BBC Worldwide CEO says Web revenue surging

LONDON - The head of BBC Worldwide, the commercial arm of the British Broadcasting Corporation, said on Tuesday the business has underestimated how much money it could make from the Internet.

BBC Worldwide Chief Executive John Smith said the business initially aimed to get at least 10 percent of its total revenues from the Internet, but has now realised this target is too low.

"We think we will be able to beat it. It has gone from one percent to nearly four percent in just 18 months. So already we are starting to see that probably we have under-egged the extent to which we will see more of our revenues coming from the Internet," Smith told a media leaders conference in London.

The BBC's commercial arm generates revenue from making programmes, acts as a TV sales distributor for other companies, publishes magazines such as Top Gear for automotive fans in more than 40 countries and is ramping up the number of global television channels it has.

BBC Worldwide's pretax profit in the year to the end of March rose 24 percent to 111.1 million pounds on sales of 810.4 million pounds.

Smith, who became CEO of the BBC's commercial arm in 2005, said there were four strands to the division's strategy.

These included capitalising on the 40 million international users to the www.bbc.com Web site, that unlike its UK site, carries advertisements.

"We intend to use the profits that come from that to significantly invest in the site and have an enormous amount more functionality and content on there and promote it," he said.

Other strategic priorities include licensing content to other businesses and using magazine publishing and television production skills on the Web to create social networks around areas such as gardening, automotive, wildlife, music and homes.

Smith said a fourth core element was unveiled in a separate announcement on Tuesday when BBC Worldwide and terrestrial broadcasters ITV and Channel 4 outlined their launch plans for an on-demand content service next year that would combine more than 10,000 hours of programming.

MORE DEALS TO COME

"The key thing is what any media company is doing in the Internet space," Smith said during a question-an-answer session at the media conference.

In October, BBC Worldwide paid around 100 million pounds to buy travel publisher Lonely Planet.

Smith said on Tuesday that, although Lonely Planet was profitable, its Web site was not as good as its books offering.

BBC Worldwide would therefore rework the publisher's online offering into its own flagship bbc.com site, as well as its new on-demand content service and social networking offerings.

Smith said more acquisitions were likely.

"You have got to fill gaps through M&A activity and there are all sorts of gaps for us," he said, noting channel distribution, magazine portfolios and intellectual property.

The chief executive said BBC Worldwide would be able to borrow more than it could now if it was not for its debt being consolidated into the BBC's borrowings for accounting purposes.

Government rules regarding this mean there was a limit on how much BBC Worldwide could borrow that was artificially a lot lower than capital market's would be willing to lend, Smith said.