Posted Sunday, October 5, 2003; 12.48BST
But it didn't kill them, and Hemmings worries that the BBC could still distort the €122 million educational software market in the U.K. — and severely hurt smaller players like his firm. His big concern is that the BBC will try to cash in through its commercial operations on what it is doing for free as a public service, just as it makes money off toys and books from its Teletubbies children's TV show, for example. "There are fantastic things the BBC could do in education, but it didn't have to come in and eat our lunch," he gripes.

Hemmings isn't alone. Independent TV producers who sell their programs to the Beeb lobbied unsuccessfully for years to get a larger cut of the revenues the BBC earns with them in secondary markets outside the U.K. Rival magazine publishers say they are unnerved by signs that the BBC, already the third-largest British magazine publisher, may be launching a slew of new titles over the next few months, several of which — including Dare, a magazine for preteen girls — have nothing to do with its TV programs.

The BBC insists it goes to great lengths to avoid conflicts. In the past two years, as it has pushed harder into commerce, the Beeb has consolidated all its for-profit activities into BBC Ventures and BBC Worldwide, which are kept at arm's length from its core publicly funded activities. The two firms are separate legal entities from the main corporation, and their staff are paid by the business units, not by the public-service arm of the Beeb. Every piece of business they do for the BBC is contractually drawn up at market prices, they say, and they are subject to quarterly internal audits as well as an annual external audit. Gavin at BBC Worldwide is even required to bid for the rights to BBC programs. Worldwide says it has never been beaten by an outside bidder on a hot program it thinks it can turn into an international commercial success, but other firms have picked up some shows, including Rockface, a BBC One drama about mountain rescue that is being distributed in the U.S. by Columbia.

"No doubt at some point we'll do something wrong and there'll be a big row," says John Smith, the BBC's finance director. "But the processes involved are so comprehensive, so thoroughly audited, so thoroughly reported on in the annual report that I think we're pretty solid in that area." Smith draws a distinction between the gripes of commercial competitors who feel the BBC has not adhered to fair-trading rules and those — like MacKenzie, BSkyB and Disney — who simply object to the presence of a publicly funded competitor in their markets. His answer to the latter camp is that the BBC's mandate is to provide the license-fee-paying public with great sports, kids' and other programs to show them they're getting value for money. "That's what the BBC is for," he says unapologetically. The very purpose of the license fee is to drop "a dollop of cash" on British-originated programming that's "homegrown, mixed genre and not animation."

But there's a fine line between the BBC as a noncommercial public service broadcaster and the BBC as a for-profit media conglomerate. The Blair government in 2000 commissioned an independent assessment of the BBC's internal rules from Richard Whish, a law professor at King's College, London, who concluded that they "are appropriate to ensure that the BBC does not distort competition in commercial markets." But he noted, it's one thing to have rules in place, and another to implement them. That's where some critics say the BBC is falling down.

Internet firms, for example, fume that the Corporation spent €144 million to build a hefty online presence — five times as much as it initially promised it would spend — and that its online content includes such lifestyle areas as gardening and travel, even though the BBC originally promised to stick to news and current affairs. Like many others, the Beeb has lost money on the Internet, but it's now a massive online presence, registering more than a billion page views per month. "We feel they've really been dishonest," says Angela Mills of the British Internet Publishers Alliance, who says rivals have been "crowded out." Following complaints by the alliance and others, the government in August ordered an independent review of BBC Online.

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