Talk to producers about how business is in 2016, and you’ll hear a great variety of opinions.
The majority, however, say that business is good overall, albeit ever challenging and increasingly competitive.
Among the standout trends in this year's Production 100 - Televisual's annual survey of the UK indie TV sector - is clear evidence of the drama boom that has seen broadcasters in both the UK and US turn to British indies for scripted content. Sports producer IMG Media takes poll position in the survey for the fourth year in a row. However, six out of the top ten indies in the Production 100 are predominantly drama producers (Carnival, Left Bank, Lime, Kudos, Tiger Aspect and Neal Street).
Carnival, the producer of Downton Abbey and The Last Kingdom, generated £110m in revenues over the past year, the highest ever figure for a non-sports indie taking part in the Production 100. Close behind is Left Bank Pictures on a turnover of £101m. As well as Outlander for Starz, the Sony-owned indie is producing the highly anticipated royal biopic The Crown for Netflix.
The drama surge
This drama boom has helped underpin growth in the Production 100, with the turnover of the top 100 indies rising from £1.77bn last year to £1.94bn. Kate Wilson, director of operations at veteran indie Hat Trick describes the business climate as “good, particularly in relation to high end scripted TV production.” Kudos’s chief operating officer Martin Haines adds: “It’s very competitive but we are enjoying the thriving drama market and the increased plurality of buyers.”
Haines’ comment underlines the pros and cons of the drama boom. Deep pocketed SVOD platforms Amazon and Netflix have helped to expand the small pool of drama buyers. But more and more production companies are going in search of the money that is being invested into scripted. Drama indies Sid Gentle Films and Eleventh Hour Films are two new entrants to the Production 100, both launched relatively recently to take advantage of the scripted surge. It means the UK drama market has become very crowded, notes Newman Street md Paul Marquess.
Indie launch boom
It’s not just in drama that competition has hotted up though. One of the other noticeable trends in the UK production sector over the past year has been the number of new indies to launch, often with backing from superindie groups.
Endemol, for example, backed new indies like Karen Ross’s Sidney Street and Derek Wax’s Wild Mercury, while Fremantle has taken 25% stakes in indies launched by well known execs including Laurence Bowen (The Eichmann Show), Gary Hunter (Top Gear), Justin Gorman (C4) and Colette Foster (Remarkable TV).
Elsewhere ABC has backed former Sky and BBC comedy boss Lucy Lumsden’s Yellow Door, while Kudos founders Jane Featherstone and Stephen Garrett have both launched their own new TV production vehicles, as have drama execs Jane Tranter and Julie Gardner (Doctor Who). David Heyman (Harry Potter) launched a TV operation with backing from NBC Universal and Tessa Ross (Film4) with investment from BBC Worldwide.
“There is an increasing amount of competition, particularly as execs leave broadcasters and set up their own companies,” says Hartswood Films’ director of operations Debbie Vertue. Illuminations md Linda Zuck says the market is increasingly overcrowded.
Indeed the spate of new indie launches has eclipsed all other deal-making in the indie sector over the past year. The consolidation that the market has witnessed over the past decade has slowed to a trickle, with All3Media’s acquisition of Indian Summers producer New Pictures the only sizeable deal since September 2015’s Production 100.
Seeding new companies run by well-known executive talent rather than investing large sums to buy one of the dwindling number of true indies has become the new focus for the superindie groups looking to grow their UK footprint.
Reflecting on the past year, many indies say one of the big challenges has been major personnel changes at broadcasters, particularly the BBC and ITV, following the departure of execs such as ITV director of TV Peter Fincham and BBC2 and BBC4 controller Kim Shillinglaw.
Artists Studio exec producer Patrick Irwin talks of “chaos in the UK broadcaster commissioning process”, while Blakeway director of production Andrew McKerlie says the job changes have caused “major delays in decision making and made the first six months of 2016 extremely challenging in the factual genre.” Talkback md Leon Wilson also says the changes in BBC and ITV entertainment have ‘slowed down the commissioning process for the first half of 2016.’
Slow to greenlight
In fact, many indies say that the commissioning process has become ever slower in the UK market. “Getting ideas fully commissioned and in to production feels like it is becoming harder than ever before,” says Firecracker’s chief creative officer Jes Wilkins. “We’ve had a number of ideas that have been verbally green lit with contracts agreed only for them to fall through because of personnel changes at channels, goalpost shifts or unexpected budget constraints.”
Budgets are, as always, a big talking point in the Production 100. Between them, indies say that budgets have fallen an average of 2.1% over the past year. Keo Film’s financial controller Chris Day says there’s been “continued pressure on production margins as costs continue to rise but channel tariffs don’t.” Clelia Mountford, md of Catastrophe producer Merman Films says budgets are diminishing yet there’s “the same expectation for high production values from broadcasters.”
“Budget have held study for us, but due to increased creative demands, production costs and staffing costs, it seems like about a 5-10% decrease in budget levels,” says Maverick’s chief finance officer Ian Ayres.
With talent and production costs rising, producers are having to be ever more innovative to make budgets work – whether finding international co-production partners, ad funders or investing themselves into projects. “Increasingly, we find broadcasters telling us they like an idea but can’t pay for it, so we’re tasked with finding the money,” says Cactus TV head of production Lucy Eagle. Tiger Aspect’s COO Helen Wright says profit margins are decreasing as licence fees remain static or fall. “We are constantly seeking additional revenue sources and ways to bridge funding gaps.”
Indies like Dragonfly and Remarkable say that funded development is harder to secure. It means that many producers are having to invest more themselves to generate broadcaster interest. Sundog director of production Iris Maor says the amount of unpaid development work required to get a commission often does not reflect the size of the commission. “The development process has become longer and more arduous, with expectations and deliverables higher than they have ever been,” adds Nerd’s development coordinator Jessica Hall.
In addition, several indies say that the secondary rights market is diminishing, as more broadcasters demand full buyout in return for a commission. “This in turn has led to growth but uncertainty – with more work year on year, yet less IP ownership for the long term,” says Lambent Productions md Emma Wakefield.
