788.8

4.8

986.6

Represented by:
UK Public Service Broadcasting reserves
BBC World Service reserves

181.0
12.0

653.1
135.7

–
4.8

834.1
152.5

193.0

788.8

4.8

986.6

2004
£m

2003
£m

Increase/(decrease) in cash in year
Net cash inflow from management of liquid resources
Net cash inflow from increase in loans and finance leases

2.3(52.3)(90.0)(1.5)(291.9)(37.2)

Change in net debt resulting from cash flows
Non-cash movement on loans
Non-cash decrease/(increase) in finance leases(140.0)–15.8(330.6)0.1(28.3)

Change in net debt
Net (debt)/funds at the beginning of the year

(124.2)(74.0)(358.8)284.8

Net debt at the end of the year

(198.2)(74.0)

Non-cashCash flows movements
£m
£m

At
31 March
2004£m

20 Reconciliation of net cash flow to movement in net debt

21 Analysis of changes in net (debt)/funds
At
1 April
2003£m

Net cash
Bank overdrafts
Cash at bank and in hand

Liquid resources are current asset
investments that are readily disposable
without disrupting the BBC, and areeither readily convertible into known
amounts of cash at or close to theircarrying amount, or are traded on an
active market. In relation to the BBC,liquid resources are sterling amounts
on deposit.

(70.7)
69.5

32.5(30.2)––(38.2)
39.3

(1.2)

2.3

–

1.1

Liquid resources
Short-term investments

64.9(52.3)–

12.6

Gross funds

63.7(50.0)

–

13.7

Debt
Loans from third parties
Unsecured loan notes
Finance leases(88.1)(1.7)(47.9)(92.4)
0.6
1.8

0.5
(0.5)
15.8

(180.0)(1.6)(30.3)Net debt(74.0)(140.0)15.8(198.2)Public Service Broadcasting
Commercial Businesses
Centre House Productions Limited
Less: Intercompany eliminations(24.1)(31.5)(27.1)
8.7

20.1(156.7)
(1.4)
(2.0)

6.7
15.8
–
(6.7)

2.7
(172.4)(28.5)–Net debt(74.0)(140.0)15.8(198.2)

Made up of:

The debt and repayments on finance leases held by Centre House Productions Limited are offset
directly by cash held on matching deposits, and the income from them, such that there is no long-term
cash flow effect.

BBC Annual Report and Accounts 2003/2004

129

Financial statements
Notes to the financial statements

22 Reconciliation of net funds/(debt) to the Department for Culture, Media and Sport (DCMS)
borrowing ceilings

Note

PublicServices
2004
£m

21

2.7

(24.1)(172.4)(31.5)

17b(109.1)(108.1)––

Borrowings as defined by DCMS borrowing ceiling(106.4)(132.2)(172.4)(31.5)

Borrowing ceiling

200.0

200.0

350.0

350.0

Net funds/(debt)
Licence savings stamps deposits anddirect debit instalments*

Public Commercial Commercial
Services Businesses Businesses
2003
2004
2003
£m
£m
£m

* The BBC must be able to repay the licence savings stamps deposits and direct debit instalments on demand and they
are therefore included in the public service borrowings.

The public service borrowing limit of £200million is set within the BBC Charter. As at 31 March 2003
and 31 March 2004 the BBC was in compliance with this borrowing ceiling.
When the Department for Culture, Media and Sport granted a £350million borrowing limit for
BBC Commercial Holdings Limited in July 2002, three financial covenants were defined which
are required to be met as at 31 March each year. As at 31 March 2004 and 31 March 2003
BBC Commercial Holdings Group was in compliance with each of these covenants. Compliancewith the borrowing ceiling is detailed in the table above.
A forward currency contract isa contract to buy or sell foreign
currency in exchange for sterlingat a specific date. Companies typicallyenter into forward contracts to lock
into a particular exchange rate, thereby
eliminating cash flow risk that may
be associated with a future purchaseor sale.
An interest rate swap is a contract
between two parties to change thebasis of their interest rate payment
or receipts either from fixed tofloating rates or vice versa.
Companies typically enter into thesearrangements to reduce the exposure
to interest rate risk by fixing a floatinginterest rate. Alternatively, a company
may believe that interest rates may
fall and wish to convert a fixed rate
loan to a floating rate.

23 Financial instruments
23a Treasury management and financial instruments
The Group’s treasury operations are managed, by a Group Treasury function, within parameters definedformally within the policies and procedures manual agreed by the Executive Committee. Group
Treasury’s activity is routinely reported and is subject to review by internal and external auditors.
Group Treasury uses financial instruments to raise finance and to manage financial risk arising fromits operations in accordance with its objectives, which are:to ensure the business of the BBC, both Public Services and Commercial, is fully funded in the mostefficient manner and remains compliant with borrowing limits
to protect the value of the BBC’s assets, liabilities and cash flows from the effects of adverse interest
rates and foreign exchange fluctuations
to maximise the return on surplus funds, whilst ensuring sufficient cash is retained to meet foreseeableliquidity requirements
The Group’s financial instruments, other than those used for treasury risk management purposes,
comprise cash and liquid resources, borrowings and various items such as trade debtors and creditorsthat arise directly from its operations.The Group finances its operations from these financial instruments.
The main risks to be managed are ensuring that the Group has sufficient liquid funds to meetits obligations as they fall due and that it is compliant with its borrowing limits imposed by the Charter,by the Department for Culture, Media and Sport and by external loan covenants.
The Group is principally a domestic organisation with the majority of transactions and assets being
in the UK and sterling based. However, the Group undertakes some transactions in currencies otherthan sterling and enters into forward currency contracts to manage this currency risk. The Group
has also entered into interest rate swaps to manage the interest rate risk arising as a result of its
borrowing needs.The Group does not undertake speculative treasury transactions.
23b Cash and borrowing facilities
The Group invests short-term surplus cash in fixed rate investment products. Funds are invested only
in organisations which have a minimum long-term rating of AA.
As at 31 March 2004 UK Public Service Broadcasting had available a £100million loan facility whichis available as either a revolving LIBOR-based loan or an overdraft to May 2004 with an option toextend the facility to May 2005.The loan facility bears interest at a margin of 0.2% and the overdraft
facility bears interest at bank base rates plus 1%.This facility was renewed in May 2004 on the sameterms with a new maturity date of May 2005 and option to extend to May 2006.

130

BBC Annual Report and Accounts 2003/2004

Money market lines are shortterm borrowings.

