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The great indie takeover

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09 June 2014

Is the takeover of the UK production sector by foreign, largely US, buyers a good thing for British creative businesses?

It has been a seismic few months for the indie TV sector in the UK. A spate of deals has seen many of the largest players change ownership, with American and international buyers investing heavily in the market. The three largest superindies – All3Media, Endemol and Shine – are in the process of changing hands, with Discovery and Rupert Murdoch’s 21st Century Fox emerging as key players in the sector. The dealmaking follows hard on the heels of another US buyer, Viacom, acquiring Channel 5.

The talk is that ITV might now emerge as the next major target for US buyers, which would leave the BBC and Channel 4 as the last significant broadcasting entities that are wholly UK owned.

So how do British broadcasters and producers view this new landscape? There was a political furore when US drugs giant Pfizer tried to takeover UK rival AstraZenica. But there has been no such comment about the takeover of the British production sector, which is now largely in foreign hands (see box below).

Some of the few remaining truly independent producers in the UK do admit to concerns. Small and medium sized indies worry they don’t have the financial resources or network of customers to be able to compete with the superindies.

“You watch from the sidelines as this consolidation takes place and don’t know the full consequences of it,” says Blink Films md Dan Chambers. He says true indies fear that broadcasters which have bought into the sector, like Discovery, may prefer to commission from their own production companies rather than go to the indie sector.

That said, Chambers points out that there is still a great diversity of buyers in the UK and the US for indies to pitch ideas to. Chambers, and fellow indie md Richard Farmborough of Reef Television, also say that deals like the All3Media takeover could be good news for true indies.

All3Media producers will no longer qualify for official indie status, now they are owned by a broadcaster. It means that All3Media companies will not qualify for the official quota of 25% of programmes that the BBC has to commission from indies. The corporation may instead be forced to look to other indie suppliers to ensure it hits the quota mark. “Quite a few indies are looking on thinking this will be a benefit,” says Farmborough.

Many observers say the presence of foreign investors in the UK production sector should be welcomed. The deal-making is part of a structural shift that’s seeing media conglomerates position themselves for the global market, points out Pact chief executive John McVay. And they are attracted to the UK because of its strong creative reputation. “It’s really interesting for the UK market that this is all happening here. We could be sitting in a market where it is not happening at all. We are firmly in the game.”

Besides, he adds, it’s up to each entrepreneurial indie owner to sell whichever company he wants to. “That is their right,” says McVay.

Others point out that UK producers are also very active in the US market, either buying US producers themselves or selling in shows like The X Factor, Downton Abbey and Supernanny. ITV, for example, has acquired a swathe of producers in the US and now claims to be the largest independent unscripted producer in the country.

Tom Manwaring, MD of advisory group About Corporate Finance, says his company has brokered the sale of six independent production companies this year. Four of those six deals involved European companies buying up US producers, including ITV’s purchase of Leftfield, Tinopolis’s acquisition of Magical Elves and Fremantle’s purchase of Jersey Shore producer 495 Productions.

“Traffic is going both ways,” says Manwaring. “There are lots of transatlantic deals.”

Broadcasters have, so far, been watching from the sidelines amid all the corporate activity amongst their producer suppliers. The implications of all the deal-making is still being absorbed and debated, says Channel 4 chief executive David Abraham.

“There isn’t any cause for panic. We are not feeling that,” Abraham says, while pointing out that the debate about foreign ownership is likely to play out over the summer.

Abraham adds: “A Tory led coalition is never likely going to have the instinct to want to intervene in markets and block foreign ownership. Conversely they will be sensitive to this issue of indigenous culture. Who knows, we may only be one step away from ITV being bought by an American company. When that happens, politicians will really wake up. Then you would only have two broadcasters [C4 and the BBC] who are not foreign owned or controlled.”

Arguably this underlines the vital cultural and economic importance of both these broadcasters, particularly at a time when the BBC Charter is soon set for review.

Abraham adds that the indie sector has always been in a state of flux, with new companies emerging all the time. “The good news is that this business constantly replenishes itself.” C4 is backing some of them too via its £20m indie growth fund, with the first deals set to be announced this summer.

Moreover, he says that broadcasters and producers have to accept that they are now operating in a truly global market, where there is international competition for the best ideas and financing. This view was reinforced by a recent trade mission to China that Abraham went on, organised by Pact. “One can’t put one’s head in the sand in terms of the economics of how programmes are made and invested in and exploited,” he says.

Abraham also believes there are “many upsides to globalisation for Channel 4”. If the broadcaster commissions a show that ends up being a hit in America, like Studio Lambert’s Undercover Boss, it shares some of the back end revenue. And, as non-qualifying indies do not benefit from the terms of trade, Channel 4 will be able to keep a larger share of the back end from shows commissioned from broadcaster-owned indies like All3Media.

For its part, All3Media chief executive Farah Ramzan Golan says the deal is a good one for the company and the sector. She insists All3Media indies will not simply take their best ideas to Discovery, but will interact with the market as usual. To do otherwise, she adds, “would be counterproductive because it would constrain our future growth.”

Moreover, she says, the deal will lead to greater investment. “These are trade buyers with long term horizons, so now we will make long term bets with the kind of IP we develop."

The acquisition, she says, is a good one for Britain – as are the other media deals being done in the UK. “I would be the first to be extremely protectionist about our culture and creativity. I think you should ask the question, is this happening because the terms of these deals are showing a significant desire to protect and nourish these companies, to put investment in, to put resources in, to put R&D in? And Ramzan Golant clearly thinks they are.


Foreign owners of UK indies

21st Century Fox/Apollo Global Management
Indies Remarkable, Initial, Tiger Aspect, Zeppotron, Darlow Smithson, Tigress, Shine TV, Princess, Kudos, Dragonfly, Lovely Day, Brown Eyed Boy, Shine Pictures Key shows Big Brother, MasterChef, Deal or No Deal, Million Pound Drop, Broadchurch and Bad Education

Discovery/Liberty Global
Indies Bentley, Company Pictures, Lime, Lion, Maverick, North One, Objective, One Potato Two Potato, Optomen, Studio Lambert. Discovery bought Raw TV in March, and owns Betty TV Key shows Hollyoaks, Gogglebox, Undercover Boss, Wild at Heart, Peep Show, Midsomer Murders, Horrible Histories

RTL/FremantleMedia UK
Indies Thames, Talkback, Boundless, Retort and Newman Street Key shows The X Factor, Britain’s Got Talent, Grand Designs

William Morris Endeavour/Silver Lake

Indie IMG Productions Key shows C4 Horseracing, Football League Show

Warner Bros
Indies Shed, Wall to Wall, Ricochet, Renegade, Yalli, Twenty Twenty and Watershed Key shows Who Do You Think You Are?, New Tricks, The Choir

Sony Pictures (UK)
Indies Silver River, Victory Television, Left Bank and Gogglebox Key shows Strike Back, Who Wants to be a Millionaire, Wallander

NBC Universal
Indies Carnival, Monkey Kingdom, Chocolate Media Key shows Downton Abbey, Whitechapel

DeAgostini/Zodiak UK
Indies RDF TV, IWC, Touchpaper, Comedy Unit, Bwark, Foundation, Bullseye, Lucky Day Key shows Being Human, Secret Millionaire, Dickinson’s Real Deals

StudioCanal
Indies Red Production Key shows Scott & Bailey, Last Tango in Halifax

ProSiebenSat.1/Red Arrow
Indies CPL Productions, Endor, Mob Film Key shows A League of their Own, All Star Mr and Mrs

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