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October 2017
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Production 100 2010 Back to Reports & survey Listing

The Production 100

The indie TV market remains hugely challenging, but there’s a cautious optimism evident in Televisual’s Production 100 that’s been missing in recent years. Tim Dams reports on an indie sector emerging from recession


Welcome to the Production 100, Televisual’s 17th annual survey and ranking of the independent production sector. If one word sums up the past year for independent producers, it’s “challenging.” That’s how most indies describe the business climate over the last 12 months. Others came up with variants of the word: “tough”, “difficult” or “hard”. But “challenging” is the word that crops up again and again in the feedback we received from indies taking part in the Production 100.

That said, the picture this year looks more positive than 2009’s survey, when indies were particularly bleak in their outlook and the recession was at its worst. Most indies say the TV market is currently flat or going through a slight upswing as ad revenues improve, allowing broadcasters to spend more on programming. “2010 has been better,” says Shed Media chief executive Nick Southgate. “That’s partly because 2008/2009 was so bad that anything is better than then. We’ve had increased turnover in the UK over the last year from it being flat the year before, which is emblematic of the uptick in the market. People are feeling a bit better and that maybe the worst is over. But it’s still incredibly hard and incredibly competitive.”

Southgate’s comments are echoed by DCD Media chief executive David Green: “The market has flattened out – it is steady. We will never in my opinion return to the volume of business that we had pre-2009. That has gone forever. But I do think that we now have a substantial return to the market by the big broadcasters.”

There are signs of increased investment from all key commercial broadcasters. ITV and C4 have finally, after months of stasis, got their new senior management in place and their respective chief executives Adam Crozier and David Abraham have pledged to invest more in content. Sky, flush with subscription cash, is also spending big money on drama, entertainment and factual with independents. And Five, which looked on the verge of going bust last year, has new owner Richard Desmond pledging to spend on programming. Meanwhile, more and more indies are winning direct commissions from the US market, from both network and cable broadcasters.

“It’s been tough. In fact it’s been tough for the last two years but it does now feel more positive, more buoyant and the broadcasters are at last commissioning again, in development and for series,” says Hartswood Films general manager Debbie Vertue.

Measured optimism
Any return to a sense of optimism in the market, however, needs to be tempered. There are still plenty of indies finding conditions incredibly difficult. Talkback Thames, for example, is currently in consultation about making 20% of staff redundant as a result of the downturn. Successful indies like Love Productions are finding that the market is still challenging: “I haven’t noticed a massive pick up,” says md Richard McKerrow. “There’s not that much change - I’d say it is still pretty hard.” Baby Cow financial director Jonathan Merrell adds: “It’s tough and getting tougher.”

Against this tough and flat-to-slightly improving background, the indie sector itself has been going through big changes in the last year - changes that are reflected in the Production 100 itself.

There’s been some fast risers up the rankings, notably Icon Films, Pulse Films and Big Talk. And there’s a string of new entrants including Nutopia, Rare Day, Stagereel, Firecracker, HCA Entertainment, Matchlight and Minnow Films.

Others have disappeared from the survey altogether: major player IMG Media sold its key indies, Darlow Smithson and Aspect&keyword_name='>Tiger Aspect, last year to concentrate on its sports businesses. Stock market listed Motive chose to move out of the difficult TV production market and into TV technology.

Surprisingly, only a few indies have gone under in the last year, despite the grim economic background. Drama producer Greenlit Rights recently went into administration, while Welsh indie Calon went into voluntary liquidation. Scarlet Television, maker of Delia Through the Decades, fell into administration in February. Impressively, it seems that most indies have managed to weather the recession by battening down the hatches and, in some cases, downsizing.

Interestingly, at the top of the rankings, there’s been a renewed bout of consolidation. The massive indie consolidation spree that began with the introduction of the Terms of Trade in 2003 came to an abrupt halt when the downturn kicked in during 2008. But it has shown signs of picking up in recent months.

All3Media completed its first major acquisition since 2008 earlier in August with the purchase, for a reported £40m, of Optomen. Warner Bros is in the process of taking a controlling stake in Shed Media. Zodiak Entertainment acquired RDF Media in June. French superindie Banijay Entertainment snapped up Zig Zag in January. Tinopolis purchased specialist factual outfit Pioneer Productions for £12m in November. And Endemol bought Darlow Smithson and Tiger Aspect for £32m in November too.

Super-consolidation
The big difference this time is that it’s often superindies acquiring other superindies, with US studios and global groups like Zodiak, Endemol and Banijay doing the buying. This trend is expected to continue with NBC Universal, which already owns Carnival Films in the UK, looking to buy and Disney also said to be active on the buy side. Superindie DCD Media is also looking to buy or to partner up with another superindie.

“There’s almost a super-consolidation going on,” says Alex Mahon, president of Shine Group. “It’s the big buying the big.”

