Televisual’s exclusive annual report into the TV indie sector, the Production 100, is out now with IMG Media in the number one spot once again.

IMG posted a turnover figure of £462m. This is IMG’s seventh year in poll position in the survey. The top 100 indies collectively turned over £3bn over the past year

RAW TV was voted the producers’ producer in the report’s annual Peer Poll in which indies vote for the rivals they most admire.

The survey also asked respondents to name the broadcasters that are the best, and worst, to work with. The BBC was voted as both the best and was also named as the broadcaster indies found it hardest to deal with over the past year.

All3media International took the crown as the indies’ best rated distributor.

Below is the introduction to the survey. The full 41 page report is out now in the Autumn issue of Televisual Magazine

In a rapidly changing TV industry, producers say there is more opportunity than ever for those able to adapt to the new landscape. Tim Dams reports on the findings of 2019’s Production 100

Full of opportunity, but not always easily navigable.” That’s the verdict of one of the UK’s leading drama producers, Lookout Point, on the state of the production market in 2019 – and it neatly sums up the views of many producers responding to this year’s Production 100.

Many of them note that we are living through a golden age of TV, which has created major opportunities for producers. Demand for programming, particularly premium content, is higher than ever, and there’s a growing number of buyers, from traditional TV through to international networks and deep-pocketed SVOD players. Most say the business climate is positive; only 13% think business is going to be worse next year.

Beneath this upbeat take on the market, however, lies a raft of challenges: rising production costs; falling budgets and ratings at UK broadcasters; rights retention issues with SVODs; growing levels of competition amid indie launches; and securing top talent.

Many say a key challenge is simply keeping up with fast moving changes in the commissioning landscape. This isn’t so much the traditional concern of changing personnel at UK broadcasters, but more about identifying new buyers in the SVOD landscape.

“There’s a general sense that the industry is changing rapidly, and we’re doing our best to adapt and embrace new opportunities,” says Boundless, speaking for many producers in the P100.

The top 100
First, a quick overview of the top 100 companies. The turnover of the top 100 producers stands at £3bn this year, significantly higher than last year’s £2.08bn. Much of this rise can be attributed to the decision to include BBC Studios Production in this year’s P100, which entered in second place with a turnover of £412m. The reason to include BBC Studios is that it is no longer simply an inhouse production operation, but now makes content for commercial broadcasters and SVODs.

The top ranked producer, sports outfit IMG, has also had a strong year with turnover more than doubling from £218m to £462m.

Increased spend on drama production has also buoyed the total turnover figure of the Production 100. For example, third placed Left Bank, producer of The Crown, saw its turnover rise by over £70m to hit £220m this year. Two Brothers, maker of The Widow and Fleabag, jumped from 83rd to 14th place this year with turnover rising to £42m. Les Miserables producer Lookout Point debuts in 16th on £40m, while Chernobyl producer Sister Pictures makes its debut in 25th on £26.3m. Elsewhere, natural history producer Silverback makes its first appearance in the P100 this year with a £16.1m turnover, having enjoyed huge success with premium series Our Planet for Netflix.

Fourth placed Avalon also saw its revenues hit an all-time high of £165.4m. Other risers included Nutopia, Mentorn and Plimsoll.

As always, the UK market remains key to most indies. Some 60.5% of an average indie’s production revenues are derived from UK broadcaster clients, with another 3.5% coming from UK rights.

By comparison, indies earn an average of 23.5% from production for international clients, with 8% coming from international rights.

But it’s clear where producers say they anticipate their growth to come from: the international market, and particular from global streamers. “The single most significant area of growth is the international streamers/SVODs with their growing appetite alongside scripted for premium factual, high end documentary, comedy and children’s,” says Lion Television, which adds that the classic US cable companies are “back in the premium space and are having to compete with the SVODs.”

Darlow Smithson says: “The UK is very slow, but international companies are more willing to invest.” Dragonfly cites the arrival of SVODs like Netflix, Hulu and Quibi: “Competition between them and the more established global players like Discovery and Nat Geo means there are more places to take our ideas, and more commissions to be won at every price point.”

Raw Cut, meanwhile, says there are “significant commissioning opportunities from international networks looking to UK content producers for quality programming at manageable costs.”

