The evolution of the TV content production sector
A discussion document
Prepared for Ofcom by Oliver & Ohlbaum Associates Ltd
September 2014 The TV content production sector CONFIDENTIAL
Introduction Definitions and caveats
Data on the UK external and UK independent production sector
The data on the UK indie production sector includes data for non-qualifying independents, i.e. previously independent productions groups who are now owned by broadcasters (such as Shed, Shine and Carnival). This is to maintain consistency between data sources over time and the available breakdown of data from public sources.
The indie data does not include external production by traditional broadcaster production units for other broadcasters (such as ITV Studios, BBC Production)
The report uses the following definitions and distinctions for external content production:
External production Output produced both by indies and by a broadcaster related production house for another broadcaster (NBCU, Sony, Discovery, ITV etc)
Non-qualifying independent Previously independent super indie production groups now part of a broadcaster related group (Shed and Shine)
Future non-qualifying independent Recently purchased super indie production groups that will now be part of a broadcaster related group (All3Media, Endemol)
Programmes made within 2 years of being commissioned retain independent status if an independent production company loses its qualifying status after commissioning has taken place
2 Contents
The evolution of the UK TV content production sector
Appendix - Main trends in originated output - The UK external sector - Terms of Trade
3 The TV content production sector CONFIDENTIAL
The evolution of the UK TV content production sector The independent sector has experienced a significant increase in revenues
The UK indie sector showed strong growth up until 2008. The recession put pressure on UK commissioning budgets with indies relying on international revenues. UK commissioning bounce back in 2012 boosted total sector income
Independent producer TV-related revenues* REVISED METHODOLOGY CAGR
£ million 2004 - 07 2008 - 13
3,000 6.9% 6.6% 2,779 OTHER UK (23.0%) (9.0%) 4014 PRE-PRODUCTION 2,588 39.0% 1.1% 2 2,500 41 OTHER INT’L 13.0% 22.0% 2,227 755 INCOME* 2,145 18 670 27 25 2,016 1,999 26 2,000 22 17 - 1,867 INT’L SALES OF UK 38 32 156 20.0% 21 495 652 FINISHED PROGRAMMES* 1,732 43 279 152 16 369 147 UK RIGHTS INCOME* 4.7% 6.7% 1,527 32 310 63 185 107 87 1,500 46 351 70 28 115 119 16 118 154 215 36 165 107 103
1,000 PRIMARY UK 1,668 5.5% 2.0% 1508 1,539 COMMISSIONS 1347 1395 1,356 1,247 1,147 1191 500
0 2004 2006 2007 2008 2009 2010 2011 2012 2013 (2005 (2007 (2007/2008 (2010 Census (2010 Census (2011 (2012 (2013 (2014 Census) Census) Census) - restated) - restated) Census) Census) Census) Census)
*Definitions: ‘Other international income’ - revenue from companies overseas operations and any primary commissions received from non-UK broadcasters; ‘Int’l sales of UK finished programmes’ - sales of first run UK programming sold as finished product abroad; ‘UK rights income’ – UK secondary sales, publishing, formats, DVD sales etc. 4 Source: Oliver & Ohlbaum analysis, Pact census The TV content production sector CONFIDENTIAL
The evolution of the UK TV content production sector TV exports have seen significant growth
Following the introduction of Terms of Trade there was an initial significant boost to TV exports followed by healthy growth in more recent years.
