Television Production in Transition: Independence, Scale, Sustainability and the Digital Challenge (Palgrave Global Media Policy and Business) [1st ed. 2021] 3030632148, 9783030632144

Table of contents :
Preface
Contents
List of Figures
List of Tables
1 Introduction
What Is Television Production?
Typology of Production Companies
Independent Producers or Indies
Vertically Integrated
Conglomerates and Super-Indies
Why Does Television Production Matter?
Television Production in Transition—Aims and Methods
Layout of the Book
References
2 International Trends
Early Formation, Growth and Internationalisation
Key Territories
Us
Europe
Rest of the World
Digitisation and Convergence
References
3 From Minnows to Sharks
Early History
Annan Report and Channel 4
Peacock, the 1990 Act and Increased Competition
2003 Communications Act
Success, Growth and Consolidation
References
4 Business Performance and Advantages of Takeover
Performance Measurement
Determinants of Business Performance
Advantages Conferred by Takeover
Advantages of Scale
Market Access
Bargaining Power
Informational Advantages
References
5 Scale, Independence and Economic Sustainability
Specialist Financial Intermediaries and M&A Activity
Trade Buyers Versus Professional Investors
Strategic Complementarity
Building Scale
Vertical Expansion
International Reach
Reconfiguring for the Digital Era
Scaling up and Remaining Independent: The Challenges
References
6 Configuration and Content
Measuring Content
Ownership, Control and Content: A Complex Relationship
Corporate Configuration and Content: Findings
Creative and Business Leadership
Commercial Ambitions, Content Strategies and Continuity
The Corporate Behemoth
Strategic Function and Content
Horizontally Integrated Super-Indies
Vertically Integrated Broadcaster Producers
Distribution Plus Production
Transnational Groups
References
7 Cultural Production, Indigeneity and Globalisation
He Who Pays the Piper Calls the Tune
Non-scripted Factual and Entertainment
Scripted Content
Is There Such a Thing as British Content?
Home Versus International Markets
IPRs and Windowing
References
8 Conclusions and Implications for Policy
Changing Corporate Ownership Configurations
Do We Need TV Production Companies that Are Independent?
Is the Definition of Independents Still Valid?
Sustaining Renewal
Digital Transformations and the Challenges for Policy
References
Bibliography
Index

Citation preview

PALGRAVE GLOBAL MEDIA POLICY AND BUSINESS

Television Production in Transition Independence, Scale, Sustainability and the Digital Challenge Gillian Doyle · Richard Paterson Kenny Barr

Palgrave Global Media Policy and Business

Series Editors Petros Iosifidis, Department of Sociology, City University, London, UK Jeanette Steemers, Culture, Media & Creative Industries, King’s College London, London, UK Gerald Sussman, Urban Studies & Planning, Portland State University, Portland, OR, USA Terry Flew, Creative Industries Faculty, Queensland University of Technology, Brisbane, QLD, Australia

The Palgrave Global Media Policy and Business Series has published to date (2017) 15 volumes since its launch in 2012. Concentrating on the social, cultural, political, political-economic, institutional, and technological changes arising from the globalisation of media and communications industries, the series considers the impact of these changes on matters of business practice, regulation and policy, and social outcomes. The policy side encompasses the challenge of conceiving policy-making as a reiterative process that recurrently addresses such key challenges as inclusiveness, participation, industrial-labour relations, universal access and freedom in an increasingly globalized and transnationalized world. The business side encompasses a political economy approach that looks at the power of transnational corporations in specific contexts—and the controversies associated with these global conglomerates. The business side considers as well the emergence of small and medium media enterprises. Focusing on issues of media convergence, industry concentration, and new communications practices, the series analyses the tensions between systems based on national decision-making and publicly-oriented participatory structures and a more global perspective demarcated by commercialization, privatization and monopolization. Based on a multi-disciplinary approach, the series tackles three key questions: • To what extent do new media developments require changes in regulatory philosophy and objectives? • To what extent do new technologies and changing media consumption require changes in business practices and models? • And to what extent do privatisation, globalisation, and commercialisation alter the creative freedom, cultural and political diversity, and public accountability of media enterprises?

More information about this series at http://www.palgrave.com/gp/series/14699

Gillian Doyle · Richard Paterson · Kenny Barr

Television Production in Transition Independence, Scale, Sustainability and the Digital Challenge

Gillian Doyle CCPR University of Glasgow Glasgow, UK

Richard Paterson CCPR University of Glasgow Glasgow, UK

Kenny Barr CCPR University of Glasgow Glasgow, UK

ISSN 2634-6192 ISSN 2634-6206 (electronic) Palgrave Global Media Policy and Business ISBN 978-3-030-63214-4 ISBN 978-3-030-63215-1 (eBook) https://doi.org/10.1007/978-3-030-63215-1 © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. Cover illustration: Alex Linch, shutterstock.com Cover design by Spi This Palgrave Macmillan imprint is published by the registered company Springer Nature Switzerland AG The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland

Preface

This book is based on findings from a research project entitled Television Production in Transition: Independence Scale and Sustainability which was led by Professor Gillian Doyle (Principal Investigator) and conducted by her and a team comprising Co-Investigator Richard Paterson, former Head of Research and Scholarship at the British Film Institute, and Research Associates Dr. Kenny Barr and Dr. Michael O’Neill, all based at the Centre for Cultural Policy Research at the University of Glasgow. We gratefully acknowledge the support of the Economic & Social Research Council (Reference ES/N015258/1). The broad objectives of our study, which ran from April 2017 until October 2020, were to investigate the implications of recent restructurings in ownership that have swept across the UK and international television production industry. Recent transformations in ownership of television production, characterised by increasing consolidation, have raised concerns about the ability of ‘independent’ production to survive and flourish in an increasingly globalised and competitive environment for television. Our project investigated the relationship between independence, scale and economic sustainability in the UK television production sector. In addition, we conducted extensive empirical research into the effects of recent changes in ownership on creative decision-making and content. We also analysed the implications of our findings for public policy. Our study centred on the experience of a carefully selected sample of UK-based television production companies as case studies. While our v

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focus was mainly on ownership and on understanding how the economic performance and content of production companies is affected by differing sorts of corporate ownership configuration, it should be acknowledged that factors other than ownership can and do shape how production companies fare and what content they make. The scope of our research, while confined in terms of focus, geography and time, has enabled us to create a unique and ground-breaking analysis of transformations that are widely affecting the television production industry worldwide. Even so, as the television landscape evolves and as globalised platforms continue to gain economic power, there is no shortage of opportunities for further research on questions around how content is affected by the industrial change, how television production companies can adjust successfully to advancing technology and how public policy can help ensure that independent production continues to thrive. In our analysis we drew on two original quantitative databases created for the project. One of these examines the business performance of our sample group over an eleven year period from 2007–2017 and is based on data drawn from analysis of company report and accounts and other secondary sources of financial data, including the indispensable survey of the production sector commissioned by PACT annually and produced by leading media consultancy Oliver & Ohlbaum Associates (Oliver & Ohlbaum, 2019). The second database analyses the sort of content produced by the sample group and is based on categorising, coding and rating their content outputs (according to such measures as distribution reach, ratings and awards received) over the same 2007–2017 study period. Our investigation also involved extensive fieldwork including some 50 interviews with corporate financiers specialising in takeovers in the television industry, key policy-makers and with senior executives at production companies and at their parent companies. Interviewees at selected production companies included Chief Executive Officers and heads of legal and business affairs with responsibility for business strategy, senior distribution executives and Chief Creative Officers with responsibility for overseeing content production. Our interviews (with only a couple of exceptions, which were conducted by telephone) were generally all audio-recorded face-to-face. All were professionally transcribed with full confidentiality observed where requested. We have given the dates and the locations on which these interviews took place. We have in all cases respected the wishes of contributors and, in instances where we have been unable to

PREFACE

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directly cite our sources, they have nonetheless very valuably informed our study. We thank Research Associate Dr. Michael O’ Neill who participated throughout the research project. In particular, we are grateful for Michael’s work in coding, categorisation and measurement of programming outputs for our sample group of companies—his care and efficiency was invaluable in completion of the content database. We are very grateful to interviewees, including the following, who kindly consented to participate in our research: Sir Peter Bazalgette at ITV, Zai Bennett at Sky Television, Ross Biggam at Discovery, Roberto Suarez Candel of the European Broadcasting Union, Nick Catliff at Lion Television, Susan Cooke at Media Wizards, Ed Coulthard at Blast! Films, Simon Cox at Endemol Shine International, Andrew Critchley at Red Productions, Tim Davie at BBC Studios, Thomas Dey at About Corporate Finance, Bruce Dixon at Pulse Films, Sachin Dosani at Wonderhood Studios, Matt Elek at Vice, David Frank at Dial Square, Jane Featherstone at Sister Pictures, Wayne Garvie at Sony Pictures Television International, Charlie Goldberg at Left Bank Pictures, Anna Herold at GD CNECT of the European Commission, Tim Hincks at Expectation Entertainment; Jacquie Hughes at Ofcom, Alastair Jones at DCMS, Elena Lai of CEPI, Rose Lubega at DCMS, Kevin Lygo at ITV Studios, Debbie Manners at The Ingenious Group, Richard McKerrow at Love Productions, Stewart McKinnon at Headline Pictures, John McVay of PACT, Jane Millichip at Sky Vision, Jimmy Mulville at Hat Trick Productions, Mark Oliver at Oliver & Ohlbaum Associates, James Penny at Mammoth Screen, Jon Thoday at Avalon, Jane Turton at All3Media, Siobhan Walsh at Ofcom, Jes Wilkins at Firecracker, Beth Willis at The Forge; John Willis at Tinopolis, Doug Wood at Endemol Shine, Sue Vertue at Hartswood Films and Andrew Zein at Warner Brothers International Television. We thank Andrea Esser, Professor of Media & Globalisationat Roehampton University, John McVay at PACT (the trade association for UK independent producers), Philip Schlesinger, Professor in Cultural Policy at the University of Glasgow, Dr. Simon Harden at University College London, Raymond Boyle, Professor of Communications at Glasgow and David Booth at media consultancy DBB12, who, over the course of the project, provided invaluable guidance and advice. Thanks also to commissioning editors Lucy Batrouney (Palgrave Global Media

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Policy and Business Series) and Mala Sanghera-Warren and to the rest of the team at Palgrave Macmillan for superb support. Glasgow, UK

Prof. Gillian Doyle Richard Paterson Dr. Kenny Barr

Contents

1

Introduction What Is Television Production? Typology of Production Companies Independent Producers or Indies Vertically Integrated Conglomerates and Super-Indies Why Does Television Production Matter? Television Production in Transition—Aims and Methods Layout of the Book References

1 2 5 6 7 7 7 10 16 18

2

International Trends Early Formation, Growth and Internationalisation Key Territories Us Europe Rest of the World Digitisation and Convergence References

21 22 26 26 30 34 39 44

3

From Minnows to Sharks Early History Annan Report and Channel 4 Peacock, the 1990 Act and Increased Competition

53 53 56 59

ix

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CONTENTS

2003 Communications Act Success, Growth and Consolidation References

63 67 71

4

Business Performance and Advantages of Takeover Performance Measurement Determinants of Business Performance Advantages Conferred by Takeover Advantages of Scale Market Access Bargaining Power Informational Advantages References

75 76 82 90 91 94 96 99 101

5

Scale, Independence and Economic Sustainability Specialist Financial Intermediaries and M&A Activity Trade Buyers Versus Professional Investors Strategic Complementarity Building Scale Vertical Expansion International Reach Reconfiguring for the Digital Era Scaling up and Remaining Independent: The Challenges References

103 104 110 112 113 116 119 121 122 125

6

Configuration and Content Measuring Content Ownership, Control and Content: A Complex Relationship Corporate Configuration and Content: Findings Creative and Business Leadership Commercial Ambitions, Content Strategies and Continuity The Corporate Behemoth Strategic Function and Content Horizontally Integrated Super-Indies Vertically Integrated Broadcaster Producers Distribution Plus Production Transnational Groups References

129 130 133 136 138 139 142 148 149 150 152 154 157

7

Cultural Production, Indigeneity and Globalisation He Who Pays the Piper Calls the Tune

163 164

CONTENTS

8

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Non-scripted Factual and Entertainment Scripted Content Is There Such a Thing as British Content? Home Versus International Markets IPRs and Windowing References

167 171 174 178 183 187

Conclusions and Implications for Policy Changing Corporate Ownership Configurations Do We Need TV Production Companies that Are Independent? Is the Definition of Independents Still Valid? Sustaining Renewal Digital Transformations and the Challenges for Policy References

193 193 197 201 206 210 219

Bibliography

225

Index

249

List of Figures

Fig. 4.1 Fig. 4.2 Fig. Fig. Fig. Fig. Fig.

