The future direction of the indie production sector has come into sharp focus in recent weeks amid a slew of policy announcements, deals and financial results. From BBC budget cuts to strong ITV results, a Pact Census that hinted at plateauing revenues to a new deal for Top Gear, the events hint at a mixed outlook for indies in the next 12 months.

Pact’s annual financial census of the sector reported that total revenues fell by 4.2% in 2014 to £2.9bn. There are two key reasons for the fall, according to Pact. Overall commissioning spend by UK broadcasters fell from £1.76bn in 2013 to £1.63bn, with multi-channel broadcast spending significantly down. International revenues also fell from £939m to £891m, amid signs that the crucial US market is becoming flat and more competitive. It was the first time since 2007 that global commissioning levels had fallen, according to Pact.

Financial challenges
The financial challenges facing indies in their home market were underlined in Ofcom’s recent review of public service broadcasting. The regulator noted that investment in new UK content from the PSBs (BBC, ITV, C4 and C5) had fallen by around £440m in real terms, a decline of 15% between 2008 and 2014. The falls have been particularly acute in children’s programmes and in drama, it said.

Real term cuts to the BBC licence fee, the economic downturn, as well as the escalating cost of sports rights have led to downward pressure on original content commissioning since 2008.

This was a theme picked up by Arts Council boss Peter Bazalgette, speaking to the House of Lords Communications Committee in July. He noted that investment in original content across all UK broadcasters had fallen in the last five years, while the amount of money spent on sports rights had rocketed.  “Our investment in original programming…has declined over the five years from 2008 to 2013 from £2.6bn to £2.4bn and I view that with concern,” he said, in comments reported by The Guardian. “The new Premier League deal, because of the competition between BT and Sky, the cost of the rights went up above £5bn. The new Premier League deal will represent 25% of all the money spent on broadcast programmes, but it will attract 0.6% of the audience because it’s on a pay [TV platform].”

Fears about falling UK investment in original programming were exacerbated by the government’s announcement that the BBC will have to cover the £650m cost of providing free television licences for the over 75s – representing 17.5% of its £3.7bn licence fee revenue.

Pact has urged the BBC not to cut content spend as a result, fearing that other broadcasters may reduce expenditure too. Speaking at the launch of its Financial Census, Pact chair Laura Mansfield said: “When we’ve looked at the numbers before, it is the BBC that is the real pillar of the public service broadcast system. If you reduce the BBC spend it has a mirror effect across the other broadcasters and you see not just a reduction of spending, but you see a potential reduction of quality. We very much would want a limited reduction, and actually we’ve been campaigning for an increase.”

The case for growth
Not all broadcasters, of course, are cutting back. ITV boss Adam Crozier has said the broadcaster will invest more, particularly on drama, in a bid to shore up its viewing figures after a 4% slide in the first half of 2015. Like many commercial broadcasters, ITV has seen revenues and profits surge as the UK has pulled out of recession and it has diversified into international production. The broadcaster has money to invest.

Sky also posted a 5% increase in revenue in its annual results last month as the pay-TV broadcaster passed 12m subscribers for the first time.  Sky chief executive Jeremy Darroch called the UK its “engine of growth” after the territory delivered revenues of £7.8bn.

Following the success of original drama Fortitude, Sky has 35 productions in development, in production or on air in the next three years with 10 earmarked as pan-European “priority projects”. This includes its first co-production with HBO, The Young Pope, starring Jude Law and Diane Keaton.

However, many producers view with alarm the expansion of UK broadcasters’ inhouse production operations. ITV Studios has grown rapidly through a series of acquisitions in recent years. Wayne Garvie, chief creative officer, international production, at Sony Pictures Television recently described a vertically integrated ITV as “potentially a big threat to the independent community,” Sky is also pressing ahead with a strategy of acquring independent producers, snapping up Blast! Films last month. And many indies express concern about BBC plans to allow its inhouse production division to make shows for rival broadcasters.

If the independent production sector is feeling the squeeze, there are a few hints of it in Televisual’s upcoming Production 100, our annual survey of TV indies.

The full survey is published in the September issue of Televisua, but early responses reveal a sector that appears in good health. Budgets are ever tighter and competition remains fierece, and indies say slow decision making by broadcasters continues to put a strain on business. Yet the majority of indies say the business climate has been good over the past year, with plenty of opportunity in the UK market and abroad. The word that many use to describe the outlook for the year ahead is ‘positive’.

Indies were also given something to cheer about last month when Ofcom ruled that there is no need, for now, to reform the terms of trade, which have underpinned growth in the sector for over ten years.

Also, Amazon Prime’s headline grabbing deal with the former Top Gear team for three 12-part series underlined that competition for top quality content is only expanding as the market becomes increasingly global.

Tim Dams

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