Earlier this month, Televisual published its 21st annual survey of the indie sector – the Production 100.
Some of the names from our 1993 survey – Hat Trick, Wall to Wall, Windfall, Tiger Apsect – are the same as when we first started out with the Producution 100.
But the sector has changed so much, it’s barely recognisable. Back then, indies were famously characterised as lifestyle businesses. They largely operated in the margins of television, which was dominated by the powerful inhouse production divisions of the BBC and ITV. One customer, Channel 4, provided the bulk of their business – with the BBC and ITV offering scraps from their table.
In 2013, the independent sector looks in rude health. UK revenues of the Production 100 indies stand at £2.1bn. Throw in the international subsidiaries of the big superindies, and the figure is over £3bn.
It has grown in leaps and bounds in the last few years, with entrepreneurial (and often desperate) producers weathering the recession by cutting back and then aggressively going in search of new markets.
First, indies have grown to dominate the UK production sector – winning ever more business from an expanding range of broadcasters. Secondly, they have broken into international markets, particularly the US, earning a world class reputation for production.
Along the way, UK indies have become huge export successes – with outfits like Raw TV, Studio Lambert, Blink, Darlow Smithson and Wag TV earning over 60% of their revenues from overseas markets.
This growth hasn’t come about easily. The Production 100 reveals that indies are working harder than ever, with smaller teams putting in far longer hours, to maintain and build their businesses. They are having to cope with a continuing decline in broadcaster budgets, yet rising expectations. The sector also remains hugely competitive.
Along the way, the sector has changed structurally too. Very few of the companies that feature in the Production 100 can really be called independent. Very few of them, ultimately, are UK companies either.
The majority of the companies at the top of the Production 100 are owned by global media conglomerates (Sony, NBC, Warner Bros, 20th Century Fox, RTL, De Agostini) and private equity firms.
Meanwhile, broadcaster ITV has realised that production is where the all the action is. It has become the most active consolidator of the past year, snapping up three key indies – Big Talk, So Television and The Garden.
The word ‘indie’ has become something of a misnomer, describing mainly the companies in the second half of the Production 100 rankings.
Interestingly, though, it’s these true indies – as we detail in the report - who are posting some of the fastest growth of the year, among them Raw TV, Two Four, Mammoth Screen, True North, Red, Reef, Roughcut, Keo and Wild Pictures.
“And they say there is no money in television any more,” joked Richard Bacon.
He was speaking last night at the launch of Bear Grylls’ new Discovery series Escape From Hell.
Held at the iconic Battersea Power Station, the evening must surely rank as one of the biggest, showiest – and expensive – TV programme launches ever held in the UK.
Certainly, it seemed a reminder of those pre-recession days when broadcasters would think nothing of spending tens of thousands of pounds on events to promote channel launches or new seasons of programmes.
This, though, was for just one show.
The evening began with Bear Grylls emerging from the upper reaches of the vast Battersea Power Station, which was lit up specially for the occasion.
Amidst huge explosions and plumes of flames, he then abseiled down the building’s rugged exterior in front of hundreds of watching guests. (The flames were so high that two London fire engines were apparently dispatched to the event, alerted by members of the public who thought Battersea Power Station was on fire.)
Discovery president and CEO David Zaslav then introduced Grylls at a packed Q&A event, hosted by Richard Bacon, before the guests – including many Discovery staff and suppliers, journalists, advertisers, Scouts and Grylls fans – were ushered through to an adjoining marquee for drinks and food.
For Discovery, the evening seemed very much about putting down a marker in the UK, its most important international market.
Zaslav emphasized that Grylls' new show – which is produced by Discovery’s UK indie Betty and sees the adventurer relive true stories of survival in the wilderness – would be broadcast to a potential audience of billions given Discovery’s global reach. (Discovery says it has global operations in over 220 countries and territories with more than 2bn cumulative subscribers.)
The evening also powerfully underlined how important a talent like Grylls, who seems to embody many of the values that Discovery likes to project, is to the broadcaster.
