BBC commercial arm reports record profit as broadcaster faces funding squeeze

The BBC’s main commercial arm has reported a record profit amid hefty spending cuts across the UK public service broadcaster, which is marking its centenary with a significance squeeze to its largest funding source.

The broadcaster has in recent years found itself under growing pressure on several fronts, facing not only deep-pocketed competition from global streaming giants but also a Conservative government that has raised the prospect of cutting its long-term funding.

Negotiations over the BBC’s next charter, which will set out how the broadcaster will be funded from 2028 onwards, are under way.

The Conservative government has signalled that it wants to overhaul the broadcaster’s funding model, with culture secretary Nadine Dorries having imposed a two-year freeze on the licence fee, the corporation’s main source of income that is paid by everyone in the UK who watches BBC programmes or uses iPlayer.

The BBC’s recently appointed chair, Richard Sharp, a former Goldman Sachs partner and adviser to the UK’s chancellor, said on Tuesday it was “entirely legitimate to consider” the future role of the BBC, which was founded in 1922.

He added, however, that the government risked ending up with a much weaker public service broadcaster if it prioritised funding cuts above all else.

The Conservative government has had notably tetchy relations with the BBC, using complaints over alleged bias in its coverage to question its funding model.

Tim Davie has steadied relations with Downing Street since taking over in September 2020 as director-general, in part by taking a tough approach against “opinionated” staff whose views were undermining the BBC’s impartiality.

Davie said on Tuesday that impartiality and trust remained the broadcaster’s “first priority”, adding that it was “too soon” to speculate how the Tory leadership election might affect the BBC’s future.

Revenue from BBC Studios, which is behind shows such as Doctor Who and Strictly Come Dancing, jumped by nearly a quarter last year to £1.63bn, the broadcaster said. Earnings before interest, taxes, depreciation and amortisation reached £226mn, topping £200mn for the first time.

This left the BBC with a surplus of £206mn, 9 per cent less than the previous year, which the broadcaster blamed on higher costs related to its commercial growth.

Abi Watson, senior media analyst at Enders Analysis, described the BBC’s results as “really good” but added that they followed a year full of lockdowns, meaning that a production rebound and pent-up advertising demand were likely to have helped.

The network unveiled a plan in May to cut output and 1,000 jobs in a bid to save £200mn annually, to battle both inflation and the squeeze to its licence fee income. In the past year, the BBC reduced its overall headcount by more than 400, leaving a workforce of just over 17,500.

The exodus has not been cost free, with the BBC revealing that it spent £125mn in redundancy payments during the past two years.

The broadcaster has frequently found itself under fire for the pay of its leading on-air talent, a list that continues to be topped by sports presenter Gary Lineker, who last year made roughly £1.35mn. It has, however, lost some high-profile journalists in the last year, including Emily Maitlis, Jon Sopel and Dan Walker.

Davie was paid £522,000 last year, an increase of nearly 10 per cent on the previous year.

“It is worth noting that, both on-air and off, we continue to operate in extremely competitive markets for talent,” the BBC said of its list of just over 70 employees that earn more than £150,000 a year, which contained roughly the same number of people as last year.