Index (1998 = 100) 2008-2012 CAGR 9% 593 600 570 523 Terms of Trade 500 Introduced 464 425
400 2004-2008 CAGR 22.2% 340
300 277 230 1998-2003 CAGR 12.6% 191 200 181 139 148 121 100 108 100
0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Source: BTDA / TRP / UKTI / PACT, Oliver & Ohlbaum analysis 5 The TV content production sector CONFIDENTIAL
The evolution of the UK TV content production sector There has been some consolidation of mid-tier indies
There was some consolidation into mid-tier indies up until 2010/11. The distribution of companies has remained stable in more recent years
Per cent Distribution of number of indie companies by turnover brackets – 2008-2013
100% . Some consolidation of smaller companies into mid tier 90% . Small amount of consolidation at top 80% end of the sector 50% 50% 50% £1-5m 55% 53% 52% 70%
60%
50%
15% 15% £5-10m 40% 16% 19% 21% 21% 30%
20% 22% 22% £10-25m 20% 17% 12% 15%
10% 6% 6% 7% 9% 9% 9% £25-70m 5% 5% 5% 4% 4% 4% £70m+ 0% 2008 2009 2010 2011 2012 2013
#Indies* 140 141 122 137 152 152
*In addition to the companies above, we estimate there are circa 500 small prodcos with a turnover of less than £1m
Source: Broadcast Magazine, Oliver & Ohlbaum analysis 6 The TV content production sector CONFIDENTIAL
The evolution of the UK TV content production sector The sector has attracted external investment, now consolidated in trade buyers
There has been a much higher concentration into non-qualifying ownership than vice versa. Prior to 2008 most consolidation did not affect indie status as this was indies buying other indies, creating the so called “super indies”
SONY Victory Television, Left Bank Pictures*
DISCOVERY DISCOVERY/LG Betty TV All3Media NON- ITV QUALIFYING ITV So Television, Big Talk**, 12 Yard The Garden Productions 21 CF 21 CF/Apollo Shine Endemol TIME WARNER Shed SKY Love Productions Programmes made within 2 years of being commissioned retain indie status NBCU NBCU if an indie prodco loses its qualifying Carnival Films Monkey Kingdom, Working Title, status Lucky Giant, Chocolate Media
2006 2007 2008 2009 2010 2011 2012 2013 2014
RTL Fremantle All3Media QUALIFYING BBCWW Cactus TV Left Bank Pictures*, Hardy & Sons, Cliffhanger Productions, Clerkenwell Films, Baby Cow, Big Talk**, Sprout Pictures
Source: Oliver & Ohlbaum analysis *BBCWW retains a smaller minority share in Left Bank Pictures after it was sold to Sony 7 **BBCWW sold stake in Big Talk 2013 when purchased by ITV The TV content production sector CONFIDENTIAL
The evolution of the UK TV content production sector Revenue is concentrated among the biggest indies
The top 6 indie production companies represent almost 45% of total revenues
Total indie revenue £bn Indie revenues by turnover band – share of revenue and number of companies - 2013
3.5
3 <£1m
£1-5m
2.5 £5-10m £10- 25m 2
£25-70m 1.5
1
£70m+ 0.5
0 Number of indie companies
Source: Broadcast Magazine, Oliver & Ohlbaum analysis 8 The TV content production sector CONFIDENTIAL
The evolution of the UK TV content production sector Increased share of UK commission spend, smaller indies are claiming more share
The largest indies’ share of UK commission spend has declined over the last year, i.e. the so called “super indies” with more than £70m in turnover. The indies in the £25-70m turnover bracket have gained the most from this shift in spend
Share of spend on UK externally produced primary commissions turnover band of producer, 2008 to 2013
Percent Less than £1m 100% 0% 0% 0% 0% 0% 3% 3% 4% 6% 6% 4% £1-5m 5% 4% 7% 2% 3% 6% £5-10m 90% 10% 13% 11% 16% 14% £10-25m 80% 29%
70%
36% 32% 60% 33% 29% 40% £25-70m
50% 23%
40%
30%
47% 46% 44% 46% 20% 40% 37% £70m+
10%
0% 2008 2009 2010 2011 2012 2013 Note: *Primary commissions expenditure data excludes all expenditure on news and sports programmes and rights but includes expenditure on all regional and nations and regions programmes Source: Ofcom Communications Reports, BARB, Company reports, O&O / Pact Census, Oliver & Ohlbaum analysis 9 The TV content production sector CONFIDENTIAL
The evolution of the UK TV content production sector Indies have been able to generate secondary revenues on rights retained
Indies (including currently qualifying indies and current and future non-qualifying indies) generate approximately £300m in content rights from UK commissions.