Grylls has made seven series of Born Survivor (or Man vs Wild as it's known internationally) for Discovery, and has become a global star as a result. Not only has he cracked the important US market, but he has a massive fan base right around the world.
And, clearly, Discovery and Grylls have moved on from their falling out last year when they stopped working together. (“Due to a continuing contractual dispute with Bear Grylls, Discovery has terminated all current productions with him”, said Discovery at the time.)
By comparison, four in ten (40%) use newspapers and just over a third (35%) use radio as a source of news. Almost a third (32%) use the internet for news. The average UK adult will use 2.1 platforms for the news, whether television, newspapers, radio and online.
The figures help explain why PRs will often move heaven and earth to get TV coverage for their clients, over and above print, radio and online.
However, the Ofcom figures reveal that TV news faces some challenges ahead. TV news audiences are older and tend to come from lower socio-economic groups, while younger adults aged 16-24 are increasingly using the internet to access the news.
Below are some slides of the key findings from the research:
Anyone who works in kids television – or indeed who has young children themselves – would do well to take a look at the BBC Trust’s review of the corporation’s children’s services.
The report, published today, rightly flags up the strengths of the BBC’s children’s department, saying that CBBC and CBeebies are performing well and are much-loved by children and parents alike.
But it also outlines many of the challenges facing the department as it seeks to keep up with children's changing media consumption habits – while operating on a much-reduced budget.
Here are some of the stand out facts to come out of the report:
- The UK now has 32 digital TV channels dedicated to children’s content. But only 20% of original programmes are currently made in the UK (many of which are made by the BBC).
- CBeebies and CBBC are the most watched kids channels in the UK for their respective target audiences. In 2012-13, CBeebies had a weekly reach of 48% of its target audience, more than twice as high as its nearest competitor, Disney Junior. CBBC currently reaches 36% of children 6-12, considerably higher than the Disney Channel (22%) and CITV (21%).
- But BBC Children’s does not perform as strongly in homes where children have more choice over what they watch. For example, CBBC has been overtaken by Disney as the most watched children’s channel in satellite and cable homes.
- The BBC Children’s budget has faced a 10.5% cut under the BBC’s Delivering Quality First (DQF) savings proposals, down from £101.7m in 2011-12 to £91m in 2016-17. The department is expected to meet the savings through increases in productivity and by earning additional commercial revenue. Savings also are expected to come from a cut in repeat fees as a result of stopping broadcasts on BBC1 and BBC2. BBC Children’s is reducing the commissioning budgets of CBBC and CBeebies by around 8% and 5% respectively to achieve a £6.1m saving in 2013/14. As a result, both services will commission slightly fewer original programmes over the next two years.
- BBC Children’s feels it is at risk of falling behind kids' media consumption habits. The report says the interactive offer for both CBeebies and CBBC is relatively basic compared with some commercial rivals. It notes that only a minority of content works well on smart phones or tablets – and this may be impacting on reach. The report cites Ofcom stats that say around one in seven children aged 5-15 used a tablet device such as an iPad at home in 2012, a threefold increase since 2011.
- Older children are less inclined to watch CBBC or CBeebies, and CBBC struggles to inherit younger viewers moving on from CBeebies.
- The performance of CBeebies and CBBC is not uniform across the UK. Both continue to underperform in Northern Ireland in particular. Across the English regions, in 2012-13 CBBC’s weekly reach was nine points greater in the South (excluding London) compared with the North, where reach has declined year on year since 2010-11.
- The cost per user hour of CBeebies is very low in comparison with other BBC services. But the cost of CBBC is relatively highly, partly because of the type of shows it commissions, particularly drama.
- The BBC should do more to cater for young audiences after they move from CBBC to mainstream TV, radio and online services. Some 2.1m children watch BBC1 or BBC2 each week, but do not watch either CBeebies or CBBC. In fact, reach of BBC TV and BBC Radio is lower among older children and teenagers compared with adults (except 16-24 year olds).
Here’s an extract, taken from the introduction, that reveals the ten key themes to emerge from the Production 100.
