2013: Big deals for British TV
By Kate Bulkley
For Broadcast December 12, 2013
From sporting battles and controversial content funding to indie buyouts and UK tax credits
BT SPORT STARTS LAND GRAB
Of all the programming purchases this year, BT Sport’s massive spend to win all live Uefa Champions League football games from 2015 was the headline story.
Not only did BT double the price for the 350 games to £900m, but the gut punch led to a £1.4bn fall in BSkyB stock the Monday after the news of BT’s winning bid spooked investors in the broadcaster, which has had its own way in sport for so long.
Meanwhile, ITV has lost a high-profile live sport from its primetime schedule and the impact on attracting younger male audiences is not to be underestimated. However, the broadcaster will save £75m a year, some of which it says will go back into the programme budget.
BSkyB defended its failed bid, branding £300m a year as “uneconomic” and pointing out that the Champions League accounts for only 3% of Sky Sports viewing, compared with the Premier League’s 18%.
BSkyB has 85% of its sports rights already secured for the next three years, but the willingness of BT to pay big money to attract subscribers to its TV/broadband/telephone packages is forcing Sky to rethink.
The next English Premier League bidding round in 2016 is set to be very expensive indeed, with the real possibility of BSkyB becoming a second division football broadcaster to BT.
ITV LEADS INDIE BUYOUTS
ITV has led the indie buyout race in the UK this year, helping to set new high prices and recasting ITV Studios as a much bigger player in content creation than ever before.
ITV has bought five indies over the past 12 months, starting with US producer Guerny, the maker of Duck Dynasty, in December 2012. In rapid succession, it picked up two more US indies, High Noon and Think Factory, and two in the UK: Big Talk and The Garden.
Taken together, the five purchases cost ITV £126m, but with performance earn-outs and options, that figure could double. The acquisitions – part of ITV’s five-year transformation plan to broaden its revenue base beyond spot advertising and boost its export potential – came in a good year for the broadcaster. On screen, homegrown dramas Broadchurch and Downton Abbey contributed to strong advertising sales.
The City has nodded its approval. ITV’s stock price has risen by 79% in the past 12 months (as of 9 December). Numis Securities recently reiterated ITV as a “buy”, being “greatly impressed” with ITV Studios, where revenues rose by 11% in the first nine months of 2013 – 6% of which was through acquisitions.
Expect ITV’s push into content to continue through a mixture of organic growth and strategic acquisitions, though non-UK markets, including the US and Israel, look likely to provide opportunities going forward.
ITV has not been alone in its search for good content-creation houses to scale up its business. Former BBC1 controller Lorraine Heggessey took fledgling indie Boom Pictures into the big leagues this year, spending an estimated £35m to buy Twofour Group, riding high on Educating Yorkshire and Splash!.
With combined revenues of £76m, Boom Pictures is now in the top 10 UK indies by revenue. The Walesbased producer, set up by Heggessey last year through a management buyout of Boomerang led by Huw Eurig Davies, is also now the biggest out-of-London indie.
Twofour brings with it international distribution, expertise in entertainment and feature programming and post-production assets in Plymouth, plus Twofour Digital, which counts clients such as Ogilvy Entertainment.
It sits nicely alongside Boom Pictures’ digital and branded content expertise – it produces GT Academy for Ford Nissan and PlayStation and The Clare Balding Show for BT Sport under the Boomerang label.
THE RISE OF GME
The most controversial development of the year has been GroupM Entertainment’s (GME) growing presence as a funding partner to UK indies.
From a start in 2009, when GME (part of the WPP advertising conglomerate) funded only two programmes with Channel 5, the company has since linked with ITV for Lucan (ITV Studios) and this year added several projects – including The Jump (with Twofour Digital) and Troy (with ZigZag) – with Channel 4 for the first time.
There are also reports of advanced conversations with Sky, while GME began to put money into development and pilots in 2013, with the aim of priming the local production market. This year, GME funded more than 30 commissions, at an estimated £30m investment. It has helped to fund 100 shows since 2009.
