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.