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October 2017
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Production 100, 2014 Back to Reports & survey Listing

The independent TV production sector has enjoyed a robust but challenging year. Tim Dams reveals the ten key themes to emerge from Televisual’s 2014 Production 100 survey - from budget cuts to worldwide deals

The UK independent television production has continually evolved since Televisual first carried out its Production 100 survey in 1993, but the past year has been one of major transformation. Global media groups like Discovery, Liberty Global, 21st Century Fox, and StudioCanal have acquired a swathe of the production sector. 

The deal-making has confirmed the UK’s place as a major global TV production centre, with a reputation for being outward looking, creative, entrepreneurial and risk-taking. It’s led to greater investment in the sector, but has also sparked a major rethink by UK broadcasters about how they deal with a production landscape dominated by foreign media groups. ITV’s answer has been to go on a buying spree of its own to build up its production base. The BBC and C4, meanwhile, are preparing to get tougher on rights with non-qualifying foreign-owned producers.

Behind the deal-making, the concerns of many indies are unchanged. Falling budgets and slow commissioning continue to vex many, while others say that costs are rising. That said, one of the big themes of this year’s survey is the sense of cautious optimism that is apparent with many indies. 


1. A Positive But Challenging Year For Indies

The top 100 indies in our survey turned over an impressive £1.93bn between them. The consensus among them is that the business climate is increasingly positive, albeit continually challenging.

“The business climate has been very buoyant,” says Susy Liddell, head of production at The Honourable Woman producer Drama Republic. “It feels more positive, there are more opportunities generally,” adds Initial md Nick Samwell-Smith.

Many point to the demand for the creative skills and programmes of UK indies: in the UK with the likes of Sky ramping up its commissioning; internationally, from US broadcasters like Discovery and Nat Geo; and from new players like Netflix and Amazon.

The reputation of British indies remains high, befitting a sector that this year has produced acclaimed shows like Live From Space (Arrow Media), The Great British Bake Off (Love), Room on the Broom (Magic Light), Gogglebox (Studio Lambert), Broadchurch (Kudos), Educating Yorkshire (Twofour), Syria: Across the Lines (Quick Silver), Uncle (Baby Cow) and Downton Abbey (Carnival).

However, many indies temper their enthusiasm. “There’s lots of opportunity but also increasing competition,” says Kudos COO Dan Isaacs. For Outline md Laura Mansfield, meanwhile, the year has been “fabulous and incredibly challenging in equal measure.”


2. The UK Cornerstone

The UK market remains the cornerstone for the indie sector, with UK commissions accounting for 60.5% of indie revenues in the Production 100. Indies also earn an average of 3.3% of their revenues from selling their programme rights to UK broadcasters.

Indeed, there’s a sense that indies are renewing their attention on the all important UK market after several years of concerted international focus. Some 58% of indies say they are seeing most growth from TV production for UK broadcasters.

The increased commissioning spend of broadcasters like Sky, BT Sport and UKTV as well as the introduction of the tax credit for drama and animation have buoyed production levels, helping to make up for budget cutbacks at the BBC in particular. C4 is also commissioning from a wider range of indies.

Despite bemoaning tough budget cuts, most indies acknowledge that the UK market has improved since the recession. The biggest indie group, All3Media, says its UK production growth was 4%, which it views as “strong” given the “constricted market place.”

Compared to the rest of the world, there’s also a strong belief that UK broadcasters are prepared to take more risks in the ideas they commission.“It feels like the UK is still the place to be if you want to push boundaries and make interesting TV,” says Darlow Smithson md Emily Dalton.

If the risk pays off in the home market, the idea can then be exported around the world. “TV production for UK broadcasters is our absolute focus, but we continue to be encouraged by the appetite for UK IP internationally, both finished tape and format,” says Shine TV head of commercial and strategy Kate Ward. Confirming that the UK still acts as a spring board for indies to grow internationally, Love Production md Letty Kavanagh says: “Our production for UK broadcasters is growing due to the success of our programming with the UK audience and returning formats. This in turn leads to growing opportunities for international broadcasters and IP rights income.”