October Films md Adam Bullmore says the business climate has been strong but there is a “constant conflict between shrinking budgets, rights retention or surrender, and escalating costs of production” which has hindered stronger growth.
Targetting UK growth
Despite these funding and development challenges, the majority of indies (72%) say that the UK is where they are seeing most growth in their business. Indeed, the average production company earns 66.5% of its revenues from UK broadcasters, up from 62.6% last year.
Many are optimistic about the outlook for the year ahead, saying that the commissioning landscape should be more stable having gone through so much personnel upheaval, as well as major one off hits such as the closure of BBC3 as a broadcast channel.
Others say that BBC charter renewal and the review of the Terms of Trade brought a chill to the indie sector, but that both have been resolved in a positively as far as producers are concerned which bodes well for 2017. “With the publication of the White Paper on the BBC and new personnel in place at ITV and now the BBC, day to day business should settled down and opportunities open up,” says Boundless md Hannah Wyatt.
Many hope that the big question mark hanging over the future of Channel 4 will also be laid to rest soon. The threat of privatisation is cited as a big issue by many indies, who worry that it would lead to a fall in programme and supplier diversity. “It would no doubt have a detrimental impact on high quality documentaries and specialist factual,” says Swan Films md Joe Evans. “If Channel 4 is privatised, the true indie community might as well shut up shop,” warns Tern creative director Harry Bell.
The Brexit effect
However, many indies say Britain’s decision to leave the EU creates new uncertainty for UK production. There is concern that Brexit may spark an economic slowdown, which would lower commercial broadcasters’ ad revenues and reduce their ability to fund new content. But there is acknowledgement that the fall in the value of the pound has made content produced by UK indies cheaper for US and international broadcasters.
The outlook is challenging but positive, says CPL business manager Alexandra Kallis. But, she adds, there is uncertainty about the impact of the EU referendum. Icon Films md Laura Marshall, meanwhile, speaks of a challenging outlook “with the impact of Brexit still unsure.” Arrow Media, meanwhile, says it is optimistic for the year ahead, despite Brexit.
Another uncertainly ahead for indies is the full launch of BBC Studios as a commercial division in April 2017. This will allow the corporation’s inhouse production arm to make shows for other channels in exchange for opening up more BBC production to competition from the indie sector. “It remains to be seen how BBC Studios coming into the market will affect business available for the independent sector,” says Dragonfly’s head of production Yvonne Bainton. Reef Television md Paul Hanrahan sees “additional opportunities” amid increased tendering to indies.
However, many indies express concern at the growth of broadcaster owned production divisions, notably BBC Studios and particularly ITV Studios. The appointment of former ITV Studios boss Kevin Lygo to run the broadcaster’s commissioning division is viewed with alarm by many, who say ITV is increasingly ordering shows from its ever growing production operation.
“It’s tough out there – especially for a true indie. There are more companies than ever vying for fewer slots, we’re in competition with BBC Studios and ITV Studios (and all of its associated companies) and budgets get ever more challenging,” says Cactus TV’s Lucy Eagle.
True vs super indies
Not only has there been extensive superindie consolidation, but the inhouse commercial arms of the BBC, C5 and ITV are getting bigger, says Tern’s Harry Bell. “It doesn’t feel like a squeeze but a stranglehold.”
Smaller indies face inherent disadvantages compared to their superindie-owned rivals, believes Voltage md Steve Nam. “It is more difficult to be commissioned off paper alone and at a time of continued consolidation of smaller indies by big media groups with deep pockets and the ability to self-fund tape or take bigger risks, the environment can feel uncompetitive.”
Indies also cite hiring and retaining skilled staff as a key challenge for their business. Indies like Bristol based Icon say it is difficult to attract creative talent to the region given the continuing dominance of “M25 companies.” Finding top talent “particularly for highly ambitious programmes” is a challenge for Nutopia, as it is for Red Planet in a drama market where competition is high.
Fellow drama indie Sid Gentle Films says there is a shortage of top class directors and heads of department, while Tiger Aspect says the drama boom has pushed up talent and crew rates.
Rough Cut commercial director Tim Sealey says: “The big challenge to our business is in attracting to and keeping talent within the company. The business is very busy and there are not enough talented people to go around.”
And it is diverse talent – on and off camera – that many indies say they are looking to hire as they look to achieve diversity targets set by the leading broadcasters.
The full Production 100 report can be read at: http://www.televisual.com/reports-surveys.html
Sports producer IMG Media tops the 2016 Production 100, Televisual’s 24th annual survey of the independent production sector.
It’s the fourth year in a row that IMG, which covers sports including Wimbledon tennis and Premier League Football, has led the Production 100 rankings.
The stand out trend of this year’s survey is the rise of drama producers, who have taken advantage of the incredible growth in demand for scripted TV.
Six of the top ten companies in the Production 100 are drama indies; two of them, Carnival and Left Bank, posted turnovers in excess of £100m each.
The other noticeable trend is the launch of a swathe of new indies, many of them backed by superindie groups.
With fewer acquisition targets left after so much industry consolidation, the big groups are choosing to seed lots of ambitious new start-ups rather than invest heavily in existing production companies. Little wonder, therefore, that many indies say the climate is more competitive than ever.
A spate of major anniversaries, the ongoing popularity of ‘list’ shows, as well as the rise of clip-based docs like Senna, have helped to buoy the archive sector. Tim Dams reports on the business of content libraries
Archive libraries are busy preparing for the next wave of anniversaries about to hit TV screens. The 100th anniversary of the 1st World War, particularly last month’s centenary of the Battle of the Somme, has led to strong business for many historical libraries.
British Pathe’s general manager Alastair White says business is booming – up 25% year on year, thanks in part to a spate of big anniversaries. As well as The Somme, 2016 was also the centenary of Ireland’s Easter Rising. And there are plenty of big war anniversaries to come. America joined the 1st World War in 1917. There will also be plenty of docs to mark the end of the war in 1918. The following year, it’s time to mark the start of a new global conflict – the 80th anniversary of the 2nd World War.