1. Hard won success
The past 12 months have, in general, been good ones for the independent TV production sector. The overwhelming consensus of indies taking part in the Production 100 is that business has been strong overall – with reported total UK revenues of £2.1bn (or £3.1bn including the international activities of UK-based superindies).
The UK commissioning market has picked up and indies have continued to expand into international markets. Many indies report positive growth, while the majority (54%) are confident about the prospects for business in the year ahead. It’s a remarkable achievement at a time when so many other sectors of the economy are still struggling.
At the same time, the Production 100 reveals that indies are working ever harder, in a very competitive landscape, to maintain their success. Long hours, falling budgets, stress and air miles are part and parcel of the experience of many production executives.
“It’s challenging but the climate seems slightly more positive this year,” says A League of their Own indie CPL Productions. True North’s creative director Andrew Sheldon says that business has been ‘positive’ but that this is the result of effort and commitment. “Nothing is served up on a plate.” Two Four md Melanie Leach says the climate continues to improve “with more slots and more opportunity.”
ClearStory’s Russell Barnes says:. “Things do feel like they’re picking up across the industry.” Remedy md Juliet Borges adds: “It hasn’t been easy but we are seeing some movement and commissions coming through.”
2. The UK bedrock
The average indie earns 65% of its revenues from producing shows for UK broadcasters.
And the majority of indies say that they are seeing most growth and opportunity from producing for UK clients. Many report that key commissioner Channel 4 is, as it promised, ordering from a wider range of indies – which has particularly boosted medium-sized and smaller indies. “The UK market feels robust and Channel 4 is as ever supporting a large part of the UK indie sector,” says Darlow Smithson creative director Emily Roe.
And the arrival of Sky as a commissioner of real scale has boosted the fortunes of many indies. Roughcut, for example, has picked up a swathe of comedy commissions from Sky such as Trollied and Cuckoo. And there’s also an increasing amount of business to be had with multichannel broadcasters, which are looking for more content than ever.
“We are seeing most growth in UK secondary as non-terrestrial channels are looking to licence more quality UK programmes,” says Objective Productions finance director Stuart Duthie.
Sunset+Vine, meanwhile, picked up a huge order from new entrant BT Sport to produce its football and rugby coverage.
Lime Pictures cites multichannel broadcasters ITV2 and MTV as key clients, and describes the UK market as a continuing place of opportunity.
Crucially, success in the UK is viewed as a springboard for growth elsewhere. A strong UK show can translate into success abroad, often thanks to the UK’s favourable rights situation.
Love Productions md Letty Kavanagh says success in the UK “in turn leads to growing opportunities for international broadcasters and international rights income.”
3. International jackpot
Many production companies slimmed down, reorganised and went in search of new markets during the downturn. This hunt for new business has now paid off for those indies. As a result, the horizons of the sector have expanded hugely since 2007, when most producers were working with just four key domestic commissioning clients – the BBC, ITV, C4 and C5.
The Production 100 is full of countless examples of indies producing for clients in the US, in particular, as well as rising territories such as China and Latin America.
A dozen or so well known British indies now earn more than 50% of their revenues from international broadcasters, including Wag TV (85%), Raw (78%), Darlow Smithson (87%), Studio Lambert (62%) and Blink Films (60%).
Wag’s head of production Steven Green reports that one of its highlights of the year was producing its first Spanish language series for Discovery Latin America. Lion TV picks out growth in China as a key highlight, as does Blakeway which is working on a second factual series for China’s CCTV. “The big picture is the globalisation of the indie marketplace,” says Argonon chief executive James Burstall.
But the US has been the main focus. Discovery and National Geographic’s decision to set up production hubs in London has been hugely beneficial to many indies now producing for the broadcasters. A swathe of entrepreneurial producers have also set up shop in the US, either on the west or east coasts.
Dimitri Doganis, the founder of Gold Rush producer Raw TV, says the US has “huge opportunities and potential for growth” with US broadcasters ordering series in significant bulk. Nerd TV md Jago Lee adds: “We are finding the US to be a sellers market if you have the right ideas and the crew to deliver what the broadcasters need in terms of look and attitude.”