PSB decline
By comparison, many producers say the UK business climate is challenging and feels introspective, arguing that SVODs, premium international players and non-UK commissioners seem to be showing greater confidence and ambition. “Exciting abroad, stifling at home,” is how First Look TV describes the landscape.

Many producers say that the big challenge for the year ahead is the “continued decline of the UK public service broadcasters, where ratings are falling particularly among younger viewers. Broadcasters are becoming more risk averse as ratings fall because viewers have so much choice. “It is harder than ever to launch a new hit show, and at its worst this can lead to channels becoming more conservative in their commissioning decisions,” says STV. Tern TV says that the UK PSBs in particular don’t have “the courage of their convictions in commissioning big new ideas from the sector, but are relying on old fading brands that are going soft.”

UK broadcasters, of course, remain a bedrock for most producers, and many such as ClearStory, Element Pictures, Neal Street and North One pick out the domestic market as a key growth area. But there is a clear sense that many producers who have been focused on the UK market, such as Voltage TV, are now looking further afield for future opportunities. “As a relatively small indie our focus to date has been predominantly the UK…we are devoting more resource to bigger scale ideas for the SVODs and the US market.” Back2Back says it is increasingly relying on multiple international funders rather than “queuing for the UK broadcasters, and this has enabled us to greenlight commissions far more quickly.”

Budget squeeze
One of the key reasons that indies are looking further afield is that budgets at ratings-challenged UK broadcasters are under severe pressure, particularly in the factual, factual entertainment and entertainment genres.

There are “declining budgets in the UK broadcaster market” says Outline Production. Pulse Films says that “UK non-fiction budgets are going down but channel and creative expectations are higher.” Meanwhile, the greatest challenge for Thames TV is “the struggle to produce scale with lessening budgets.” It’s a point echoed by Brinkworth Films, which says the big challenge is “to keep up our level of innovation, high quality storytelling and ambition with budgets that don’t give us the ability to deliver as they should.”

Dragonfly says broadcasters “are constantly trying to drive down costs and expecting us to subsidise productions, either from sales advances or by covering overspends which were inevitable due to the low budget offered at the point of commission.”
Nutopia adds that “so many lines are now being included within the production fee and overhead there is no wiggle room. With certain broadcasters we cannot even meet base company margin.”

Maverick says there is a decline in fully funded budgets, meaning that decefit financing and ad-backed funding from Group M “is becoming standard”.

Many also say that there’s a lack of traditional development funding, particularly at the SVODs which require fully developed shows with taster tapes when pitching.

Rising costs
In drama, production budgets have soared thanks to the impact of the UK tax credit and the influx of SVOD funding into the UK market.

But so too have costs, according to many producers – and across all genres. Vertigo flags “escalating costs due to an increase in crew rates, which have not been matched by production budgets.” Britespark, says “budgets are static, while costs are rising” and notes that the degree of compliance required in the UK has increased.Talent war

Maverick says there is a “highly competitive market for good staff and talent – staff are extremely expensive and budgets are not high enough to match.” The company says there’s a lack of quality, experienced staff, especially production managers, production teams, series producers and execs.

Blink flags “shortages of quality editors” and skilled, qualified production staff across all levels, and across the creative and production management side of the industry. “Finding and holding on to staff in natural history” is a concern for Bristol-based Silverback Films too.
Raw TV, meanwhile, cites the “recruitment and retention of quality staff in a freelance market” as a concern.

Cashflow concern
Not only are budgets tightening and costs rising, but there are problems with cashflow and broadcaster payments, report many producers.

Merman cites “broadcasters sufficiently cash-flowing projects” as an issue, while Blink says that complex co-production deals delay cashflow. Bigger Bang says that broadcasters take longer to pay milestones.” In one example, “the broadcaster was so late we received our first payment after we’d delivered the film.”

Work for hire
A major issue that indies flag in this year’s Production 100 is loss of programme rights. Many fear the industry is moving back towards a work for hire model, given the rise of streamers which want to own all rights globally, and growing demands from UK broadcasters to hold on to rights for longer for their streaming platforms. “UK channels need to secure / retain digital rights to compete with the SVODs but are unable to offer increased licence fees to compensate indies for loss of secondary revenue,” says Drama Republic.
Plimsoll draws attention to the “erosion of the UK terms of trade”, while Raw Cut says “broadcasters are trying to undermine the terms of trade either by using their own secondary channels or VOD offerings.” Limited chances of revenue generation from IP means “losing a key long-term element to sustain production businesses,” points out Neal Street.