In addition to this loan facility UK Public Service Broadcasting has access to uncommitted money
market lines, from three individual banks, totalling £25million (2003 £45million) with interest payable
at a margin of between 0.125% and 0.5% over LIBOR.
BBC Commercial Holdings’ loans comprise a £350million multicurrency revolving credit facility agreement
repayable in full in March 2008. At 31 March 2004 £105million (2003 £85million) was drawn down by
way of advances. Interest is payable at LIBOR plus 0.375%, rising to LIBOR plus 0.45% once the facility
is more than 50% utilised. Of the total amount £100million is available in the form of letters of credit to
be issued in favour of the European Investment Bank to support their lending under the facilities detailed
immediately below. As at 31 March 2004 a further £76.9million (2003 £nil) was utilised by way of lettersof credit issued to support the borrowing under these facilities.
The European Investment Bank has made two loan facilities available to BBC Commercial Holdings.
The first, for an amount of £66million, is available for drawing until March 2005 and must either be
repaid in full as a single repayment by March 2013 or on an amortising basis by March 2015. £50million
was drawn under this facility at 31 March 2004 (2003 £nil).The second, for £25million, was available fordrawing until November 2003 and is repayable in one single instalment by November 2007. £25million
was drawn under this facility at 31 March 2004 (2003 £nil).The interest rate applicable on both facilities
is determined with reference to the European Investment Bank’s own funding cost and carries nomargin above this funding rate.The lending under both these facilities is supported by letters of credit
issued by the commercial banks under the £350million revolving credit facility referred to above.
As at 31 March 2003, other loans included a US$5million loan from Discovery.This was repaid in full
during the year to 31 March 2004. In addition BBC Commercial Holdings had an overdraft facility of£20million available, which is due to be reviewed in January 2005.
BBC Resources has a £50million revolving credit facility agreement, repayable in full in September 2004.
Interest is payable at LIBOR plus 0.375%. During the year, BBC Resources drew £40million under thisfacility and repaid this balance in full before the year end.
23c Maturity of financial liabilities
The Group arranges its borrowings to meet forecast cash flows such that UK Public Service
Broadcasting has access to sufficient funds to meet its commitments. Short-term flexibility is achievedby overdraft facilities. The maturity profile of the Group’s financial liabilities, other than short-term
creditors, at 31 March was:

2004
Within one year
Between one and two years
Between two and five years
Greater than five years

2003
Within one year
Between one and two years
Between two and five years
Greater than five years

Overdraft£m

Bank loans£mUnsecuredloan notes£mFinanceleases£mTradecreditors
£m

Total
2004
£m

38.2
–
–
–

–
–
130.0
50.0

1.6
–
–
–

–
–
–
30.3

–
4.6
1.4
–

39.8
4.6
131.4
80.3

38.2

180.0

1.6

30.3

6.0

256.1

70.7
–
–
–

0.9
2.2
85.0
–

1.7
–
–
–

8.8
5.0
2.0
32.1

–
18.2
14.9
–

82.1
25.4
101.9
32.1

70.7

88.1

1.7

47.9

33.1

241.5

During the year, the Group disposed of all computer hardware held under finance leases. As aresult the obligations under finance leases in respect of computer hardware at 31 March 2004 is£nil (2003 £15.8million).The remaining finance leases relate to Centre House Productions Limited,£30.3million (2003 £32.1million)

BBC Annual Report and Accounts 2003/2004

131

Financial statements
Notes to the financial statements

Defeasance deposits are amounts
deposited with banks by Centre
House Productions Limited whichearn the exact amount of interest
needed to cover the capital
repayment and interest elementof each of the finance leases.
The defeasance deposits are ‘ringfenced’ and therefore cannot be
used for any transactions apartfrom the agreed capital andinterest payments.

Centre House Productions Limited enters into finance leases as a means of financing drama productions
which result in lower production costs for the BBC.These finance leases are matched by defeasancedeposits which may only be used to settle the finance lease liabilities and therefore do not represent
separate assets and liabilities. Consequently they are netted off the finance lease creditor to show thenet unmatched liability at the year end.These defeasance deposits, £273.5million at 31 March 2004
(2003 £275.3million), are structured such that the principal on deposit and the interest earned will
be sufficient to cover the rental obligations on the finance leases until the end of the lease. Accordingly
it is not included as borrowing for the purposes of compliance with the BBC’s borrowing limits.
The maturity profile of the UK Public Service Broadcasting’s financial liabilities, other than short-term
creditors, at 31 March was:

2004
Within one year
Between one and two years
Between two and five years
Greater than five years

2003
Within one year
Between one and two years
Between two and five years
Greater than five years

Overdraft£m

Financeleases£mTradecreditors£mIntercompany
creditors
£m

Total
2004
£m

31.3
–
–
–

–
–
–
–

–
4.6
1.4
–

–
5.9
13.7
13.7

31.3
10.5
15.1
13.7

31.3

–

6.0

33.3

70.6

70.7
–
–
–

1.9
–
4.8
–

–
33.1
–
–

–
1.6
6.8
9.9

72.6
34.7
11.6
9.9

70.7

6.7

33.1

18.3

128.8

23d Interest rates
The Group’s main exposure to interest rate fluctuations arises on external borrowings. Since March 2003
the Group has been borrowing at floating rates of interest and then used interest rate swaps to generate
the desired interest profile and to manage the Group’s exposure to interest rate fluctuations.
The Group’s financial assets, excluding short-term debtors, amount to £51.9million at 31 March 2004
(2003 £134.4million) all of which are subject to floating rate interest.
After taking account of the various interest rate swaps and forward foreign currency contracts enteredinto by the Group, the interest rate profile of the Group’s financial liabilities at 31 March 2004 and2003 was:Fixed rate liabilities

Total
£m

Financialliabilities
on whichno interestis paid£m

Floating
rate
financialliabilities£m

Amount£m

Weighted
averageinterest
rate%

Weighted
averageperioduntil
maturity
Years

2004
Sterling

256.1

36.3

10.8

209.0

4.5

4.0

Total

256.1

36.3

10.8

209.0

2003
Sterling
US dollar

238.4
3.1

65.2
–

87.4
–

85.8
3.1

3.8
4.1

4.5
1.4

Total

241.5

65.2

87.4

88.9

Sterling fixed rate borrowings are achieved by entering into interest rate swap transactions; all outstanding
swaps mature in March 2008. In addition to the £209million (2003 £70million) of swaps included in
the fixed rate liabilities of £209million (2003 £85.8million) shown above, which were effective at theyear end, an additional £17million (2003 £116million) of forward starting swaps had been transacted
to cover projected borrowings.These additional swaps were transacted at an average rate of 4.79%(2003 4.63%).
132

BBC Annual Report and Accounts 2003/2004

23e Currency exposure
The majority of the Group’s operations are UK-based.The Group has one significant overseas
operation, BBC Worldwide America, which operates in the USA and whose revenues and expenses
are denominated exclusively in US dollars.
The Group has a number of transactions involving overseas parties and priced in the currenciesof those parties.The Group’s policy is to eliminate currency exposure at the time of the transaction
through the use of forward contracts.
As at 31 March 2004, after taking into account the effects of forward foreign exchange contracts,
the Group had no significant currency exposures.
23f Gains and losses on hedging contracts
The Group undertakes some transactions in international markets. Due to movements in exchange
rates over time, the amount the Group expects to receive or pay when it enters into a transaction
may differ from the amount that it actually receives or pays when it settles the transaction.The Groupmanages its exposure to movements in exchange rates by entering into forward exchange hedging
contracts.These allow the Group to settle transactions at known exchange rates, thereby eliminatingmuch of this uncertainty.
At 31 March 2004 the Group had entered into a net commitment to purchase foreign currencies
amounting to £71.0million (2003 £84.5million) that mature in the period through to 2010 in order
to fix the sterling cost of commitments through this period.
Unrealised gains and losses on forward exchange hedging contracts amounted to an unrealised lossof £6.7million (2003 £3.4million gain) at the balance sheet date, of which £2.0million is expected tobe recognised in the next financial year.
From March 2003 the Group started using interest rate swaps to manage its interest rate profile.
Unrealised gains or losses on these contracts amounted to an unrealised gain of £3.9million(2003 no significant contracts) at the balance sheet date, of which £1.0million is expected tobe recognised in the next financial year.
23g Fair values of financial assets and liabilities
There are no significant differences in value between the book and fair value of the Group’s financial
instruments other than as disclosed in Note 23f.
24 Commitments
24a Contracts placed for future expenditure
Group
2004
£m