4.3 4.4 4.5 4.6 7.1

Turnover for case study companies, 2007–2017 Operating profit margins for case study companies, 2007–2017 Left Bank Pictures, turnover and total hours transmitted Love Productions, turnover and total hours transmitted Mammoth Screen, turnover and total hours transmitted Mammoth Screen, first run output by commissioner Lion Television, story and reach

83 83 85 86 88 95 168

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List of Tables

Table Table Table Table Table Table

1.1 1.2 3.1 4.1 4.2 6.1

Production company ownership configurations Case study production companies Chronology of key UK policy interventions Case study production companies Case study companies in 2007 and in 2017 Case study companies by specialism and key outputs

6 14 67 78 80 131

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CHAPTER 1

Introduction

While creativity is thriving in the UK, many businesses struggle to make the step from executing successful projects to becoming fully-fledged, sustainable creative businesses… Despite its reputation for world-class content, the UK has very few creative businesses of an international scale (and not enough work has been done to understand why). Often, companies that achieve early success are acquired by a large international player, rather than building sustainable businesses in the UK. While we want the UK to continue to be an attractive country for inward investment, it is vital that those companies that want to grow organically have the means to do so. (Create UK, Creative Industries Strategy 2014: 6)

In the UK and beyond, television production is seen as a vital component of the creative industries and a sector whose performance has important cultural and economic ramifications. Of the £112bn that creative industries contributed to the UK economy in 2018, in excess of £20bn was accounted for by ‘film, TV, video, radio and photography’ (DCMS 2020). Sales of finished television programme and formats are a major and growing contributor to UK creative industries exports (DCMS 2015: 26). According to data commissioned regularly by the trade association for producers PACT, the value of UK television exports had reached £1.4bn in 2018/2019 (Pact/3Vision 2019). In addition to the sector’s © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 G. Doyle et al., Television Production in Transition, Palgrave Global Media Policy and Business, https://doi.org/10.1007/978-3-030-63215-1_1

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financial significance, the ways in which television is ‘tied to local and national cultures’ (Waisbord 2004) and the contributions to culture that a healthy indigenous television production sector can make are also widely recognised (Barker 1999; Hall 1992). However a recent restructuring in ownership of the television industry has raised concern about the ability of independent production companies to survive in an increasingly globalised and competitive environment for television. Many leading independent television production companies across the globe have become prime targets for corporate activity in recent years and many have been subject to takeover, often by large broadcasters and by US media groups. Does this matter? This book, drawing on a major research project funded by the UK Economic and Social Research Council (ESRC),1 investigates the relationship between independence, scale and economic sustainability in the television production sector and related implications for public policy. Focusing on the growing power of transnational media corporations in an increasingly globalised environment for distribution of television content, and on the effects of mergers and acquisitions involving local and independent television production companies, it examines how current and recent restructurings in ownership across the television industry reflect changing business models, how they affect creativity and diversity of television output, and to what extent they call for new approaches to regulation and policy. Based on a major study of the UK production sector as a case study, it offers a unique analysis of wider transformations in ownership affecting the television production industry worldwide and of their economic, socio-cultural and policy implications.

What Is Television Production? The process of supplying television or video content to viewers can be broken down into a number of stages in what Michael Porter has referred to as the vertical value chain (Porter 1985). One of the key stages in the chain is production or making content. Television production companies develop ideas for programmes and make content which they then sell to service providers who, in turn, convey it to audiences. Service providers such as broadcasters and subscription video on demand (SVoD) services 1 We gratefully acknowledge the support of the Economic & Social Research Council (Reference ES/N015258/1).

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3

such as Netflix, as the gateway to viewers, occupy a very powerful position in the supply chain. But all stages in the vertical supply chain are interdependent (Doyle 2013)—content service providers cannot survive without programmes and content producers need outlets to sell their wares to. The interdependent nature of the relationship between different phases in the supply chain has important implications for the sorts of corporate ownership strategies that are pursued by television companies. The history and characteristics of television production vary somewhat from one country to another and in many instances public policy has played a key role in shaping the development of the industry. In the UK for example, the impetus to establish and sustain a television sector that is independent (i.e. not cross-owned by broadcasters) can be traced back to the Annan Report of 1977 and it has been acted on through a series of policy interventions such as the setting up of Channel 4 as a ‘publisher-broadcaster’ in 1982 and, later, the imposition of compulsory access quotas for ‘indies’ on other public service broadcasters (Doyle and Paterson 2008). A particularly influential intervention came via the 2003 Communications Act which required UK regulator Ofcom to oversee new terms of trade in commissioning negotiations between public service broadcasters and independent producers which, in turn, enabled UK indies to retain a greater share of ownership in the intellectual property rights (IPRs) to their productions and greatly improved their business performance (ibid.). Other initiatives to encourage the development of independent production across the UK have included, for example, support for regional and minority programming and provision of tax incentives for high-end television productions and children’s programmes. Adjustments in UK public policy that enhanced the performance of production companies and boosted their sales revenues have also, in turn, marked out the UK’s leading independent producers as attractive vehicles for takeover. A notable corollary to greater commercial success over recent years has been increased investment interest in the sector, often from international media and television groups (Chalaby 2010; Campelli 2015; Lee 2018). The trend towards consolidation and takeovers of television production companies has not been confined to the UK (Agnew 2017). But UK production companies have become especially attractive targets for US and other international media groups such as NBC Universal, Warner Brothers and Banijay Group who, since 2008, have bought up a significant number of programme-making companies (Barker 2020; Ofcom 2015: 13; Paterson 2017b).

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It is not only international groups but also domestic UK broadcasters who have been acquiring programme-making companies. For example, advertising-supported network broadcaster ITV plc has bought up a number of large and small UK and US independent television producers since 2010. Likewise, subscriber-based broadcaster Sky Television has acquired or made equity investments in several television production businesses over recent years. A central concern in this book is to build an understanding of what has been driving major restructurings in ownership in the television industry in recent years. What are the implications of takeovers and consolidation of ownership in the production sector? What difference do takeovers make to the economics of production companies and to the nature of the content that they make? The core activity that production companies perform is making programmes or other forms of television content. But, related to this, producers often engage in two other activities: pitching ideas for new programmes to ‘commissioners’ or buyers; and selling or exploiting secondary rights in the programmes that they have already made. The marketplace for new or original television content in which production companies pitch their ideas to commissioners is generally competitive amongst producers and is ever-changing (Lourenço and Turner 2019). From its inception in the 1920s to the present day, the conduits and platforms through which audiences are able to enjoy television content have evolved continuously. Whereas in the past broadcasters supplying content to audiences via schedule-based television channels were very dominant, nowadays SVoD services such as Netflix and Amazon Prime offering on-demand content have become an increasingly important touchpoint for audiences. But commissions for original television content still take place in markets that are oligopsony in the sense that they are dominated by a relatively small number of buyers. Growth in digital delivery platforms and online services which, in turn, has facilitated transformation in consumption behaviours has radically reshaped the landscape of provision over recent years (Ofcom 2019). As one television production executive who is a former chair of the UK trade association Pact puts it: …we all thought twenty years ago that television would be dead by now and of course it’s not. Because television as we know it still exists. It’s still alive and well but it’s sitting on different platforms. (Manners, Interview, London, November 2018)

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5

Far from being in decline, overall consumption of television content is increasing (Lee 2018: 3; Ofcom 2019: 16). And, notwithstanding the need to adapt to a changing television landscape, television production companies still make their living from pitching, making and then licensing rights to television content. Consequently, having the talent and relationships needed to win commissions and, also, the skills and other resources needed to cost-effectively produce content that audiences find appealing are key to economic success in the production sector (Doyle 2018; North and Oliver 2010). Effective exploitation of intellectual property rights (IPRs) also plays a vital role in the business performance of television production companies (Doyle 2016; Doyle and Paterson 2008; Mediatique 2015; Oliver and Ohlbaum 2015). A key issue that this book sets out to examine is the extent to which, in the era of globalised television distribution, added to the above attributes and capabilities which determine the viability of production companies as enterprises, economic success also now hinges on having the right sort of corporate ownership arrangements.

Typology of Production Companies One very notable feature of the television production sector is its heterogeneity. The origins and aspirations of production firms vary (Paterson 2017a) but by their nature all are creative and highly individual. Although often defined by the genre of content they make, such as drama producers or comedy producers or factual entertainment producers, companies that are medium or large often have mixed portfolios of output. Production companies vary enormously in scale with some employing hundreds of individuals (often including freelancers) and others just a handful or even one or two people. In the UK, for example, despite the presence of many large entities or so-called ‘super-indies’, the production sector is also heavily populated by an abundance of very small companies (Mediatique 2015; Oliver and Ohlbaum 2018). Production firms also vary widely in terms of their ownership. Our research sets out to examine how the business operations and the sort of content that television production companies make are affected by their corporate ownership configuration. Configuration in this context refers to whether a company is an independent producer or whether it is a subsidiary of another company and, if the latter, what sort of organisation the parent company is. Table 1.1 below details the main ‘types’ of television production companies that we focus on in this book.

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Table 1.1 Production company ownership configurations Company Size

Ownership Configuration

Small Turnover < £1 m

Medium Turnover £1 m–£10 m

Large Turnover > £10 m

Stand-alone Indie No cross ownership from broadcasters Part-Vertically Integrated Up to 25% broadcaster owned Vertically Integrated UK +25% UK broadcaster owned Vertically Integrated Non-UK +25% non-UK broadcaster owned Conglomerate UK Horizontally integrated UK cluster/‘Super-Indie’ Conglomerate Non-UK Horizontally integrated non-UK cluster/‘Super-Indie’

Independent Producers or Indies A central focus in our study is independent television producers or ‘indies’. Although the term ‘indies’ as it applies to cultural sectors is sometimes tinged with political and ideological resonance, suggestive of entities that stand in opposition to prevailing mores, many independents are straightforwardly mainstream and commercial in their profiles and instincts (Hesmondhalgh 1997). The term ‘independent’ takes on different interpretations in differing circumstances. When it comes to media, it is often strongly associated with the idea of independence or freedom from state interference (Bennett and Strange 2014). In the television production industry, ‘independent’ generally distinguishes companies that are autonomous from production operations that are integrated within or cross-owned by broadcast organisations. In the UK, the definition of an independent producer has been imbued with legal significance since the publication of the Broadcasting Act 1990 which imposed minimum compulsory access quotas on PSB channels for transmission of programmes made by independent producers. Similarly, ‘independent’ producers are defined under EU legislation so as to facilitate compliance with a 10% compulsory access quota, contained in the European Audiovisual Media Services Directive, for independently-made programmes (CEC 2018). In the context of this study, the concept of an ‘independent’ television producer means not owned by a television broadcaster or by a major non-UK parent television company.

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7

Vertically Integrated By contrast, vertically integrated production companies are those that are cross-owned by broadcasters or vice versa. Supplying television content is in some ways an uncertain business and the desire for more control over the market environment acts as a powerful incentive to become vertically integrated by diversifying into additional upstream or downstream phases in the value chain or vertical supply chain. Involvement in both production of content, which brings ownership of valuable IPRs, plus broadcasting, which allows exploitation of content rights, yields obvious advantages in terms of strategic complementarity. So in many countries such as the UK the television production industry is composed of both the in-house production divisions of vertically integrated broadcasters (such as the BBC and ITV plc) and an ‘independent’ production sector which is populated by stand-alone programme-makers that are not cross-owned by domestic broadcasters, or vice versa. Conglomerates and Super-Indies Another prominent corporate ownership configuration in the television production sector is the consolidated conglomerate or the so-called ‘super-indie’ (Chalaby 2010; Esser 2016). Many of these started life as small independent production companies who achieved success and over time have grown organically to become very sizeable companies. But super-indies are also often the result of a series of mergers with or acquisitions of other independent production companies. Many super-indies are effectively clusters of independent production businesses or ‘labels’ operating, with levels of autonomy that vary from one group to another, under the collective ownership of a consolidated parent companies. The scale of revenues earned by some super-indies now exceeds that of major broadcast organisations and many have well-developed in-house international distribution businesses, making these very powerful players in the television ecosystem (Lee 2018).

