The Future of the Entertainment Sector Brochure 2
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CREATING GROWTH THE FUTURE OF THE UK ENTERTAINMENT SECTOR NNLP_white_paperLP_white_paper 5.indd5.indd 3 001/04/20151/04/2015 08:2508:25 NNLP_white_paperLP_white_paper 5.indd5.indd 4 001/04/20151/04/2015 08:2508:25 CREATING GROWTH: THE FUTURE OF THE UK ENTERTAINMENT INDUSTRY CONTENTS: Nyman Libson Paul We started in 1933 when the wonderful world of celluloid was in its infancy, TV 6 providing a wide range of services from traditional accountancy and tax compliance to much broader commercial and business advice. Over 80 years Film 10 later we have looked after some of the biggest and brightest stars and projects Animation 14 in Film, TV, Music and Theatre. This continues to the day with our knowledge and expertise expanding into the world of Animation, Video Games and Digital Video Games 18 as we continue to evolve with our client base. Our network and knowledge extend around the world assisting our clients with their global ambitions and Theatre 22 keeping pace with the rapid globalisation of the entertainment industry. References 26 Executive Summary Though a year of uneven economic growth, 2014 was highly successful for the UK’s creative industries. A recent government report reveals that the creative industries are now worth £76.9 billion a year to the UK economy, with the gross value added having risen to 9.9%, a marked increase on 2013.1 What’s more, the UK entertainment industy is predicted to grow annually by 3.1% until at least 2018, giving investors the confi dence to invest even further in the creative industries.2 Indeed, this investment provides an important opportunity for Britain to consolidate its international position. Demand for British television and fi lm content is high across the globe, and by empowering production companies and supporting the expansion of fi lm studios, the UK will be able to entrench its role as one of the world’s leading producers for fi lm and TV. Likewise, the UK has the opportunity to use the global popularity of animation to increase the size of its industry, and allow it to compete for digital as well as cinematic projects for decades to come. Whilst these industries will continue to grow steadily, 2015 will be a dramatic year for British video game producers. As mobile phones overtake consoles as the most popular gaming device, the largely mobile-centred UK industry will have the chance to steal ahead of international rivals, and fi rmly establish the UK’s place as a tech leader. Whilst the UK’s position as the global theatre capital is much more certain, the next year will present the theatre industry with opportunities to follow that popularity with greater profi t, and thus to attract new investors to Britain’s oldest form of entertainment. What is certain, however, is that with game developers growing alongside theatre producers, there has never been a better time to invest in British creativity. 5 CREATING GROWTH: THE FUTURE OF THE UK ENTERTAINMENT INDUSTRY Television The popularity of UK TV exports is greater than ever, with high- end tax relief and new investment opportunities, combined with a global trend for Pay-TV services, increasing international demand for British content. In order to meet this demand, the BBC is due to commission more drama series, whilst pan- European funding agreements are allowing producers to create higher-quality, cinematic programming to meet the needs of today’s more eager and discerning television audience. KEY FACTS & FIGURES £12.9BN 46% 168 The British TV industry generated £12bn 46% of the BBC’s programming was There are currently 168 TV production in revenue in 2013, of which £1.3bn produced externally in 2011/2, a fi gure companies based in the UK.9 came from sales to international markets that is expected to grow even bigger in the (a 5% increase on 2012).3 coming years.6 1.9 MILLION 1.9 million hours of television was £465M NO. 3 broadcast in the UK in 2013, of which The UK TV industry generated £465m The UK is now marked third in the world 30,092 were fi rst-run original content from television exports to the USA alone. for the export of television content.7 shown on the fi ve PSB channels.10 It is predicted that exports to the ABACUS countries (Africa, Brazil, Australasia, China and the USA) will double by 2018.4 £395M 50% £394m was spent on television production Half of all UK adults now claim to have qualifying for HTR between April 2013 and used a Video on Demand (VOD) service £575M May 2014, including £225m of inward in the past twelve months, a fi gure which A £575M boost to the creative economy investment.8 has almost doubled since 2010. Netfl ix is expected if the BBC decides to focus is the fastest growing VOD service, with