For True North this is all part of a shift from traditional broadcasters towards the streamers, one that reflects a creative shift, but also a budgetary one “where the chance of a long IPR tail is being traded against the chance to bring in good revenue in the present, albeit as ‘work for hire’. It’s hard to see that changing in the immediate future with the viewers shifting allegiance in such numbers and not looking likely to return anytime soon.”

Decision delays
Adding to the challenges for producers is what Arrow describes as an “increased length in the commissioning process.” Off the Fence says “the commissioning process seems to be very protracted”, while Blink says the “time to get to greenlight is taking longer and longer.”

Synchronicity Films says “a key challenge for all indies is the length of time for commissioning decisions to be reached, and keeping a development team in place whilst working towards a greenlight.” Bigger Bang reckons fewer people at broadcasters are now taking key decisions. “Often it comes down to the head of the network himself/herself so there can be a long time spent refining an idea, involving a lot of work from inception to greenlight – only for it to die when it eventually reaches the top.”

Crowded sector
There’s also a sense that the production landscape is more crowded than ever. “There’s lots of new drama indies competing for limited commissions and slots,” says Red Planet, while Lion notes “increased competition from new start up indies.”
Others, like Rondo, say it is difficult to convince commissioners to commit to talent who they might not have worked with before. Back2Back adds: “It seems ever more difficult to secure a terrestrial commission if you are not already on the roster of favoured production companies.”

Consolidation is also an issue. “Bigger players can afford to cashflow series, attract talent and get access to opportunities as a direct upside of consolidation,” says Woodcut. The Brighton-based indie also says that Sky, the BBC, ITV and Viacom all now “have production entities that can leverage their internal relationships with major broadcasters while leveraging their scale to also deliver for other major broadcasters too.”

Diversity push
Many producers, like Dragonfly, say that diversity is both a priority but also a challenge, especially in terms of higher-level recruitment. “We are part of creative access schemes at the junior level, but attracting more senior diverse producers continues to be a challenge, especially in the nations and regions.”

TriForce Productions says there is a lot of broadcaster rhetoric about wanting to work with more diverse production companies. “However, there is a huge difference between receptivity and reality, with UK broadcasters wary of working in practice with smaller, BAME-led companies.”

Out of London
There’s a sense that the push by UK broadcasters to commission more from outside London is boosting companies in the nations and regions. Tern TV says the nations and regions have been traditionally “treated like something the cat’s brought in” by the London channels. Tern adds: “At last, perhaps, there is change afoot and N&R commissioning is changing. It’s been a long time coming but not having idiotic schemes like ‘lift and shift’ and ‘brass plating’ is going to make UK programmes better, more diverse, more representative and more inclusive. Well-done C4. The BBC have a long way to go but with significant underspend on licence quotas they need to change fast and start spending money where it’s been levied.”

Rollem says C4’s new base in Leeds is fantastic “but we are seeing large corporations moving in and are conscious to protect the “indigenous” indies from being side-lined.”

Brexit concern
Last, but not least, Brexit is again a key concern of production companies. The most immediate impact has been the fall in the value of the pound, which has driven up costs for those shooting abroad. Drama indie Sid Gentle cites the “increase in Forex costs”, as does factual and natural history specialist Icon Films.

There’s also concern about distribution of shows to continental broadcasters, which may no longer buy as much from a post-Brexit UK because of their need to hit EU content quotas. “It feels like the market uncertainty of Brexit has by passed the UK TV industry but in the event of a no deal exit this may impact the distribution market,” notes Voltage.

Sixteen South says Brexit is a great concern for most producers who sell their shows to European broadcasters. “Without knowing what sort of Brexit will be achieved, we are constantly second guessing the best way to protect all sources of potential funding. This includes the incorporation of a new subsidiary company in the Republic of Ireland. The potential ramifications of this is that jobs/work will move from UK to another EU country.”

For many, Brexit represents “uncertainty” – and that is never a good thing for any industry.

Staff Reporter

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