Indie revenues from UK content rights by category - 2013 Illustrative revenue windows for UK content rights
£303m 100% REPEAT USE OF PROGRAMMING 1% 3% OTHER MERCHANDISING
90% 14% OTHER*
MOBILE 80% 0% 1st TX 5% FORMATS 5% NEW MEDIA 70% 1% PUBLISHING 3% DVD & VIDEO SALES Primary licence commercial holdback (typically 2 years, can be longer) 7% DISTRIBUTION ADVANCE 60% DTO (from TX+7; May be TX+1 in some cases)
50% DVD release (tends to be seasonally driven)
SVoD release 40% INTERNATIONAL FINISHED UK secondary release 51% PROGRAMME SALE 30%
20% 6 12 18 24 36 Months
10%
9% UK SECONDARY TV SALES 0%
* ‘Other’ includes advertising, PRTS, and other activities such as music publishing, live events, gambling, product integration, ancillary & digital rights and cable relay 10 Source: Pact census, Oliver & Ohlbaum analysis The TV content production sector CONFIDENTIAL
The evolution of the UK TV content production sector Indie sector profitability has seen some recovery, but remains challenging
Sector average net margins improved only slightly in 2013
Net margins, 2004 to 2013 Percent
14% 13.0%
12%
10% 9.3%
8.4% 8.5% 8.0% 8% 7.0% 6.7%
6% 5.3% 5.0%
4%
2%
0%
2004 2006 2007 2008 2009 2010 2011 2012 2013
Source: Pact census, Oliver & Ohlbaum analysis 11 Contents
The evolution of the UK TV content production sector
Appendix - Main trends in originated output - The UK external sector - Terms of Trade
12 The TV content production sector CONFIDENTIAL
Trends in originated output Growth in spend on UK content has been modest in recent years
There has only been modest growth in spending on UK content since 2009. This growth has been on the back of increased multichannel spend on UK content rather than PSB spend, although PSBs remain the main spenders
Spend (incl news and sport*) on UK content by main PSB networks and multichannels – 2009-2013
£m CAGR 2009-13 3,500
3,157 3,079 3,062 2.0% 122 MC SECONDARY 3,000 2,925 122 124 7.2% 2,825 RIGHTS 103 94 540 522 MC FIRST RUN 367 597 11.4% COMMISSIONS 2,500 387 173 200 196 PSB SECONDARY (5.0)% 187 153 RIGHTS 2,000
1,500
2,255 2,323 PSB FIRST RUN 0.4% 2,157 2,239 2,188 1,000 COMMISSIONS
500
0 2009 2010 2011 2012 2013
* Sport excludes rights for multichannels, inlcudes rights for PSBs 13 Source: Ofcom broadcaster returns, COBA, O&O analysis The TV content production sector CONFIDENTIAL
Trends in originated output PSB spend on content has been cut back
PSBs have been cutting back on programme spending across the board
Content spend by main PSB networks (incl news and sport)– 2008-2013
£m CAGR 2008-13 3,000 2,798 2,700 2,656 2,581 2,620 289 (2.2)% 244 160 2,504 2,500 185 238 196 173 163 ACQUISITIONS (10.8)% 200 196 187 153 REPEATS (4.9)%
2,000
1,111 951 1,058 1,030 FIRST RUN EXTERNAL (0.9)% 1,006 1,062 COMMISSIONS 1,500
1,000
1,304 1,265 FIRST RUN IN-HOUSE (1.3)% 1,202 1,151 1,209 1,127 500 COMMISSIONS
0 2008 2009 2010 2011 2012 2013
Source: Ofcom broadcaster returns 14 The TV content production sector CONFIDENTIAL
Trends in originated output Total originated first run output has decreased
First run output hours have also declined although with some recovery over the last year. Genre focus has changed in favour of factual entertainment and factual. The cost per hour has been largely static apart from a dip in 2010