Military history is also popular for Bridgeman Images – which represents collections for the likes of The National Army Museum and Imperial War Museum. Bridgeman marketing manager Annabel O’Connor-Fenton also reports a surge of interest ahead of next year’s 100th anniversary of the Russian Revolution.
It’s also the 20th anniversary of the death of Diana, Princess of Wales in August 2017 – an event sure to spur plenty of inquiries for royalty-related archive.
Royalty is a big seller for archives. Matthew Butson, vice president of Getty Images Archive says royalty has global appeal: “Whether there is a current royal event or not, we see consistent levels of sales year in year out with this type of content.” The Queen’s 90th birthday has been a peg for many royal-themed archive sales this year.
But it’s not just royalty and war that has buoyed business in 2016. ‘Even’ years are traditionally good for archives as they are when major global events tend to take place, spurring demand for old footage. Getty’s Butson cites the European Championships, and the Rio Olympics and US Presidential elections as helping to drive growth at the archive.
The US Presidential election is a particular focus for NBC Universal Archives, which houses the oldest American TV news collection. Clara Fon-Sing, NBC’s vice president and general manager says the company has been working with producers worldwide on major background documentaries that will air this election season.
This includes historical election footage since 1948, rare clips of Donald Trump from the 70s, Hillary Clinton’s iconic soundbites over the years or a look back at Obama’s presidency.
Getty’s strategy is to curate its content – packaging it and pushing it into the market – especially around topical and newsworthy themes. “There are always a wide number of annual ‘evergreens’ we can use to package historical content – the Academy Awards, Cannes, Wimbledon etc. and with the world celebrity obsession, any number of ways we can curate celebrity content,” says Butson.
It’s not just anniversaries that are helping to drive the archive market. Archives now have a much wider client base to sell to given the rise of digital platforms and online players – and video consumption generally.
Gordon Craig is head of sales at FremantleMedia Archive, which has up to 100,000 hours of content, housing Thames TV’s news, docs and chat show archive, through to US game shows like The Price is Right and Family Feud.
Craig says that TV list shows are still the bread and butter of the archive. He also reports a surge in interest from feature documentaries too, with the archive docs such as Senna reinvigorating the genre.
It’s a point echoed by British Pathe’s White. He says there are key new doc commissioners, including Netflix, Amazon and Sky. “They have upped the game for everyone,” says White. “Big standout feature docs that can go on all platforms are very much in fashion.” White adds that hit archive docs such as Netflix’s Making A Murderer have had a ‘transformational effect’ on the industry. “It has set a trend and others are following in its wake.”
It is tougher for archives to sell into ad agencies. “Your average creative director wants to go and shoot material and will not want to merely sit in a post suite and play around with some dusty content from the 1970s,” says Paul Maidment, director of Kite Media Consultancy and former director of BBC Motion Gallery.
The big libraries often have ‘sweetheart’ deals with ad agency groups. Some of the new ‘disruptive’ content companies have had success in this field, says Maidment. “A client of mine Brave Bison [formerly Rightster] licenced some fairly straight forward natural history content for a big campaign for Dairy Milk chocolate.”
Education, adds Maidment, is seen as a huge area for video content. Archives such as ITN, BBC and NBC have specialist standalone businesses offering content and news stories to schools and universities. Specialist education businesses – such as Bo Clips and Twig – have also sprung up in the past five years. “The challenge with education content is that it is a real slog and very difficult to get to the decision makers in the ministries of Education in, for example, the Middle East and Asia, where the real money sits.”
Technology has also helped breath new life into archives, with key collections digitised and easier to access online. Some have also loaded their archive onto dedicated YouTube channels, to boost the visibility of their library. FremantleMedia, for example, runs a Thames TV YouTube channel, where it loads up hand-picked clips to promote. Associated Press also has an active presence on YouTube.
British Pathe’s Alastair White says YouTube is the archive’s biggest shop window. He plays down concerns that its footage might be stolen, citing the ability to track content loaded on to YouTube. “It would be a brave producer indeed to rip our content off YouTube.”
Meanwhile, the archive market is consolidating. Getty Images, the world’s largest commercial picture library, struck a deal in January with its main rival Corbis to distribute and licence the Corbis library. Getty has also been licencing the BBC’s content for the past two and a half years.
Kite Media’s Maidment says: “The big positive with the likes of Getty is that they have a fantastic network of sales people and your content will get maximum exposure. The downside is that content goes into a vast repository – potentially never to be seen again, let alone licenced.”
Maidment says there is still a place for niche libraries offering a dedicated, boutique-style service. He cites Firehorse in Lebanon which positions itself as a one-stop shop for Middle Eastern video content.
The landscape is changing rapidly for all libraries, made all the more complex by the fact that barriers to entry are lower for companies wanting to sell library content.
Many indies are reviewing their assets to see whether they might enable new revenue streams. To do this, says Maidment, it’s essential for content to be digitised and, most importantly, for the metadata to be rich and accurate. Companies can either manage sales themselves or partner with libraries such as Getty, Shutterstock or Pond5.
From cameras to editing, 4K and VR, Televisual’s annual Production Technology Survey reveals the kit that producers are using to make their shows and what they think of it.
Keeping on top of advances in production technology is one of the big challenges for programme makers today.
New cameras, editing kit and supporting technology are launched into the market each year, promising to enhance creative possibilities, bring down costs or boost productivity.
Televisual’s Production Technology Survey attempts to cut through this hype, asking our readers to tell us what they are using to make their shows –and which kit they rate.
The Survey seeks to establish which are the most popular technology brands and models in production today, as well as highlighting the key technology trends that are driving the market such as 4K, virtual reality and HDR.
As with previous Production Technology Surveys, we have focused on a number of key areas. On the first two pages, we take the temperature of the rapidly evolving camera market, revealing the most popular cameras and manufacturers.