Why Does Television Production Matter? Ownership structures in the television industry have undergone ‘seismic’ changes in recent years (Parker 2015). The UK has been particularly affected by waves of takeovers of production companies, resulting in the

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growing controlling presence of consolidated entities, many of whom are owned by non-domestic parent groups. Levels of consolidation within the UK sector are demonstrated by the fact that, for example, the proportion of expenditure by UK PSBs on external programme commissions that is accounted for by the ten largest television production companies increased from 19% in 1993 to 45% in 2003 and to 66% in 2014 (Mediatique estimates, Broadcast, Televisual, Pact cited in Ofcom 2015: 18). Transformations in ownership have been an area of concern, triggering critical questions from policy-makers, industry commentators, academics and the press as to why it seems so difficult for cultural production businesses to grow and flourish while remaining independent and indigenous. Why is it that, in the digital era, some forms of corporate ownership configuration appear to be more conducive to economic success than others? Why is it that local programme-makers struggle to achieve scale and sustained economic success while at the same time retaining ‘independent’ status? A prevailing assumption underlying such concerns, prevalent among academics, policy-makers and practitioners alike, is that ownership of television production companies matters (Doyle and Paterson 2008; Abraham 2014; Chalaby and Esser 2017; Lee 2018). But why is it that custodianship of the television production sector matters so much? One reason is economics. Producing television content is a major international business that employs tens of thousands of individuals across the globe and generates billions of pounds in commercial revenue every year for producers. It is well recognised that, in the words of the European Commission, ‘[t]he audiovisual sector has the potential to create hundreds of thousands of high-skill jobs’ (COM 1999). Historically, the audiovisual (i.e. film and television) production sector in the US has been exceptionally successful in making and selling content and it remains by far the largest and most economically successful exporter of television, with the UK now in second place albeit some distance behind (Doyle 2014; Steemers 2014). In most countries, public and political interest in the state of health of indigenous television production businesses is at least partly a reflection of economic issues. The general idea, first popularised by Richard Florida (2002), that creative sectors of the economy—which include television production—are especially important as drivers of wider economic growth, has been widely embraced by policy-makers across Europe and around the globe in recent years (Cunningham 2002; Schlesinger 2007).

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So it is no surprise that, in the UK for example, television production has been celebrated as part of a creative sector that, as noted by the then Chancellor of the Exchequer George Osborne (cited in Olsberg and Nordicity 2015: v) ‘adds billions to UK GDP each year and supports jobs across the country’ as well as strengthening the UK’s ‘infrastructure of innovation’. Ownership of television production companies also matters for sociocultural reasons. One such is the importance of culture in conveying what Joseph Nye has referred to as ‘soft power’ (Nye 2004) or the ability to persuade others without such traditional means as military might. Nowadays film and television, through conveying a sense of the attractiveness of a country’s culture, political ideals, and policies, represent important instruments of soft power and therefore any country’s stake in globalised cultural production industries is a matter of strategic socio-political and cultural concern (ibid.). In addition, it is widely assumed that, despite globalisation, identity remains anchored within national space and that culture—of which television is a part—plays a vital in reproducing identity (Schlesinger 1997). Consequently, the organisation and ownership of industries involved in cultural production, such as television, matters greatly. As pointed out by the European Commission: [w]hilst the economic aspects and the job creating potential of the sector as outlined above are clearly major elements to be taken into account … it is the social and cultural role of the audiovisual media that forms the point of departure for policy making… [AV media] ‘play a central role in the functioning of modern democratic societies’ … [and]… in the development and transmission of social values’ …[and]… ‘help to determine not only what we see of the world but also how we see it.’ (COM 1999)

Television, as a key aspect of culture, forms part of ‘an active shaping repertoire of meanings and images, embodied in values, myths and symbols that serve to unite’ (Smith 1998: 187). Production of television is seen as having far-reaching potential to shape and inform the views and values of individuals and society at large. Even what might be considered inoffensive or banal ‘lifestyle’ content often reflects and propagates what might be seen as weighted agendas. For example, the BBC’s hit daytime property auction programme Homes Under the Hammer

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produced by Lion Television is imbued with the unquestioning assumption that ownership of private property is a positive aspiration for citizens. An understated endorsement of aspiration and self-improvement within this highly localised programming demonstrates that even the most apparently neutral material may serve to shape values and underscore notions of identity, citizenship and nationhood (McElroy 2008: 50). Therefore, as Sylvia Harvey argues, custodianship of businesses that involve creation of cultural outputs and exploitation of rights to television content: raises questions that go beyond that of markets and of economic value. The generation of IP, how and by whom, is also of great importance to … culture, society and politics. (Harvey 2015)

Television Production in Transition---Aims and Methods The aim of this book is to build an understanding of the implications of recent ‘seismic’ shifts in ownership in a sector where custodianship is recognised to be of importance both for economic and cultural reasons. Findings are based on research carried out as part of a major project entitled Television in Transition: Independence, Scale and Sustainability conducted by a team based at the Centre for Cultural Policy Research (CCPR) at the University of Glasgow over a three and a half year period from 2017 until 2020. Funded by the UK Economic & Social Research Council (ESRC), the project set out to examine how and why the structure of ownership of the UK television production sector has shifted over recent years and what this means for the economic sustainability of the sector, for audiences and for content. Using key case studies, the scope of our investigation covered the role of changing digital distribution technologies in encouraging consolidation and strategies of horizontal, vertical and transnational expansion in the television production industry; the relationship between, on one hand, size and corporate configuration and, on the other, the ability of production companies to maximise the value of their IPRs and to achieve sustained economic success; the conditions that govern creative decisionmaking and content in the production industry and how these are affected by differing corporate configurations; and implications for public policy and regulation. Our research questions covered three themes: How do

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expansion, scale and differing corporate ownership arrangements affect business performance and sustainability? How do changes in corporate configuration affect creative decision-making and content? What are the implications for policy? As is evident from the findings presented in later chapters, a key focus throughout our research has been the growing importance of ownership as a powerful determinant of financial and economic success in the television production sector. Recent waves of takeovers, mergers and acquisitions involving UK and European programme-makers suggest that, in an increasingly globalised television environment, certain forms of configuration are more conducive to economic success than others and thus ownership has now become a decisive success factor for firms operating in the television production sector. One of the main aims of the project is to better understand the nature of the interplay between ownership configuration and performance. To what extent are changing digital distribution technologies encouraging consolidation and strategies of horizontal, vertical and transnational expansion in the television production industry? Earlier studies have suggested that the ability of producers to operate profitably is linked to scale (Doyle 2018; North and Oliver 2010). What exactly is the relationship between, on one hand, size and corporate configuration and, on the other, the ability of production companies to achieve sustained economic success? Is the sustainability of a domestically based independent production sector threatened? A further concern is to investigate empirically how a restructuring of ownership may affect content. What difference do changes in ownership make to the nature of television content and to creative decision-making within production companies? It is widely assumed that consolidation and takeovers of indigenous and independent television production companies by US or other foreign multinationals are detrimental to content—for example, by stifling creativity (Abraham 2014)—but little earlier research has been conducted which tests this out empirically. How should media policy-making respond to major changes in ownership of television production companies? At a time of concern about how incumbent television production companies can adjust successfully to advancing technology and how public policies ought to change to ensure that independent and indigenous production continues to flourish in the global arena, the project findings reported in this book are intended to deepen and enhance public understanding of creative and business strategies in the context of a rapidly evolving media ecology. By offering an

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extensive empirically-based analysis of the connections between transnational corporate power, ownership configuration, business performance and content in the television production industry, our aim is to advance understanding not only of the economic and socio-cultural significance of restructurings of ownership in the television industry but also of the wider interplay between cultural production, indigeneity and globalisation. Our project involved a multiple case study based research design focusing on the experience a number leading UK-based television production companies of differing configurations. Methods, which are described in further detail in Chapters 4 and 6 below, involved both quantitative and qualitative dimensions. We draw on a range of methodologies including expert interviews and analysis of financial data, policy texts and content output. The approach was multidisciplinary, drawing on theoretical perspectives from management, economics, media and cultural sociology and policy studies while using some techniques (e.g. correlation analysis) common in economics and others (e.g. content analysis) that are more typical of socio-cultural studies. One of the key aims was to examine the relationship between, on the one hand, expansion, scale and different sorts of corporate configurations (whether owned by a multinational parent company; vertically integrated or not) and, on the other, economic performance and capacity to engage in business strategies that sustain growth. What are the key factors that conduce to economic success and sustainability in the TV production sector? What is the nature of the association between corporate configuration and performance? Findings were derived through systematic investigation, based primarily on analysis of company accounts and statements and other secondary sources of financial data for a sample of leading UK-based television production companies and on interview findings, based around the question of what is the relationship between the ownership ‘configuration’ (i.e. size and whether owned by a multinational parent company or whether vertically integrated or not) of a company and its performance. The difficulties of defining success and sustainability and of identifying suitable measures of performance in the context of media industries are numerous and well recognised (Wirth and Bloch 1995). Although standard financial accounting measures such as changes in turnover and operating profit margins, which offer useful benchmarks, were a central focus in our analysis of the business performance of our case study companies, the overall design of our framework also reflected an awareness of

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the fact that evaluating performance in the context of media and cultural sectors requires attention to be paid to non-economic indicators too such as audiences, awards and critical reception for outputs. Another key aspect of the project was to examine how changes in ownership affect content. In order to investigate the relationship between corporate ownership and content, we conducted an analysis of programming outputs for several different types of television production companies based on their organisational configurations (i.e. whether a true independent, owned by a conglomerate—UK-based or non-domestic, or partially or fully vertically integrated) and based on genre (i.e. whether drama or factual entertainment producers), in each case studying the sort of content produced over an eleven year period from 2007–2017. This involved detailed tracking and analysis of all programmes made at each case study company over the study period in order to gauge continuity or change in the volume and nature of its outputs and in how it’s content fared for example on terms of distribution reach, ratings, awards and critical acclaim. Findings from the analysis of content were combined with evidence from interviews carried out with senior executives at production companies and with their parent companies and with corporate financiers specialising in takeovers in the television industry. Interviewees at selected production companies included Chief Executive Officers (CEOs) with responsibility for the overall strategy, Chief Creative Officers (CCOs) with frontline responsibility for developing and producing content, and also directors of legal and business affairs. Case study companies were selected based on the need to investigate our research questions across a range of differing types of production companies in terms of scale, output and ownership configurations—see Table 1.2. All were founded in the UK as independent production companies and the sample group includes producers of different genres of output. Although mainly London-based, many have activities that extend across a range of international territories. Many of the production companies within the sample were taken over during the study period. Thus, this particular selection of companies and the spread of individuals that we conducted interviews with enabled us to carry out extensive evidencegathering on our core questions about how changes in ownership have affected business performance and content in the production sector.

1979

1986

1996

2002

1992

2007

1997

2004

1994

Hat Trick

Keo Films

Firecracker

Kudos

Left Bank

Lion

Pulse Films

Blast! Films

Founded

Parent company (year of takeover)

Vertically Integrated UK

Conglomerate Non-UK

Conglomerate UK

Conglomerate UKa Conglomerate Non-UK

Conglomerate UK

Sky (2015)

Vice Media (2016)

All3Media (2004)

Endemol Shine (2006) Sony (2012)

Tinopolis (2012)

Stand-alone Indie n/a

Stand-alone Indie n/a

Stand-alone Indie n/a

Ownership configuration

Case study production companies

Hartswood Films

Company

Table 1.2

Factual/Entertainment

Factual/Entertainment

Children’s/Factual/Entertainment

Drama

Drama

Factual

Factual/ Entertainment

Comedy/Factual/Entertainment

Drama

Principal genre

Lady Chatterley’s Lover, Sherlock, Dracula Boomers, Episodes, Have I Got News for You? Hugh’s Fish Fight, Skint, River Cottage Dr. Christian Will See You Now, My Big Fat Gypsy Wedding, Hustle, Law & Order UK, Spooks The Crown, Outlander, Strike Back Horrible Histories, Homes Under the Hammer Pillow Talk, Pineapple Dance Studios 999 What’s Your Emergency?, The Supervet

Key outputs

14 G. DOYLE ET AL.

2006

1997

Mammoth Screen

Red Production Co.