a on acting as a publisher broadcaster, 6% growth in popularity between Q3 2013 investing in work from external production and Q1 2014.11 companies.5 6 CREATING GROWTH: THE FUTURE OF THE UK ENTERTAINMENT INDUSTRY is little doubt that the BBC will continue in the UK in 201426. With major SVOD KEY TRENDS to create many more opportunities for it to providers now producing their own content fl ourish, in order to serve both its viewers (such as Netfl ix’s House of Cards and and the UK television industry. Amazon’s Transparent) this trend looks The Future of the BBC set to continue even further, and the UK Changes to the way the BBC is run are The rise and rise of Pay-TV is leading it. It is Europe’s strongest SVOD market by far, with revenues exceeding creating huge new opportunities for The transformative effects of Pay TV $1.75 billion, more than 30% of all the independent television industry in services on the industry are only just being European SVOD revenue.27 the UK. For several years, the BBC has understood. As well as driving consumers been increasing the number of externally to watch more content, Pay TV is leading Pan-European Collaboration produced programmes it broadcasts, in them to demand a greater variety of order to improve the quality of its content. programming, in many new formats. A These transformations can already be seen A ‘Window of Creative Competition’ was recent report has revealed that rather than in the variety of the content consumers established in 2007, allowing external cutting the cords of unwanted services, are choosing to view online. As well as companies to compete with the BBC for viewers are actually accumulating multiple popular American series such as Breaking 12 25% of its programming. By 2014, Pay TV subscriptions21. Whereas families Bad and Game of Thrones, programmes independent producers were winning once shared a single content package, it is such as the Danish series The Killing all of the commissions in areas such as now common for individual family members and Sweden’s Wallander have achieved drama and natural-world documentaries to hold separate Pay TV subscriptions, global success online, reaching an and the BBC is now expected to abolish signifi cantly increasing household spending audience far greater than their domestic quotas for these categories, allowing on television content. Pay TV services also markets. Indeed, broadcasters in over external producers to produce much lead to greater consumption by encouraging 120 countries, as well as Netfl ix, have 13 more of its content. In July 2014, binge watching, in which viewers watch purchased the rights to The Killing28, and BBC Director General Tony Hall called several episodes of a series in a single sitting. the Danish-UK Chamber of Commerce has 14 for a “competition revolution” that As binge watching becomes an increasingly suggested that it has been so popular that could create £400m in commissioning popular form of relaxation, customers will be it helped to broker a number of trade deals opportunities15. This process began in willing to spend more on subscriptions, and between the countries.29 The global reach October, with the BBC announcing that industry revenues will increase. Indeed, the of The Killing thus reveals the extent to it had cut seven production roles from its full effects of Pay TV on the industry have which online TV services are creating new drama department16, in order to encourage yet to be realised. Despite the fact that 73% possibilities for domestic television content. commissions from external production of all viewers enjoy binge watching22, those With programmes such as Downton Abbey, companies. earning over $55,000 are almost twice which recorded the highest ever viewing as likely to binge watch as those earning fi gures for a première on US station PBS30 When the BBC’s Royal Charter is under $20,000, due to the higher cost of and has been seen by 160 million viewers renewed in 2016 opportunities for British Smart TVs23. As these fall in price, consumer in China31, the UK is especially well poised production companies are expected to demands will increase even further, and to take advantage of Pay TV’s ability increase even further. Pact – the trade transform the television industry. to build a lucrative global audience for association representing British television domestic TV content. producers – has revealed that consumer The rise of Subscription Video on Demand demand for independent content has (SVOD) services, for which consumers The UK is also benefi ting from the new increased, following the success of pay a monthly subscription giving them funding and production relationships shows such as Sherlock and The Voice, unlimited access to movies and television that this audience allows.