First run origination hours (excl news and sport), 2006-2013
All day – by channel All day – by genre Hours Hours 12,269 12,269 12000 11,393 11,432 11,500 12000 11,393 11,432 11,500 1505 10,906 915 10,906 Other 860 741 1228 Channel 5 920 827 1,274 87 Children’s 1657 1185 829 10000 10000 589 118 1,191 Drama 2142 1,262 384 2353 2094 Channel 4 1,174 1,086 1,064 1942 2289 1,586 Factual 8000 8000 2,048 1,288 1,198 1,370 1,632 3674 1,391 1,466 Current Affairs* ITV1 1,317 1,713 3232 3868 3541 6000 3169 6000 1,404 2,298 2,719 Fact Entertainment 2,551 2,576 4000 4000 2702 2091 BBC2 2207 1997 1943 4,401 2000 2000 3,826 3,226 3,483 3,545 Entertainment 2246 2355 2355 2321 2546 BBC1 0 0 2006 2008 2010 2012 2013 2006 2008 2010 2012 2013
Cost per 147 129 145 141 hour £K
* The Increase in Current Affairs output in non-peak 2013 is mainly down to programmes such as Cowboy Trap, The Sheriffs are Coming and Don’t Get Done Get Dom on the BBC
Source: BARB, Ofcom, Oliver & Ohlbaum analysis 15 The TV content production sector CONFIDENTIAL
Trends in originated output Peak time originated first run output has grown
There has been an increase in first run originated peak time output. The genre focus has shifted in favour of Factual programmes. Cost per hour is showing signs of recovery
First run origination hours (excl news and sport), 2006-2013
Peak time – by channel Peak time – by genre Hours Hours 5000 5000
4,360 4,336 4,360 4,336 4500 4,215 4500 4,215 Other 106 71 3,822 465 502 Channel 5 99 304 321 4000 3,726 476 4000 3,726 3,822 Current Affairs 98 533 394 171 3500 378 3500 318 Fact Entertainment 943 912 263 987 900 951 Channel 4 355 949 3000 726 736 3000 857 701 912 Entertainment 2500 915 929 ITV1 2500 1,028 784 877 799 746 848 2000 2000 1,071 980 Drama 1500 954 914 1091 999 BBC2 1500 893 901 1,009 895 1000 1000
500 1,165 1,042 1,152 Factual 500 921 954 998 945 994 BBC1 793 891 0 0 2006 2008 2010 2012 2013 2006 2008 2010 2012 2013
Cost per 318 265 276 288 hour £K
Source: BARB, Oliver & Ohlbaum analysis 16 The TV content production sector CONFIDENTIAL
Trends in originated output The share of new versus returning commissions has declined
The volume of new commissions has declined at an annual rate of 8.3% since 2006 with a slight recovery in 2013. Returning commissions have continued to grow over the period
UK: New versus returning commissions (excl news and sport), first run output hours on main PSB networks
Hours
14,000 CAGR 2006-13
12,269 (0.9)% 12,000 11,393 11,432 11,500 10,905
10,000
8024 8,000 8510 8570 9192 RETURNING 2.0% 8750 6,000
4,000
2,000 4244 2823 2922 2155 2308 NEW (8.3)%
0 2006 2008 2010 2012 2013
Source: BARB (Attentional), Oliver & Ohlbaum analysis 17 Contents
The evolution of the UK TV content production sector
Appendix - Main trends in originated output - The UK external sector - Terms of Trade
18 The TV content production sector CONFIDENTIAL
The UK external sector The major independent producers have recovered their output hours on PSBs
Following a drop between 2006 and 2009, the major independent producer groups have recovered their volume of first run origination output on the main UK networks