4. Tumbling budgets
The challenges facing indies remain considerable, with many citing falling budgets against a background of rising costs as their key gripe. Indies say that, on average, broadcaster budgets have fallen by 2.27% over the past year.
Talkback md Dan Baldwin says: “The business climate is difficult. Broadcasters are generally either cutting the tariff or at best offering standstill for returning series. But we need to grow our shows to keep up with audience expectation. Then there’s that irritating thing called inflation which affects our suppliers and staff and hence gets passed on to us.”
Shine TV financial controller Matt Wesley says business is, “Continually challenging, with constant pressure from broadcasters to reduce budgets.” Optomen director of development Ben Adler adds: “We have come out OK but it’s much harder won, and with margins being squeezed you have to do much more just to stand still.” Boundless also says its greatest challenge is squeezed budgets. “Ambitions remain high as ever but costs are going up while budgets are going down,” says md Patrick Holland.
Others speak of increased broadcaster caution, and the difficulty of getting commissions off the ground due to continual commissioner changes. Reef director of production Paul Hanrahan adds that broadcasters “need more convincing to work off paper treatments and instead want more pilots or taster tapes or audience research before committing to a series.”
Remarkable mds Colette Foster and Nick Mather add: “Getting stuff commissioned is tougher than ever. Then when you get the commission there’s the anxiety about underfunding.”
5. Deals and launches
The indie sector has continued to consolidate in the past year, with ITV emerging as the surprise key buyer of a handful of leading indies.
ITV has quickly built a substantial indie portfolio to complement its ITV Studios business, acquiring Graham Norton’s So Television in August 2012, The Garden in April this year and Big Talk in July. Elsewhere, other deals included the sale of Gypsy Wedding producer Firecracker to Tinopolis in December 2012, and Argonon’s acquisition of Transparent TV in April.
But perhaps the stand out trend of the past 12 months has been the number of new indie launches. In particular, there’s been a raft of new indie launches backed by a handful of investors in so-called umbrella deals.
Jamie Munro and Stuart Mullin founded Greenbird in October 2012. Billed as a production company incubator, investor and business accelerator, Greenbird has taken minority stakes in ex-Shine TV boss Karen Smith’s Tuesday’s Child, Crackit Productions, Handsome Productions and Rumpus Media.
Princess Productions co-founder Sebastian Scott launched Predictable Media last year, which has since taken stakes in start-ups Superhero Television, Richard Ackerman’s Room 414 and Richard Bacon’s Mox Productions.
Boom Pictures has also taken a majority stake in Laura Mackie and Sally Haynes’ drama start up MainStreet Pictures and backed Graham Linehan’s Delightful Industries.
Others also want to get in on the act, including All3Media, DCD Media and Sony Pictures Television.
For investors, the umbrella deals offer the chance to get in early with creative individuals who have a good track record in production. For the start-ups themselves, the deals offer investment and the promise of business support, collaboration, office space and distribution.
6. The fight for talent
Many indies say one of their key challenges is finding – and retaining – top talent.
Talent costs (both on and off screen) appear to be increasing whilst budgets remain the same or are decreasing, say Lime TV joint mds Kate Little and Claire Poyser.
“Keeping our best people,” is cited as one of the key challenges for Talkback. “We have built a very strong team over here and it’s great that our peers recognise this … however f*** off and leave them alone!” says Talkback’s Dan Baldwin.
Maintaining staffing is becoming increasingly difficult with the ever-rising rates in the independent sector, adds Love’s Letty Kavanagh.
It’s a point echoed by Oxford Scientific Films. “It’s getting harder to get really talented directors in particular,” says CEO Claire Birks.
Attaboy director Andrew Shaw adds: “The main challenge has been to expand our executive team to build a great team of skilled people that continue to deliver shows to the highest of standards. We continue to invest in staff, kit and facilities to stay ahead of the game.”