Fixed asset additions
Programme acquisitions and sports rights
Independent programmes

BBC Annual Report and Accounts 2003/2004

UK Public
UK Public
Service
Service
Group Broadcasting Broadcasting
2003
2004
2003
£m
£m
£m

78.4
1,073.6
73.9

95.6
670.1
68.5

52.9
1,073.5
70.2

76.7
670.0
68.5

1,225.9834.2

1,196.6

815.2

133

Financial statements
Notes to the financial statements

An operating lease is a lease where
the lessee has not taken on the risks
and rewards of owning and operating
the asset.The lessee (the BBC) ishiring rather than buying an asset.

24b Operating leases
Operating lease commitments payable in the following year, analysed according to the period in which
the lease expires:Group
Within one year
In two to five years
After five years

UK Public Service BroadcastingWithin one year
In two to five years
After five years

Land andbuildings
2004£mLand andbuildings
2003
£m

Other
2004
£m

Other
2003
£m

11.0
9.2
54.9

2.6
11.0
17.6

3.2
14.8
1.9

2.3
8.8
1.9

75.1

31.2

19.9

13.0

9.9
7.7
54.1

1.7
3.1
15.1

0.6
2.4
0.1

1.2
3.2
0.1

71.7

19.9

3.1

4.5

24c Other financial commitments
In the ordinary course of business the BBC enters into a large number of contracts with artists andwriters and with providers of other services including licence fee collection and channel distribution.
25 Contingent liabilities
At 31 March 2004 the Group had unprovided contingent liabilities estimated to be £0.9million(2003 £1.3million) in respect of guarantees and indemnities. All of this relates to UK Public Service
Broadcasting.
Details of further consideration which may be payable in relation to acquisitions is given in Note 11.
The Group also has a number of contingent liabilities arising from litigation.The BBC makes specificprovision (see Note 18) against an estimate of any damages and costs which may be awarded.
26 Related party transactions
The related party transactions of the Group have been presented in accordance with FRS 8, Related party
disclosures. Under the provisions of FRS 8 the BBC has not disclosed transactions between Group entities
where more than 90% of those entities’ voting rights are controlled within the Group. UK Public Service
Broadcasting does not underwrite any of the activities or liabilities of the subsidiaries.
26a Transactions with joint ventures and associated undertakings
Included in the income and expenditure account is income from UKTV of £46.0million(2003 £33.1million) relating to the sale of programmes and JV Programmes LLC of £28.4million(2003 £27.1million) relating to the sale of programmes.There is also £7.3million (2003 £6.0million)of income made up of various other associates relating to the sale of programmes. Included in theincome and expenditure is income of £0.4million (2003 £0.3million) from BBC Haymarket Exhibitions
Limited relating to dividends and management fees. In addition, Frontline Limited charged £2.9million(2003 £2.7million) for the distribution of BBC Worldwide Limited’s magazines. Also included is acharge for £0.4million (2003 £0.4million) from Parliamentary Broadcast Unit Limited, for the purchaseof broadcast licences.
The BBC, Crown Castle UK Limited and British Sky Broadcasting Limited are partners in DTV Services
Limited. In the year the BBC paid DTV Services Limited £1.4million (2003 £nil) for marketing services.
In addition the BBC received £0.3million (2003 £nil) from DTV Services Limited for administrative services.
During the year £0.3million (2003 £nil) of funding for restructuring was provided to 3sixtymedia Limited
in line with contractual obligations.
In all transactions, the terms of trade were negotiated on an arm’s length basis.

134

BBC Annual Report and Accounts 2003/2004

The BBC and Land Securities Trillium Limited are partners in the Insight Property Partnership and theWhite City Development Partnership. On their formation in 2001 the BBC contributed its interest in
the White City site in return for consideration which included reductions in service payments for future
property services which are held as prepayments in the BBC’s balance sheet.The partnership charged
the BBC £145million for property services during the year (2003 £111million).
In July 2003, the BBC granted a head lease on Broadcasting House to Daunus Limited (a company
in which the BBC holds a 10% interest (see Note 14d)) and Morgan Stanley Gamma Investments,
for a premium of £92.0million in cash, plus the cost of works to date, £47.8million, realising a profitof £40.4million. A further £12.4million has been invoiced since July for works incurred during therest of the year. Daunus Limited has appointed Land Securities Trillium Limited to redevelop the site.
Amounts owed by/to joint ventures and associated undertakings at the year end are disclosed within
Notes 16 and 17. In all transactions the terms of trade were negotiated on an arm’s length basis.
Related parties include Governors, theExecutive Committee and other senior
managers, their immediate families andexternal entities controlled by them.

26b Other transactions
Ranjit Sondhi, Governor, is married to Anita Bhalla, who has been employed by the BBC since 1987
in various production and broadcasting roles. Her current role is Head of Political & Community Affairs
for the English Regions. Her remuneration is based on the BBC’s standard terms and conditions
applicable to other staff employed in this capacity.
Dame Ruth Deech, Governor, has a daughter who is a journalist in BBC News. Her remuneration isbased on the BBC’s standard terms and conditions applicable to other staff employed in this capacity.
Sir Richard Eyre, Governor until 31 May 2003, is also Chairman and Managing Director of
Chestermead Limited. During the year Sir Richard Eyre received either directly, or throughChestermead, payments totalling £10,917 for interviews and contributions to BBC programmes(2003 £3,754). No amounts were outstanding at the year end. Sir Richard Eyre’s wife, Sue Birtwhistle,
works on a freelance basis for the BBC through Chestermead. During the year, the BBC paid
£38,675 to Chestermead in relation to services of Sue Birtwhistle (2003 £19,080). No amounts
were outstanding at the year end.
Rt Hon The Lord Ryder, Governor, is also a non-executive Director and shareholder of Ipswich Town
Football Club. During the year the BBC paid £70,947 to the club in respect of television and radio
coverage (2003 £94,814). No amounts were outstanding at the year end.
Baroness Hogg, Governor until 9 February 2004, is also non-executive Chairman of Frontier Economics.
During the year the BBC paid £48,831 to Frontier Economics in relation to advice on the online review
and work on conditional access pricing (2003 £5,925 for a project relating to the incorporation of BBC
Broadcast Limited). No amounts were outstanding at the year end.
Deborah Bull, Governor, is sole Director of Deborah Bull Limited. Subsequent to her appointment,
she received, through Deborah Bull Limited, payments totalling £13,320 for contributions to various
BBC programmes. No amounts were outstanding at the year end.
Michael Grade was appointed BBC Chairman on 2 April 2004 and took up his appointment on
17 May 2004. At the date of his appointment, Michael Grade held directorships and/or interests
in several companies that have relationships with the BBC. Since his appointment, Michael Gradehas resigned from these positions and/or disposed of these interests, except for his positions as
non-executive Chairman of Pinewood Shepperton and non-executive Chairman of Hemscott plc.
In the year ended 31 March 2004, which was prior to Michael Grade’s appointment, the BBC paid
£640,577 to Pinewood Shepperton for the use of studios and related facilities, and £500 to Hemscott plc
for business information. At the year end, £72,864 and £nil were outstanding respectively.
In the normal course of business the BBC transacts with other parties which are related to it
by virtue of its senior employees being married or closely related to employees of the BBC or
individuals who own or are employed at other media, production and broadcasting companies.
The BBC has set procedures for dealing with situations to avoid any conflict of interest. Wheretransactions have arisen between connected parties, the BBC Governor or employee is not a
party to the approval process.