UK: First run output hours on main PSB networks by independent producer group* • Endemol and Fremantle have both seen a decline in programming output on the main UK Hours networks since 2006
3,430 • All3Media made good recovery in 2013. It lost 3,500 significant hours in 2012 with the sell back of 3,251 44 NBCU 222 Cactus TV to its founders 59 SHED 195 3,000 2,882 376 FREMANTLE • Shed, Shine, Zodiak and NBCUniversal have all 25 improved their position, albeit coming from a 130 329 2,620 lower base 98 1 2,492 253 400 ZODIAK 2,500 2 347 137 • Shine’s big increase in hours from 2010 to 2011 345 was due to the commissioning of chat/current 324 735 affairs shows Live with Gabby, The Vanessa 514 711 ALL3MEDIA 2,000 86 Show and The Wright Stuff Extra, although it 575 experienced a drop in 2013 68 580 1,500 492 888 541 798 SHINE 94 536 1,000
1,132 500 1,012 828 920 879 ENDEMOL
0 2006 2008 2010 2012 2013 *Measured according to prodcos that were part of the groups in each respective year
Source: BARB (Attentional), Oliver & Ohlbaum analysis 19 The TV content production sector CONFIDENTIAL
The UK external sector There has been some movement in the use of external commissions by networks
External hours on the BBC have increased slightly, while there has been a decrease in external hours on ITV. Channel 4 and Channel 5 have remained largely unchanged in recent years
External commissioning share of all hours - 2006 to 2013
Share of hours
100% 100% 100% 99% 100% 99% 100% 99% 100% 97%
Channel 4 90% 82% 80%
70%
60%
50% ITV 42% Channel 5 40% 35% 33% 33% BBC 30% 30% 28% 25% 26% 23% 23%
20%
10%
0% 2006 2008 2010 2012 2013
Source: BARB (Attentional), Oliver & Ohlbaum analysis 20 The TV content production sector CONFIDENTIAL
The UK external sector The use of external commissions by networks – excl news and sport
The trend remains when looking at qualifying hours, excluding news and sport
External commissioning share of hours (excl news and sport) - 2006 to 2013
Share of hours 100% 100% 100% 100% 100% 99% 99% 100% 98% 94% 92% Channel 4 90%
80%
70%
60% 54% ITV 48% 50% 47% 46% 43% 42% 42% Channel 5 39% 39% 40% 34% BBC
30%
20%
10%
0% 2006 2008 2010 2012 2013
Source: BARB (Attentional), Oliver & Ohlbaum analysis 21 The TV content production sector CONFIDENTIAL
The UK external sector The share of new commissions by the major independent producers has fallen
The major independents have seen their share of new commissions fall significantly since 2006 (with the exception of NBCUniversal). Shed and All3Media have remained more stable
UK: New commissions, first run output hours on main PSB networks by independent producer group
Hours 1,000
900 870 1 802 800 173 27 35 700 640 154 CAGR 2006-13 14 600 169 114 522 528 58 24 NBCU 61.9% 17 500 62 26 FREMANTLE (23.7)% 114 48 62 ZODIAK (13.3)% 400 284 90 202 49 81 SHED 3.9% 89 300 90 81 ENDEMOL (12.2)% 41 200 112 54 82 SHINE (4.3)% 125 106 100 190 178 151 132 124 ALL3MEDIA 2.4% 0 2006 2008 2010 2012 2013
• Fremantle, Zodiak and Endemol have seen the biggest drop in new commissions from the main networks. All other major indie groups have performed better than the market average growth. • All3Media has recovered somewhat in 2013 and continues to be the biggest single supplier of new indie output. The market share of the next four groups has evened out in the last few years.
