For Broadcast July 26, 2007

In the wake of the dodgy edit showing the Queen apparently storming out of a photo shoot, RDF's initials could be taken to stand for "rather doubtful future". But the company is already doing some "really delicate footwork" that could save the day.

RDF has suffered a big dent to its reputation and the market swiftly chopped some ?20m off its value over two days. The stock fell 11% on 19 July when the BBC said that it would freeze commissions. It then plummeted a further 18% on 20 July when ITV followed suit, hitting a low of 189p.

Current commissions from the BBC and ITV represent 22% of RDF's expected revenues for the year, or about ?26m of a projected ?120m. This revenue should be "safe" as the programmes are already in production but 22% represents the approximate level of exposure that RDF has for its next financial year.

The armageddon scenario (and there's nothing to suggest this will be the case) is that the BBC's independent review concludes that RDF isn't up to scratchand the corporation reduces or ends its relationship with the company. ITV executive chairman Michael Grade has also made clear his "zero tolerance" approach to manipulation of the truth.

To put RDF's situation in perspective, when BBC Jam closed in March, Tinopolis' share price dropped 21%, wiping nearly a quarter off its value. The loss of this contract means ?400,000 less to its bottom line plus a ?150,000 bill to cover redundancies. Also when Shed Productions' flagships Footballers' Wives and Bad Girls were dropped by ITV in 2006, its share price took a hit it still has not recovered from; over the last 18 months Shed's market value has fallen over 30%.

Indies operate in a severe risk dynamic and the market has little tolerance for the creative cycles of the sector. But RDF's problem could have affected its brand. The good news is that the RDF stock price?- it partly recovered this week (see sharewatch above) - and C4's assurance that it sees "no reason currently to suspend our relationship." Nonetheless RDF has a lot of reassuring to do. You don't mess with the Queen and get off easy.

Will distributors investing in indies become more common?

If someone was writing a book on how to set up an indie, getting a solid distribution deal would be early in chapter one. With indies having control over more of their rights, putting in place a powerful distribution channel is a no-brainer.

This is certainly the thinking behind the move by Mammoth Screen to sell a 25% stake to Granada International, the distribution arm of ITV.

In fact, Mammoth is following the lead of another former ITV Productions executive, Andy Harries, who earlier this year sold a stake in his Left Bank Productions to BBC Worldwide.

What do indies need most after good ideas? Finance. Commissions are the mainstay but crucially distribution deals that move the business model beyond "cost plus some percentage" are key to growing a company.

Having dedicated distribution partners can only help a small indie look bigger in the early stages, making it less of a hostage to UK commissioners. Also, selling a stake gives indies funds to get off the ground and perhaps allows them to have a bigger development slate than they otherwise might have been able to afford.

In turn, the distributor partners are banking on programmes produced by the new indies being big sellers outside the UK.

Look for more, not less, of these types of arrangements.