Once again, Canon’s C300 (pictured above) emerges as the most popular model – although it looks set to be eclipsed by the Sony FS7 next year.
Next we focus on the take on 4K and HDR. Despite all the talk about 4K, only 48% said they had shot in the format in the past year. But its uptake looks assured: the majority of respondents think it will be commonplace in the home in 3-4 years.
We also look at virtual reality. Just 13% have produced a VR project, mainly to test the technology. However, 33% are thinking of producing a VR project, suggesting that there is growing appetite to experiment with the format.
Finally, we look post production. Avid remains the market leader in editing, with Adobe making a strong showing.
The most popular camera models
The Canon C300, used widely across factual shows, is once again the most used camera model, with 25% of respondents saying they worked with it in the past 12 months.
However, the long popularity of the C300 looks to be waning. Sony’s FS7, the second most used model in the past year, is likely to eclipse the C300 next year. It is the camera that most respondents say they hope to use in the next 12 months, with 22% of the vote versus Canon’s 12%.
The Arri Alexa remains popular with programme makers in drama, film and commercials, with 12% saying it is their most used camera. This is up from 7% last year. It’s popularity looks set to be bolstered by the Alexa Mini next year. The Arri Amira is also making headway, largely in the docs market, with 6% saying it’s the camera they most hope to use next year.
The most popular camera brands
Sony has overtaken Canon as the most used camera brand in the 2016 Production Technology Survey.
38% of respondents said Sony is the camera brand they have used most in the past 12 months - up from 31% last year.
This 7% surge has helped the manufacturer move past Canon, which took 35% of the vote - down from last year’s 38%.
The growth in popularity of the FS7 and F5/55 has helped push Sony up the rankings. Sony also offers a wider range of cameras in the professional market, with cameas such as the PMW200 and PMW700 also popular choices.
Next year, Sony looks set to increase its lead, while Canon falls back further. 40% say Sony is the brand they most hope to use, against 17% for Canon - which is pushed back into third place by Arri on 24%.
Arri’s performance is bolstered by its popular and growing range of cameras, including the Alexa, Amira and Alexa Mini.
In the past year, Arri has pushed ahead of Red – a manufacturer it tied with in popularity in last year’s survey. Last year both received 7% of the vote in the most used camera brand category; now Arri is ahead on 17% while Red remains about steady with 6%.
Shooting in 4K is starting to pick up now. 48% of respondents said they had shot in the format over the past 12 months, up from 30% in last year’s survey.
Many are filming in 4K to future-proof their productions or because they want to achieve the best quality visuals possible for a high-end doc, drama, commercial or film. Other reasons given for shooting in 4K are the greater flexibility it gives in the edit in terms of cropping, re-framing, grading and vfx.
Fewer have mastered in 4K though, choosing to downconvert to HD for post production. Only 22% say they have mastered in 4K this year.
The 4K era also seems to be getting closer. The majority think it will be 3-4 years before 4K is commonplace in the home; last year, most respondents said it would be 5-6 years. Many commentators say that HDR is more likely to take off than 4K, given the smaller bandwidth required to deliver an enhanced quality of picture.
But despite all the talk about HDR, many (42%) have not even seen it. In fact, only 7% of repsondents have been asked to deliver in HDR. Those who have worked in the format, though, are big fans and believe that it is more likely to take off in the home than 4K.
Virtual reality is still very much a fledgling business, yet a surprising number of respondents (13%) say they have produced VR content.
Most, however, have done so to test the technology, particularly with short films to experiment with workflow. Real VR projects included a UN film for the Paris Climate Summit, an immersive experience for a museum and a film for Google.
An impressive 33% say they are thinking of producing in VR, with many describing it as an exciting format. Others dismiss it as a ‘fad’.
It’s important to distinguish here between true virtual reality and 360 degree shooting. Many say they have shot 360 projects, using GoPros, rather than full immersive viritual reality.
Once again, Avid emerges as the most popular editing system in production. 60% of respondents saying that Media Composer is their primary editing system - up on last year’s 48%.
Avid of course has a strong legacy of support in post production. “The best editors use this and refuse to work on any other systems,” says one. “It is the most widely available in the post houses I use,” adds another respondent.
(Note: respondents could vote for more than one editing system, so the combined totals equal more than 100%).
One of the startling aspects of last year’s survey was the rise of Adobe Premiere. Its growth seems to have levelled off, dropping back to 27% from 31% last year. However, the editing software has developed a strong market in the corporate, digital and commercials world.
Adobe Premiere’s integration with Creative Suite and After Effects is important to many, and it has now become standard at many indies.
It’s rated for its value for money and ease of workflow. One corporate producer says: “It has wide compatibility with video files and most editors now use it which makes moving projects around between freelancers easier.” Apple’s editing software, meanwhile, is used by many for short edits and home use.
The ability to edit remotely is becoming ever more possible, yet very few programme makers have either done it or even plan to. Some 44% said they had no plans to edit remotely.
However, 36% said they had not yet opted for remote editing, yet planned to in the next 12 months. Of the technologies available, the most popular to date is Adobe Anywhere, followed by Forbidden Technologies’s Forscene.
DaVinci Resolve emerges as the most used standalone grading system with 36% saying they employed it, while FilmLight Baselight followed with 25% - signficantly up on last year’s 14%.
Many respondents say they grade using plug-ins or tools within their editing systems, reflecting the move by manufacturers to add more grading tools to their editing systems.
Love them or loathe them, third-party media recorders have been a fact of life for professional camera users since tapeless workflows became the norm.
24% of our survey respondents said they used media recorders with their cameras.
A range of recorders are now available to support professional digital cameras. Many of these were cited, from manufacturers including Atomos (Samurai, Shogun, Ninja) AJA, Convergent Design (Odyssey 7Q), Video Devices (PIX-E).
How it works
Televisual asked senior programme makers – executive producers, series producers, producers, heads of production, line producers and directors – for their thoughts and opinions on the technology they use to make their programmes.
