BBC is giving away a valuable commodity
Tuesday 18 March 1997
In order to commercialise its product and enter the fast growing subscription TV market, then, the BBC has to rely on external sources of capital; some part of its birthright has to be ceded, and quite a birthright it is too. The Flextech joint venture gets first call for digital subscription TV on all new programming produced by the BBC as well as its vast archive. This is something that over the years has been paid for by the British public out of the licence fee and its value is pretty much incalculable. All that we do know is that it must be worth a very large sum of money.
What this deal with Flextech means is that half of any money earnt from the BBC's programming via subscription TV will in future go to an outside party. Flextech's input is its marketing acumen (which given that the company has never made a profit must for the time being be viewed as of questionable quality) and up to pounds 130m of equity and debt. For many of us, that might seem like a rather small price to pay for all those billions of pounds worth of licence fee investment.
Both the BBC and Flextech, moreover, believe the venture will prove highly lucrative. For all we know the licence fee may by then be a dim and distant memory by the time this agreement is up for renewal thirty years from now and it will all be subscription TV and video on demand. In those circumstances, the deal with Flextech will look like even more of a giveaway.
The upshot is that to view this deal as the BBC getting half of something for nothing is probably the wrong way of looking at it. A better way would be to say that the BBC is, in fact, giving away a highly valuable commodity for next to nothing. But if this is what is happening here, it is because the poor old BBC doesn't have any option. In the circumstances it has probably done as good a deal as it could have hoped for.
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