Vertically Integrated Non-UK

Vertically Integrated UK

Vertically Integrated UK

Ownership configuration

Drama

Drama

ITV (2015)

Studio Canal (2013)

Factual/Entertainment

Principal genre

Sky (2014)

Parent company (year of takeover) Benefits Street, Great British Bake Off, Great British Sewing Bee And Then There Were None, Endeavour, Poldark Last Tango in Halifax, Ordinary Lies, Scott & Bailey

Key outputs

was completed in July 2020.

a After the project study period ended a takeover of Kudos’ parent company, Endemol Shine, by French entertainment conglomerate Banijay Group

2004

Founded

Love Productions

Company

1 INTRODUCTION

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Layout of the Book Drawing on interviews with leading television executives and industry stakeholders and on extensive quantitative analysis of company data and programme content, this book provides an empirically grounded examination of how and why major transformations have taken place in the structure of ownership of the television production industry and what this implies for the economics of the sector and for content. How do changes in custodianship affect creative decision-making within production companies? Why is it that local programme-makers struggle to achieve scale and sustained economic success while at the same time retaining ‘independent’ status? How should media policy-making respond? Chapters 2 and 3 provide contextual analyses that lay the background for the empirically based exploration, which follows in later chapters, of changing economic and business circumstances, how these affect creativity, content and audiences, and implications for publicpolicy-making. Chapter 2 starts with an account of how the television production industry has developed historically in the US, Europe, the Far East and other key territories. It also provides a developed analysis of recent trends arising from digital convergence and, in particular, globalisation of television distribution including such key developments as the emergence of SVoDs. Chapter 3 follows on by providing a focused account of the history and development of the UK television production sector and of the crucial role played by public policy in supporting its growth (Paterson 2017b). It examines the UK sector’s dramatic transition ‘from minnows to sharks’ and traces out recent transformative changes in ownership of the production sector. Chapters 4 and 5 focus on elucidating the economic rationale behind these changes. Drawing on extensive evidence gathered from our multiple case study sample group of leading London-based international television production companies, Chapter 4 examines the relationship between, on the one hand, expansion, scale and different sorts of corporate configurations (whether owned by a multinational parent company; vertically integrated or not) and, on the other, economic performance and capacity to engage in business strategies that sustain growth in a digital multi-platform distribution environment. Chapter 4 draws heavily on self-originated quantitative analyses of a number of key aspects of business performance and on qualitative analysis of original material drawn

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from interviews with leading executives across the selected case studies to examine the business advantages conferred on production companies that are taken over and to how ownership and changes in ownership configuration correlate with business performance in the television production industry in the twenty-first century. In Chapter 5 the focus shifts from the experience of production companies (sellers) to the perspective of investors (buyers). We assess the crucial role played by advisors and specialist financial intermediaries in matching buyers and sellers and in facilitating merger and acquisition (M&A) transactions. We also delve more deeply into the main business and economic motives that have driven M&A strategies and the attributes regarded by buyers as lending greatest appeal to production companies as investments. Thus, Chapter 5 sets out the important ways that the empirical findings of this study extend knowledge and theory about propensities towards consolidation and concentration in a digitally convergent and increasingly supra-territorial landscape of media provision. In Chapter 5 we also consider why it is that producers struggle to scale up and remain ‘independent’ and whether there is now effectively a Minimum Efficient Size for television companies. In Chapters 6 and 7 our attention shifts to the question of how changes in corporate configuration affect creative decision-making and content. Drawing on both content analysis and interview findings, Chapter 6 presents and analyses the findings of our investigation into how differing sorts of corporate configurations effect the quality and nature of content outputs in the television production industry. Drawing on the insights provided in Chapter 6 about how ownership configuration affects content, in Chapter 7 we reflect more widely on the socio-cultural significance of recent transformations affecting the television industry, including the growing significance of transnational distribution. We focus on the role of market demand or commissioning as a powerful force shaping production of television content. The growing influence of globalised and multinational content service providers is examined and we ask whether concerns about potential marginalisation of indigenous cultures remain valid in an increasingly globalised environment for television content. We consider the effects of the rise of SVoD services both as a force for disjunction in eroding production financing models that have supported the success of the UK production sector and also as an agent of continuity in advancing processes of transnationalisation of television.

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Chapter 8 offers a cohesive concluding analysis of the study’s findings about configuration, strategy, performance, content decision-making and output. These are drawn together and woven into an overarching analysis of the challenges for contemporary media policy-making posed by recent restructurings of ownership in the television industry. To what extent is the sustainability of domestically based independent production threatened by such restructurings? What are the implications for content, culture and the creative economy? How does public policy need to change? As well as reinforcing the book’s contribution to knowledge and theory on these pressing themes, the analysis presented in Chapter 8 is also intended as a timely aide to industry strategists and media policy-making.

References Abraham, D (2014), ‘After the Gold Rush’, James MacTaggart Lecture, Edinburgh International TV Festival, Channel 4 Press Release, London: 21 August. Agnew, H (2017), Mediawan Turns Up Volume TV Investment, Financial Times, 31 January, at p. 16. Barker, A (2020), Banijay Boss Stands by e2bn Best on Europe’s Biggest Indie TV Producer, FT.com, July 3 2020, Accessed at: https://www.ft.com/con tent/63078376-3d78-4542-9a4d-315da07c0f21. Barker, C (1999), Television, Globalisation and Cultural Identities, Milton Keynes: Open University Press. Bennett, J, and Strange, N (Eds) (2014) Media Independence: Working with Freedom or Working for Free? London: Routledge. Campelli, M (2015), US-Owned Indies Increase Share of UK Revenue, Broadcast, 27 March at p. 6. CEC (2018), Audiovisual Media Services Directive, 2018/1808/EC, Brussels: European Commission. Chalaby, J (2010), The Rise of Britain’s Super-Indies: Policy-Making in the Age of the Global Media Market, International Communication Gazette, 72(8): 675–693. Chalaby, J and Esser, A (2017) The TV Format Trade and the World Media System: Change and Continuity, International Journal of Television, 8(1), 3– 7. COM (1999) Communication From the Commission to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions. Principles and Guidelines for the Community’s Audiovisual Policy in the Digital Age, Brussels, 14 December 1999.

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Create UK (2014), Creative Industries Strategy, London: Creative Industries Council UK, at www.thecreativeindustries.co.uk/media/243587/cic_report_ final-hi-res-.pdf. Cunningham, S (2002), From Cultural to Creative Industries: Theory, Industry, and Policy Implications, Media International Australia incorporating Culture and Policy, 102: 54–65. DCMS (2015), Creative Industries Economic Estimates, Statistical Release— January 2015, London: Department for Culture, Media and Sport. DCMS (2020), DCMS Sectors Economic Estimates 2018 (Provisional): Gross Value Added, London: DCMS available at: https://assets.publishing.service. gov.uk/government/uploads/system/uploads/attachment_data/file/863 632/DCMS_Sectors_Economic_Estimates_GVA_2018.pdf. Doyle, G (2013), Understanding Media Economics (2nd Ed), London and New Delhi: Sage. Doyle, G (2014), Audiovisual Trade and Policy, in: Findlay, C, Nordas, HK and Pasadillo, G (Eds) Trade Policy in Asia: Higher Education and Media Services, World Scientific Publishing: Singapore, pp. 301–333. Doyle, G (2016), Digitization and Changing Windowing Strategies in the Television Industry: Negotiating new Windows on the World, Television & New Media,17(7): 629–645. Doyle, G (2018), Television Production: Configuring for Sustainability in the Digital Era, Media, Culture & Society, 40(2): 285–295. Doyle, G and Paterson, R (2008), Public Policy and Independent Television Production in the UK, Journal of Media Business Studies, 5(3): 17–33. Esser, A (2016), Challenging US Leadership in Entertainment Industries? The Rise and Sale of Europe’s International TV Production groups, International Journal of Communications, 3585–3614. Florida, R (2002), The Rise of the Creative Class, New York, NY: Basic Books. Hall, S (1992), Cultural Identity in Question, in Hall, S, Held, D, and McGrew, T (Eds), Modernity and its Futures, Cambridge: Polity, pp 273–316. Harvey, S (2015), National Broadcasting in an International Market, Response to BBC Trust Review of BBC’s Arrangements for the supply of television and radio content and online services, 20 March 2015, at [email protected]. Hesmondhalgh, D (1997) Post-Punk’s Attempt to Democratize the Music Industry: The Success and Failure of Rough Trade, Popular Music, 16(3): 255–274. Lee, D (2018), Independent Television Production in the UK, London: Palgrave Macmillan. Lourenço, A and Turner, S (2019), The Role of Regulation in Constituting Markets: A Co Evolutionary Perspective on the UK Television Production Sector, Journal of Institutional Economics, 15(4): 615–630.

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McElroy, R (2008) Property TV: The (Re)Making of Home on National Screens. European Journal of Cultural Studies, 11(1), 43–61. Mediatique (2015), TV Production Sector Evolution and Impact on PSBs, December 2015, London: Mediatique. North, S and Oliver, J (2010), Manager Perceptions of the Impact of Consolidation on the UK Independent Television Production Industry, Journal of Media Business Studies, (7):21–38. Nye, J (2004), Soft Power: The Means to Success in World Politics, New York, NY: Public Affairs. Ofcom (2015), Review of the Operation of the Television Production Sector: A Report for the Secretary of State for Culture, Media & Sport, 23 December, London: Ofcom. Ofcom (2019), Media Nations: UK 2019, 7 August, London: Ofcom. Oliver and Ohlbaum (2015), Trends in TV Production, December, London: Oliver & Ohlbaum Associates. Oliver and Ohlbaum (2018), The Impact of the Terms of Trade on the UK’s Television Content Production Sector: A Report for the Canadian Media Producers Association (CMPA), December, London: Oliver & Ohlbaum Associates. Olsberg and Nordicity (2015), Economic Contribution of the UK’s Screen Sectors, London: Olsberg SPI and Nordicity. Pact/3Vision (2019), UK TV Exports Report 2018–19, October, Bath: 3Vision. Parker, R (2015), Strength in Numbers, Broadcast: The Indie Survey 2015, 27 March, at p. 3. Paterson, R (2017a), The Competition Discourse in British Broadcasting Policy, CREATe Working Paper 2017/02, Glasgow: CREATe. Paterson, R (2017b), Early Independent Production Entrepreneurs in UK Television: Pioneering Agents of Neoliberal Intervention, International Journal of Entrepreneurial Venturing, 9(3): 280–298. Porter, M (1985), Competitive Advantage: Creating and Sustaining Superior Performance. New York, NY: Free Press. Schlesinger, P (1997), From Cultural Defence to Political Culture: Media, Politics and Collective Identity in the European Union, Media, Culture and Society, 9(3): 369–391. Schlesinger, P (2007), Creativity: From Discourse to Doctrine, Screen, 48(3): 399–387. Smith, A (1998), Nationalism and Modernism: A Critical Survey of Recent Theories of Nations and Nationalism, London: Routledge. Steemers, J (2014), Selling Television: Addressing Transformations in the International Distribution of Television Content, Media Industries, 1(1): 44–49. Waisbord, S (2004), McTV Understanding the Global Popularity of Television Formats, Television & New Media, 5(4): 359–383. Wirth, M, and Bloch, H (1995), Industrial Organization Theory and Media Industry Analysis, Journal of Media Economics, 8(2): 15–26.

CHAPTER 2

International Trends

In this chapter and the next, we lay out the background for the findings of changing ownership of the production sector which are presented and analysed in later chapters of this book. In Chapter 3, a detailed analysis of the historical development of the UK television production sector is set out, highlighting the importance of a series of public policy interventions in determining the character and circumstances of the contemporary British programme-making landscape. First however, in this chapter we sketch out key trends and issues affecting the historic and contemporary development of television production as an international industry. The focus here is on wider international industrial, technological and economic contexts that have shaped the contemporary production environment and associated patterns of international trade in television content. In the first section, we outline the historic development of production—often as an adjunct to broadcasting—and analyse key forces that, over time, have encouraged gradually increasing levels of internationalisation of television. In later sections of the chapter, we examine how television production has developed in a number of international territories including the US, Europe, South America and Far East. Finally, we consider the effects of more recent technological and market shifts that have dramatically advanced processes of globalisation of television in the twenty-first century. © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 G. Doyle et al., Television Production in Transition, Palgrave Global Media Policy and Business, https://doi.org/10.1007/978-3-030-63215-1_2

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Early Formation, Growth and Internationalisation Television is an industry that historically has been dominated by broadcasters. Broadcasting tended to develop within national territories and to be shaped by specific national circumstances and regulations, even into the twenty-first century (Morris and Waisbord 2001). Although the characteristics and circumstances of the industry differ from one country to another, a trait which is widely shared is that, often, production of content started out as an activity which was carried out by vertically integrated broadcasters, operating at local or national level, in their in-house production departments. While in the US some level of production of content on behalf of broadcasters by external—often Hollywood-based—production companies can be traced back to the inception of broadcasting, in most other countries the emergence and separate development of a programme-making sector that is recognisably ‘independent’ of broadcasting is something which has only occurred from around the 1970s and 1980s onwards. The birth and development of independent production has typically been spurred by two interrelated factors: advances in technology and changes in public policy. As distribution technologies increased the avenues available for delivery of content to viewers, this was frequently accompanied by both de-regulatory and protective impulses on the part of national regulators (Negrine and Papathanassopoulos 1991). Transfrontier broadcasting via cable and satellite broadcasting became widespread in the 1970 and 1980s. From the 1990s onwards, the growing use of digital compression techniques and the development of the internet transformed the situation of so-called spectrum scarcity which previously had constrained market entry into broadcasting and replaced it with one of relative abundance in avenues for delivery of television content. As channels proliferated, many more specialist and niche services developed, often supported by direct viewer payments or subscriptions. These trends precipitated an explosive increase in demand for attractive television content (Doyle 2014). Growing levels of transfrontier broadcasting naturally focused attention on the health and competitive positioning of domestic television systems. Fears about the impact of globalisation were typified for example in comments made during a UK Parliamentary Committee debate on National Heritage which lamented that ‘UK players… are being overtaken and overshadowed by the global media corporations that make, distribute