BBC Annual Report and Accounts 2003/2004

135

Broadcasting
facts and figures
Table 1
15-minute weekly reach by service
and platform: BBC and competitors

Table 11Monthly bbc.co.uk and BBCi
(interactive television) reach(millions of users)

Table 2
Share by service and platform:
BBC and competitors

Table 12BBC Network Radio hours of output

Table 3Comparative cost per householdof viewing/listening per hour

Table 13
BBC Network Radio hours of output
by origin

Table 4
Subtitling output on BBC Television

Table 14
Cost per hour of BBC-originatedprogrammes

Table 5
Audio description on BBC Television
Table 6Signing on BBC Television
Table 7
BBC Network Television hours of output
Table 8
BBC Television hours of output by origin
Table 9Range of peak-time UK-madeprogrammes on UK network television
Table 10Monthly bbc.co.uk page impressions

Table 15
Cost per hour of BBC-originatedprogrammes by genre
Table 16
BBC spend outside London
Table 17
BBC distribution costs
Table 18
Creative spend outside the BBC
Table 19
BBC News 24 costs
A number of tables which have historically been included in thissection but are no longer relevant have been dropped. Revisions
to the content of the section have been made following the
introduction of Ofcom-based reporting requirements during
the year.
BBC Three replaced BBC Choice on 9 February 2003. Data for
2002/2003 covers the period from launch only.

136

BBC Annual Report and Accounts 2003/2004

Table 1: 15-minute weekly reach by service and platform: BBC and competitors
All homes

Analogueterrestrial homes

Multichannel homes

Digital homes

2003/2004 2002/2003 2003/2004 2002/2003 2003/2004 2002/2003 2003/2004 2002/2003(55.2m*)(55.6m*)(32.6m*)(29.5m*)(22.6m*)(26.0m*)(30.3m*)(26.2m*)
%
%
%
%
%
%
%
%

Total BBC Television and Radio reach

92.9

92.7

–

–

–

–

–

–

BBC Television
BBC One
BBC Two
BBC Three
BBC Choice
BBC Four
The CBBC Channel
CBeebies
BBC News 24
BBC Parliament

88.2
83.7
67.0
7.0
–
2.1
2.3
5.0
3.9
0.2

87.1
82.9
67.0
8.0†
4.9
1.0
1.1
4.1
4.1††
–

85.5
79.8
57.3
12.6
–
3.7
4.2
8.9
6.9
0.3

84.1
78.9
56.6
15.1†
9.5
2.0
2.2
8.2
7.7††
–

91.6
88.5
78.8
–
–
–
–
–
–
–

90.5
87.2
78.1
–
–
–
–
–
–
–

85.4
79.4
56.5
13.9
–
4.0
4.6
9.9
6.6
0.3

84.3
78.9
56.0
15.9†
10.8
2.3
2.5
9.4
7.4††
–

ITV1
ITV2
Channel 4
E4
five
All Sky channels
Sky OneSky News
Discovery**Nickelodeon**
Nick Jr.
UK Gold
UKTV
Other channels (total)***

78.9
11.3
62.1
6.6
43.2
29.0
15.4
4.2
4.7
4.4
2.1
8.7
18.4
45.6

78.3
8.8
61.6
6.9
41.1
27.1
16.1
4.6
5.0
4.8
1.6
8.7
16.4
41.2

75.3
20.2
54.8
12.3
41.8
53.0
28.0
7.7
8.5
7.9
3.8
19.1
33.3
81.7

74.3
16.9
54.3
13.6
39.5
52.6
30.8
9.0
9.3
9.4
3.1
18.1
31.5
79.0

83.3
–
71.3
–
44.4
–
–
–
–
–
–
–
–
–

82.5
–
70.0
–
41.8
–
–
–
–
–
–
–
–
–

75.1
20.6
54.3
12.4
41.4
55.0
28.3
7.9
8.3
8.2
4.2
19.7
34.5
83.2

74.3
17.7
52.9
14.1
39.3
55.4
31.9
9.7
9.4
10.1
3.6
18.9
33.2
81.0

BBC Radio†††
BBC Radio 1
BBC Radio 2
BBC Radio 3
BBC Radio 4
BBC Radio Five LiveBBC Five Live Sports Extra****
1Xtra****BBC 6 Music****BBC 7****BBC Asian Network****BBC Local Radio (including Nations)
BBC World Service

62.8
20.7
24.5
4.0
17.7
11.6
0.6
0.6
0.3
0.6
0.9
18.9
2.5

63.4
22.6
24.2
3.8
18.1
11.9
–
–
–
–
–
19.6
–

Virgin AM
Classic FM
talkSPORT
All local commercial radio

4.3
11.5
3.9
56.7

4.7
12.4
4.6
57.7

Source: BARB,TNS/Infosys, RAJAR, age 4+, average for the year
* People age 4+ as at March, source: BARB** Includes the first transmission and +1 hour time-shifted channels*** Excludes BBC One, BBC Two, ITV1, Channel 4 and five**** BBC digital radio services have been measured since July 2003
† Figure is high due to peak at launch†† Figure is high due to peak during war in Iraq††† The standard measure for radio reach is people age 15+. See chart on page 35
Note: The data for 2002/2003 in digital homes has been restated to include Freeview homes.