3. Global Expansion
The indie sector has become increasingly export orientated in the last five years.The international market now accounts for 28% of Production 100 revenues: 18% from commissions by international broadcasters and 10% from selling rights abroad.

The reason for the growth is twofold. British indies have pushed outwards in search of new revenues, spurred on by the recession. International broadcasters have also been attracted by the creative reputation of British producers, looking for programmes and formats to exploit at home and abroad.

Some 54% of indies said they had seen most growth over the past year from commissions from international broadcasters.

Indeed, a swathe of producers report that they earn over 50% of their revenues from international broadcasters including Pacific (80%), Britespark (80%), Nutopia (74%), 3DD Productions (73%), Arrow Media (70%), Nerd TV (62%), Wag TV (60%), Studio Lambert (59%), Zig Zag (52%) and Icon (51%).

Studio Lambert hit Gogglebox, for example, has seen local language versions commissioned in the US, Germany, Netherlands, Canada, France, China, Israel, Belgium, Turkey and counting. Meanwhile, Neal Street launched its first US/UK co-pro, Penny Dreadful, with backing from Showtime and Sky Atlantic. Icon Films’ River Monsters retained its top slot on Animal Planet, in its 6th series. And Outline has just had two formats picked up by US networks.

Discovery and Nat Geo are now important clients for many producers, and their London offices have been given more financial and commissioning power. “They are now leading commissions that would previously have been American led,” says Tigress head of production Fiona Marsh.

The US has been a particular focus, with indies opening offices there in search of direct commissions from US broadcasters.

There are concerns that the strengthening pound may hit exports, though. “The strength of the pound” is “tough for commissions for the US”, says Britespark.


4. Shrinking Budgets

Shrinking budgets continue to top the list of challenges facing indies, with budgets falling an average 2.75% over the past year (on top of a fall of 2.25% the previous year).

“The price broadcasters pay for programmes has not gone up in 10 years,” notes Betty CEO Liz Warner, adding that staffing and production costs have increased. “Programme budgets are not increasing in line with expectations and productions costs,” says Reef TV director of production Paul Hanrahan. “Fitting increased crew rates into shrinking budgets,” is a key challenge for Baby Cow finance director Jonathan Merrell.

Many indies say there is increasing pressure on margins, and that it’s difficult for indies to make a profit as a result.
At the same time, “office rents and rates in London have risen to a point where they are inhibiting the growth of the creative community in London,” says Nutopia COO Helena Tait.

5. Slow Commissioning
Many indies complain that broadcasters are increasingly slow to commission, citing disruptive commissioner changes and interminable decision making processes.

“There’s lots of people moving around or new owners of channels which can delay the commissioning process, and this can be very debilitating for independent production companies,”says True North md Marc Allen.
ClearStory director Russell Barnes, meanwhile, notes the “slow and uncommunicative processes of commissioning by UK broadcasters.”

Outline md Laura Mansfield says its biggest challenge is coping with lengthening development periods, something that is hard for genuine indies, who are not part of deep pocketed superindie groups, to deal with. Some high profile funded development projects are taking up to a year to develop and close, making it “incredibly hard for indies like ours,” says Mansfield.


6. Dealmaking Transforms The Indie Sector (Again)

The indie sector has undergone huge change in the past few months. US studios and European broadcasters in particular have swallowed many of the biggest UK production outfits, spurred on by their desire to create and own IP that they can distribute around the world.

Discovery and Liberty Global are finalising their joint acquisition of All3Media; Discovery also purchased Raw TV this year. Meanwhile 21st Century Fox and Apollo Global Management are merging Endemol, Shine and Core Media. Warner Bros has taken full control of the Shed Media Group.