The GME model is to fully fund the programme, in return for splitting IP with the indie, and to take commercial inventory (airtime or digital space) from the broadcaster that it can then re-sell. This is not brand-funded content in the sense that GME brings a brand’s money to the project; the GME funding is considered “risk capital” by the WPP unit.
The rub for some indies has been the issue of IP ownership and exploitation. Some larger indies with their own distribution units already have a rights distribution model; others simply disagree with sharing IP owner ship that they fought so hard to claim in the past from broadcasters.
But this model is clearly not going away – indeed, there are rumours that rival ad giants including Publicis Omnicom are looking to set up content- funding units of their own. “It will be interesting to see which companies ultimately thrive – the companies that ‘hold their ground’ on commercial models established in a different landscape, or the companies that recognise the current, broader marketplace and adapt to embrace the change that has already happened,” says Richard Foster, managing director of GME.
Meanwhile, there has been some growth in advertiser-funded content, but not as quickly as some analysts predicted, despite initiatives such as branded content on Channel 4’s 4 Shorts on 4oD. The main problem is the tricky business of trying to align the needs of all the stakeholders – the brands, the broadcasters and the indies – but it is clear from the December report co-authored by Sian Kevill and Alex Connock, Ask the Audience: Evaluating New Ways to Fund TV Content, that brand-funded content will continue to grow because the “church and state” distinctions of the past are disappearing, says Connock.
BBCW INCREASES SPEND
BBC Worldwide chief executive Tim Davie is driving a £30m increase (to £200m) in spend on commissioned programming from March 2013 to February 2014. This includes more first-look deals (Voltage TV has the first), BBC Worldwide funded commissions for BBC Worldwide channels, co-productions and development of content for nonlinear channels, and an expanded commissioning team of three.
There is a focus on working directly with writers such as Glen Morgan on new drama The Intruders. BBCW will also be the principal coproduction partner for the BBC’s Natural History Unit.
The spending rise comes as the BBC Trust orders BBCW not to invest any more indies. Deals already done are being unwound, including Left Bank Pictures’ sale to Sony earlier this year. BBCW still holds stakes in six indies – Clerkenwell Films, Baby Cow Productions, Sprout, Slim Film & TV, Temple St and Burning Bright – and looks under no pressure to sell.
BBCW chief content officer Helen Jackson says: “BBC Worldwide is serving as a real incubator for British talent and creativity – and we’re working not just with producers, but writers too, to make truly outstanding content to take to the rest of the world.”
TAX CREDITS ARRIVE
Tax credits for UK-made, high-end drama were heralded as good news for the industry and there is now some movement to lower the £1m threshold so that factual programming could also qualify at levels of perhaps £650,000 an hour, including postproduction work.
Tiger Aspect decided to shoot Peaky Blinders in the UK, rather than Ireland, even though the tax credit would not apply to series one, but would apply if it were recommissioned – which it has been. “The tax credit certainly makes it easier to fund these shows,” says Endemol chief operating officer Richard Johnston.
But he also thinks there is a “bit of a bun fight going on” about who gets the tax credit, and whether it is used on screen or for talent fees, or is replacing or lowering broadcaster funding. “It’s increased the pie, but there are a lot of people trying to have a slice of that pie. The main issue is how to manage this growth, with the supply of talent and studios struggling to keep up with the demand from both UK producers and the growing number of US studios choosing to produce here.”
Mark Oliver, chief executive of media adviser Oliver & Ohlbaum Associates, recently warned a Westminster forum that the industry should be wary of misusing the tax credits as the sale-and-leaseback rules were exploited 10 years ago.
“We are talking about a mismatch in demand and supply at the moment. What no one wants to see is that there’s a huge effort to get more skilled people and for people to build studios and the rest of it, and then in five years’ time it’s all taken away again and suddenly, you get a lot of resources wasted and upset people.”