BBC Annual Report and Accounts 2003/2004

137

Broadcasting facts and figures

Table 2: Share by service and platform: BBC and competitors
All homes

Analogueterrestrial homes

Multichannel homes

Digital homes

2003/2004 2002/2003 2003/2004 2002/2003 2003/2004 2002/2003 2003/2004 2002/2003(55.2m*)(55.6m*)(32.6m*)(29.5m*)(22.6m*)(26.0m*)(30.3m*)(26.2m*)
%
%
%
%
%
%
%
%

Total BBC Television and Radio share

43.4

44.4

–

–

–

–

–

–

BBC Television
BBC One
BBC Two
BBC Three
BBC Choice
BBC Four
The CBBC Channel
CBeebies
BBC News 24
BBC Parliament

37.8
25.2
10.9
0.3
–
0.1
0.2
0.7
0.4
0.0

39.1
26.5
11.2
0.7
0.4
0.1
0.1
0.7
0.4
–

29.2
19.2
7.0
0.6
–
0.2
0.4
1.2
0.6
0.0

29.9
20.2
7.0
1.4
0.8
0.1
0.2
1.3
0.7
–

48.7
32.8
15.9
–
–
–
–
–
–
–

49.6
33.5
16.0
–
–
–
–
–
–
–

28.9
18.9
6.8
0.7
–
0.2
0.4
1.4
0.6
0.0

29.2
19.6
6.6
1.4
0.8
0.1
0.2
1.5
0.7
–

ITV1
ITV2
Channel 4
E4
five
All Sky channels
Sky OneSky News
Discovery**Nickelodeon**
Nick Jr.
UK Gold
UKTV
Other channels (total)***

23.7
1.0
9.7
0.6
6.5
6.3
1.5
0.5
0.4
0.4
0.3
1.2
2.4
24.0

23.9
0.6
9.8
0.8
6.3
6.2
1.9
0.6
0.4
0.5
0.2
1.2
2.2
22.3

19.3
1.7
7.1
1.1
4.8
11.5
2.7
0.8
0.7
0.7
0.5
1.9
4.2
42.6

19.6
1.2
6.9
1.5
4.6
11.9
3.5
1.1
0.7
1.0
0.3
1.8
4.1
41.8

29.2
–
13.2
–
8.6
–
–
–
–
–
–
–
–
–

28.9
–
13.1
–
8.1
–
–
–
–
–
–
–
–
–

18.8
1.7
6.9
1.1
4.7
12.2
2.7
0.9
0.7
0.7
0.5
1.9
4.3
44.1

18.9
1.3
6.7
1.6
4.4
12.7
3.6
1.1
0.7
1.0
0.4
1.9
4.2
43.8

BBC Radio
BBC Radio 1
BBC Radio 2
BBC Radio 3
BBC Radio 4
BBC Radio Five LiveBBC Five Live Sports Extra****
1Xtra****BBC 6 Music****BBC 7****BBC Asian Network****BBC Local Radio (including Nations)
BBC World Service

50.5
8.0
14.8
1.1
10.7
4.3
0.1
0.1
0.1
0.1
0.3
10.4
0.6

50.6
8.8
14.7
1.1
10.8
4.4
–
–
–
–
–
10.6
–

Virgin AM
Classic FM
talkSPORT
All local commercial radio

1.1
4.1
1.6
37.8

1.2
4.4
1.7
39.8

Source: BARB,TNS/Infosys, RAJAR, age 4+, average for the year
* People age 4+ as at March, source: BARB** Includes the first transmission and +1 hour time-shifted channels*** Excludes BBC One, BBC Two, ITV1, Channel 4 and five**** BBC digital radio services have been measured since July 2003
Note: The data for 2002/2003 in digital homes has been restated to include Freeview homes.

138

BBC Annual Report and Accounts 2003/2004

Table 3: Comparative cost per household of viewing/listening per hourBBC
Sky (family package)
All pay television
Video hire

2003/2004
Pence

2002/2003
Pence

4.7
38.5
21.9
76.4

4.5
34.2
19.5
71.1

Source: BARB, RAJAR, BBC Strategy estimates
Note: This table shows how the licence fee compares with other forms of entertainment for each hour of viewing or listening

Table 4: Subtitling output on BBC Television
Subtitled hours

Target for year

Actual for year

2003/2004

2002/2003

2003/2004%

2002/2003%

2003/2004%

2002/2003%

11,432
8,924
1,977
1,771
2,892
3,459
4,708

10,656
7,421
1,453
1,155
2,589
3,772
3,579

80.0
80.0
50.0
50.0
50.0
50.0
50.0

76.0
76.0
40.0
40.0
40.0
40.0
40.0

81.2
87.2
60.6
61.4
66.7
73.5
52.9

76.8
76.0
54.0
43.5
59.7
80.2
41.0

BBC One
BBC Two
BBC Three/BBC Choice
BBC Four
The CBBC Channel
CBeebies
BBC News 24
Note: A target has been set for 100% of programming output to be subtitled by 2008/2009

Table 5: Audio description on BBC Television
Audio described hours

BBC One
BBC Two
BBC Three/BBC Choice
BBC Four
The CBBC Channel
CBeebies

Target for year

Actual for year

2003/2004

2002/2003

2003/2004%

2002/2003%

2003/2004%

2002/2003
%

441
429
227
176
227
276

415
374
307
117
174
227

4.8
4.8
4.8
4.8
4.8
4.8

4.0
4.0
4.0
4.0
4.0
4.0

5.2
5.0
7.0
6.1
5.2
5.9

4.9
4.5
11.4
4.4
4.0
4.8

Note: A target has been set for 10% of programming output to be audio described by 2008/2009

Table 6: Signing on BBC Television
Sign interpreted hours

BBC One
BBC Two
BBC Three/BBC Choice
BBC Four
The CBBC Channel
CBeebies
BBC News 24

Target for year

Actual for year

2003/2004

2002/2003

2003/2004%

2002/2003%

2003/2004%

2002/2003
%

222
213
90
79
119
114
212

170
218
63
58
94
97
180

2.4
2.4
2.4
2.4
2.4
2.4
2.4

2.0
2.0
2.0
2.0
2.0
2.0
2.0

2.6
2.5
2.8
2.7
2.7
2.4
2.4

2.0
2.6
2.3
2.2
2.2
2.1
2.1

Note: A target has been set for 5% of programming output to be signed by 2008/2009.

BBC Annual Report and Accounts 2003/2004

139

Broadcasting facts and figures

Table 7: BBC Network Television hours of output
On all platforms
BBC OneOn digital platforms only
BBC Three/
BBC Choice

BBC Two

BBC Four

2003/2004

2002/2003

2003/2004

2002/2003

2003/2004

2002/2003

2003/2004

2002/2003

1,686
–
2,571
134
650
496
777
923
66
911
87

1,432
–
2,694
117
722
688
766
895
68
828
84

1,293
664
516
311
872
863
1,261
328
289
818
37

1,020
688
487
358
719
878
1,160
515
291
761
36

876
–
369
109
1,155
65
–
239
168
172
13

522
–
299
21
1,086
6
–
347
181
127
–

774
–
126
163
107
–
–
167
1,213
254
30

769
–
118
160
38
–
–
171
1,030
303
18

–
–

–
–

455
577

586
601

–
–

–
–

5
–

–
–

253

257

292

270

116

118

71

71

Total network

8,554

8,551

8,576

8,370

3,282

2,707

2,910

2,678

Included in total network are acquired programmes of

1,590

1,528

1,843

2,025

206

333

542

617

54

34

147

149

–

–

–

–

Factual and learning
Education for children
News and weather
Current affairs
Entertainment
SportChildren’s
DramaMusic and arts
Film
ReligionOpen University
BBC Learning Zone
Continuity

Included in total network are parliamentary programmes of

On digital platforms only
The CBBC Channel

CBeebies

BBC News 24

BBC Parliament

2003/2004

2002/2003

2003/2004

2002/2003

2003/2004

2002/2003

2003/2004

2002/2003

637
–
3,423

614
–
3,442

182
–
4,043

134
–
4,105

–
8,711
–

–
8,687
–

–
8,290
–

–
6,820
–

294

293

492

475

73

73

14

12

4,354

4,349

4,717

4,714

8,784

8,760

8,304

6,832

Included in total network are acquired programmes of

866

1,021

799

914

–

–

1

–

Included in total network are parliamentary programmes of

–

–

–

–

–

–

8,290

6,820

Education for children
News and weather
Children’sContinuity
Total network

Note: Network television hours of output includes originations, acquired programmes and repeats.

