The MT Interview: BBC Worldwide's John Smith
By Andrew Davidson Saturday, 01 October 2011
MT Exclusive: the BBC boss you've never heard of, who earns more than the director-general. After seven years of having to operate under tight financial restrictions, is he getting itchy feet?
The last time I interviewed a BBC Worldwide boss, he jumped ship two months later.
'Yup, that came as a total shock to me,' says John Smith, the man who replaced him. Smith, the former finance director and chief operating officer of the BBC, had just completed a long internal report on the business - the Beeb's commercial arm - which recommended keeping it, not privatising it, and driving it harder for profit. So he got the job of replacing Rupert Gavin, the boss who jumped, and got to put his own recommendations into practice.
That was seven years ago. And just look at Smith now - sitting atop one of the most admired media businesses in the world, with a string of global brands such as Top Gear and Dancing with the Stars (the US version of Strictly Come Dancing) and a raft of ever-escalating profit figures that pay sizable returns back to the BBC: £181.9m in the year to March 2011.
And when people ask who the next director-general should be, it's Smith, 54, whose name comes up time and again. Yet, to many outside television, he's unknown, doubtless helped by that plain name.
He sighs when I mention the job of director-general. 'Yes, it's inevitable that my name comes up, but I'm much better qualified to do this. I don't want to be director-general.'
He pauses. 'And, no, I didn't push Rupert out.'
That's in response to my needling. But he did get to transform BBC Worldwide. Gone is the old building off London's Westway with its piles of boxes and the lingering sense that commerce was just an embarrassing adjunct to the main business down the road.
Now Worldwide is centre stage in the broadcaster's new White City development, happily ensconced inside its own glass and steel Media Centre. While the BBC itself is battered by demands to cut back, Worldwide seems to thrive.
And whereas Gavin was a 6ft 4in, rumpled, bristly, superbright and just occasionally prickly Old Etonian, Smith is rather different: short, bald, smooth and modestly born in Derby - he left school at just 15 to work in accountancy, before helping to privatise British Rail's non-rail interests, then jumping to the BBC's finance department to sort out TV licences and more.
He's clearly a fast learner. Worldwide's last reported results showed profits up 10% to £160m, and revenue up 7.8% to £1.16bn in the year to March 2011, with international sales accounting for 55% of that. Talk to anyone in the TV industry and they will say the Worldwide chief is one of the most successful bosses around.
Smith says he likes working 'on the border' between creativity and business. He has been investing heavily in the US and in independent producers over here. His problem is Worldwide doesn't have the access to capital of its larger US rivals, so it always has to start small and build. Hence the minority stakes it takes in independent start-ups and the trickling out of channels abroad.
'But we have doubled the size of revenues in seven years,' says Smith, 'and quadrupled the profits. And the next five-year plan sees the same rate of growth again.'
In fact, he says a lot more than that, hunched over a vast meeting room table, speaking fast, fact-filled, accentless English, interspersed with the odd sharp joke. Tanned, relaxed and articulate, he could be any other BBC executive, but old colleagues say he is actually one of its best people managers - better at organising and motivating than many of the Beeb's predominantly Oxbridge senior cadre.
'The BBC is full of the sort of people who used to run parts of India and should be running bookshops now,' jokes Wayne Garvie of production group All3Media and formerly Worldwide's content and production chief. 'But John is interesting - he's a doer. They need someone like him to get things done.'
Outsiders, however, inevitably get puzzled at how it all works. Both the Beeb and Worldwide make programmes, and Worldwide also invests in independents that then sell to the Beeb, presumably without any pressure on the commissioners to choose productions backed by the commercial arm of the public sector broadcaster they work for.
At the same time, Worldwide runs its own TV channels, sells DVDs, puts on live events and markets online applications. Until recently, it also had a magazine arm, now sold. All are licensed (technically Worldwide bids for the rights and can be outbid by outsiders) from BBC productions. Except when they aren't. Worldwide bought Lonely Planet, the travel publisher, now one of its major brands, in 2007.