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and deliver film and television software all over the world’ (HoC 1993, cited in Negrine 1998). More channels and greater resources to support strategies of segmentation of audience demand combined with the spread of transfrontier delivery platforms and the growth of thematic services aimed at transnational audience groups (e.g. CNN, MTV, Discovery, etc.) encouraged greater awareness, including among broadcast policy-makers, of the growing opportunities surrounding the production and of the potential value of having a well-developed indigenous television production sector. Calls for more local production were fuelled by growth in the number of commercial broadcasters and concerns about their reliance on US-made content (Franquet et al. 2020). So, from the 1980s onwards, technological advances that expanded avenues for delivery of television not only ushered in more demand for content but also, in the UK and many other countries, encouraged changes in approach towards policy and regulation that resulted in more emphasis being placed on promoting representational diversity and on improving the competitive position of indigenous television production vis-a-vis international rivals. As television systems have become increasingly internationalised over time, this has favoured the development of programme-making as a sector of economic activity that stands separately from broadcasting. Internationalisation has been spurred on by the launch of international channels and pay-TV services (Chalaby 2003). Another route via which television has expanded across frontiers is through co-productions where programmes are funded by partners in differing territories (Hoskins et al. 1998; Hilmes 2014). Internationalisation has also been propelled by growing cross-border trade in finished programmes and formats—broadcasters and other service providers acquiring rights to programmes or purchasing the right to use existing tried-and-tested formats from overseas television companies, in some (though certainly not all) cases from neighbouring countries or countries that share a common language (Doyle, 2014; Steemers 2014). Fuelled by the rise of internet-based globalised streaming content services who have been major buyers of both original and archive content, the value of international trade in television content has grown consistently in recent years (EAO 2020: 60; Steemers, 2016; USITC 2018; WTO 2010). All available data about international trade in film and television confirms that audiovisual is an area dominated by English language products and particularly by exports from programme suppliers based in one country: the US (Doyle 2014). A number of factors account for the

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success of US-based suppliers, including the size and wealth of the US domestic television market, which makes it feasible for domestic producers to invest in expensive scriptwriters and other talents (ibid.). However since the 1980s the production sectors of other countries around the globe, including in the Far East and South America, have benefitted from growing international demand for content and increased cross-frontier trade (USITC 2018). The UK production sector has been a major beneficiary of increased international demand for content and, as is discussed in Chapter 3, exports of finished programmes and formats from the UK have grown exponentially over recent years (Pact/3Vision 2019). But the UK is just one component within an increasingly globalised landscape for production and supply of television content, as reflected in the international ownership profiles of a number of our case studies where parent companies are headquartered in Europe, the US and/or Japan. The development of independent production at regional and national levels across the globe reflects a combination of both local and wider circumstances that are shared across most territories. The production sector of any country has its own identity and idiosyncrasies but, more generally, this is an activity whose development has been powerfully shaped by economic factors. The fundamental economics of television content production, which are distinctive in many respects, have acted as an influential force encouraging international growth and consolidation. As highlighted by some of the earliest work on economics of television, this is a sector that flouts some of the norms of behaviour in that television content, like other so-called ‘information’ goods (Withers 2006: 5), has characteristics that, in economic terms, are quite unusual (Collins et al. 1988; Blumler and Nossiter 1991). As with other informational goods, the way that viewers derive value from television content is through the information or the messages being conveyed, rather than the material carrier of that information (the digital file, the airwaves, etc.). So, because the main value within content is generally to do with attributes that are immaterial (i.e. its messages or meanings), it follows that these attributes do not get used up or depleted in the act of consumption. As a consequence, this is a sector in which economies of scale are present (Doyle 2013). Initial production or ‘first run’ creation costs in television are typically high but once these have been covered, facilitating consumption of content by additional viewers and/or audience segments typically involves relatively low marginal costs. Extending consumption across international

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frontiers may well involve some minor outlays on marketing and distribution e.g. costs of attendance at international content markets such as MIPCOM, and on dubbing or sub-titling where additional markets have their own distinctive languages. But replication costs tend to be low so the wider the audience, the more profitable the content will become. Therefore economies of scale are a prevalent feature of the business and there are great natural incentives for the makers and suppliers of television content to extend the consumption of their output as widely as possible, including across national territories (Doyle 2014, 2016). In short, the economics of production strongly favour extended international consumption of output, to whatever extent this may be feasible. Uncertainty about likely demand for an as-yet unproduced item of content is another economic feature of the television production industry. As an ‘experience’ good, the extent to which any given television show might satisfy consumers is a subjective and unknowable matter (Caves 2000). At the same time, the high costs and uncertainties involved in audiovisual production encourage and indeed necessitate the use of strategies aimed at risk reduction such as repetition and imitation of storylines or formats that have already worked successfully with audiences (Hoskins et al. 1997). Another approach towards risk reduction is to adopt a corporate shape that is conducive to financial success. A vertically integrated structure, for example, reduces risk by ensuring access to both content and audiences. Or risk can be reduced by scaling up to a size that is sufficiently large to deploy a portfolio strategy where a number of different sorts of output are produced simultaneously (Doyle 2013). Production of television, as with film, is a hit-based business and so companies that have the scale to mitigate risk by operating product portfolio strategies will enjoy a competitive edge (Achtenhagen 2012). The point here is that economic forces based on traits that are fundamental to the television industry play a significant part in encouraging processes of international expansion, consolidation and globalisation. The presence of economies of scale in any industry acts as a powerful incentivising force that drives tendencies towards corporate expansion and consolidation of ownership and television production is no exception. The exact nature of advantages, benefits and economies of scale that accrue to enlarged, diversified and consolidated television production entities is examined in depth and detail in Chapters 4 and 5.

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However an increasingly internationalised television environment has highlighted tensions between the globalising aspirations of many production companies and the perceived need to protect television systems which historically, guided by PSB-inflected regulatory frameworks, have been primarily orientated towards the needs and interests of domestic audiences (Flew, Iosifidis and Steemers 2016; Straubhaar 2007; Thussu 2006). In most territories, the preservation of indigenous television production and associated audience access to locally made content are seen as important goals for public policy (Joly 2017; Puppis 2008). But achieving such goals has become more challenging in the face of trends—evident across all regions and territories around the world—towards globalisation, consolidated ownership and ‘the emergence of powerful transnational platforms commercialising cultural goods and services online’ (García Leiva and Albornoz 2017: 10). As is demonstrated in Chapters 6, 7 and 8, the effects of globalisation and consolidation of ownership on processes of content-making and on international trade in television content are manifold and complex. While a comprehensive survey of production in all regions and countries of the world is well beyond the scope of this study, the following section provides an outline of major trends and issues in a number of important territories. The main focus here is on countries other than the UK—a full analysis of the history of the production sector in Britain is set out in Chapter 3.

Key Territories Us The US always has been and remains the dominant player in the global television production sphere, both in terms of commercial value and cultural influence. As was the case in many other territories, the first US television networks—ABC, CBS and NBC—initially grew from the radio sector. Michele Hilmes describes how ‘the schizophrenic nature of US broadcasting split between First Amendment, free-market ideals and protective social goals, would carry over into television’ (Hilmes 2003: 30). Nonetheless, a license fee system of public funding support for television was not considered and so, from the outset, the US television industry was orientated towards commercial sources of revenue in the form of sponsorship and advertising.

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Historically the television production landscape in the US was distinctly different from that of the UK and much of Europe and Asia where free-to-air public service broadcasters, funded by licence fees and advertising, conducted the great majority of production in-house. While US networks produced their own news, sport and other live content, much of their drama and comedy content has always been produced out-of-house by producers independent of the networks. Even so, an oligopoly television market dominated for many years by just three broadcasters—the ‘Big 3’ networks ABC, CBS and NBC—led to imbalances in bargaining power between broadcasters and producers ‘that shifted most of the risks onto external producers - and placed most of the profit potential in the networks’ hands’ (Hilmes 2003: 47). Such imbalances in bargaining power favouring commissioning broadcasters over producer suppliers were to become a familiar feature in other national television markets later as independent production began to develop elsewhere. In the US, concerns about the power and predominance of the three major networks led to the introduction by the industry regulator, the Federal Communications Commission (FCC), of the Financial Interest and Syndication Rules which were designed to limit the networks’ ownership of secondary IP rights (Potter 2008: 51). The ‘FinSyn’ rules prevented ABC, CBS, and NBC from producing more than 40% of their own prime-time (or peak-time) programming in-house. This limitation forced them to commission at least some of their programmes from external or independent production companies, often based in Hollywood. The idea behind these rules was to counter the dominance of broadcasters by strengthening the position of the production sector, an idea replicated later in the UK when a compulsory access quota for independent productions was introduced via the 1990 Broadcasting Act. The deficit financing approach generally adopted by the three networks when commissioning programmes from external suppliers suited larger and well-funded production companies and studios but was onerous for cash-strapped smaller production companies (Paterson 2017). Even so, the FinSyn intervention, which allowed at least some programme producers a chance to become well-resourced and to develop their reputations as important suppliers of content in the US and beyond, was effective in boosting the position of the US production industry and in limiting levels of vertical cross-ownership during the period while the rules were in place from 1971 to 1994.

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However, as the position of dominance enjoyed by the ‘Big 3’ was progressively eroded from the 1970s onwards by the arrival and growth of new competitors, particularly cable television and also independent overthe-air networks, the FCC was persuaded by the mid-1990s to rescind the FinSyn rules. Expansion in avenues for delivery of television and growth in subscription payments resulted in vastly increased competition in the US television industry and in fragmentation of audiences and declining revenues for the traditional advertiser supported over-the-air networks (Owen and Wildman 1992; Lotz 2007). But relaxation of the FinSyn rules paved the way for a restructuring of ownership with several mergers taking place between the main broadcast networks and independent studios, such as Walt Disney’s purchase of Capital Cities/ABC in 1995, Viacom’s merger with CBS in 1999 and Universal’s acquisition of NBC in 2004. Further phases of mergers, acquisitions and consolidation in the twenty-first century have reinforced a pattern where television in the US is once again predominated by a relatively small number of diversified media, telecommunications and television groups who are major players both in their home market and internationally, such as Comcast, Disney, Liberty Global and Warner Media. Television content that is produced in the US, as with US-made film, tends to export well across both English-speaking and most non-English speaking markets (USITC 2018). At the same time, major US television and media groups have been active in recent years in acquiring production subsidiaries in other international territories (Esser 2016). For reasons that are examined in later chapters, the UK sector has proved especially attractive to acquisitive US conglomerates including Disney, NBCUniversal, Sony Pictures Television and Liberty Global. Liberty Global, for example, has a portfolio of more than 20 UK production subsidiaries secured through its purchase of super-indie All3Media. This includes one of our case study companies, Lion Television, producer of the long-running returning series Homes Under the Hammer and Horrible Histories for the BBC. Acquisitions have not been confined to television production companies but include terrestrial, satellite and cable broadcasters, studios and distribution companies. Liberty Global owns Virgin Media outright while also holding a minority stake in ITV. Other examples of conglomeration abound. The sale of subscription satellite broadcaster Sky to Comcast in 2018 following a bidding war between three US companies, Comcast, Disney and Fox illustrates the appetite amongst major US media groups