140

BBC Annual Report and Accounts 2003/2004

Table 8: BBC Television hours of output by origin
Programmes made in:England(excluding London)

London

Northern Ireland

Scotland

Wales

Total

2003/2004 2002/2003 2003/2004 2002/2003 2003/2004 2002/2003 2003/2004 2002/2003 2003/2004 2002/2003 2003/2004 2002/2003

First Transmission: Originatedprogrammes Network
BBC One and BBC Two
Factual and learning
834
Education for children
44News and weather
3,083
Current affairs
357
Entertainment
644
Sport
1,241
Children’s
313
Drama
267
Music and arts
142
Film
5
Religion
4

882
68
3,151
377
663
1,442
355
277
192
17
7

768
3
–
58
105
–
37
174
17
–
108

573
6
–
52
111
4
48
169
33
–
104

1
1
–
1
12
–
–
12
–
–
1

–
2
–
–
10
–
–
18
–
–
–

48
7
–
2
13
–
84
27
29
–
2

23
6
–
4
15
–
70
23
24
–
4

16
1
–
8
–
–
4
18
13
–
1

10
1
–
–
3
–
–
–
9
–
1

1,667
56
3,083
426
774
1,241
438
498
201
5
116

1,488
83
3,151
433
802
1,446
473
487
258
17
116

Subtotal

6,934

7,431

1,270

1,100

28

30

212

169

61

24

8,505

8,754

Digital channels
Factual and learning
Education for children
News and weather
Current affairs
Entertainment
SportChildren’s
DramaMusic and arts
Film
Religion

112
113
5
12
12,754 11,813
42
50
247
261
58
–
715
993
13
16
194
211
–
4
3
–

61
8
–
7
30
–
28
13
39
–
4

41
10
–
2
9
–
22
7
28
–
3

3
–
–
3
–
–
–
4
1
–
–

–
–
86
6
2
–
–
–
2
–
1

20
–
123
–
7
–
78
–
66
–
–

8
–
123
–
–
–
116
2
48
–
–

–
–
123
1
–
–
–
2
36
–
–

5
196
167
–
13
22
123 13,000 12,145
–
53
58
4
284
276
–
58
–
–
821 1,131
–
32
25
31
336
320
–
–
4
–
7
4

Subtotal

14,143 13,473

190

122

11

97

294

297

162

163 14,800 14,152

Nations and Regions
Factual and learning
Education for children
News and weather
Current affairs
Entertainment
SportChildren’s
DramaMusic and arts

1
–
291
10
–
–
–
–
–

–
–
300
11
–
–
–
–
–

11
–
3,218
103
–
28
–
–
2

–
–
3,236
112
–
32
–
–
–

87
2
347
35
91
93
–
–
3

107
2
383
27
103
96
–
1
3

89
10
448
56
26
256
21
53
17

94
7
495
35
38
239
14
28
30

86
4
418
45
27
264
1
11
27

85
6
435
42
38
250
–
11
26

274
16
4,722
249
144
641
22
64
49

286
15
4,849
227
179
617
14
40
59

Subtotal

302

311

3,362

3,380

658

722

976

980

883

893

6,181

6,286

Acquired programmes

864

1,076

6

9

1

2

6

8

3

2

880

1,097

22,243 22,291

4,828

4,611

698

851

1,488

1,454

1,109

Total first transmissions*

BBC Annual Report and Accounts 2003/2004

1,082 30,366 30,289

141

Broadcasting facts and figures

Table 8: BBC Television hours of output by origin continued
Programmes made in:England(excluding London)

London

Northern Ireland

Scotland

Wales

Total

2003/2004 2002/2003 2003/2004 2002/2003 2003/2004 2002/2003 2003/2004 2002/2003 2003/2004 2002/2003 2003/2004 2002/2003

Repeats
Network
Nations and Regions

19,488 17,096––

Continuity
Open University
BBC Learning Zone

1,519
448
577

2,052
3

2,522
2

45
109

41
201

994
196

500
142

166
277

133 22,745 20,292
296
585
641

1,483
586
498

19
3
–

26
–
100

196
3
–

51
–
–

185
3
–

170
–
3

171
3
–

149
–
–

Total hours of broadcasting

44,275 41,954

6,905

7,261

1,051

1,144

2,866

2,269

1,726

*Of which independents
Network
Nations and Regions

1,637
2

1,528
–

415
38

418
12

26
78

25
93

134
145

82
113

39
118

22
121

2,251
381

2,075
339

*Of which parliamentary
programmes

4,803

3,908

–

–

–

86

123

123

125

123

5,051

4,240

ITV1

C4

five

2,090
460
577

1,879
586
601

1,660 56,823 54,288

Table 9: Range of peak-time UK-made programmes on UK network television
Number of UK-made genres averaging a half-hour slot during peak time in a typical week. This excludes all digital output.
Network
BBCTV

BBC
One

Arts
Contemporary music
Consumer affairs

*
*
*

*
*

Factual drama
Factual entertainment
Human interest
Natural history
Science/medical

*
*
*
*

UK-originated drama serials
UK drama series
Long-running drama serials
UK single plays/films

*
*
*
*

*
*
*

Family/people shows
Sitcom – UK originated
Other comedy
Quiz shows/panel games
Special events

*
*
*
*
*

*
*

DIY
Gardening
Other hobbies/leisure
Travel*****Network news
Current affairs
Regional news
Sport

*
*
*
*

*
*
*
*

Total 2003/2004

24

Total 2002/2003

24

*
*

*

*
*

BBC
Two

ITV1/
C4/five

*
*

*

*
*
*

*
*
*
*

*
*

*
*

*
*

*
*
*
*

*
*

*

*

*
*
*
*
*

*

*

*
*
*

*

*
*
*

*
*
*

*

*
*

*
*
*
*

*
*

*

*
*
*
*

17

13

19

12

8

6

18

14

17

11

9

7

*

Source: BARB, TNS/Infosys
Note: Peak time is 6pm–10.30pm. The genre breakdown used has been updated to better reflect current BARB classifications.