And the latest rumour is that the BBC may put all its in-house production into Worldwide, leaving the Beeb with ...
Confused? You might be.
'I wish I could persuade you it wasn't complicated,' says Smith with a grin. 'We have only two relationships with the BBC. It owns all our shares. We buy its material on the open market. Yes, we have stakes in companies selling to them but it's all at arm's length.'
But there is nothing else like BBC Worldwide in Europe. 'It's nearer to Disney and Time Warner and Viacom than anything in the UK. We are the biggest owner of TV channels round the world outside the American studios, which are 20 to 30 times the size.'
Smith says he took on the job in 2004 knowing exactly what he wanted to do - he had already written that report, one of a number commissioned by incoming director-general Mark Thompson. He had also made recommendations as to what else the BBC should sell. BBC Broadcast, BBC Technology, the outside broadcast fleet - but Worldwide was kept. Why?
'I thought it needed reform.' Ever the numbers man, he counts off the points under four headings: financial performance, culture, brands and digital technology.
But hold on. Gavin, his predecessor - now chief executive of Odeon & UCI Cinemas Group - was widely praised. In fact, some thought he made too much profit. The endless DVDs, magazines, exhibitions, websites and Teletubby toys made competitors fume. Is he saying Gavin didn't push it hard enough?
Smith becomes wary. 'Look, Gavin's a good guy, but you said yourself you thought the organisation seemed a bit at arm's length from the BBC. It was in a rubbish building, rubbishly looked after, it had lots of different businesses not doing things together - I don't think any DG had been to the building to talk to staff. There wasn't much interest from HQ except in the numbers.'
He gestures round at Worldwide's new base. 'One of the big journeys we have been on is having a building like this and forcing everyone to accept that growing internationally and being successful is good for everybody, provided it is within certain bounds.'
Gavin, when I relay this back to him, is sanguine about the changes made, and their reception. But he points out that he built on the deals left by his predecessors, and Smith likewise has benefited from initiatives he made that take five to seven years to bear fruit.
'And all credit to him. He's done a fantastic job. He has continued the momentum.'
Gavin adds that he found heading Worldwide a thankless task - criticised if he did too well and criticised if he didn't. For Smith, the world has changed. Politicians want Worldwide to make money for the BBC.
But it is true that Worldwide's success always rankles with someone - right now, it annoys producers inside the BBC. They note just how much celebrating goes on at the commercial arm. It looks insensitive, given the new austerities at the Beeb.
Smith nods. 'Two things I'd say. The BBC is going through a period of adjustment to the new licence fee settlement - but does it really want Worldwide to be run as if it is in decline? It needs Worldwide to be successful more than ever. And in Worldwide, you have to stand up with vision, strategy and ideas, and get everyone motivated behind that. You don't march them up to the top of the hill then pretend you haven't got there.'
So what about that rumour the BBC now wants to put all its in-house production into Worldwide? 'Look, there's been hardly any discussion of that. It's an idea that comes around periodically and is so fraught with difficulty - you'd have to ask what is the BBC for? Does it mean it now starts making programmes for ITV?'
Well, as a viewer, would I care?
Smith's eyes narrow. 'OK, it may sound good but if you read your corporate strategy it says 'never give to your competitors your main source of competitive advantage'. So it's just not thought through properly.'
That mention of corporate strategy is important. Smith has the passion of the autodidact for learning. He spent a stint at Harvard Business School in 1997, and cites Professor John Kotter, the leadership expert, as one of his inspirations. 'Three things preoccupy me: strategy, culture and recruitment. I spend a third of my time on each.'
