Media Analysis: Coming soon: the `Mr Darcy' shirt collection

THE BBC is becoming a toy company. That is to say, in its quest to squeeze ever more money from its programme spin-offs it is taking over the design, product development and the manufacturing of toys based on BBC programmes.

Last month it signed a groundbreaking deal with Tomy, the Japanese toy company which makes Tamagotchi, for Tomy to distribute Teletubbies and other BBC-based toys in the Far East. But, for the first time, it wasn't simply giving over control of its copyright and taking a fee while the toy company makes money from manufacturing and selling the products.

From now on, the BBC will develop its own designs for toys, negotiate with the manufacturers itself and, more importantly, take a profit for the first time ever from making the toys. Tomy will just distribute the toys to shops through its distribution network.

It is a pattern which will be repeated in Australia, the UK and Europe when its existing licensing agreements expire, and then it will be extended beyond toys spun-off from children's programmes. The BBC envisions heritage wallpaper brands that it can design and develop, spun off from a costume drama. It has big plans.

"At the moment BBC Worldwide makes 40p in the pound from a sales made through a licensing agreement," says Jeff Taylor, BBC Worldwide's director of global marketing and brand development. "By taking on the design, development and manufacturing ourselves we should double that."

The phrase that the BBC is using for this development is "moving higher up the value chain", and is reflected in other areas of its commercial activities.

Last year the BBC announced a joint venture with America's Discovery cable network to create a number of global channels using BBC programmes. In the UK it has entered into a similar deal with Flextech, to create the UKTV series of cable and satellite channels.

The rationale for these deals was explained by Sir John Birt last year, when he described how channels like Discovery and other upmarket American cable channels had become companies worth billions on the back of showing programmes licensed from the BBC. While the BBC had made some money from selling programmes to these channels, it had missed out on the longer term value of having a stake in the channels showing them.

By creating joint venture companies, it is moving higher up that value chain in the sense that it has an equity stake in actual branded channels which have a value in themselves beyond the programmes they show.

Changes in the global business world have made it possible to get into the toy business without spending millions on start-up costs. It will buy in expertise on the creative end, with toy designers and such like, but manufacturing and quality control can now all be supplied by outside companies. This is thanks to the growth of "outsourcing" so that services can be supplied by specialist agents and companies without the BBC carrying the cost or risks of setting up a division which actually owns plastic moulding equipment for toys.

Equally, Tomy now distributes its rival Hasbro's toys in Japan, while Hasbro does the same for Tomy in Australia - such is the nature of global capitalism - so it is simple for the BBC to just plug into existing business systems where it needs to, without expanding too far out of its own core business.

Taking more direct control of product design and manufacturing also means that the corporation can ensure that everything carrying one of its own brands upon it hits a certain quality threshold - thereby protecting the corporation's overall image as an upmarket, quality brand. It also plans to sign up to an ethical monitoring system, again something you can "outsource", as the ugly phrase has it, to make sure that its toy-manufacturing is not carried out by children or sweated labour in the Far East.

But this strategic move is not simply a decision based on ethics or protecting its image. Jeff Taylor forecasts that the revenues he makes from toys will rise from around pounds 11m-pounds 15m this year to pounds 50m in three years' time.

Despite the changed business culture at the BBC, and a changed style of global business which allows the BBC to get into toy manufacturing, the move is not completely new. Since the 1920s the BBC has been in complete control of its production of the Radio Times, its most valuable spin-off, which is as far up the value chain as you can get. Its just that now it can make things - like toys and wallpaper - which stray much further from its core business.