We’re delighted to present another guest post from Tabitha Elwes of Prospero, an advisory firm that specialises in the media and sports industries. 

The global strength of UK independent production partially reflects the success of regulatory intervention in the form of the indie quotas and Terms of Trade. However, with the sale of All3 to Discovery and Liberty and the potential merger of Endemol, Shine and Core, is that intervention still fit for purpose? Prospero has undertaken a study to identify trends and implications for the sector.

Over the last five years the turnover of UK independent production has grown by 6% a year to £2.1bn in 20131. A rise in international and multi-channel spend has offset broadly flat UK PSB commissions.

Beneath the headline a more interesting story emerges. At a label level (i.e. before looking at consolidation into “mega-indies”) value is slowly but surely leaching away from smaller companies. In 2009 the top 50 indies accounted for 63% of sector revenue, by 2013 they accounted for 79%, with just 20 labels accounting for 54% of revenue.

Market Share of Major Labels

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It is the mid-tier labels that have seen the biggest growth, suggesting this may be the size that manages best to balance creative independence and scale synergies.

Average Annual Growth 2009-13

diag 2

The above analysis, however, understates the degree of change, notably the rise of the “mega-indie”. While stand-alone labels accounted for 67% of revenue in 2009, they now account for only 29%.

Share of Non-Consolidated Labels

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The acquisition of labels by international broadcasters means that (post the Endemol and All3 deals) indies accounting for nearly half the sector revenue will be non- qualifying. Only 44% will be UK-owned, while 47% will be owned by US players.

% Qualifying and UK-Owned

Diag 4

Five groups will account for over 50% of sector revenue and the top ten will control nearly 70%. Only three of these top ten are controlled by UK companies.

Share of Major Groups

Diag 5

Closer examination of these top five, shows how much the sector and players have changed since 2009.

Share of Major Groups

Diag 6

In summary, if the All3 and Endemol deals go through, only half of the indie sector will be “qualifying”, less than half will be UK- owned and ten groups will account for nearly 70% of revenues. Given this, are existing indie regulations still relevant and sustainable or has the intervention achieved its purpose? Specifically,

  • Can the BBC and ITV balance indie quotas with in-house production? The BBC in particular could see its qualifying hours decline significantly.
  • With 20% of UK commissioning now from commercial multi-channels with lower quotas, does the regulatory framework need to be rebalanced?
  • Is there risk to long-term investment if nearly 50% of the sector is US-owned?