7. Where’s the risk?
Although many indies are feeling flushed with success – particularly those with long running, high volume series – there’s a nagging sense of disquiet swirling about the sector. And it’s that UK TV production is becoming increasingly risk averse.
There’s a feeling that many indies are churning out shows that look and feel the same, with the ‘hidden hand of the producer’ conspiring to take viewers on increasingly familiar journeys with similarly outlandish characters where the highs, lows, jeopardy and resolution take place at predictable points.
One indie, in confidence, says the narrowness of the editorial range and originations drought should be a TV talking point. “Does PSB really still exist? Is there a thirst for genre reinvention and innovation? Where is it?”
Knickerbockerglory md Jonathan Stadlen says that one of the big challenges facing the industry is commissioners not taking risks. “A lot of channels seem keen to mitigate failure – and I think they can only succeed as much as they are willing to fail. I think that’s why so many shows look and feel exactly the same, because so few people are willing to risk a failure.”
Love Productions’ Kavanagh adds: “It’s a particularly hard climate to get original creative programming away due to the rigidity of tariffs and categorising of programming from most UK broadcasters. What is perceived to be factual ideas versus entertainment ideas are immediately valued differently because of the genre categorisation rather than being valued against the creative concept. This naturally produces a climate of creative risk adverseness.”
8. The digital dilemma
Some 28% of indies taking part in the Production 100 say their fastest growth comes from the digital sector. However, digital still only accounts for 2% of the average indie’s annual revenues – making it still a fledgling market for producers.
“We’re seeing growth in emerging digital content markets which is why we’ve launched a start-up called Little Dot Studios to exploit TV and original content on new media platforms such as YouTube,” says All3Media group portfolio manager David Swaby.
Company Pictures financial controller Robert Smith adds that distribution via digital platforms, such as 4oD, “generates a high margin.” Reef’s Paul Hanrahan, meanwhile, says: “We are seeing increasing revenues from international distribution with new territories emerging buying UK content and more digital sales for VOD etc. This is a good and interesting time for the sector to really exploit the full potential of our content.”
Meanwhile, Lambent’s head of production Isabelle Pavitt says that it is seeing more opportunities in the digital production space.
9. Financing headaches
Running an indie is, it seems, an increasingly complex business. Many producers say that business affairs and financing is ever more difficult, as funding becomes more international and reliant on multiple financiers.
“The disconnect between the ease of editorial versus the challenge of negotiating business affairs issues, particularly in the US, remains a drain on time and economic resources,” says Nutopia md Carl Griffin. The requirement for deficit financing is also increasing. “Financing ambitious productions has been tough; in particular it has been very difficult managing multiple broadcasters on returning series,” says Red Planet production executive Alex Jones.
At the same time, there is concern that many new ad funders like GroupM are ultimately affecting the bottom line of producers by taking the rights to shows they finance. But there is hope that the new tax credit for animation and high-end drama will lead to growth for many indies. The tax incentive offers Blue Zoo opportunities in all areas over the next year, says director Oli Hyatt. “Because we are more competitive on price, we expect to work a lot more on international projects.” Lupus joint md Camilla Fielding adds: “With any luck the new animation tax credit will…bring work back to the UK.
Others say they are drowning in red tape. The HMRC and requirements like pensions auto-enrolment place more pressure on indies, says Lime Pictures. Raw Cut director Bill Rudgard adds: “The endless red tape doesn’t help whether it’s daft fire regulations or insane insurance demands.”
10. Looking good for 2014
Producers are invariably bullish by nature, but one of the most remarkable themes to emerge from the Production 100 this year is the sense of optimism many feel about the prospects for business in the year ahead.
54% of indies say the outlook for their company looks better next year, the highest figure for years. Only 6% think conditions will deteriorate.
We report in more detail on the outlook for indies, but it’s fair to say that many expect modest growth in the UK with sustained growth in international markets, complemented by more work from sectors such as digital and branded content. So many indies – from the smallest such as Aenon to the bigger players like Zig Zag and Zeppotron – say the outlook is good, positive and promising for the year ahead, that one cannot but be hopeful that the sector is set to grow further in the year ahead.