The BBC’s Global News operation faces a “significant challenge” to stay profitable over the coming years and will have to reduce costs by £12m a year, according to a National Audit Office report.
BBC Global News, which provides international English language news services overseas via the BBC World News channel and BBC.com, made headline profits of £2m in 2016-17 and profit after tax of £400,000.
BBC Global News’s revenue comes from advertising sales and payments from other media companies that offer its channel to their subscribers.
The BBC World News channel reached 450m households in 2016-17 while BBC.com had 97m monthly unique browsers, also up.
But, despite its strong performance, Global News faces a “significant challenge” in line with other commercial international news providers to achieve sustainable profitability in the coming years, the NAO has said.
In its report, covering five years of accounts, the NAO said: “[Global News] expects that structural changes to the TV advertising and distribution sales markets will continue to exert downward pressure on its revenue.
“Also, from 2017-18, it is fully incorporating the BBC’s TV and digital advertising sales operations.
“Previously, Worldwide sold such advertising on behalf of the World News channel, in return for a commission. Given the decline in sales in recent years, this commission no longer fully covered Worldwide’s costs.
“Assuming direct responsibility for TV and digital advertising sales will require Global News to make economies, but the subsidiary also believes that it will allow for closer cooperation between editorial and advertising teams.”
In response to these challenges, BBC Global News plans to reduce costs or increase revenue across its operations by more than £12m a year by 2020, the report said.
The BBC has also approached the government to discuss alternative sources of income for some of Global News’s operations, according to the NAO.
A BBC spokesperson said: “This is not a £12m cuts announcement – like all commercially funded journalism businesses, BBC Global News is operating in a challenging environment.
“As a result of improved revenue performance and previously announced cost reductions, the business has already made significant progress in meeting the financial challenge and is confident of achieving sustainable profitability in the near-term.”
The BBC’s commercial activities have generated more than £1.1bn of revenue annually in each of the last five years, with BBC Worldwide generating around 90 per cent of the corporation’s commercial revenue.
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