And at times you get the sense that Smith is turning over ideas at speed before rattling them out, numbered if you're lucky, lost in a blizzard of words if you're not. Those who have worked with him, however, say he tones it down internally. 'He's actually one of the best I've worked with at employee question and answer,' says Alison Jeremy, his former communications director, now head of comms at the NSPCC. Not all BBC managers like too much direct questioning from employees. Smith, apparently, thrives on it.
He's also been adept at charting a course through the BBC's tricky internal politics. His relationship with Thompson is key. The Worldwide chief executive is appointed by the director-general, but reports to his own board and chairman. Those close to Smith say he is given considerable freedom by Thompson.
Smith has also been smart at reorganising Worldwide itself and making different disciplines talk to one another. As Smith says himself, it's no good having one team making Top Gear formats and another producing Top Gear magazines and others making online and Facebook innovations, and none knowing what the other is doing. That's reflected in the open-plan spaces and eight-seat tables he now makes staff share. And he joins them.
'People are encouraged to innovate,' says Smith, 'to create new products. It's not going to work by a CEO barking commands from his office.'
Is this a difficult culture from the BBC proper? 'Yeah, but we face a different challenge. I am innovating products to suit customers all over the world. The BBC's mission is to provide domestic programmes.'
He runs through Worldwide's big brands - BBC Earth, Dancing with the Stars, Doctor Who, Lonely Planet, Top Gear, Walking with Dinosaurs. They can have any number of global products spun off them, from new shows, DVDs, magazines, websites, local formats, live shows, mobile applications, even cinema films. Walking with Dinosaurs' next incarnation will be a 3D animated film released in the US in 2013. 'It could be a real hit,' promises Smith. 'And we've all sorts of other plans for it.'
That push on branding is another skill he has ramped up. 'This is basically a brand management company. It takes bits of intellectual property and turns them into global brands.'
Smith also sits on the board of Burberry, the luxury fashion label, so he can see how the experts do it. 'Their brand positioning is exemplary,' he says. Its chairman, Sir John Peace, describes Smith's approach as analytical. 'But he gets branding and people - that has stood him in good stead.'
So is that a Burberry suit he's wearing? Smith giggles. Or is he one of the Beeb's Armani Tendency?
'No, it's not Burberry, and I'm not telling you where it's from,' he says, shifting uneasily.
Smith's 2011 earnings are nearly £900,000, including bonus and he's is well aware of the political sensitivities over what's perceived as the lush life of the BBC's senior team. But, as he points out, Worldwide is a separate, commercial organisation, set up along plc lines, which pays competitive salaries to attract the best talent. It's not in the public sector and questions about pay are irrelevant.
Has he the highest salary? 'No, executives in our US arm earn more...' So in a sense, a political decision has been taken about his pay.
"You're becoming like John Humphrys - you haven't let me finish the sentence. We pay the going rate until you get to the chief executive because, yes, my pay is a political issue. But I am not motivated enough by money to be unhappy about it, and I am paid well enough to feel well remunerated.'
Though he looks a bit grumpy now.
'I'm definitely not grumpy about it.' Then he sighs again. 'It's a shame it's such a complicated problem.'
But it's not just the salaries. His purchase of Lonely Planet caused ripples around medialand. Squeezing maximum returns from BBC product is one thing, buying in other brands to compete is another.
He pulls a face when I bring it up. 'Yes, it was controversial, obviously.'
Can he buy in any more brands? 'No one's told me not to, but the BBC Trust (which oversees the BBC) has suggested any new large-scale acquisition is unlikely to find favour with it.'
Frustrating? No, he says, what's frustrating is the lack of access to capital. 'We cannot raise capital by equity or debt, our balance sheet is consolidated into the BBC and it doesn't want our debt on its balance sheet. So all the time I've been boss we have had to be financed by our own operating cashflow while delivering back to the BBC a 75% dividend ratio - it's not easy when you are up against people like Disney, which are brilliant, successful and fantastically capitalised.'