This “super-consolidation” trend is being driven by big companies searching for growth. Many of them are looking to emulate the model that Endemol started in the 1990s, when it made a fortune by developing and then rolling out its own formats, like Big Brother, across multiple territories. “You both capture the local production value and the format value - if you add the two together you make a significant business,” says Shed Media’s Southgate. “Everybody is trying to do the same thing, which is trying to capture as much value as they can from the creativity at the heart of their business.”

Some are doing this via acquisitions, others are doing it by backing start-ups abroad. Shine, for example, has launched new operations in France, Germany and Australia in the last year to produce its hit formats such as MasterChef.

Are all superindies bastards?
The scale and international reach of the superindies is making it arguably even more difficult for medium and small sized indies to compete. Production 100 figures show that the top five superindies alone account for a 50% of the independent production market by revenue. There’s certalnly a feeling that superindies can absorb margin pressures imposed on the sector by UK broadcasters better than smaller indies, in effect pricing them out of the market.

C4 documentaries commissioning editor Mark Raphael, who is producing a session at the Edinburgh TV Festival called ‘All Superindies are Bastards’, says smaller indies increasingly believe that superindies have some inherent advantages over them. Superindies can spread the costs of overheads such as business affairs, IT and accountants. They can put more resource into development and taster tapes, and even play shows from their own international network that might already have aired in Holland or Scandinavia. Others may have agents in the US who can open doors for them that are closed to smaller indies. Superindies may also choose to co-fund projects safe in the knowledge that they can recoup the money from foreign sales, an option closed to a smaller indie.

Raphael comments: “It’s tough for the smaller indies. They’re often less inclined to go for returnable franchises. It can be a very rocky existence, reliant upon building relationships wih the ever changing commissioning editors.” His point is backed up by Alice Huzar, head of production at Giant Film and TV, who says one of the biggest challenges for her small indie is simply “to compete on a level playing field with the bigger indies when it comes to key commissions.”

Budget pressure
Indies large and small, however, report downward pressure on budgets this year. 69% of indies say that budgets have fallen year on year, while 26% say they have stayed the same. Just 5% think they have risen. Many comment that broadcasters are paying much less but demanding the same high standards on programmes. “Programme budgets are not increasing in line with increasing expectations and production costs,” says Reef Television’s head of production Paul Hanrahan.

In fact, declining budgets are one of the main bugbears of indie producers in the Production 100. “The challenge has always been, and remains, to deliver high quality must-see shows that viewers love,” explains Optomen Television’s director of group development Ben Adler. “The new challenge is to do this on reduced budgets from broadcasters.” Spun Gold’s finance director Simon Gray says it is particularly “difficult to make money in a market that squeezes the tariff and still wants the same quality as before.”

Falling budgets mean that producers are increasingly having to co-finance programmes. “Margins are being squeezed and programmes are getting harder to finance,” says Oxford Scientific chief executive Clare Birks.

Finding alternative sources of funding is a painstaking, time-consuming business. Windfall Films, which has a track record of stitching financing together for big specialist factual shows like Inside Nature’s Giants, says its biggest challenges lie in this area. Head of production Kristina Obradovic cites, “The length of time that it takes to pull in financing, given that most of our shows need to be co-produced in order to meet programme budgets and that commissioning decisions are taking longer.”

Indies are also having to get to grips with complex methods of financing, like AFP and branded content. “The business climate has been very tough,” says Denham Productions md Peter Gregory. “TV production increasingly relies on ad funded opportunities.”

Money troubles
Pressure on financing has led to more aggressive contract negotiations with broadcasters. Many indies say broadcasters are looking to take enhanced rights on programming at a time when they are already paying reduced licence fees. The fear that broadcasters would “net off” at the expense of indies in the immediate post terms of trade years has now become a distinct reality. “Netting off is now the standard,” says Impossible Pictures md Jonathan Drake. “You’ve got a much tougher mix now of what margins can you take out of the production and how you’re going to make your money at the back end.”Shine’s Alex Mahon says: “Everyone needs to be smarter about the deals we cut with broadcasters, and the need to align risk.”

If budget negotiations are difficult, then so too is getting hold of the money to make shows. A notable feature of this year’s Production 100 is the number of indies complaining about broadcasters failing to cash flow productions properly. This is a particular problem for mid-sized and smaller indies without deep pockets. Hardcash Productions md David Henshaw says a key concern this year is, “Obtaining realistic budgets and pressurising broadcasters into keeping to an agreed cash flow.” Big Talk’s financial director Sharon Martin says a major challenge is, “Cashflow, due to having to defer production fees, which we expect to recoup eventually from residual incomes.” Kindle Entertainment co-director Anne Brogan adds: “Budgets are decreasing, issues over cash flow are increasing.”

Despite a sense of cautious optimism returning to the market, these money and budgetary concerns colour 2010’s Production 100. TV’s great recession may be over, but it is still casting a long shadow over the indie sector.

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