We had 116 in depth responses in total. The majority – 53% - worked in factual TV production. 15% worked in entertainment TV, 9% in drama and 5% in TV sports and events. Meanwhile, 26% were employed in corporate production, 17% in commercials and 6% in film.
All worked in senior roles in production companies. Over 50% told us they had full control over choice of technology workflows and budgets.
A month since Britain backed Brexit, the mood among the creative industries has moved on from the profound shock of the days after the vote.
Many producers had loudly and vociferously called for the UK to Remain in Europe (85% of TV producers association Pact said they planned to vote Remain). They feared that leaving Europe would lead to a swift downturn in production levels – for film, TV, commercials or corporate production.
With the immediate post-Brexit shock now over, the mood has morphed into one of uncertainty about what the impact of the leave vote will really have on production companies.
Most believe that Brexit will make business more challenging. But, entrepreneurial by nature, producers also say they are determined to adapt to the new landscape and make a success of it.
The industry is already starting to face up to the challenges of Brexit. Early in July, a new Creative Industries Council working group was set up to assess the impact of Brexit on the UK TV and media sector.
John McVay, CEO of Pact, is chairing the group, which will identify the challenges and opportunities arising from Brexit. The group will report its findings to government.
“This is a key moment for the creative industries to create concrete proposals that can bring benefits to the UK’s creative industries and ensure that one of the UK’s most successful sectors remains at the top table,” said McVay.
Very little is expected to change in the next two years, the time period that Britain has to negotiate its exit from the EU after triggering Article 50. However, this long period of uncertainty is not helpful for the creative industries, which relies on strong investor confidence to back projects.
“As producers we need to be incredibly vocal and, through Pact, make sure the DCMS doesn’t allow the industry to fall into the English Channel,” says Laurence Bowen, CEO of drama indie Dancing Ledge Productions.
The big immediate fear is that Brexit will spark an economic downturn that will hill hit production levels; only last week ITV said it will need to cut costs by £25m in 2017 to prepare for economic uncertainty sparked by the UK's decision to quit the EU.
Beyond worries about a Brexit recession, though, the concerns – and opportunities – about Brexit centre on five key areas:
1. Loss of EU Funding: The UK receives a share of funding from the EU’s Creative Europe programme, which has Euros 1.46bn to invest between 2014-2020. For example, seven UK film producers – including See-Saw, Origin Pictures and Recorded Picture Company – recently shared £1.2m in slate funding from Creative Europe. Creative Europe Desk UK says there would be no change for those who have applied or are planning to apply for Creative Europe funding in 2016 and 2017. If UK indies can no longer access Creative Europe funding, the UK government will be under enormous pressure to replace it.
2. Quotas British films and TV shows have, until now, qualified as European works. This is important as some EU countries have quotas on the amount of European content their broadcasters must show. This has helped to boost the demand for UK films and television shows as well as making UK / US co-productions more attractive.
“Brexit will not in itself change the status of UK productions as ‘European works’, but co-productions will be affected,” says Jeremy Roberts, a senior partner in the TV team at law firm Sheridans. UK productions will still be classified as European because the UK is party to the European Convention on Transfrontier Television of the Council of Europe, which is separate from EU membership.
Post-Brexit, Roberts says that because the UK will nolonger benefit from co-production treaties between the EU and third countries, UK co-productions that do not fulfill the requirement of “originating in the UK” will no longer qualify.
To be deemed to have ‘originated’ in a state, a production must be mainly made with authors and workers residing in one or more of the states that are a party to the Convention. Says Roberts: “So, under the Convention alone it is still possible for a UK-US co-production to come within the definition of a ‘European work’, but it will be much harder in practice.”
However, Roberts says it is important for the UK industry not to overreact. “Until the formal cessation of the UK’s membership of the EU, the existing regime remains in place. Thereafter, the most likely outcome is that the UK will negotiate some form of status akin to what we have now as part of any new deal with the EU. Finally, while the ‘European work’ designation is undoubtedly important, it is not the be-all and end-all. European broadcasters did not acquire The Night Manager just because it is a ‘European work’; they acquired it because it was a great show.”
3. Tax credits Tax credits for film, drama, kids and animation programming are a vital subsidy for UK producers. If the government no longer has to adhere to EU state aide rules, there is the possibility that the UK could offer more generous subsidies to shore up production.
4. Exchange rate The fall in the value of the pound is likely to make the UK more attractive as a base for international shoots. Pinewood Shepperton said last month that it expected to host a greater number of film and TV projects as a result of the favourable exchange rate. Chief executive Ivan Dunleavy called it “undoubtedly positive for our international customers.” However, the weaker pounds makes it more expensive for UK producers filming abroad, such as Sid Gentle Films. The drama indie is currently in pre-production for the second series of The Durrells, which is filmed in Greece.
5. Talent The UK is a magnet for international talent, in front of and behind the camera. The free movement of European cast and crew as well as production kit throughout Europe has helped to underpin the success of the UK creative industries. Production companies will fight hard to retain free movement protections the creative industries have so far enjoyed.
Throughout the industry, there is a desire for a positive Brexit deal with the EU. Camilla Deakin, joint md of Lupus Films, says: “We’ve co-produced with France, Germany, Denmark, Ireland and Luxembourg as well as with territories outside the EU, so we’ve learned to collaborate and co-operate with producers from other countries to get the best talent combined with the maximum financing. So it seems completely counter-intuitive to turn our backs on Europe and try to pull up the drawbridge.”
