The Lowdown: Mr Flynn is working his magic on Auntie

For his next trick, the head of BBC Ventures and amateur magician must raise profits and cut costs, reports Heather Tomlinson
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He doesn't wear a top hat and he's not carrying his magic wand, but Roger Flynn, the chief executive of BBC Ventures, is the Beeb's answer to Harry Potter. In his day job he runs one of the BBC's two commercial arms, but he is also a member of the Magic Circle and has been honing his skills for the past six years.

He may not pull rabbits out of hats ("I don't work with animals") but Flynn is a class act when it comes to managing his division, which last week reported a £14.5m profit compared to a £10.5m loss in the previous year, and an increase in sales to £440m from £338m.

BBC Ventures is young, an amalgamation of BBC bits and bobs such as its wigs and costumes department and the back-office production facilities, as well as all its in-house software and technology. It was set up as a company to allow the BBC to exploit its assets in the commercial world. To this end the 40-year-old Flynn was hired from the private sector, where his CV had included running the Prudential's retail division, heading British Airways' worldwide sales operations and holding senior positions at Sir Richard Branson's Virgin Group.

Flynn has since been occupied in bringing a businesslike approach to the world of arty creatives. "There's no doubt the operational skills, the craft skills and the editorial skills are world class at the BBC," he says. "To blend that capability with commercial people is the key to unlocking the transition [to a more commercial environment]."

Greg Dyke, the BBC's director general, has set a target to cut the corporation's costs by £1.1bn, and Flynn's division must contribute a third of this by increasing revenues from external customers and bringing in profits while reducing the prices it charges the BBC for the services it provides.

Jealous rivals might wonder why the BBC needs more money. It is funded to the tune of £2.6bn a year by the licence fee, described last week as a "poll tax" by Gerald Kaufman, chairman of the Culture, Media and Sport Select Committee.

But Flynn dismisses the idea that the BBC takes the licence fee for granted. "The BBC was charged by the Government to drive more commercial revenues by exploiting more of its assets," he argues. "If the public have paid for [the BBC's] assets and they remain in a cupboard commercially unexploited, that is doing a disservice to the people who bought them in the first place."

BBC Ventures now has contracts with the mobile operator 3, which uses its video technology; with the Office of National Statistics, whose website it runs; and with the American sports broadcaster ESPN, for which it provides software. Profits have also been boosted by the BBC's new digital TV service Freeview, which uses its technology to compress video on to the airwaves, and by the launch of new channels such as UK History and BBC Three.

The other side of Flynn's job is to cut costs. The BBC has closed its old special effects division, which staged explosions and snowstorms, and has also shut down relics from the dot-com era. The cost-cutting drive comes as the corporation faces one of the toughest tests in its history, a charter renewal process imposed by the Government. By 2006 the BBC must justify not only the licence fee but also its own existence. Flynn is a key player in the process and is advising the BBC team charged with justifying the corporation's method of funding.

He resists proposals for the BBC to operate more like its commercial rivals, by selling subscriptions to the public or opening its doors to advertising. "If you tried to sell the BBC on subscription, you would decimate all the other players in the market," he says. "The market in the UK is about £4bn, and you would probably end up halving everyone else's revenues. It's the same for advertising - you are not going to get advertisers stumping up another £2.5bn just because the BBC turned up, so ITV, Channel 4 and Five would have a big dent in revenues."

He also argues against privatising the BBC. "You lose something if you do that," he warns. "One of the BBC's great strengths is that it has public service cut into it. You want to be very careful you don't throw away the connection with the audience, doing things for their benefit rather than the bottom line."

But the BBC must remain strong to compete with powerful players in the media market, such as AOL Time Warner, BSkyB (part of Rupert Murdoch's News Corp), Sony and Microsoft. The importance of this was underlined by last week's passing of the Communications Bill, which will allow US companies to take over ITV and large newspaper groups to take over Channel Five.

"To compete against those [big players], you have to have some scale," says Flynn. "My fear is that you could end up constraining and curtailing the one organisation in the UK that can compete on a global basis."

Although the BBC is often perceived as a sprawling bureaucracy, Flynn says it is run as a plc. "It's got budgets and controls and audit committees. In terms of focus on cost control and head count, it's the same as anywhere else." But after arriving at the corporation in June 2001 he admits he had to adjust to his new role. "It was quite difficult at first ... running a commercial subsidiary within a public service framework," he recalls. "[For example,] if you want to launch a new subsidiary, you have to go to the secretary of state, which takes a long time."

Not many people benefit financially from moving to the public sector, but Flynn is now the third highest paid executive in the BBC - a measure of how much importance his boss Dyke puts on the corporation's commercial divisions. Last year Flynn earned more than Jenny Abramsky, director of radio and music, and Richard Sambrook, director of news.

But the money isn't his motivation. "For me the BBC's breadth of offering to the UK audience, and what it does in local communities, and the way it can glue the nation together in times of national excitement or national grief, is unparalleled anywhere else in the world."