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BBC takes on Netflix and Hulu worldwide

Leading global OTT players on the world stage such as Netflix, Amazon and Hulu will face a mounting challenge from an unexpected source, the BBC.

While prevented by statute in the UK from seeking direct revenues from linear or catch-up content, the corporation’s commercial arm, BBC Worldwide, has unveiled ambitious plans to become a major OTT service provider on the world stage. The long-term ambition is for the BBC as a whole to become self-funding after progressively reducing dependence on license fee income from UK households, which in any case has been frozen at its current level of £145.50 ($220) per year until 2017. This means the BBC is having to cope with a 16-percent funding cut in real terms over that period, which it has addressed partly through cost reductions, including relocation of staff from London to Manchester, and partly by beefing up the commercial arm.

More controversially, the BBC now plans to introduce commercial activities to the UK, through a digital store offering people the chance to download content to own in return for a payment. This way, the BBC will still honor its remit to make its content available free at the point of delivery and now for catch up viewing up to 30 days after linear transmission, while charging for access after that on a download to own basis.

This new BBC Store is also one of the three components of the newly revamped BBC Worldwide strategy designed to take on Netflix, Hulu, amazon and others. The other two components are consolidation around a single website and increased investment in content production.

As part of the consolidation, BBC Worldwide is ditching the global version of the iPlayer portal that has proved so successful in the UK. This represents a U-turn given that BBC Worldwide originally in 2010 touted the global iPlayer app as the cornerstone of its strategy for gaining subscription revenues from its content outside the UK. But after two years of testing, it is now to be dropped, which according to BBC Worldwide CEO Tim Davie has been done purely to converge all services on a single website to become more competitive against global OTT players.

"It is purely a branding question: If you want content, you go to," Davie said. "It has been too fragmented, and globally it is a ferocious market dominated by U.S. and Asian players — like Hulu, Netflix and Amazon — and we have to have scale and a real competitive edge."

Another reason is that iPlayer in the UK emerged as a catch-up platform rather than for distributing combined linear and VoD services. The corporation now wants to establish a common web platform for all services outside the UK, including the BBC Store.

The third plank of the BBC Worldwide strategy, content investment, is at least as important as the digital innovation around the new platform. This is being promoted as a key differentiator by combining globally popular content such as the Winter Olympics and World Cup with quintessentially British material like the Proms concerts, Edinburgh Festival and Glastonbury.

“It will also support big television events and major news events such as UK Election Night,” said BBC director general Tony Hall.

The BBC is increasing its spending on programming by £30 million ($48 million) a year to £200 million in total, including a new drama from the writer of the X-Files, the popular US science fiction horror series, pitched at a global audience.

BBC Worldwide has a long way to go though to finance the whole corporation. It made net income of £156 million on revenues of £115.8 billion for the year ending March 2013. License fee income on the other hand is running at around £3.6 billion per year.