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 £218.8m, the first time a single production company has reported a turnover greater than £200m in the Production 100 survey’s 26-year history. This is is IMG’s sixth year in poll position in the survey. The top 100 indies collectively turned over £2.08bn over the past year

Studio Lambert 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 the best with Channel 4 named as the broadcaster indies found it hardest to deal with over the past year.

TCB Media Rights took the crown as the indies’ best rated distributor with BBC Worldwide and All3media International in joint second place.

Below is the introduction to the survey. The full 46 page report is out now in the Autumn issue of Televisual Magazine

Many producers report that they have had a good year, albeit in a market where the rise of the streamers has caused a crisis in confidence at their traditional broadcaster clients. Tim Dams reports on the findings of 2018’s Production 100

Producers in 2018 find themselves operating in a market full of opportunity, but beset by disruption. This year, more than ever, there is a very real sense that the industry is facing change at an accelerating rate.

The rise of the streamers has brought greater opportunity and budgets, with drama producers like Left Bank, Kudos, Lime Pictures, Sid Gentle, Drama Republic, House of Tomorrow and New Pictures posting bumper turnover figures.

The flip side of the growth of the streamers is a crisis of confidence at the main clients of most indies – British terrestrial broadcasters and US cable channels.

The drift of viewers to Netflix and Amazon is starting to manifest itself in lower budgets at traditional broadcasters, fewer slots and increasing battles for indies to hold on to back end IP.

The top 100
First, though, a quick overview of the top 100 companies. The turnover of the top 100 indies stands at £2.08bn, down slightly from last year’s £2.17bn.  It chimes with recent Pact research that overall revenues in the indie sector are flatlining. Revenue growth at many of the top tier indies certainly seems to have stalled.

Within this, there are some strong individual results. Sports giant IMG takes first place once again, and in doing so becomes the first Production 100 company to post revenues above £200m.

The Crown producer Left Bank has posted another solid set of results on the back of big budget drama commissions, with turnover at £154m, up from £148m.

Third placed Avalon, meanwhile, has consolidated its place in the top three indies. Revenues at the entertainment producer and talent management firm have risen from £114.6m to £130.8m. Its hit Taskmaster format debuted in the US on Comedy Central this year.

The climbers
One of the most impressive performances in this year’s P100 comes from drama indie Kudos, which has climbed from 18th place to 5th this year. Turnover has almost doubled to £73m thanks to a bumper scripted slate that has included Troy: Fall of A City, Tin Star and Humans 3.

Diversified indie Pulse Films – which works across TV, commercials, music and film – also breaks into the top 10 for the first time. Now owned by Vice Media, it has posted a turnover of £48m.

Big climbers this year include factual producer October, which has built a strong business on both sides of the Atlantic. Elsewhere Plimsoll, Primal Media and Brinkworth Films have all recorded strong growth.

Fullwell 73, which has James Corden as a partner, makes its Production 100 debut with an impressive £21.2m turnover. Other new entrants include relatively new indies Alaska, Bandit, Two Brothers, Chalkboard, Bryncoed, Middlechild, Firecrest and Expectation.

The UK market
The British indie sector also remains in rude creative health. Highlights over the past year include shows such as Drama Republic’s Doctor Foster, Label1’s Hospital and Dragonfly’s Ambulance, Nutopia’s Civilizations as well as event production such as CC Lab’s UHD coverage of the Isle of Wight Festival for Sky and Whisper Films’s Winter Paralympics coverage for C4.

Many producers report that they have had a good year, albeit in a market where budgets are under pressure, broadcaster decision-making is painfully slow, and crew and talent costs are rising,

As always, the UK market remains key to most indies. Some 62.5% of an average indie’s production revenues are derived from the UK, with another 2.8% coming from UK rights income. Big Brother producer Initial is typical of many indies when it says: “We have seen the most opportunity in TV production for UK broadcasters. Though we anticipate an increase in international and OTT sales this year, the opportunities are still strongest in linear UK TV production, especially when it comes to entertainment formats.”

Many indies report that increased commissioning by non-PSB channels, such as Dave, W and Comedy Channel, is boosting business. The UK is cited by 34% of indies as the area they are seeing most growth, (although this is well down on 2016’s figure of 72%).

Streaming success
The international market, by comparison, accounts for 20% of production revenues and 9% of rights income.