Source: BARB (Attentional), Oliver & Ohlbaum analysis 22 The TV content production sector CONFIDENTIAL
The UK external sector Genre specialisms of independent producers – a move out of entertainment
There has been a move out of entertainment and into factual entertainment specialism among indie producers. Factual has regained some ground in recent years
Hours All day – by genre
100% 6% 11% 10% 10% Other 18% 90% 7% 1% 1% Children’s 2% 5% 3% 5% Current Affairs 3% 7% 80% 7% 3% 8% Drama 6% 3% 7% 15% 70% 12% 17% Factual 25% 12% 60%
50% 34% 37% 29% Entertainment 28% 40%
41% 30%
20% 30% 31% Factual Entertainment 26% 29% 10% 12% 0% 2006 2008 2010 2012 2013
Hours 6,056 6,065 6,009 6,025 6,211
The increase in “other” in 2010 is largely down to an increase of Nightscreen programming and “The Zone – Netplay / QVC” on ITV
Source: BARB, Oliver & Ohlbaum analysis 23 The TV content production sector CONFIDENTIAL
The UK external sector Genre specialisms of major independent producer groups (i)
Since 2006, Endemol has seen it return to predominantly having entertainment shows commissioned (mostly Big Brother), whilst Fremantle has diversified away from entertainment towards factual entertainment
Major independent producers: Genre mix*, 2006 versus 2013: Endemol and Fremantle
Share of hours
100% Other 2% 4% Other 7% Current Affairs 2% Drama 3% 90% 12% Drama 7% Factual 26% Factual Entertainment
80% 29% Children’s 13% Factual Entertainment
70%
60% 20% Factual
50% 38% 84% 40% 74% Entertainment
30% 51% Entertainment 20%
26% 10%
0% 2006 2013 2006 2013 ENDEMOL FREMANTLE Note: Genre mix on 5 main PSB networks only Source: BARB (Attentional), Oliver & Ohlbaum analysis 24 The TV content production sector CONFIDENTIAL
The UK external sector Genre specialisms of major independent producer groups (ii)
All3Media and Zodiak have both had more hobby and leisure output commissioned, moving away from entertainment, factual and drama, and in All3Media’s case sport
Major independent producers: Genre mix*, 2006 versus 2013: All3Media and Zodiak
Share of hours
Other 100% Other 1% Children’s Current Affairs 4% Current Affairs 13% 1% Drama 90% 20% 22% Drama 3% 1% 80% 5% 1% Children’s
70% 48% Factual Entertainment 24% 23% 60%
50% 53% Factual Entertainment
23% 40% 10% Factual
30% 49%
13% 20% 13% Factual 36% Entertainment
10% 17% 11% Entertainment 6% 0% 2006 2013 2006 2013 ALL3MEDIA ZODIAK Note: Genre mix on 5 main PSB networks only Source: BARB (Attentional), Oliver & Ohlbaum analysis 25 The TV content production sector CONFIDENTIAL
The UK external sector Genre specialisms of major independent producer groups (iii)
Shed is still mainly focussed on factual programming, whilst Shine has seen most commissions coming from its entertainment strands. Both have seen a drop in drama output
Major independent producers: Genre mix*, 2006 versus 2013: Shed and Shine
Share of hours
Other 100% 1% 3% 4% Other 5% 3% Drama 3% Current Affairs 1% Children’s 90% 9% 19% Drama
80% 23% 30% Factual Entertainment 18%
70% 18% Factual Entertainment 7% 6% Factual 17% 60%
50%
40% 45% Factual
30% 61% 60% Entertainment 53%
20%
10% 14% Entertainment
0% 0% 2006 2013 2006 2013 SHED SHINE Note: Genre mix on 5 main PSB networks only Source: BARB (Attentional), Oliver & Ohlbaum analysis 26 The TV content production sector CONFIDENTIAL
The UK external sector All3Media – Key deals over time
Over the longer term, qualifying status has only been affected by broadcaster / studio deals in recent years. Prior to this was the creation of the “super-indies” (indies buying other indies) which did not affect indie status
Management buy out of Chrysalis TV Purchased by Discovery / LG
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Bentley Productions North One Cactus TV
Company Pictures Lion Television
Lime Pictures
Maverick Objective Productions Zoo Productions
Studio Lambert
One Potato Two Potato Optomen
Cactus TV
John Stanley Productions Little dot studios
Apollo 20
27 The TV content production sector CONFIDENTIAL
The UK external sector Fremantle – Key deals over time
The sale of Channel 5 has marked the only significant event of a non-qualifying production group becoming a qualifying indie