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to acquire UK-based and other overseas television companies. Vertical and diagonal integration in order to control both upstream production and downstream distribution elements of the value chain is a well-established strategy in the television industry across the globe, but US companies have been particularly active in employing this approach. While much M&A activity has revolved around familiar entertainment and media industry brands, the emergence and growth of US-based technology companies—Facebook, Amazon, Apple, Netflix and Google (the FAANGs)—over recent years presents a direct challenge to the longstanding predominance of established media and television conglomerates (Wayne 2018). Of these only Netflix is supplying television content as its core business but all operate business models which involve accumulating, analysing and exploiting consumer data. The growing centrality of data analysis, the economic heft, plus the power of the FAANGs to influence consumer decision-making, including in relation to directing choices of television content, poses new challenges for media policy-making as it aims to tackle emerging forms of digital dominance (Hesmondhalgh and Lotz 2020; Tambini and Moore 2018). The rise of technology companies has acted as a spur to acquisitions and consolidation as traditional media organisations in the US, Europe and around the globe have pursued mergers and partnerships in order to compete with ‘streaming giants’ (Solomon 2020). For now, the US remains the pre-eminent player in the global television industries in terms of the scale of its activities and influence. However, as television content is increasingly consumed in the borderless sphere of on-demand viewing and via multiplatform delivery systems, it remains to be seen if this situation will endure. Regional markets for television content have flourished in recent years, for example in the Far East and South America, lending strength to Thussu’s ‘contra-flows’ (Thussu 2006). While the US continues to dominate exports, it is notable that the position of several other countries as exporters has improved significantly in the twenty-first century (Doyle 2014; WTO 2010). As Esser observes ‘[m]ore than ever before in the history of television, content is shared across borders, is originating from a multiplicity of sources and is spreading across several continents’ (Esser 2014: 88). While USoriginated content continues to dominate including on new platforms such as Netflix, the advent of wider global availability for audiovisual products emerging from alternative and smaller markets has influenced

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audience tastes and over time this may well pose an increasing challenge to historic patterns of diffusion typified by largely one-way flows emanating from the US outwards. Europe The television production and broadcasting landscape is hugely varied across the continent of Europe. Each national system has evolved according to differing cultural, political and commercial imperatives, but there are also important shared characteristics. In many cases, the context in which television production has emerged has been similar to the UK where the established pattern has involved a mixed economy of PSB plus commercial broadcast networks. All of the other largest nations of Western Europe—France, Germany, Italy and Spain—mirror this broad pattern. European neighbours have cooperated with one another, for example on policy matters and in terms of development of co-productions. But the national television industries of Europe also compete with one other to sell content into and across international territories. However, despite occasional successes such as Spiral (France) and Inspector Montalbano (Italy), the larger nations of Western Europe other than the UK have achieved only limited success as exporters of television content. Most Western European countries, particularly France (Miller 1993), share concerns about the implications for their respective cultural economies of imbalances in trade in audiovisual (film and television) content and about the possible effects on languages and cultures of excessive audiovisual imports. While Britain has at times been regarded as an ‘awkward partner’ in discussions about collective European measures to protect culture, political support for action to protect and boost the position of domestic programme-makers has more generally across Europe remained robust (Collins 1994). Shared concerns about the need to counter the effects of globalisation and of the dominance of US audiovisual suppliers have paved the way for protective policy interventions at national and collective European levels, such as quotas requiring broadcasters to screen a minimum proportion of locally made content and subsidies for local production sectors. Support for local production is seen partly as a necessary counter-measure to the potentially adverse effects of cultural imperialism and partly as a means of protecting national producers who otherwise would struggle to compete in the

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global marketplace against much larger international rivals (Broughton Micova 2013). Although definitions of the term ‘independent’ vary across Europe (Medina 2004), adherence to the idea that local and independent television production should be protected is widely shared. This is reflected in a plethora of national policy measures whose aim is to support and protect indigenous production within each of Europe’s largest television markets (EAO 2019). In addition, at collective European Union (EU) level, the Audiovisual Media Services (AVMS) Directive requires that a majority of transmission time on broadcast channels in all member states is preserved for European-made works and that a minimum of 10% of transmission time is devoted to independent productions (CEC, 2018). Levels of compliance vary from country to country and in practice member states tend to satisfy the requirements of the Directive by producing domestic nationally focused content as opposed to material aimed at pan-European audiences (Broughton Micova 2013: 256). However, partly on account of language factors, few of the other large countries of Europe other than the UK have succeeded in becoming major international exporters of television content. Although Europeanmade television content often permeates across overlapping (usually neighbouring) language areas within Europe, the UK’s experience of selling finished television programmes and formats much more widely to markets around the globe is unmatched by that of other major European countries. Indigenous independent television production has been nurtured and supported in most of Europe’s major markets and frequently the espoused motive for this has been in order to promote diversity (Albornoz and García Leiva 2019). In France, inclinations to protect culture in face of growing trends towards internationalisation of television have been especially strong (Kuipers 2011) and protectionist instincts are evidenced for example by levies to support national audiovisual production and by high quotas for locally made and French-language content which are stringently enforced (EAO 2019). By contrast in Italy production of television has developed in a less protectionist environment where the national cultural space is ‘relatively porous and open to the influence of foreign art forms and media products from the very beginning’ (Buonanno 2015: 195). In Germany, where the emergence and growth of independent production took place later than the UK and similarly was helped along by a series of domestic policy interventions, promoting efficiency and

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plurality were key motives for supporting the creation of a production sector which was identifiably separate from broadcasting (Elbing and Völzkow 2006). While the success of major European countries other than the UK in exporting content has been limited, it is clear that many European-based companies, such as Germany’s RTL Group, harbour ambitions to become major forces in global television (Solomon 2020). French group Vivendi, for example, has extended its international footprint through acquisition in an effort to build the scale and configuration needed to compete effectively as a supplier of content in a rapidly evolving television landscape (Agnew 2019). As a diversified media conglomerate, Vivendi’s activities span across music, book publishing, video games and video hosting sites as well as film and television. Its television interests include broadcasting via Canal + and production via Studio Canal. It also has a significant shareholding in Banijay which, through acquiring the Endemol Shine in 2020, became the world’s largest non-US television production group. In 2013, Vivendi subsidiary Studio Canal acquired the maker of such quintessentially British content as Last Tango in Halifax, Ordinary Lies and Scott & Bailey, UK independent drama producer Red Production Company, which is another of our case study companies. The effects and implications of takeovers of independent producers by globalised media groups, including European players such as Studio Canal, are examined in later chapters. In contrast with large Western European countries such as Germany, Turkey has emerged in recent years as an increasingly important exporter of television dramas. Global viewership of Turkish-made musical dramas called ‘dizi’ has expanded dramatically in recent years (Öztürkmen 2018) with such content ‘finding huge audiences in Russia, China, Korea and Latin America’, especially Chile (Bhutto 2019). The increasing success of the Turkish production sector in recent years in supplying content which sells well internationally stems not only from apparent audience affinity with the content in question but also from the effects of state support measures for the production sector and from the conscious efforts of Turkish producers to build international revenue streams, as Yesil argues: The unduly narrow focus on the notion of cultural proximity has led to the omission of the economic imperatives behind the transnationalisation

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of Turkish content, most prominently those having to do with the development of the Turkish television industry and its global integration in the late 1990s and 2000s. (Yesil 2015: 54)

In addition, a number of smaller Northern European, despite being small territories linguistically, have been remarkably successful in producing television drama with global commercial and critical appeal. Media systems in Nordic countries, which have evolved distinctively and with emphasis on consensus and cooperation, have since the 1960s developed a strong tradition of joint funding and coproduction of television content including drama (Syvertsen et al. 2014). Emerging from this context, ‘Nordic Noir’ dramas such as The Killing and Wallander have been exported both as finished content and also for remake in English language (Bondebjerg and Redvall 2015). The appeal of Scandinavian dramas has been successful in encouraging transnational encounters for audiences and is indicative of a growing acceptance of foreign language content on the part of audiences. By facilitating and encouraging more cosmopolitan audience tastes, it appears that the rise of multi-territory channels and globalised on-demand content services is helping to fuel demand for high quality locally specific drama from smaller countries such as Denmark, Sweden and Norway (Doyle 2016; Lobato 2018). However, as Raats et al. (2016) point out, production sectors in small European countries do face difficulties. Given the high costs involved in drama production, a product that promises to appeal across the Scandinavian countries or even across several European countries may nonetheless struggle to gain funding and distribution. Challenges related to accessing finance are particularly acute in Europe’s small nations and regions (Raats et al. 2016). Even so, the production sectors of Europe’s smaller countries have fared well in recent years not only in terms of making dramas that appeal widely internationally but also in terms of selling television formats. The Netherlands is behind only the US and the UK as an international exporter of formats (Bazalgette 2005; Chalaby 2017: 10). A successful format generally requires the application of a ‘local-global-local’ model of exploitation to a show with potentially global appeal and sufficient malleability to allow for adaptation to suit local tastes across a range of additional territories (Chalaby 2012: 31). As Esser notes, the effects of

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increased global trade in television formats are complex, on one hand encouraging homogenization of content but, on the other, promoting adaptation and greater heterogenization (Esser 2014: 88). Rest of the World While development of television systems in the US and Europe has received much attention, fewer scholarly articles and books have focused attention on systems elsewhere such as in the Far East and East Asia. In these regions, adherence to the tradition of public service broadcasting has generally been weaker than in Europe and, aside from in Japan, market forces have helped to shape the development of television in countries such as South Korea, Taiwan and Singapore (Lent 1978). In Hong Kong for example, local production of dramas by vertically integrated commercial broadcasters flourished from the 1970s onwards, with institutional forces exerting varying levels of ideological influence over the character of content (Ma 1999). Historically, the development of television production in the main countries of the Far East has focused predominantly on servicing the needs of domestic markets. A study of television broadcasting and production and trade in nine Far Eastern countries in the early 1990s indicated that intra-regional trade in content, for example between Hong Kong, Taiwan and Japan, was ‘very low’ at that time and, by contrast, content produced in the US ‘overwhelmingly dominates Far Eastern program flows’ (Waterman and Rogers 1994: 98). In the Far East as in Europe, economic factors are significant in explaining the relative success of USmade content, as opposed to programmes made, say, in Japan, in selling across borders throughout that region (ibid.). Albeit that political factors, quotas and restrictions on imports play a determining role in shaping trade flows in this part of the world, so too do the advantages naturally enjoyed by US producers based on the scale and wealth of the domestic US market and associated implications for their average perhour programming budgets. But levels of production and cross-border exchange of locally produced television content in the Far East and East Asia have increased significantly since the mid-1990s, resulting in new niche markets and counter-flows of trade and new forms of engagement between production in this region and the global cultural economy (Keane et al. 2007).

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As in the West, television production in the Far East developed as a distinct economic activity supported by rapid growth in avenues for delivery of broadcast channels and the rise of pay-TV since the 1980s. But the production sectors of the major countries of East Asia—China, Japan and South Korea—have strengthened in recent years as these countries have become increasingly important as international exporters of content (ibid.). At the same time, in a region marked by political complexity, television is often regarded by nations not only as an exportable market commodity but also as a means of national branding and to exert soft power (Chua 2012; Iwabuchi 2015). Japan is home to a range of successful cultural content production sectors. Similar to many European countries, television production has developed historically in the context of a mixed economy of PSB and privately owned commercial broadcasting. However, unlike most European nations, television production in Japan has continued its existence predominantly as an activity carried out in-house by vertically integrated broadcasters with ‘independent’ production playing a less significant role (Murakoshi 2016). Japan produces the vast majority of its own programming and, for such a large television market, engages in relatively little cross-border trade in television content (ibid.). However, in Japan as in South Korea, the potential economic benefits of commodification of culture have increasingly been embraced (Otmazgin 2011) and a number of Japanese dramas and formats have found success with audiences in neighbouring countries. The development of cultural content production, including television dramas and films alongside Anime, Manga and video games has been closely nurtured, supported and protected under the banner of ‘Cool Japan’ (Choo 2012; Iwabuchi 2015). Japanese companies are long-established major forces in the global media hardware and software markets with interests that extend to television production. The Sony Corporation of Japan, with its origins as a technology hardware firm, like other media and entertainment conglomerates seeking to compete on a global scale, has made numerous strategic acquisitions across the film and television production industries worldwide in recent years. Its US-headquartered subsidiary Sony Pictures Television (SPT) has acquired interests in several UK television production companies (Barker and Inagaki 2020), including another of our case study companies Left Bank Pictures whose high-profile drama outputs include The Crown, Outlander and Strike Back.

