BBC told to reign in commercial division

BBC Worldwide must end mergers and acquisitions activities

LONDON -- BBC Worldwide must end mergers and acquisitions activities, offload stakes in such international non BBC-branded channels as Animal Planet and exit from any activities not "in keeping" with the BBC brand, the pubcaster's in-house regulator the BBC Trust said Tuesday.

Following an 18-month review into BBC Worldwide -- the commercial division that handles BBC program sales, licensing and international channels brands including BBC America -- BBC Trust chairman Michael Lyons has said that the division must become "more aligned" with the BBC's public purposes.

BBC Worldwide has come under attack from powerful commercial groups here, including Rupert Murdoch's News International and the Guardian Newspaper Group, who have accused it of distorting markets by exploiting the power of the BBC brand.

Lyons said that The Trust "would not expect" to approve a deal of the scale of last year's controversial acquisition of travel guide company Lonely Planet, but he stopped short of ordering Worldwide to unravel the £89 million ($147 million) deal.

Worldwide has been told to back out of deals to operate non BBC-branded channels like Animal Planet, "over time when it makes commercial sense," and step back from any mergers and acquisitions activities "unless there are exceptional circumstances."

But some industry observers said the report did not go far enough.

"There are so many caveats that it is meaningless. What's the point of banning M&A if you then allow it when it is 'essential'?" said a senior executive at a publishing group.

"The one deal they should have acted on -- Lonely Planet -- they have let go right through," the executive continued.

The review does not make it clear whether BBC Worldwide would be allowed to bid -- potentially in partnership with Channel 4 -- for the Virgin Media-owned channels that are currently up for sale.

But Trust chairman Lyons insisted that the review offered new clarity on BBC Worldwide's operations.

"Our commercial operations are not exempt from the BBC's public mission. They must keep the public purposes at their heart, engaging carefully with markets globally to help 'bring the U.K. to the world and the world to the U.K.'" he said in a statement.

"We're satisfied that these changes will provide much-needed clarity and a greater alignment with the BBC's public purposes, without stifling Worldwide's ability to perform as a thriving and profitable entity," Lyons added.

The division, which reported turnover of $1.7 billion in the year to March 2009, exists to exploit BBC brands and programming commercially and internationally, returning profits of $142 million to the BBC to be plowed into program making.