C5 sold
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Thames Talkback
Boundless
Retort Newman Street
28 The TV content production sector CONFIDENTIAL
The UK external sector Endemol – Key deals over time
Purchased by 21 CF / Apollo
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Initial Zeppotron
Cheetah
DSP Remarkable Television Tiger Aspect Tigress
Artists Studio
29 The TV content production sector CONFIDENTIAL
The UK external sector Shine – Key deals over time
Organic creation Purchased by 21CF
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Shine TV Shine North
Kudos Princess Productions
Dragonfly
Brown Eyed Boy
Bossa Studios
Channel Flip
30 The TV content production sector CONFIDENTIAL
The UK external sector Warner Bros. Television Productions UK (formerly Shed) – Key deals over time
Organic creation Purchased by Time Warner
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Shed Productions Watershed Yalli Productions Shed Media Scotland
Ricochet
Wall to Wall Twenty Twenty Television
Studio Lambert
Renegade
31 The TV content production sector CONFIDENTIAL
The UK external sector Zodiak – Key deals over time
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
IWC Media Touchpaper Television
The Foundation
Bullseye Productions
Lucky Day Productions Red House
RDF Television The Comedy Unit Presentable Productions
Bwark Productions
32 Contents
The evolution of the UK TV content production sector
Appendix - Main trends in originated output - The UK external sector - Terms of Trade
33 The TV content production sector CONFIDENTIAL
Terms of Trade Timeline of key events in the run up to Terms of Trade
Prior to ToT the indie sector was highly fragmented and was highly dependent on the main PSB network groups. There was little scope to negotiate on production fees or take strong positions in rights against which to build up an asset base
2002 2004 ITC PSR Negotiated 1986 1993 1997 recommends ‘Terms of Trade’ Peacock Independent quotas Launch of Channel negotiated terms come in to force Committee become a statutory 5 as new PSB of trade to recommends 40% requirement for broadcaster counter-balance independent quota PSB channels inequality in bargaining power 1982 1990 1996 1998 Channel 4 launch Broadcasting Act Broadcasting Act Channel 4 agrees 2003 2006 stimulates growth introduces 25% introduces 10% out of London Communications Following Ofcom of independent independent independent quota of 30% Act mandates TPSR, Heads of Terms sector quota quota on DTT broadcaster Codes agreed between channels of Practice broadcasters and Pact for new media rights 1980s 1990s 2000s
1998 2003 Millionaire Chrysalis TV premiers in the (All3Media) UK produced by MBI backed by Celador Bridgepoint (Euro 72m) 1999 Millionaire premiers in the US on ABC
2001 Pop Idol premieres on UK television 34 The TV content production sector CONFIDENTIAL
Terms of Trade Revenue covered by Terms of Trade by window
Primary UK commissions continue to constitute the main source of revenue covered by Terms of Trade, although international sales are now as important as UK secondary rights income
Indie revenues by window covered by Terms of Trade – 2006-2013
£1,334m £1,678m £1,597m £1,876m £1,971m 100% 3% 4% 5% INT’L SALES OF UK 8% 8% FINISHED PROGRAMMES* 8% 6% 90% 10% 7% 10% UK RIGHTS INCOME*
80%
70%
60%
50%
89% 90% PRIMARY UK 85% 85% 40% 82% COMMISSIONS
30%
20%
10%
0% 2006 2008 2010 2012 2013 * 35 Source: Pact census, Oliver & Ohlbaum analysis The TV content production sector CONFIDENTIAL
Terms of Trade Windows and platforms collapsing
1st TX in originating country
Primary licence commercial holdback (typically 2 years, can be longer)
DTO (from TX+7; May be TX+1 in some cases)
UK DVD release (tends to be seasonally driven) commissions SVoD release (moving earlier)
UK secondary release (UKTV)
6 12 18 24 36 Months 1st Pay window (moving to 12 months exclusive)
st US Imports DTO (from 1 run series end) DVD release (tends to be seasonally driven)
SVoD release (moving earlier) Sky use threat of side-loading from DVR to secure more VoD FTA or 2nd pay TV window rights, otherwise can use this to limit SVoD window value
36