For some indies, it’s a key source of revenue. Nine indies – Bryncoed, Pioneer, Raw TV, Nutopia, Pacific, Arrow, House of Tomorrow, Icon Films and Company Pictures – generated more than 75% of their business from international commissions. 

30% of indies say the international market is where they are seeing most growth, while 9.5% point to the global streaming platforms. “The biggest opportunities are in international, especially SVOD clients, and we are aiming for growth in this area,” says Dragonfly. ITN, meanwhile, reports that it is making “considerable gains in the US market both in terms of TV production for US cable channels and global platforms such as Netflix.”

Indeed, the SVOD players are the big talking point of the 2018 Production 100. For many they are a boon, particularly those in the business of producing high-end, premium content. “SVODs continue to drive forward the premium market, impacting price points and editorial in the cable nets as a consequence,” says Nutopia. Indies such as Lime, Keo, DSP, Red Production and Optomen all pick out the likes of Netflix, Amazon and Apple as the areas they are seeing most growth and opportunity. “In general, there is more work available with investment by SVOD services,” says Blue Zoo.

Confidence crisis
But many say the rise of SVOD players is both exciting and concerning in equal measure. “Broadcasters sense that their business models could soon be redundant and are peering anxiously into the middle distance,” says True North. “For indies this means continued downward pressure on budgets as business affairs teams try to recoup value.”

There’s a “crisis in confidence” among UK broadcasters, which still accounts for most indie sector business, says Voltage. Stressed UK broadcasters feel threatened by Netflix – and will become more risk averse, says Air TV. Others report a reduced appetite for risk, leading to short series or single commissions. “Falling terrestrial audiences mean that there is increased anxiety within commissioning,” says DSP.

The SVODs have created huge opportunity and huge uncertainty, says Raw TV. “Every pound from the traditional broadcasters needs to deliver more than before and this pressure and expectation trickles down to the producers who are bearing some of the impact of this lower risk and uncertain environment. Every commission is hard won with a huge amount of unpaid development work required to create the amount of materials broadcasters need in order to greenlight.”

Keeping abreast of the changing landscape is a challenge for indies. The proliferation of new platforms means “there is a danger that one can lose focus,” says Fulwell 73. Many others say the likes of Netflix, Amazon and Apple might offer big money for ideas, but are “very hard to actually get in the room with.”

Rights wrangles
Two of the most direct challenges caused by the rise of the SVODs centre on the subject of rights and broadcaster budgets.
Many producers report that it is becoming more and more difficult to hang on to back-end IP. Netflix, for example, offers work for hire deals for indies, meaning that producers earn a good production fee but don’t share in the rights.Naked Entertainment reports a “squeeze on rights in the US.”

Plenty of indies, like October Films, say there is an intensifying turf war for rights and IP. Talkback adds: “Channels are demanding more rights from indies.” Knickerbockerglory says there is a “mission creep from broadcasters trying to keep more of the back end.”

Indies say this can take the form of broadcasters suggesting that production companies use their back-end IP to subside programmes, or creating a fixed price for a programme and then ramping up the editorial ambition. For example, Brinkworth Films comments: “The growing trend is for us to fund development over many months and then battle to recoup it with broadcasters. There is a growing “subsidisation” where our international sales pay for UK development.” Meanwhile, Nutopia comments: “There’s an increasing push towards work for hire contracts with commissioners who have little vested interest in the sustainability of key suppliers in the UK.”

Budgets are the other big gripe. Traditional broadcasters, who make up the bulk of indie clients, are offering stagnant or falling budgets at a time when costs are rising. “Budgets being cut along with more rights being taken make it a challenge going forward,” says Windfall. Betty notes that there is a “lot of commercial pressure on broadcasters which is being passed down to production companies.”

According to indies, budgets have fallen by an average of 1.51% over the past year – even though broadcasters expectations and editorial ambitions continue to rise.

Costs, however, are continuing to increase, particularly for experienced crew and talent.  The drama boom has pushed up competition and rates, says Sister Pictures, a point echoed by indies such as Neal Street, Sid Gentle, Rollem and Two Brothers. Optomen says there is a “highly competitive market for good staff and talent. Staff are extremely expensive and budgets are not high enough to match.”

