Making Money Opportunities

BBC Online is meeting its obligation to commission 25 percent of eligible production work from external suppliers - but must make wide-ranging changes to the process, a review by its regulating BBC Trust has concluded (release, review)

The BBC has met the quota requirement every year since it was recommended by the 2004 Graf report. Last year, it commissioned external interactive producers for work totalling £20 million.

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But a Deloitte review in to the quota commissioned by the trust slates the system for lack of transparency, management, direction and value for money.

Consequently, the trust - whilst it is not raising the quota - has ordered BBC Online to “discuss with industry what form strategic goals for a quota system might take”, and to simplify the current process.

This BBC Trust review has been many months in the making - the BBC executive had already known the outcome and recommendations before Friday’s publication and has partly responded - it has already agreed to give the trust, after speaking with industry, a review within three months. The trust says the whole issue requires “urgent attention”.

Deloitte’s review (highlights):-

“The BBC is complying with the requirements set out in the BBC Agreement. However, the Online independent supply quota does not appear to be working well in practice. Whilst steps have recently been taken to remedy the issues surrounding it, both the BBC and the independent sector recognise there is a lack of: communication around how the commissioning for online takes place, clarity around how the quota is calculated and tracked; and, consistency and efficiency in commissioning practices. Most significantly, interviews demonstrate a strong belief in the independent sector that BBC online commissioners select suppliers to pitch for commissions based on the commissioners’ personal knowledge, rather than any rounded evaluation of who is equipped to deliver quality and value for money.

“There is a high degree of external scepticism as to whether reported performance is real or the result of an accounting allocation.

“Overall BBC Online expenditure is expected to go down rather than up

“There are issues with the management of the current arrangements that impact the value for money and quality BBC Online achieves for licence fee payers

“BBC Online has failed to provide sufficient transparency to the sector in terms of: strategic direction, emerging opportunities, decision making processes, and reporting of performance relative to the quota.

“An average commission size in FY 2009/10 of less than £5,000 and only 17 commissions over £100,000

“The revenues of the top 100 interactive agencies totalled c. £790m in 2009. In 2009/10 the BBC spent c. £20m externally as part of the BBC Online quota. Although the BBC will spend more on digital content (for example on those areas excluded from the eligible base), in absolute terms the impact that the BBC makes on the online content sector is limited.

“In this context, BBC Online’s c. £20m of ‘eligible’ annual spend lacks the scale to have as significant an impact on the shape of market as the BBC does in TV broadcasting.”

Back in December, we spotted an SEC filing indicating that Union Square Ventures was raising between $135 million and $200 million for a new “Opportunity Fund.” The offering wasn’t complete and the firm could not discuss it, but today partner Fred Wilson explains in a post what the new fund (which ended up being a $165 million fund) is all about.

The fund is not about going after different opportunities than Union Square has been focussed on since the outset. It is that the size of the opportunity Union Square is focussed on—which Wilson describes “Internet services that create large networks”—is larger than ever. And the new fund will provide more dry powder to invest in network startups, whether they need $25,000 or $25 million. Wilson explains:

Since 2004, the opportunity to invest in networks has evolved. In 2004 the entire market capitalization of the social media sector was probably less than $100M. Today a single company in that sector is valued at over $50B. The amount of venture capital focused on the sector has exploded. Networks that did not exist in 2004 now consume a huge chunk of users’ time and attention, making the launch of new networks more challenging. The opportunity to invest in networks has changed, and once again we are changing with it.

Union Square is an investor in Twitter, Zynga, Tumblr, Foursquare, and Disqus—all of which fit under the network thesis. As these companies grow and command higher valuations in private rounds (Union Square sat out Twitter’s latest $200 million round), the Opportunity Fund will allow Union Square to keep participating. It will also be tapped to invest in companies in later rounds (something Union Square has shied away from so far, they like to be first) and other special situations such as spin-offs. Interestingly, Union Square is not committing to invest all the money raised. Maybe they should have called it the Dry Powder Fund instead.

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