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The term ‘Korean Wave’ or Hallyu was coined to describe South Korea’s increasing success in recent decades as a prolific exporter of cultural goods. It was first used to refer to the boom in popularity of Korean television drama in China in the late 1990s (Berg 2018; Kim and Ryoo 2007). Historically, Korean broadcasting was tightly controlled by the central government in terms of its operation and the character of content. But this situation was radically changed when, starting in the early 1990s, deregulation was introduced and the existing broadcasting duopoly market was opened up to competition from private broadcasters (Jeon 2013: 60). Helped by liberalising measures, the production sector in South Korea flourished with a subsequent massive upsurge in the popularity and export success of such television dramas such as What is Love All About and Winter Sonata in the early 2000s (Shim 2008). The more recent proliferation of social media platforms has provided additional transnational conduits for Korean television and K-Pop content to move beyond the confines of Asian markets to represent an increasingly global scale ‘contra flow’ in cultural goods (Jin 2018: 8). By comparison with Japan and South Korea, China is at a relatively early stage in the arc of its entry as a supplier of television content to global markets. Until the turn of the twenty-first century, China was predominantly an importer of popular cultural goods from neighbouring countries. However, as Chua points out, ‘the popularity of Korean television dramas and Taiwanese mandarin pop music spurred the state-controlled media in the PRC to think competitively, deploying various strategies’ aimed, successfully, at boosting exports from China of regional historical dramas, literary classics and contemporary television dramas which have sold well, for example, in Korean and Japan (Chua 2012: 67). Strategies to boost production and exports included the separation of programme-making from broadcasting in China in 2003, following which a number of private or independent production companies developed often located in special zones or media clusters (Keane 2015). Despite growing levels of commercial and export success for Chinese producers, state control in the form of censorship and restriction remains a feature of the marketplace for television content in China. The Chinese television industry, from its inception in 1958, ‘was if anything a propaganda industry’ (Keane 2015: 8). As Zhu argues ‘letting commerce into China does not mean taking the state out’ (Zhu 2008: 11). The contemporary Chinese model combines vestiges of the paternalistic Communist

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state with a fierce commitment to competing in the global television marketplace. The government’s ‘go out’ strategy, first mooted for the cultural industries in 2007, encourages Chinese companies and institutions to expand operations into overseas territories (Keane and Wu 2018: 52). This policy targets not only East Asian and Western markets but also Africa where Chinese media companies, including CCTV, have been particularly active, reinforcing the perceived value of television as an instrument of soft power overseas (Zhang et al. 2016). A push by China both to develop ICT rivals capable of competing with the globally dominant US-based technology companies (FAANGs) and to retain tight control over its own information infrastructure has resulted in the emergence over recent years of a set of Chinese-based powerful technology giants (Jia and Winseck 2018). Baidu, Alibaba and Tencent (BAT) media companies dominate the Chinese landscape and their influence is increasingly felt as they ‘go out’ internationally (Keane and Wu 2018). Expansion through numerous foreign acquisitions on the part of the BAT companies has attracted controversy and raised concerns about their growing economic power and about surveillance as well as reliance on technologies controlled by non-domestic companies. As a result, ‘[r]egulators, most notably the US Committee on Foreign Investment (Cfius), have blocked several deals over fears on national security’ (Lucas and Feng 2017) and investment in the US by Chinese technology companies has reduced (Kruppa and Yang 2020). While expansionist ambitions remain, to what extent Chinese technology companies will, in the face of growing tensions about international investment, become more fully integrated within global television industries, is difficult to predict. Latin America is another region where, focused initially on serving national markets, production industries have developed successfully (Antola and Rogers 1984; Straubhaar 2003) and international trade in locally produced content has gradually increased over time. As with the US, commercialism and competition served as key drivers for the historic development of television production and broadcasting in this area (Biltereyst and Meers 2000: 395). Unlike European and East Asian examples, Brazil’s television sector was largely unregulated in its early years (Sá-Earp et al. 2017). By the early 1970s, Globo TV rose to become the pre-eminent national network in Brazil boosted by support from US media company Time-Life and by its capacity to produce up to twelve

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hours of original content per day as well as by the development of the hugely popular telenovela genre (Litewski 1987; Straubhaar 1989). As with Turkish-made dizi or musical dramas, telenovelas which are produced in Latin America and sell to audiences around the globe constitute another example of television content that travels outward from less to more developed television markets (Mato 2005). Production of the genre is by no means confined to Brazil but is shared across a number of countries in South America. The telenovela provides an interesting example of how a generic form imbued with markers of national specificity can work not only domestically but also as an effective driver of exports regionally and globally. Cultural proximity is seen as contributing to regional appeal across other Latin American countries and nations with significant Portuguese and Spanish speaking populations (Biltereyst and Meers 2000). However, telenovelas also sell in remote territories where grounds for audiences finding affinity are less obvious (Jedlowski and Rêgo 2019; Miller 2010), their success acting as a reminder that crossborder television flows and contra-flows are neither a recent phenomenon nor one where the direction of travel is always from large to smaller markets. Australia is a relatively small country, in terms of population, and it follows that the domestic television market is modest in scale. Even so, a range of internal forces including state policy plus the wider market environment have encouraged screen production in Australia to become increasingly oriented towards international markets in recent years (O’ Regan and Potter 2013: 7). Australia has historically been a prolific exporter of television programmes with soap opera content faring especially well in the UK. Cunningham and Jacka attribute this success partly to the ‘particular mythic role that “Australia” plays in the British psyche’ (Cunningham and Jacka 1994: 524). Australian soaps have also worked, although primarily only as cheap substitutes for US-made drama, in other parts of Europe that have no obvious historical and cultural ties to Australia (ibid.: 516). An evident lesson is that strategies of capitalising on cultural proximity can play an important role in developing a production sector capable of then addressing global markets.

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Digitisation and Convergence While each territory has its own distinctive history and position in the international marketplace, the forces which have shaped development of the production industry are in some cases widely shared across all territories. Television has been revolutionised in the twenty-first century by ‘the twin engines of digitisation and globalisation’ (Chalaby and Esser 2017: 3). Driven by the growth of the internet and the spread of digital technology, ‘convergence’—characterised by shared use of common digital technologies across media, communications and computing industries— has been an especially powerful driver of change (Doyle 2020). Digitisation and convergence have significantly affected modes of delivery and consumption of media, including television content, with far-reaching implications for the corporate and operational strategies of media organisations (Doyle 2013; Küng 2017; Picard 2011). The development of digital distribution platforms has brought extensive opportunities for innovation (Donders et al. 2018) and, in line with Schumpeter’s vision of industrial renovation and rebuilding through ‘creative destruction’ (Schumpeter 1942), has acted as a force for renewal and growth in the media sector. But it has also resulted in difficulty and demise for some market incumbents, particularly print media organisations (Nielsen 2016; Schlesinger and Doyle 2015). For the television industry, digitisation and convergence have been transformative (Bennett and Strange 2011; Doyle 2010; Lotz 2017; Waterman et al. 2013). Growth of the internet and the rise of online streaming have accelerated processes of international expansion by television service providers, fuelling demand for content and boosting international trade in television content. These trends are evident even across Europe where nationally focused public service media still garners considerable support. A recent report from the European Audiovisual Observatory highlighted three ways in which greater internationalisation across Europe has become manifest (Schneeberger 2019). First, the tendency towards fragmentation of national audiences with major indigenous channels losing share while audiences become spread across a multiplicity of channels and services each with relatively small market shares. Second, the increased market presence in a majority of European countries of non-domestic television channels. And thirdly the ‘growing footprint of US groups’ such as Discovery whose channels account for a high market share in many

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countries, especially in smaller countries including Slovenia and Bulgaria (ibid.: 1). As well as facilitating additional conventional television channels, digitisation and growth of the internet have transformed television viewing habits by making streaming of content an increasingly important mode of delivering moving images to audiences (Lobato 2019; Olsberg SPI 2020). Although the capability for streamed video was pioneered in the UK by the BBC, developing this up into a viable commercial business model was led by others, prominent amongst which has been Netflix (Doyle 2019; Voigt et al. 2017). Netflix, which initially set out as postal-based DVD rental business, then launched an SVoD service in the US in late 2007 before expanding outwards across a number of European territories. Through re-investing its subscription revenues into high-profile original commissions Netflix has created a virtuous circle of increasing subscription revenues and improved content offerings, thus evolving into a global streaming business (Voigt et al. 2017: 127). Growth in the popularity of SVoD services such as Netflix and Amazon Prime has been spectacular. In the UK for example, data from the industry regulator Ofcom confirmed that by early 2019 there were more SVoD subscriptions than pay-TV subscriptions (Ofcom 2019: 59). The rise of SVoDs has raised a number of critical concerns related to indigenous broadcasting and production, diversity and the role played by algorithms (Albornoz and García Leiva 2019). As mentioned earlier, the development of global online markets for entertainment and the emergence of powerful internet companies—Amazon, Facebook, Google, Netflix and Apple—has also sparked countering corporate strategies on the part of established media and communication players such as the US studios, telecommunications and cable companies, and has precipitated reconfigurations in ownership through mergers and acquisitions within and across adjacent sectors (Evens and Donders 2018), including across the television production sector. Propelled by growth in the number of competing broadcast outlets and pay-TV services and by the growth of SVoD services, international demand for high-quality content has increased dramatically over recent years (Olsberg SPI 2020). While posing a major competitive threat to national broadcasters (Steemers 2016) the rise of globalised SVoD services which aim to commission programmes that they can offer in every country has created huge opportunities for production companies. Commissions from major streaming services such as Netflix and

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Amazon Prime tend to pay well. Given the large size of their international subscriber base, SVoDs can capitalise on economies of scale to outbid local players for high calibre scripts, talent and finished productions. Originals are produced for an audience of tens of millions of subscribers; global distribution can be promised and leveraged in content acquisitions; and hundreds of countries can be covered when striking deals to license content to aggregators such as smart TV or streaming device manufacturers (Ampere Analysis 2019: 14). Not surprisingly then, SVoD services have made a significant impression on international demand for original content and on the landscape of television production. From the perspective of producers, while the arrival of extra wellfunded purchasers competing at the programme commissioning stage has been welcome in numerous respects, it also introduces complication in deciding which distribution outlet (and therefore which audiences) to target when programmes are in development. Also, the terms on which commissioning takes place vary depending on such factors as the footprint of the commissioning entity and prevailing conditions and regulatory requirements in local markets. When it comes to commissions for original content from SVoDs, although the fees offered in return for global rights are often generous, a potential problem is lack of subsequent opportunities for producers to exploit secondary rights (Doyle 2016). For broadcasters, the reinvention of television within an ‘online, broadband-enabled transnational if not global paradigm’ as opposed to within national frameworks (Cunningham and Silver 2013: 7) has proven challenging. Faced with increasing competition and encroachment on their revenues, many have countered by seeking to diversify vertically upstream through building a presence in content creation (Ofcom 2015: 13; Esser 2016). For example, the president of Discovery argued that in a world where many distribution channels and points of access to content exist, ‘[g]ood content will separate the winners from the losers’ (Perette cited in Sweney 2014). For television broadcasters, ownership of production has become increasingly important. Consequently, organisations such as, in the UK, ITV and Sky, as well as the BBC, have embarked on a strategy of vertical expansion through numerous acquisitions of independent production companies (Davies 2016). Likewise, the US major networks have become ‘laser focused’ on the need to acquire ownership of content creation and IPRs in order to sustain ‘maximum control over multiplatform distribution’ (Littleton 2016: 42).

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A further powerful incentive towards vertical and horizontal mergers involving production companies is the potential this may bring for improved access to international markets and funding. Recent data show that the proportion of income which the UK independent television production sector earned from international sales and commissions grew from 19% in 2006 to 34% in 2018 (Mediatique 2015: 16; Oliver and Ohlbaum 2019: 10). As Chalaby has argued, the production sector has long tended to draw on international markets and co-production deals to finance production of content (Chalaby 2012). However the sort of intense competition which exists at present between broadcasters and SVoDs such as Netflix has generated demand for ‘big statement’ and often expensive programmes and, in turn, increased reliance on international sources of finance (Ofcom 2015; Doyle 2016). In investigating the implications of restructurings in ownership in the production sector, our aim is to extend work in the realm of political economy, sociology and cultural studies which analyses the effects of concentrations of ownership in cultural production industries (Bagdikian 2014; Herman and McChesney 1997; Hesmondhalgh 2019; Tunstall and Palmer 1991) and, especially, which seeks to build critical understanding of relationships between media ownership, control and content (Baker 2006: Doyle 2002; Hesmondhalgh 2019). Earlier analyses of the effects of changing market conditions and of the rise of networked, globalised and more consolidated media industries have frequently drawn on global value chain theory (Chalaby 2016, 2019; Evens and Donders 2018). This perspective is valuable in the context of an increasingly internationally joined-up media environment, but the specificities of television production call for an approach that facilitates integration between such order-generating models as supply chains and the effects of the less predictable but ongoing corporate interactions and accompanying responses that characterise this sector. Our study builds on earlier work in economics (Coase 1937; Williamson and Winter 1993) which examines how marketplaces characterised by uncertainty in transactions between the differing vertical stages may well incentivise the development of vertically integrated organisational forms. It also builds on theories of industrial organisation, integrating insights from complementary perspectives including the resource-based view of strategic management (Barney 1991), dynamic capability (Helfat and Peteraf 2003; Teece 2007) and theories of industrial renewal (Van Stel, Carree and Thurik 2005), globalisation and

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inter-organisational advantage (Bartlett and Ghoshal 1989; Herman and McChesney 1997; Lee and LiPuma 2002)—alongside analysis of traditionally recognised determinants of propensities towards consolidation and concentration such as minimum efficient scale (Scherer and Ross 1990; McEachern 2018). A further significant influence for our analysis of organisational adaptation and reconfiguration via M&A strategies has been management theorist Michael Porter’s ideas about the importance of strategy as a source of competitive advantage (Porter 1987). As the findings presented in later chapters will show, while driven by a compelling economic logic, increased investment interest from multinationals in indigenous UK and European-based production companies also has implications for content and, in turn, audiences. Part of the importance of television is its cultural function and role in representation and national storytelling. But as flows of television content become increasingly globalised, the connections between ‘the images and symbolic tools incorporated into the construction of collective identities’ and ‘distinct places of origin’ seem frayed (Tinic 2005: 1) as do notions of a public sphere bounded by geographic terrain. Transnational agglomeration and the rise of globalised SVoD services raise important questions about the sustainability of national production sectors. The disadvantaged position of (often smaller) indigenous production companies who, to the extent that they wish to make content that is predominantly oriented towards the concerns of domestic audiences, may well ‘struggle to attract funding adequate to compete with the high-production-value fare developed and produced for the international market’ has rightly been highlighted by Esser (2016: 3605). Such issues are a concern for policy-making because access to a diverse array of content, including domestically made television content, is generally seen as integral to democracy, pluralism and preservation of identities and in some cases languages (UNESCO 2001: 5–6). Maintaining access to diverse outputs is dependent on ‘in home countries, a vigorous industrial base for the production of cultural goods’ (Mas-Colell 1999: 89). These are the concerns that lie at the heart of this book. In examining the effects of recent transformations in ownership we are not only concerned with how incumbent television production companies can adjust successfully to advancing technology but also with how public policies ought to change to ensure that independent production continues to flourish in the global arena.

