BBC rakes in adverts cash as heads roll in cost cuts

The corporation’s rivals and detractors are up in arms over claims of commercialisation

Just as the corporation’s director-general Mark Thompson was revealing details of 2,500 job cuts that will hit hardest in news and factual programming, the BBC’s money-making arm was celebrating a windfall.

After being granted approval from its governing body, the BBC Trust, the BBC announced that its news content, due to be generated by some 370 fewer staff, will later this year be beamed online around the world � adorned for the first time with advertising.

The new commercialisation of BBC.com is very much in keeping with thrifty Thompson’s mantra of making less go further � forced on him by a shortfall of £2 billion on the licence fee. Users of BBC.co.uk will not notice any difference as banner ads will be seen only by overseas readers.

But critics fear the move puts the BBC’s hard-won international reputation for impartiality under threat � even though a portion of the new income will be ploughed back into the BBC newsroom. On top of that, the advertising will cover the loss of the £4m annual grant the international website gets from the Foreign Office. The grant is being reallocated to World Service radio.

Moreover, the BBC’s commercial rivals are again up in arms that an institution supported by a £3 billion annual bursary is chasing a slice of their income stream.

David Moody, BBC Worldwide’s director of strategy, retorted: “They should welcome this as the nature of competition. Users will get more choice. And for us this is a chance to earn money from an international business site to reinvest in the BBC’s core journalism. It seems eminently logical to me.”

This is the BBC’s second notable attempt at making money from its cyberspace operations. Its first, Beeb.com, an online shop for viewers, was shut down in 2002 because it was insufficiently different from the corporation’s free sites.

This time the BBC seems to be more confident. In April, it struck a deal with You Tube to set up a channel of television clips that can be viewed in Britain, with advertising alongside.

Commercials have also appeared since 1991 on BBC World, the international news channel that loses £15m a year.

Support for the controversial BBC.com plan is the latest development at BBC Worldwide, whose tentacles are quietly but inexorably spreading.

Not only is it Britain’s third-largest magazine publisher, with titles including the Radio Times and Top Gear, but abroad it publishes Hello! magazine under contract in India and makes television shows in Hollywood for the American networks.

There is more to come. Eyebrows were raised by the recent purchase of a controlling stake in the Lonely Planet travel-guide business, not least at Penguin, which owns the rival Rough Guide imprint.

Armed with a £350m loan facility, BBC Worldwide’s chief executive John Smith is aiming for two more such deals in the next year.

He wants to build up a clutch of online “communities” round themes such as parenting, cars and travel. As an example of what could be achieved, the Lonely Planet’s website has 4m users.

The target is to plough £200m a year back into the BBC by 2012, with 10% of income coming from digital sources.

Worldwide’s ownership was last assessed three years ago, when the corporation opted to sell off smaller, noncore divisions instead of the whole shooting-match. Of these, only BBC Resources, which owns the corporation’s studios and outside-broadcast trucks, remains. A sale process, led by Ernst & Young, has been kicked off. In addition, the corporation is selling its famous Television Centre headquarters in west London in 2013.

Meanwhile, strong exports of Doctor Who DVDs and the sale of the Strictly Come Dancing format around the world sent BBC Worldwide profits up 24% last year to £111m.

Unsurprisingly, it argues that such expansion benefits the licence-fee payer. A chunk of its profits is handed back to the corporation, in effect depressing the licence fee by £9 a year.

Moody said: “We have a very robust business that is producing a lot of profit that can be reinvested. Our shareholders want us to take a long-term view so we can deliver ever larger profits back to them.”

Perhaps he has a fair point. But as they prepare to bid farewell to hundreds of colleagues, the argument is unlikely to cut much ice with Humphrys and Paxman.