Kate Bulkley, Media Analyst.

Brit TV indies to score big with new law

By Kate Bulkley

The Hollywood Reporter

May 11, 2004

LONDON -- British independent television producers are in for a multimillion-dollar bonanza because of legislation that empowers them to hold on to the lion's share of international and other rights to their product, according to London-based media consultancy group Mediatique.

The Communications Act, which went into effect Jan. 1, protects the rights of independents and gives them more negotiating clout with broadcasters and has, according to industry experts, provided a kick-start for the independent television production sector in the United Kingdom.

Mediatique, an influential U.K. media firm, forecasts that within two to three years there should be a group of independent production companies with revenues of more than 100 million ($177.6 million), making them ripe for either a public stock market listing or overseas investment. By decade's end, the consultancy group said, independent programming will grow in overall value by a third to be worth 1 billion ($1.77 billion).

"The U.K. independent sector has been a cottage industry, and in large part it has been run as a lifestyle more than as a business," Mediatique director Mathew Horsman said in an interview. "Now there is a real opportunity to professionalize the sector and make something out of it."

The likelihood of dramatic growth in the independent production sector is now attracting outside investment in indie companies and is resulting in some industry consolidation. Venture capital arm of bank Dresdner Kleinwort Wasserstein Kleinwort Capital took a 45% stake in independent Hat Trick which makes the popular British program "Have I Got News for You" and "The Kumars at No. 42" for 23 million ($44 million), while another venture fund, Bridgepoint Capital, led a 45 million ($80 million) buyout of Chrysalis' TV arm by a trio of former ITV executives to create All3Media.

"The interest (from investors) in the sector today has been prompted by the Communications Act," David Frank, CEO of indie production group RDF Media, said. "Now the share (of rights) that the independents control is significantly greater."

Added indie Ten Alps CEO Alex Connock: "It's a very, very expansionary time. Everyone is keen to expand."

In February, Ten Alps, a company partly owned by Bob Geldof, acquired factual producer 3BM in a deal worth up to 1.1 million ($1.95 million). Ten Alps is looking for further acquisitions. Meanwhile, Hat Trick is in the midst of formal due diligence on Shed Prods., which makes "Bad Girls" for ITV. Two Scottish independents Wark Clements and Ideal World are finalizing their merger this month, and Lion Television, which makes "Homes Under the Hammer," is being eyed for acquisition by All3Media, among others.

Connock echoes the fact that the Communications Act has fired interest in independent TV producers among the financial community. "Not a two- or three-day period goes by when I don't get a call from a city-type saying he can raise money for me," Connock said. "All I need to do is find the right deal." He said that plans include an expansion into the United States.

For indie production group Wark Clements, the decision to merge with fellow Scottish producer Ideal World the maker of "Location, Location, Location," which airs on BBC America was prompted by the desire to be a key producer for U.K. broadcasters, while expanding to compete on the international stage. "We are doubling our size, and we are going to come out of this merger with a much bigger international focus," Wark Clements CEO Alan Clements said.

Clements said, "America is an absolutely key market for us, and although there has been a lot of flirting, there hasn't been any kissing yet."

"The future for the whole sector is a lot brighter now," said Eileen Gallagher, CEO of Shed Prods., the maker of "Bad Girls." "The buying power is no longer in the hands of the broadcasters, and that's a fundamental change. In the past, you could be successful creatively but you couldn't make a business out of it.

"The government has put a lot of effort into this legislation, so we need to become proper businesses that attract finance and that can export its products, but that doesn't mean that we also don't need to grow at the grass roots," Gallagher said. A real strength of the new legislation, she added, is that it helps independents of all sizes stand up to the broadcasters when negotiating for distribution and other rights.

The new Communications Act changes the old practices forcing broadcasters to negotiate separate deals for everything beyond the original broadcast license for the program. That means that rights for broadcast on other channels (even those owned by that broadcaster), international distribution rights and any other ancillary rights for DVDs, consumer products associated with the program and even revenues from such things as text messaging or interactive voting must be secured through separate negotiations.

Frank of RDF Media believes that the new rules and regulations will be good for the industry both financially and creatively. "It will become a virtuous circle because as the independents become stronger and better at what we do, we will compete more with each other, and that will incent creativity and that will also erode the position of the vertically integrated producer broadcasters," he said.

The future is all about making and distributing shows that have commercial value," Frank said.


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