Talent issues
Out of London indies emphasise the talent issue. “Attracting talent as a regional indie can be very difficult,” says Northern Ireland-based Stellify. Leeds-based Daisybeck adds: “The hardest part of the business is finding great talent. We need more amazing production people to be based in Yorkshire / the North to capitalise on all the hours we and others are being commissioned to make.”

This goes hand in hand with the industry wide call for more diverse talent. A big challenge for Bristol-based Icon Films is ,“the lack of experienced diverse talent in the industry and the demand for broadcasters for increased diversity on productions.”

Rising costs
Vertigo says that “rising above the line and crew costs and increasing ambitions for shows” at a time of stagnant budgets mean that producers are having to find “more creative solutions to keep production costs down and to find additional finance.”

Spun Gold, meanwhile, says the reduction in number of fully funded commissions means there is a greater reliance on distribution advances and co-productions.  However, Blink notes that “complex co-pro deals can make legals difficult, expensive and time-consuming, and as a result cashflow on productions can at times be stretched.”

Several indies say there is a real shortage of quality, experienced crew in production – particularly heads of department, editors, production managers, series producers and exec producers. The importance attached by commissioners to ‘star’ writers, cast, directors and exec producers is also a challenge for many indies, particularly when they are under pressure to keep costs down. Indies as diverse as IMG, Blue Zoo and Lime cite skills shortages as a key concern.

Competitive market
“There’s an increasingly large number of production companies looking for the best talent both on and off screen,” reports Betty.

Indeed, there’s a widespread belief that competition is becoming more intense in the indie sector, given a slew of new entrants in recent years – particularly in the drama space. There are “too many scripted” companies, says Bandit.

Competition is tough in every other genre though. Cactus reports that there are “fewer available slots vs more new indies than ever.” Chalkboard explains that competition to secure commissions is fierce: “Every slot and opportunity has a number of great producers pitching into it meaning ideas and materials have to be of the highest quality.” Others, like Little Gem, reckon the indie sector is “oversupplied”. Off the Fence reckons there are “many, many small indies segregating the market and causing broadcasters to spread themselves thinly.” Zig Zag adds: “There are too many new start ups clogging the system who are destined to fail.”

Smaller indies, meanwhile, say the consolidated nature of the industry is a big challenge. Angel Eye comments: “As a smaller independent company, competing with companies with more development resources for the same broadcast slots is always a challenge.” Larger indies are able to “invest much more heavily in development and innovation” adds CC Lab. Many other indies say the rise of inhouse production is a worry. “Some UK broadcasters are increasingly keen to feed their inhouse production arms,” reckons Primal Media.

Slow orders
Elsewhere, indies raise a host of other challenges. One regular complaint is the slow speed of the commissioning process. Monkey speaks of aversion to risk, slow decision making and constant changes at broadcasters. Nutopia says that securing commissions with high price point budgets can take “very many months to finally agree on all editorial, budget and contractual terms.” However, eleventh hour signatures on contracts make it difficult to secure the best high-end talent.

Many producers say the change of the senior team at Channel 4 has exacerbated the problem of slow commissioning. “Recent re-shuffles at UK broadcasters have led to a bottle-neck in development, which is now starting to ease,” says Carnival.

Others flag up specific genre issues. Indies such as Channel X, Retort, Zeppotron and Sister say there is a dearth of slots for new comedy, while Hardcash notes that budgets are shrinking in real terms for current affairs half hours. Dragonfly says making important single documentaries is becoming ever harder.

Brexit issues
The impact of Brexit is also flagged up by some indies, but not to the same extent as last year – it seems as if the uncertainty caused by the referendum is now baked into the thinking of indies. The biggest Brexit issues are around the weak pound pushing up international production costs, and the impact on staffing. Says Magic Light: “Two of our staff are European nationals without permanent residency. For Revolting Rhymes we set up our own studio in Berlin to access the best European talent which may be harder to do post Brexit.”

For all these challenges and concerns, it’s worth stressing once again that the overall feedback to the Production 100 from production companies is positive. 44% say they think business will be better next year, compared to 18% who reckon it will stay the same and 38% who predict it to be worse. Despite the tumultuous change being ushered in by the rise of the streaming giants, many indies say the result is better and more interesting shows. New indie Expectation sums it up best: “The UK is the one market in the world which still takes risks on new, original and unproven ideas. It must hold its nerve!”

Staff Reporter

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