Posted Sunday, October 5, 2003; 12.48BST
"This is a company with billions of pounds of taxpayers' money trying to grind me into the dirt," says Kelvin Mackenzie, the former editor of the U.K.'s Sun newspaper and an outspoken BBC basher who now runs a small radio company that includes a station dedicated to sports. He complains bitterly that the BBC uses public money to overpay for broadcast rights to sports, making such events as Wimbledon, the Grand National or the British Open unaffordable for a smaller company such as his. The BBC, he rages, is "a significant anticommercial force."

These are serious charges, and ones the BBC is growing accustomed to hearing. "It comes up all the time," says Roger Flynn, who runs BBC Ventures Group, the Beeb's other commercial arm, which sells BBC services — such as its studios and use of a brand-new broadcast center — to businesses. He and others say that the BBC has bent over backwards to ensure that its commercial operations compete fairly and don't touch any license-fee money. But the criticism is likely to figure high on the agenda of an upcoming review of the BBC's charter — a once-a-decade look at the Corporation's mandate — since at its core the debate is about what the BBC is and what it should become.

By tradition, the Beeb is supposed to produce programs in the "public interest," although exactly what that means has never been unequivocally defined. At the same time, it tries to be popular in order to justify the license fee. It's a difficult juggling act, and competitors — and many viewers too — complain that it is using public money to duplicate the same cooking, gardening and home makeover shows as other broadcasters. At a Royal Television Society gathering in Cambridge last month, an executive from Walt Disney asked pointed questions about why the BBC had felt it necessary to start two new digital channels for children, competing with Disney's own programming. In a widely noted speech in August, Tony Ball, the outgoing chief executive of Rupert Murdoch's BSkyB, wanted to know why the BBC is spending €144 million per year on imported programming, most of it from America, when commercial channels could do the same without wasting public cash."I really cannot see why public money is being diverted to those poor struggling Hollywood studios in this way," Ball said.

We're not rushing to shoot every TV commercial under the sun. We're looking to show our strengths — ANDY BRYANT, head of BBC creative services

Generating hundreds of millions of dollars in cash flow every year requires far more than renting out wigs, studio space and dancing fruit costumes, although the BBC now does that, too. Its most obvious, and least contentious, sources of external revenue are sales of its TV programs abroad — everything from Top of the Pops and Teletubbies to Walking With Dinosaurs — as well as deals with cable and satellite operators to run its international TV channels, BBC World (a 24-hour international news channel), BBC Prime (an entertainment channel featuring the most popular TV shows) and BBC America (a hybrid news and entertainment channel aimed at U.S. audiences).

But that's just the start. The BBC is pushing hard to become a significant player in a variety of media markets, from publishing and Web design to franchising, brand marketing and outsourced broadcasting (see chart). But the stronger the BBC becomes as a commercial force, the more people question whether it's losing its real purpose. Phil Hemmings, for one, has severe doubts. "When dealing with the BBC, you are probably better off presuming the worst," he says.

Hemmings is director of corporate affairs for RM, a publicly listed company that sells educational software for teachers and kids. Last year the BBC announced that it wanted to spend €215 million to develop free online educational materials for schools. RM, along with an array of educational book publishers and software firms, viewed this proposed digital curriculum as a direct threat. The firms started an intensive lobbying campaign — complaining to the European Union's competition authorities in Brussels — that ultimately led the government to tone down the BBC's plans.

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