So when, for example, Worldwide starts a TV channel abroad, it must do it organically. 'Start small, tread the boards, meet the distributors, get deals done, launch the channel, only invest in programming as profits come through. Competitors can just invest enormously upfront with the very best programmes and marketing and get an immediate effect.'
What can he do? Selling a chunk of BBC Worldwide to private equity is off-limits. 'Lord Patten, the BBC Trust chairman, has made it clear it's not something he would support. He's encouraging us to look at alternative ways of getting finance in.'
Which means? 'Other forms of debt schemes and partnerships.'
Others suggest this might make Smith feel like moving on - it's one of the reasons Gavin left - but he says he's happy to take what's thrown at him. Talking over his career to date, Smith stresses twice there was 'no plan'. Born the second of three children to a Rolls-Royce factory foreman in Derby, his first ambition was to be an architect, but there simply wasn't enough money in the family. Instead he became an accountant. 'Classic working class family thing - saw the accountancy job advertised, applied for it, studied on day release from a small firm.'
He worked on company accounts and used that grounding to apply for a management traineeship at British Rail's Derby base. There he rose to become part of the team entrusted with breaking up the empire, as rail privatisation loomed. 'Sealink ferries, Seaspeed hovercraft, hotels, hamburger chains, poster agency, Europe's biggest wine lake... ' He helped sell everything that British Rail had accumulated in decades of running a nationalised service.
By 1989 all the non-rail interests were sold and Smith was juggling offers from the City, where his skills at preparing state-owned businesses for sale had been noted. Yet he plumped for the BBC. Why?
'It depends what motivates you. I find creativity quite an exciting thing.'
The 1990 Broadcasting Act meant that for the first time the organisation had to cost programmes to compare external and internal proposals, and Smith was one of the money men who rose rapidly. He's worked under a quartet of director-generals, but rates Thompson the best. 'I think he has done a great job.'
But then, he would say that, wouldn't he? Smith suddenly looks steely. 'Turn that off,' he says, gesturing at my recorder, 'and I'll say the same thing again. He's done a great job.' Which, as he also said before, doesn't mean he wants it.
So what will he do next? He has a good life as BBC Worldwide chief - a house in Henley, an apartment in Notting Hill, an old Land Rover to drive around in and tickets to the opera, which he loves. He's twice divorced and takes his three kids for half of each week. You get the impression he's not itching to leap to America and run something bigger there.
Which leaves the European media scene. One who knows him says his biggest challenge, if he stays at BBC Worldwide, may be motivating himself. He's already put together one senior team - some have moved on, now he has to rebuild again.
Another says plainly that Smith wants to run a properly commercial business - and to do that, knows he must leave. Gavin says one of the reasons he left Worldwide was so that he wouldn't get 'pigeon-holed' as a BBC man, and he was there only six years.
Does Smith have his eye on leaving? He offers a slow smile. 'It's always possible I could work somewhere else, but I'm not looking. There's no timetable.'
So he's promising to hang around longer than his predecessor, post-MT interview? 'Hahaha, yeah, yeah, I'm sorry about that.' But, in truth, he doesn't look that sorry at all.
FOUR CHALLENGES FACING SMITH
- Ensure BBC Worldwide has sufficient investment to build its brands and support the mothership
- Develop BBC Worldwide's presence in Asia, Latin America and central and eastern Europe for medium-term growth
- Expand Worldwide rapidly without political interference
- Find a job outside the BBC empire suited to his talents
SMITH IN A MINUTE
1957: Born in Derby, 1957 and attended Shelton Lock School
1973: Trainee, Bocock Bew, chartered accountants
1975: British Railways Board, London. (Joined as manager, BR commercial property division, left as corporate finance manager - responsible for subsidiary demergers)
1989: Group chief accountant, BBC
1992: Financial controller, BBC TV
1996: Director of finance, BBC
1997: Harvard Business School advanced management course
2000: bbc director of finance, property and business affairs, later retitled chief operating officer
2004: Chief executive, BBC Worldwide