142*

BBC Annual Report and Accounts 2003/2004*

Table 10: Monthly bbc.co.uk page impressions
2003/2004
Millions

2002/2003
Millions

535.1
54.5
704.6

357.1
34.4
371.3

1,294.2

762.8

BBC World Service, accessed via bbc.co.uk sites
BBC World Service, accessed via key partners***

55.0
3.4

33.1
2.5

Total BBC World Service

58.4

35.6

2003/2004
Millions

2002/2003
Millions

8.9
5.3
13.2

7.0
3.3
10.1

2003/2004
Millions

2002/2003
Millions

2.2

n/aNews and sport*
Education**
Other bbc.co.uk
Total bbc.co.uk (excluding beeb.com)

Source: BBC server logs, BBC World Service* Includes page impressions from international facing site (average monthly figure for 2003/2004 was 138.3 million), funded by Grant-in-Aid** Education comprises all schools and lifeskills sites*** Key partner websites host BBC World Service text and audio

Table 11: Monthly bbc.co.uk and BBCi (interactive television) reach (millions of users)

bbc.co.uk*
BBCi (interactive television – 24/7)**
Combined reach of bbc.co.uk and BBCi***

BBCi (interactive television – enhanced TV)****

Sources: * BMRB Access, Monthly Omnibus Survey, adults age 15+** Interactive Television Tracking Study, adults age 16+, July 2001 to date for satellite
Digital satellite usage only, no reliable figures available for other platforms*** This figure includes an individual only once for using bbc.co.uk and BBCi (interactive television)**** Source: BARB, Data is not available for 2002/2003 due to a change in methodology used to collect the data
Note: BBC interactive television services are those that are available on digital television by pressing the red button. They include BBCi 24/7 digital text services,
ie news, sport and weather, and BBCi enhanced television services which are interactive applications related to a specific programme, ie Wimbledon, Olympics
and RHS Chelsea Flower Show.

Table 12: BBC Network Radio hours of output
Analogue stations
BBC Radio 1

BBC Radio 2

BBC Radio 3

BBC Radio 4

BBC Radio Five Live

2003/2004

2002/2003

2003/2004

2002/2003

2003/2004

2002/2003

2003/2004

2002/2003

2003/2004

2002/2003

Music
News and weather
Sport
FactualCurrent affairs
Drama
Arts
Entertainment
Religion
Schools
LeisureChildren’sPresentation

8,500
270
30
15
35
–
–
–
–
–
63
–
148

8,460
270
29
15
34
–
–
–
–
–
65
–
148

7,206
533
–
26
458
14
88
71
192
–
–
–
196

7,285
455
–
13
451
13
85
71
191
–
–
–
196

8,264
19
–
–
–
103
169
–
60
64
–
50
55

8,095
18
–
–
–
103
179
–
56
202
–
48
59

–
2,404
542
1,254
1,199
1,079
464
511
289
160
–
26
56

–
2,393
756
1,274
1,188
1,082
442
505
292
–
–
26
55

–
6,486
2,106
–
46
–
–
–
–
–
–
–
146

–
6,378
2,199
–
43
–
–
–
–
–
–
–
140

Total

9,061

9,021

8,784

8,760

8,784

8,760

7,984

8,013

8,784

8,760

BBC Annual Report and Accounts 2003/2004

143

Broadcasting facts and figures

Table 12: BBC Network Radio hours of output continued
Digital stations
BBC Five LiveSports Extra

1Xtra

BBC 6 MusicBBC 7

BBC Asian Network Total network radio

2003/2004 2002/2003 2003/2004 2002/2003 2003/2004 2002/2003 2003/2004 2002/2003 2003/2004 2002/2003 2003/2004 2002/2003

Music
News and weather
Sport
FactualCurrent affairs
Drama
Arts
Entertainment
Religion
Schools
LeisureChildren’sPresentation

–
–
1,089
–
–
–
–
–
–
–
–
–
–

–
–
1,320
–
–
–
–
–
–
–
–
–
–

7,840
292
76
–
430
–
–
–
–
–
–
–
146

4,472
153
43
–
134
–
–
–
–
–
36
–
616

8,147
370
–
9
–
–
–
–
–
–
–
–
266

8,232
263
–
–
–
–
–
–
–
–
–
–
265

–
–
–
–
–
3,328
–
2,852
–
–
–
1,464
–

–
–
–
–
–
743
–
744
–
–
–
424
–

3,094
1,344
351
8
1,690
–
–
65
286
–
–
–
208

1,397 43,051 37,941
568 11,718 10,498
149 4,194 4,496
4 1,312 1,306
714 3,858 2,564– 4,524 1,941
–
721
706
28 3,499 1,348
121
827
660
–
224
202
–
63
101
– 1,540498– 1,221 1,479

Total

1,089

1,320

8,784

5,454

8,792

8,760

7,644

1,911

7,046

2,981 76,752 63,740

Note: Digital radio – all networks are broadcast via DAB (Digital Audio Broadcasting), DCable (digital cable), DSat (digital satellite), DTT (digital terrestrial television)and are streamed online.
Note: BBC Radio 1 and BBC 6 Music operate nations’ opt-outs.

Table 13: BBC Network Radio hours of output by origin
Analogue stations
BBC Radio 1

BBC Radio 2

BBC Radio 3

BBC Radio 4

BBC Radio Five Live

2003/2004 2002/2003 2003/2004 2002/2003 2003/2004 2002/2003 2003/2004 2002/2003 2003/2004 2002/2003

Programmes produced in London

8,359

8,332

5,831

5,723

6,496

6,572

6,251

6,241

8,547

8,510

Programmes produced outside London
England excluding London
Northern Ireland
Scotland
Wales

422
90
97
93

422
90
89
88

2,825
9
119
–

2,893
14
124
6

1,112
115
371
690

1,191
89
404
504

1,461
44
157
71

1,487
47
162
76

234
3
–
–

248
2
–
–

Subtotal

702

689

2,953

3,037

2,288

2,188

1,733

1,772

237

250

9,061

9,021

8,784

8,760

8,784

8,760

7,984

8,013

8,784

8,760

Total hours of broadcasting

Digital stations
BBC Five LiveSports Extra

1Xtra

BBC 6 MusicBBC 7

BBC Asian Network

2003/2004 2002/2003 2003/2004 2002/2003 2003/2004 2002/2003 2003/2004 2002/2003 2003/2004 2002/2003

Programmes produced in London

1,089

1,320

8,779

5,452

7,948

7,659

7,598

1,911

780

330

Programmes produced outside London
England excluding London
Northern Ireland
Scotland
Wales

–
–
–
–

–
–
–
–

4
–
1
–

2
–
–
–

844
–
–
–

1,101
–
–
–

14
24
8
–

–
–
–
–

6,266
–
–
–

2,651
–
–
–

Subtotal

–

–

5

2

844

1,101

46

–

6,266

2,651

1,089

1,320

8,784

5,454

8,792

8,760

7,644

1,911

7,046

2,981

Total hours of broadcasting

144

BBC Annual Report and Accounts 2003/2004

Total network
radio

Nations andlocal radio

Total radio

2003/2004

2002/2003

2003/2004

2002/2003

2003/2004

2002/2003

Programmes produced in London

61,67852,050

8,784

8,760

70,46260,810Programmes produced outside London
England excluding London
Northern Ireland
ScotlandWales

13,182285
753
854

9,995 219,249
242
8,758
779 11,333
674 14,731

218,028 232,431
8,776
9,043
10,620 12,086
13,898 15,585

228,023
9,018
11,39914,572

Subtotal

15,074

11,690 254,071

251,322 269,145

263,012

Total hours of broadcasting

76,752

63,740 262,855

260,082 339,607

323,822

Note: BBC Radio 1 and BBC 6 Music operate nations’ opt-outs.