Producers and studios on the impact of leaving the EU
“A lot of false allegations were made by the Leave campaign about businesses like mine being forced to go through lots of paper work due to our being part of the EU. In fact the reverse is true – we had less paperwork as part of the EU and now we have left, we are likely to have to get carnets whenever we film in Europe.” Cat Lewis, CEO, Nine Lives Media
“Having recently filmed one drama in Lithuania and Malta [The Eichmann Show] with financing tax schemes in place in both countries that were critical to our budget, any step away from Europe feels like a huge mistake. The MEDIA programme invested almost Euros100m in the UK audio-visual industry from 2018-13. Will that investment continue at the same level? Unlikely.” Laurence Bowen, CEO of Dancing Ledge
“The immediate challenge for independent producers like Sid Gentle Films is coping with the volatility of exchange rates. The fall of the pound against the euro has come at a particularly bad time for us as we are in pre-production for the second series of The Durrells which is of course filmed in Greece. Ultimately, it is just another production variable. It will have an impact but we will find a way around it and still deliver the ambitious series that we had planned to.” Lee Morris, md, Sid Gentle Films
“In the context of our business, the decline in the pound sterling exchange rate is undoubtedly positive for our international customers.” Ivan Dunleavy, CEO, Pinewood Shepperton
“There is still a lot of uncertainty about what will happen next and it could affect the ability of the US based children’s channels (Disney, Cartoon Network and Nickelodeon) to produce series in the UK that would then count as EU content in the rest of Europe, which would definitely hit our business hard. However, as a producer it’s my job to find solutions in difficult situations, so I am optimistic that whatever happens we will adapt and survive” Camilla Deakin, Joint MD, Lupus Films
The president of content at Discovery Networks International tells Tim Dams about the ‘creator led’ shows she’s looking for
Within a few minutes of walking into Marjorie Kaplan’s office, she is showing a promo in which lots of couples strip off and jump into bed. It’s an unexpected start to any interview, let alone at broadcaster like Discovery with its roots as a science and natural history specialist.
Yet for Kaplan, the show – dating series Undressed – sends a strong signal about the kinds of programmes she is looking to commission in her role as president of content at Discovery Networks International. “It breaks the mould a little bit about what people think Discovery is,” she says.
Undressed is produced by RDF-owned Fizz for Discovery’s TLC, and is based on an Italian format that first played on one of Discovery’s Italian channels. Local versions are also being produced in countries including the Netherlands, Poland and Australia.
Part of Kaplan’s brief at DNI is to dig out promising Discovery shows from across the 220 countries in which it operates, and to take them around the world. “Finding local sparks and blowing on them,” is how she characterizes the role.
The other part is to commission big, standout shows that can play all over the world on DNI’s channels, including Discovery Channel, TLC, Animal Planet and ID: Investigation Discovery. But big doesn’t necessarily mean expensive, she says. “Big expensive is fine, but money doesn’t always mean things are big ideas. I want to find exciting, bold and brave content.”
Kaplan stresses that DNI channels already have a ‘fantastic pipeline’ of 1,800 hours of shows from the US, so she is not looking for content to fill specific slots or for particular genres. “We are the stretch,” says, adding that she is looking for “creator led content – surprising, interesting ideas for our audience.”
Expanding on the theme, she says that competition is fiercer than ever given the growth of catch up services and digital platforms. “We are not just competing with what is on television tonight. We are competing with everything that has ever been on television.” That means the creative bar has to be set higher by broadcasters like Discovery. “More than ever, it is so important for content to move from being liked to being loved. We are only interested in content that we believe can be loved.”
She thinks Undressed has the potential to be loved. A fixed rig show that attempts to find out if two people can fall in love after undressing each other, she describes it as a ‘noisy’ social experiment.
She also picks out Everest Rescue, a Betty production about high altitude helicopter rescues on the world’s talent mountain. Everest Rescue has been commissioned to play to global audiences and, says Kaplan, is more than just a typical ‘dangerous jobs’ show. In a pitch tape for series, a pilot is asked what it is like to save a life and he wells up in tears. “That was the moment I knew we can definitely do this show,” says Kaplan, explaining that she wanted characters with emotional range rather simply hard-driving, stoic types who just get on with the job.
Kaplan says she doesn’t just want to commission shows that look and sound like successes that Discovery has had in the past; she stresses the need for range, subtlety and the unexpected. The first rescue by one of the pilots in the show – which took place at an altitude that is incredibly dangerous for a helicopter to fly at – was for a rich climber who didn’t want to walk down the mountain. “That is part of what it means now to be at Everest, and I want those stories,” says Kaplan.
As yet, however, it’s unclear exactly how much Kaplan intends to commission at DNI. She started in October, and Undressed and Everest Rescue are the only two shows to be announced. She points out that she has spent time visiting Discovery’s international teams, meeting producers and putting ideas into development. “We cut way back this year, because we wanted to take a breath and say, ‘What should we really do?’”
Among some producers, there’s a feeling that Discovery has scaled back commissioning as it focuses on its Eurosport platform, particularly since acquiring the European rights to the Olympic Games between 2018-2024 for $1.44bn. “That is not true,” says Kaplan. “There is no question that getting the Olympics was a big swing and a big financial commitment. But that has not had an impact on the money we intend to spend on content internationally.”
She also says that DNI is open to business to all indies, even though Discovery now owns a range of UK production companies following its acquisition of the All3Media stable as well as Raw and Betty.
“We expect a lot to come from them and to come from the rest of the creative community. We don’t have a policy of saying that we only work with companies that we own or partially own.” Discovery, she adds, works with over 70 indies in the UK. “We want to be the people that people want to work for and with,” she concludes. “It has to be about being the best creative partners.”
Based in London, Marjorie Kaplan has been president of content for Discovery Networks since October 2015.
Kaplan has spent nearly 20 years at Discovery, where she was most recently group president for TLC, Animal Planet and Velocity.
She made her name running Animal Planet from 2007, repositioning the network as a more adult focused entertainment brand.
Kaplan joined Discovery in 1997 as senior vice president for children’s programming and products.
There’s plenty to consider when it’s time to invest in expensive new kit, beyond whether it is has the right specifications for the job. For many, a key priority will not just be the quality of a camera or the versatility of an editing system, but how best to finance the purchase.
If you are fortunate enough to have a reasonably healthy bank balance, it might seem obvious to go ahead and purchase new kit upfront. But it is not necessarily the case. Buying outright is a good option if you have the capital available, or if it is essential that you own the equipment.