Sky has also emerged as a buyer, snapping up Love Productions. ITV continues to bolster its production division ITV Studios following the purchase of Big Talk, The Garden and So TV. And France’s StudioCanal acquired Red Production.

The acquisitions confirm a truth that has been apparent for several years now: that the UK indie sector is now largely foreign owned, and hardly deserves the label ‘indie’ any more. 65% of the Production 100 by turnover is owned by major global media groups.

This structural change has caused UK broadcasters to rethink relations with the indie sector. The BBC is set to scrap its production quotas for indies and to allow BBC Production to make programmes for other broadcasters. DG Tony Hall said a key reason for the change was that the quota system was now out of date as only a small proportion of the indie sector is truly independent any more. The BBC and C4 also look set to get tougher on rights negotiations with non-qualifying and foreign-owned producers, amid concern that the UK’s generous rights regime is playing into the hands of the major studio groups.

7. Talent Inflation
“Attracting the best talent in a much busier competitive freelance market” is cited as a key challenge by Optomen, a point echoed by many other indies.

The introduction of the drama tax break, in particular, has led to a swathe of big budget shoots in the UK – driving up the demand for behind the scenes talent.

“The tax credits are encouraging more overseas companies to shoot here, so studio space and crews are getting stretched,” says Hartswood Films director of operations Debbie Vertue. Blue Zoo co-founder Tom Box cites wage inflation due to the tax credit as a major challenge, admitting it’s a good problem because people are in work.

Blacklisted Films acknowledges that it’s a golden age for scripted TV drama. “That said, the bar is higher than ever with broadcasters (and audiences) expecting and demanding an even higher level of talent (on and off screen).”

8. Fight For Rights

There’s increased grumbling in this year’s Production 100 about the ability of indies to hold on to programme rights in the face of broadcaster and third party funder demands for a bigger slice of the back end.

Carnival Films md Gareth Neame says reduced broadcaster licence fees “coupled with more aggressive rights requirements” are a major challenge. “Keeping hold of rights is getting increasingly difficult,” adds Knickerbockerglory md Jonathan Stadlen.

The growth of ad funder GroupM, which takes rights in return for plugging broadcaster budget shortfalls, concerns many. Maverick TV head of production Alison Todd talks of being “strong armed into doing deals” by C5 with GroupM. She says: “When you have a business model based on retaining rights, it makes things difficult when you are forced to give a large chunk of rights away if you want a commission.”

9. Genre Kings
Indies in certain genres are faring better than others. Drama producers are thriving thanks to the tax credit and global demand for scripted shows. Indies like Carnival, Company, Hartswood, Red Planet and Drama Republic have seen revenues shoot up.

The arrival of BT Sport has also boosted sports focused indies, notably Sunset+Vine which is produces much of its football and rugby coverage, as well as North One.

Factual entertainment is billed as “the new growth genre” by Betty CEO Liz Warner. “People have realised that fact ent is what they want – viewers want to be amused and entertained.”

Kids producers have been helped by the animation tax credit. But, says Blue Zoo’s Tom Box, many of the distributors are rehashing brands like Dangermouse, The Clangers, The Wombles and Teletubbies making it difficult to get new shows off the ground.”


10. Good for 2015

The majority of indies sound upbeat about their immediate future. 52% say the outlook for business in the year ahead is better than this year, while 37% say it will be about the same. Only 11% think that prospects look worse in the next 12 months.

Growth in the US, as well as the healthy but challenging UK market is cited by many indies as their reasons for feeling confident.

Indeed, the words “good”, “positive” and “promising” are echoed by many of the indies giving their judgement on the outlook for the year ahead. Nerd TV md Jago Lee says the outlook is “very good in terms of growth but still tough in terms of margins.” Outline md Laura Mansfield thinks it will be the year “we finally crack the USA.” Tern creative director Harry Bell says the indie has already booked its “best year ever.” Concerns include worries about the shift of BBC3 online, more competition, and flat budgets.






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