Table 15: Cost per hour of BBC-originated programmes by genre

Table 14: Cost per hour of BBC-originated programmes
2003/2004£000

2002/2003£000

Television channels
BBC One
BBC Two
BBC Three/BBC Choice
BBC Four
The CBBC Channel
CBeebies
BBC News 24
BBC Parliament

155.6
100.2
124.1
56.4
37.7
60.5
5.6
0.5

160.3
108.7
129.0
58.9
27.4
39.6
5.7
0.7

Radio stations
BBC Radio 1
BBC Radio 2
BBC Radio 3
BBC Radio 4
BBC Radio Five LiveBBC Five Live Sports Extra
1Xtra
BBC 6 MusicBBC 7
BBC Asian Network

3.1
3.6
4.2
11.5
7.0
1.5
0.6
0.5
4.4
0.7

3.1
3.5
4.3
11.2
7.5
1.3
0.8
0.5
9.0
0.5

Nations and Regions
Television (BBC One/BBC Two/
BBC Three/BBC Four)Radio (Local radio/Nations radio)

31.9
0.6

31.3
0.6

2003/2004£000

2002/2003£000

Analogue television programmes
Factual and learning
Education for children
News and weather
Current affairs
Entertainment
SportChildren’s
DramaMusic and arts
Film
Religion

110.9
83.1
40.6
117.6
200.6
162.4
81.6
518.3
145.6
280.0
106.6

110.8
119.1
47.6
118.0
177.3
192.2
83.7
521.3
139.9
681.5
112.7

Digital television programmes
Factual and learning
Education for children
News and weather
Current affairs
Entertainment
SportChildren’s
DramaMusic and arts
Film
Religion

127.3
–
4.5
96.9
171.9
16.0
40.4
316.3
70.1
–
154.9

114.3
–
4.7
57.5
162.6
–
29.4
193.3
65.3
484.0
87.0

Note: Drama cost per hour has been restated due to films now being
separately identified; the previous year films were included as drama.

BBC Annual Report and Accounts 2003/2004

145

Broadcasting facts and figures

Table 16: BBC spend outside London

Table 18: Creative spend outside the BBC
2003/2004£m

Cost of television originationsin the nations and regions
England
Northern Ireland
Scotland
Wales

Cost of radio originationsin the nations and regions
England – local radio
Northern Ireland
ScotlandWales

2002/2003
£m

274
46
106
50

256
48
113
52

476

469

121
14
25
22

121
12
25
21

182

179

Other programme costs incurred outside London
Other costs, including transmission

57
116

56
95

Total spend in the nations and regions

831

799

2003/2004£m

2002/2003
£m

277

272

45

43

2003/2004£m

2002/2003£m

Analogue
Digital

75
77

73
69

Total distribution costs

152

142

Included in television originations
is network spend of
Included in radio originations
is network spend of

2003/2004£m

Independent programme productions transmitted
External programme facilities and resources
Acquired programmes transmitted
Artists, contributors and copyright
Performing groups

323
252
90
290
27

323
270
103
284
25

982

1,005

Table 19: BBC News 24 costs
Note 2b (page 109) sets out the cost of BBC services andchannels. Certain categories of expenditure, including newsgathering
are not allocated to individual services and channels. Had part ofthis expenditure been allocated to BBC News 24, its costs would
have been as follows:

Total production costs*
Newsgathering allocation**Central costs allocation

2003/2004£m

2002/2003
£m

23.5
19.7
7.2

23.8
18.8
7.5

* Total cost as set out in Note 2b** Included in newsgathering allocation is £3.4million of regional spend(2002/2003 £3.0million)
Note: 1,014 hours of BBC News 24 programming were shown on BBC One
and 196 hours on BBC Two (2002/2003 1,146 hours on BBC One and
156 hours on BBC Two).

Table 17: BBC distribution costs

146

2002/2003£m

BBC Annual Report and Accounts 2003/2004

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147

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The following photographs have been
reproduced courtesy of:SimonRix.com
Pages 2 (Michael Grade),
8 (BBC Governors except Richard
Ryder and Merfyn Jones),
10 (Executive Committee except
Mark Thompson), 17 (BBC bus),
19 (Upfront course, Abseil),
27 (Jools Holland audience),
29 (Globe Theatre), 49 (Radio
Sheffield studio), 69 (Andy Pandy
Roadshow), 71 (Broadcast Centre),
73 (Upfront course), 75 (BBCGovernors’ event), 79 (Learn For Real)The report is printed using
soya-based inks which arebiodegradable, renewable and emit
fewer volatile organic compounds(VOCs) than mineral-based inks.
The printer holds ISO 14001
Environmental Management
Certification.

Jeff Overs
Pages 10 (Mark Thompson),13 (Question Time), 33 (Newsbeat),
33 (Jeremy Vine), 35 (Today office),
39 (Phill Jupitus), 43 (Six O’Clock
News), 45 (PM), 75 (Panorama),
55 (World Service studio),57 (BBC Monitoring)
Warren Orchard
Page 8 (Merfyn Jones)
Pacemaker
Page 53 (Let’s Talk, Would You Pass
The 11 Plus?)
Charles Best
Page 71 (Rugby celebrations)Kieron McCarron
Page 73 (Holby City)
MencapPage 79 (Blue Peter)
Roy Peters Photography
Page 81 (BBC bus)
PA Photos
Page 43 (Saddam Hussein statue)
William Cherry/Pacemaker
Page 21 (BBC Information office,Belfast)EMPICS
Page 37 (World Athletics
Championships, Rugby World Cup)
Swing Productions/Gemma BoothPage 15 (Art and the City)
ZCZ
Page 29 (Gauguin: The Full Story)
Top TV Production
Page 31 (Big Cook, Little Cook)
Patrick Baldwin
Page 47 (Get Writing)Victor de Jesus
Page 49 (Inside Out)
Daniel Meadows
Page 51 (Capture Wales)

148

BBC Annual Report and Accounts 2003/2004

BBC Annual Report and Accounts 2003/2004

Annual Reportand Accounts
2003/2004

British Broadcasting Corporation
Broadcasting House
London W1A 1AA
bbc.co.uk© BBC 2004

BBC Annual Report and Accounts 2003/2004

Auditors' supplementary notes to online accounts

1) The maintenance and integrity of the BBC website is the responsibility of
the Governors and Executive Committee; the work carried out by the auditors
does not involve consideration of these matters and, accordingly, theauditors accept no responsibility for any changes that may have occurred to
the financial statements or audit report since they were initially presented
on the website.
2) Legislation in the United Kingdom governing the preparation anddissemination of financial statements may differ from legislation in otherjurisdictions.

KPMG
Chartered Accountants
Registered Auditors
London17 June 2004