But other options, such as lease purchase (HP) or finance leasing, see a finance company buy the kit for your business to use in return for regular payments over a fixed period. These smaller payments will leave you with cash in the bank, but because you pay interest on the instalments, you will pay more for the goods in the long run.
Specialist finance companies in the broadcast sector include Azule Finance, Clockwork Capital, Paragon Bank Technology Finance and Medialease.
For example, Clockwork has, so far this year, funded projects including equipment and vehicles for a large-scale production in the Highlands; an IT refresh for a creative technology studio; a refurbishment loan for a facility move; camera bodies and lenses for a rental company; and cash flow finance for a company with a short term hiatus.
Medialease, meanwhile, has traditionally funded the post production business and some of the larger and mid-sized OB and TV/ Film production companies. It has also become more involved in the audio visual installation market, and the equipment intensive end of the live market for West End theatre shows, festival and music concerts.
Finance companies argue that it often makes sense to use lease purchase or finance leasing for kit, spreading payments to ease cash flow. The cash buffer in the bank could help your company if it ventures into choppy waters down the line.
Freeing up working capital also allows companies to invest in their businesses more effectively, particularly on development and new opportunities.
Geradine Scher, managing director of Clockwork Capital, says: “The maxim “cash is king” can refer to the balance sheet or cash flow of a business and having cash on hand is normally a positive sign, with a strong cash flow allowing a company more flexibility in regards to making business decisions and potential investments, such as key hires or even acquisitions, as well as being able to cover operational costs over a period of time, to hedge against any downturn in business. By hanging on to cash and utilising leasing when purchasing large value capital items you get immediate access to the equipment you need while easing cashflow and taking advantage of available tax benefits.”
Paul Robson, managing director of Medialease, adds: “It’s a question of cash flow and best use of it. Many customers we deal with have excellent cash flow and particularly good monies on deposit, but they might not wish to tie up that cash on buying assets that could easily be financed (at currently still very good interest rates generally). This enables them freedom to conserve cash reserves for potential other non-asset based requirements – expansion of premises, new premises investment / warehouse alterations, or simply in reserve for future tax payments or purchase of another company.”
From a management perspective, leasing simplifies budgeting because it offers a set payment every month. Monthly payments are fixed throughout the term regardless of what happens to interest rates or inflation. Leasing also allows you have access to the latest equipment or technology, which is particularly useful when technology is changing so fast.
If you decide to go down this route, there are multiple options available from finance companies. The two most common in the production sector are lease purchase (HP) and finance lease.
Lease purchase involves paying for the equipment in instalments over an agreed term after which the item is yours. A finance lease gives you the option to either return the equipment at the end of the lease period, continue renting it at a further reduced cost or selling the equipment on behalf of the financier whereby you retain a pre-agreed percentage of the sale proceeds.
There are a number of additional leasing options too, including an operating lease, where you lease the equipment for as long as you need it rather than a fixed period. The ownership then returns to the leasing company. Furthermore, there’s a contract lease option, which is similar to the operating lease but also includes maintenance cover.
Which of the above options you choose depends on whether you want to own the product at the end of the lease agreement. Different types of contracts also have different accounting, tax and VAT implications – which would be worth discussing in more detail with your accountant before proceeding.
Scher comments: “Finance leases enable the VAT element to be cashflowed along with the rentals on a monthly basis. Some of our technology funders are now favouring operating leases once again, which can provide significant cashflow and tax advantages to lessees, particularly if they want to refresh their equipment on a regular basis.”
In return for their investment, finance companies will want to see as much financial information as possible, plus clear evidence of the business rationale for your investment. Says Clockwork’s Scher: “Every deal is different and Clockwork has no hard and fast criteria because as a niche funder as well as broker to mainstream funders we are always prepared to look outside of the box to find a way of helping clients, but it is important to us that we meet with clients face to face. We work with start-ups, early stage and long-established businesses, finding them the best funding options to meet their specific needs.”
Medialease’s Robson adds: “As an intermediary and not the primary lender, we take all sorts – from new start companies to major PLC and VC backed companies. We fund the widest spectrum as we are not restricted to one bank / one decision maker.“
A specialist financier who knows the industry can make the documentation process run a lot more smoothly than approaching a bank direct, as well as providing advice about the best options to take.
Robson says: “On a larger deal, over say £200k, we know we can compete with the client’s bank and often provide a quicker and easier service for the same rates, if not slightly more competitive on the right terms and equipment. However for the much smaller companies and new start companies we will structure the deal to suit the customer – so if there is little or no deposit available or perhaps they are looking at a relatively large investment for the size of the company or size of their balance sheet, we can structure a deal that a traditional lender just can’t get to.”
Interest rates can vary from a few percentage points above the Bank of England’s base rate through to the mid-teens. The size of a deposit will also vary, ranging from 0% to 30%, and often depends on the perceived risk profile of your business to the lender.
Says Robson: “We have large post production and OB clients, turning over in excess of £10m per annum who we are providing funding to at under 2.5% flat rate and others at over 8% flat (equivalent to a spread of 4.5% to 17% across the spectrum of clients on an inherent % rate basis). It all depends on the strength and weaknesses of a customer, the size of the opportunity and the specific assets they are looking for us to buy.”
LEASING CASE STUDIES
John Rogerson, CEO
What were you looking to invest in? “Halo have done a great deal of spending over the past 12-18 months. The sharp rise in demand for UHD/4K delivery has necessitated a significant infrastructure upgrade. We always buy the best we can afford, it simply makes good sense - but it can be expensive. We’ve added a VFX department, a VR team, another 5.1 audio suite (our 8th), several online suites, a further grading suite… and another new building, our 4K finishing hub. So it was an expensive period.”
Why did you choose to lease rather than buy? “The reason for leasing as opposed to buying is simple. It spreads the cost of big ticket items over a number of years and makes it possible to buy the things you need, when you need them. Our reputation is built on being technically ahead of the game and creatively first-class so we don’t take chances on our infrastructure.”
