The BBC is turning to reruns of Top Gear and Only Fools and Horses to help plug a looming £745m funding gap after sealing its most expensive ever deal to take over the owner of the Dave and Gold channels.
BBC Studios, the corporation’s commercial arm, has taken control of the lion’s share of UKTV, which runs 10 free-to-air and pay-TV channels, in a transaction worth about £180m.
The BBC will take control of seven of the 10 UKTV channels including Eden, Alibi and the popular Dave and Gold. The latter shows BBC classics including Fawlty Towers, Blackadder and the Victoria Wood hit Dinnerladies, while Dave has become a bastion of male-targeted broadcasting with its mix of panel shows, comedy and Top Gear. The US pay-TV giant Discovery, which co-owns UKTV with the BBC, will get the Good Food, Home and Really channels as part of the deal.
The BBC has used a combination of cash, debt and a content deal to take control of UKTV because it does not have the financial firepower for a straight buyout of Discovery. UKTV is a cash cow for the BBC, with profits surging from £29m to more than £90m in the past eight years, valuing the business at about £750m. UKTV also pays £54m a year to BBC Studios for the rights to an extensive library of BBC shows from Top Gear to Dad’s Army.
The deal is the biggest in the corporation’s history – well in excess of the ill-fated £130m purchase of travel guide publisher Lonely Planet – and comes at a politically sensitive time for the broadcaster.
The BBC has warned of channel closures and cuts to services if it were forced to take on the full £745m cost of paying the licence fee for over-75s when the government stops funding it.
The BBC has been approached in the past about selling its stake in UKTV, worth almost £400m in straight cash terms, but instead has decided to spend heavily to take control of the hugely profitable business.
“BBC Studios taking control of the UKTV channels that best fit our programmes is good news,” said Tony Hall, the BBC director general. “It means a secure future with long-term commercial returns.”
The BBC has agreed to pay about £100m in cash, take on about £70m of debt from UKTV that Discovery was obliged to pay, and also give Discovery a £10m share of the dividend that UKTV has amassed in its current financial year.
In addition, the BBC has agreed a lucrative 10-year, £300m deal to license its natural history and wildlife content, spanning hits such as Blue Planet and newer fare including Dynasties, for a new international streaming service Discovery is planning to launch in 2020. David Zaslav, the Discovery chief executive, has said the new streaming service “will look like a natural history Netflix” and “the fact that content will be coming off Netflix is important to us”.
The BBC has been an outspoken critic of the rising power of Netflix, which in November further muscled in on the corporation’s territory by signing Sir David Attenborough to front a documentary from the makers of Planet Earth and Blue Planet.
Hall defended selling off crown jewel rights to Discovery, which will now have highly sought-after content on its own international streaming service.
“This [deal] is not based out of a threat, it is based out of a strength,” said Hall. “The natural history unit is world-beating … who do you want to ally yourself with? The strongest people to ally ourselves with is [Discovery]. Discovery and ourselves are motivated by the same sorts of ideas and ideals.”
Under the terms of the content deal the new streaming service, which will feature Discovery and BBC content, will not be available in the UK, Ireland and China. Hall said it is the biggest content sales deal the corporation has ever struck.
Last year, Discovery struck a $2bn (£1.5bn) 12-year deal with the PGA Tour to create a “Netflix of golf” streaming service supported by an exclusive programming deal with Tiger Woods.
Hall said that taking full control meant the BBC would be able to sort out the complicated video-on-demand rights relating to UKTV shows, while helping pave the way to launch BritBox UK, the streaming service joint venture with ITV.
The BBC said it will keep the UKTV brand and its separate offices in Hammersmith, London, and maintain its strategy including its highly successful move into investing in original content. UKTV employs about 290 staff. Nearly all UKTV staff will remain employed by the BBC with only a small number moving to Discovery.