Which company arranged the lease? ”Geraldine Scher at Clockwork Capital. We came across Geraldine in 2009 and have since become good friends. Geraldine played a big part in Halo’s success by taking a chance on us when we were smaller. We’ve stuck together ever since.”
Mike Georgiou, CFO
What were you looking to invest in? “In 2013 we began an investment and recruitment program to increase the number of services that we offer to drama and feature clients and transform the UK post production business into the UK’s leading one-stop-shop for audio and digital intermediate services. In May we opened Theatre 1, central London’s largest sound mixing theatre.”
Why did you choose to lease rather than buy? “Leasing is a much better use of the company’s working capital, especially given the scale of what we set out to do. Although there is an increase in the overall cost of the equipment, leasing allows us to spread the cost of that equipment over the time that it is used.”
Which company helped to arrange the lease? “Medialease. Paul, Simon, Ali and Kelly are a fantastic team to work and have been a great help to us over the years.”
Jon Howarth, Director
What were you looking to invest in? “A set of Cooke Anamorphic /i lenses which cost approximately £100k.”
Why did you choose to lease rather than buy? ”With the level of investment combined with the long life expectancy of these lenses, it makes sense to spread the cost of the investment over a long period to maintain our cash flow for other expenditure.”
Which company helped to arrange the lease? ”Azule Finance. We have worked with Azule for many years. They have a great understanding of the equipment and the industry.”
CCO, Procam group
What were you looking to invest in? “Our recent assets purchase of the camera side of Take 2.”
Why did you choose to lease rather than buy? ”Due to the significant financial commitment, we chose to lease – and negotiating a three year term lease also provides us with good visibility of future cash flows.”
Which company helped to arrange the lease? ”Paragon Bank Technology Finance because of their excellent customer service, in-depth industry knowledge and ability to access particularly competitive rates.”
The lack of studio space for film and TV has been a big issue for producers for a few years now.
The on-going boom in TV drama, aided by the introduction of the high-end drama tax break, has left many shows scouring far and wide for suitable spaces to film.
A continual flow of Hollywood films into the UK – like Star Wars: Episode VIII and Fantastic Beasts and Where to Find Them – has also driven up demand for studio space.
At the same time, the London area in particular has seen a steady decline in the availability of studio space. The BBC’s Television Centre and Riverside Studios are both closed for refurbishment. Others have closed altogether, most notably Teddington Studios, which was sold to a property developer. Fountain Studios, home to The X Factor, is set to close at the end of December – after a £16m sale to a property developer.
This squeeze in supply has only heightened demand for what space is left. “Stage space is at a premium,” confirms Twickenham Studios chief operating officer Maria Walker.
The Space Project concurs: “Drama and TV production in the UK is thriving…We are already taking bookings for 2018,” says general manager Colin Johnson. Pinewood describes the past year as “buoyant”. Sales director Mark Hackett says the UK is now a world leader in providing facilities and crews to the production of film, TV and games “and this shows in our high levels of occupancy.”
For many studios, this heightened level of demand has led to its own set of challenges – how to fit the work in. “While the lack of studio space across the UK, and particularly in London, is a challenge for the industry, it is an opportunity for us,” says 3 Mills Studios head of studios Tom Avison. Dock 10’s head of commercial Patrick Steel adds: “The hardest game of Tetris you’ve ever played doesn’t compare to the challenges in getting the best fit of large productions in the autumn.”
Bristol’s The Bottle Yard, for example, has hosted four big shows – at the same time: Galavant, Poldark, The Living and the Dead and Trollied.
The London Studios, says ITV Studios md of resources, Paul Bennett, remains extremely busy. “Some of our bookings extend way beyond the next 12 months.” Bennett is quick to add, however: “We might be able to do you a deal in August if you get in quick.”
However, business remains challenging for many studios – particularly for fully equipped TV studios. Budgets are under pressure for many shiny floor shows, with productions shopping round in an effort to spend less on studio hire. There has also been huge change at senior commissioner level at the BBC and ITV, meaning that decision making is delayed – leading to uncertainty or late cancellations for studios.
Many studios point to the challenge of booking in the right kind of shows to make good business sense. BBC Studioworks head of studios and post production services John O’Callaghan says: “For us, the key is having a balance of long-term shows which can be in the studios for 20 weeks producing four shows a day and also weekly, fast turnaround topical shows.”
The London Studios’ Paul Bennett adds that studios have to work faster to turn projects around: “Broadcasters’ budgets are ever more challenging and so production companies are always looking for best value – our ability to turn shows around extremely quickly maximises their ‘on-camera’ time...We can even use a single studio for three different live productions, with three different sets, in a single day.”
Many more studios are set to open in the next year or two, alleviating the problems facing producers – but adding to the competition for existing providers. This month, Pinewood opens five new large sound stages and additional facilities as part of an expansion plan approved back in 2014.
Three studios are set to reopen at the BBC former Television Centre HQ in spring 2017, with bookings being taken later this year.
The Space Project is also set to double in size, having won a £14m investment package.
Warner Bros-owned Leavesden Studios, meanwhile, plans to extend facilities at the 200 acre site by a quarter.
North London’s Elstree Studio complex is also expanding, building more stages and technical facilities.
Belfast’s Titantic Quarter, home to Game of Thrones, is investing £14m to develop two more film studios. A new £10m studio complex to rival Titanic is also in the works at North Foreshore Film Studios, an ex- landfill site at Belfast Harbour.
Screen Yorkshire is converting a former RAF base into a studio facility, and has already enticed ITV drama Victoria to shoot there.
Pending council approval, Liverpool could also be opening its first film studio. The £25m scheme is on the 4.5 acre site of a former Littlewoods warehouse.
Scotland, long without a significant studio space, could finally be about to have its own studios, with plans afoot to develop Wardpark Studios in Cumbernauld and Pentland Studios outside Edinburgh.
This rush to build studios has sparked concern about whether the expansion is sustainable over the long term. Says Pinewood’s Mark Hackett: “We all know how fast things can change so no-one is resting on their laurels…we are always striving to improve and develop new ways to support the creative industries achieve their ambitions.”