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CHAPTER 3

From Minnows to Sharks

This chapter examines the historical development of the television production sector in the UK. It traces the development of what started out as a fragmented industry, populated by small creative companies in which livelihoods were highly uncertain, to one that is now widely celebrated as a powerhouse for UK creative exports and an internationally recognised success story for business transformation. The main sections of this chapter detail key phases in the evolution of the UK production industry. As our analysis shows, policy interventions have played a crucial catalytic role at each stage in the sector’s development. While promoting competition has been a recurrent motif in the narratives supporting changes in UK policy, the ensuing result has been a production sector which, having progressed in the 1980s and 1990s from being a cottage industry into one that was highly competitive, has— perhaps paradoxically—in the twenty-first century been marked by rapid consolidation as many of the sector’s leading players have transformed ‘from minnows to sharks’.

Early History Throughout the history of television in the UK the most important industry players have been broadcasters. Experiments with broadcasting © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 G. Doyle et al., Television Production in Transition, Palgrave Global Media Policy and Business, https://doi.org/10.1007/978-3-030-63215-1_3

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began in the 1920s and the British Broadcasting Corporation (BBC) started to provide a limited but regular scheduled television service, in what was generally regarded as a natural extension to its radio output, in November 1936 (Briggs 1995). Production of content at the licence fee funded BBC was carried out at in-house production departments guided by the vision of the organisation’s first Director General, Lord Reith to ‘inform, educate and entertain’ the masses—an ethos that remains at the core of public service broadcasting (PSB) values and aspirations to this day (Siân 2014). However, some were critical of the monopoly status of the publicly funded BBC. After World War 2, a number of studies, inquiries and reports drew attention to the potential for television to develop as a commercial activity and highlighted the need for greater competition. In the late 1940s and early 1950s, prominent economist Ronald Coase provided pioneering critiques of the lack of market mechanisms within broadcasting (Coase 1949) and argued that ‘it is reasonable to assume that the force of competition would operate as a stimulus to improvements of all kinds’ (Coase 1949: 185). The Beveridge Committee inquiry into broadcasting which reported in 1951 also looked closely at the monopoly position of the BBC (Beveridge 1951). Its Final Report acknowledged the importance of competition in ideas but discounted the notion of an open market and, rather than advocating more radical steps, recommended reforms to guard against potentially adverse consequences of monopoly. However one member of the Beveridge Committee—Selwyn Lloyd, a Conservative MP who would later become Foreign Secretary and then Chancellor of the Exchequer—produced a Minority Report, appended to the main paper (ibid), which suggested a different solution. Lloyd recoiled from Reith’s glorying in the ‘brute force of monopoly’ (Reith 1925) to underpin a sense of moral responsibility on the part of broadcasters. He disputed the argument for protecting higher social values espoused by the BBC and instead advocated the introduction in the UK of regulated commercial competition as already existed in Australia and Canada (Beveridge 1951). Lloyd’s prescription was taken up in the subsequent 1954 Television Act which provided for the introduction of a commercial ‘independent’ television system under the aegis of regulator the Independent Television Authority (ITA). For the ITA, competition was a central ambition, including in programme-making, according to its first Director General Sir Robert Fraser:

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This will be competition with a vengeance, and with all its fruits… I would like to see the Authority insist that each producer company should secure a proportion of its own original programmes from sub-contractors. I do not see why this should not be fixed as a percentage, either. This would give competition at another level. Sub-contractors would be in competition with one another and the main contractors would be competing with one another for the best programmes of the sub-contractors. If the network were compulsory there would be only one buyer for sub-contractors to approach. (Fraser quoted in Sendall 1982: 66)

Following the 1954 Television Act the BBC’s position as the monopoly provider of television was broken by the arrival, in September 1955, of the Independent Television (ITV) network. ITV was and remains a free-to-air commercially funded national broadcaster financed by advertising made up of a number of regional licenced areas. The ITV network shares programmes through a system where each licensee pays into a collective budget and in return is eligible to broadcast a shared schedule of programmes in their region. Ownership was originally spread across numerous individual regional ITV television companies, many of whom were very profitable, but over time has consolidated dramatically (Doyle 2013). After the initial launch of ITV in 1955 and up until an additional commercial service—Channel 4—was established in 1982, production of programmes in the UK was principally carried out by ITV and the BBC— both vertically integrated entities that produced programmes, assembled schedules and then broadcast their own services. The arrival of ITV ‘created not so much a fully competitive system on American lines as a dual system, part free part controlled, within similar frameworks of public regulation’ (Briggs 1995: 4). The establishment of a PSB-orientated BBC/ITV duopoly, coinciding as it did with widespread increases in ownership of television sets, paved the way for what some have termed a Golden Age of British television in which quality of programmes formed the main basis on which these two broadcasters vied against one another for viewers. The ‘comfortable duopoly’ of the BBC plus ITV (Peacock 1986), while falling short of Fraser’s earlier espoused vision of an openly competitive system, nonetheless established a British television system that became very successful both culturally and economically.

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Annan Report and Channel 4 Despite evident satisfaction on the part of audiences with the UK television system, by the early 1980s there was growing recognition that more competition within processes of supplying programmes to broadcasters was desirable. Television broadcasting had flowered since the 1950s but programme-making, as a separate stand-alone activity, hardly existed in the UK (Doyle and Paterson 2008). Programme-making was typically seen as a mere subsidiary function or ‘cost of sale’ to the activity of broadcasting and so the UK’s two vertically integrated broadcasters—BBC and ITV—made almost all their content in-house up until the 1980s. A growing sense emerged that the strength of the ‘comfortable duopoly’ needed to be challenged and that more competition in programmemaking was desirable, both on cultural and economic grounds. The change was instigated through the setting up of a new commercial channel in 1982 (Caterall 2013). However, the catalyst for Channel 4’s arrival was the Report of Annan Commission published in 1977 (Annan 1977). The Annan Report set in motion a fundamental change in the UK’s broadcasting ecology. An influential precursor to this was broadcaster and academic Anthony Smith who argued publicly for a new broadcasting model in which programme-makers were not tied to the duopoly broadcasters and so could provide fresh perspectives on the world (Smith 1972; Lee 2018: 29). According to Smith, although the BBC and IBA (the Independent Broadcasting Authority which regulated ITV) were ‘good organisations’, the problem remained that control over production and transmission of television content was institutionally too narrowly confined and the existence of the BBC/ITV duopoly meant that ‘no-one who was not employed by them could ever find expression’ (Smith, in Catterall 2013: xi). Smith’s arguments reflected a restlessness felt particularly among BBC producers in the face of a system characterised by heavily centralised control that at times was seen as curtailing producer creativity. Echoing these views, filmmaker Roger Graef later observed that: There was a feeling inside the BBC that many people could not do what they wanted to because the management was so restricting and so cautious. And although Granada, certainly where I went, was a very creative place to be, there was a feeling led by the BBC that there were a lot of programme

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makers dying to get their hands on a kind of free space. So when the opportunity came in this form there were a lot of people ready to use it. (Graef, cited in Catterall 2013: 86)

The opportunity referred to by Graef was the setting up of Channel 4. The Annan Committee which was tasked with considering the effects of new technology and the future of broadcasting, aware that a fourth television channel in the UK in addition to the ITV and the BBC licencefunded BBC1 and BBC2 was feasible, recommended the establishment of a new independent advertising-supported channel (Annan 1977; Freedman 2001). The subsequent Broadcasting Act 1980 provided for the creation of Channel 4 as a ‘publisher-broadcaster’—i.e. a broadcaster that instead of making its own programmes would instead commission all its content from external programme-makers. The establishment of the new channel based on a publisher-broadcaster model was a crucial and decisive landmark step in fostering the development of a production sector in the UK comprising stand-alone firms that were ‘independent’ of broadcasters (Doyle and Paterson 2008). The 1980 Act confirmed the new channel’s mandate to focus on education, to innovate and experiment within its programming and to have a ‘distinctive character of its own’ (Broadcasting Act 1980, 3(1) cited in Goodwin 1998: 28). By ensuring that the new channel was to be supplied with programming by out-of-house production units, the Act ensured that Channel 4 would be different in flavour and tone from the entrenched duopoly with their long-established in-house production units. Channel 4 began transmissions in September 1982 financed initially by a levy on the ITV companies and with a remit to commission programming from independent production companies (Bonner and Aston 1998; Brown 2007). ‘Independence’ for a production company was defined in the legislation as not entailing cross-ownership with a broadcaster of more than 15%, a proportion later increased to 25% (Darlow 2004). The founding Chief Executive of Channel 4, Jeremy Isaacs, appointed commissioners for various programming strands ‘as if they were commissioning editors within a large publishing house’ (Potter 2008: 86). The prevailing definition of indies plus the appointment of Isaacs encouraged a host of producers at the BBC and ITV to quit their posts and set up their own production companies (Paterson 2017). The demand for programmes that accompanied the arrival of Channel 4 provided a crucial propeller for the initial growth and development of

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an independent sector in the UK (Ofcom 2006: 34). Barriers to entry in the sector were low. The number of new companies founded in the early 1980s surged and although most were led by individuals with little or no experience of running a business this brought ‘an explosion of originality and ideas, as if a pressure valve of creative energy had been released’ (Lee 2018: 36). This resulted in the formation of a vibrant new industry but one that was largely dependent on a sole buyer: Channel 4 (Darlow 2004). Livelihoods for independent producers were precarious in a sector that was over-supplied with small-scale companies and, although renewal through new market entry was persistent, many companies quickly went out of business (Harvey 2000). Channel 4 frequently found it had to offer business advice to the newly formed and commercially inexperienced programme-making companies. The terms on which the new broadcaster commissioned original programmes typically involved full reimbursement of production financing costs plus a production fee for the producer but in exchange for Channel 4 retaining ownership of the majority of residual intellectual property rights. The ‘let a thousand flowers bloom; let a thousand voices be heard’ philosophy which had surrounded the setting up of the new channel (Channel 4 1985: 6) resulted in a situation where each individual production company ended up having little or no market power or negotiating leverage and this state of affairs impeded indies from extracting full value from their intellectual property assets and, in turn, building up their businesses. Reliant as the emergent sector was on a ‘cost-plus’ model of production financing, it remained populated by predominantly small and under-resourced firms vying for commissions (Mediatique 2015). By the mid-1980s, it was recognised that commissions from a single channel alone would not be sufficient to support and sustain a robust and commercially ambitious sector. Producers had established their own trade association, the Independent Programme Producers’ Association (IPPA), in 1981 which acted on their behalf in negotiations with the new channel as well as providing an industrial relations service (Goodwin 1998; Potter 2008). IPPA and its successor PACT (the Producers’ Alliance for Cinema and Television which was set up in 1991) mobilised to set in train further changes in broadcasting policy favouring the interests of independent producers. IPPA’s and then PACT’s lobbying influence in relation to a series of connected inquiries and reports were to have an important influence on the economics and organisation of production in the UK as the sector evolved from what business ‘troubleshooter’ John Harvey Jones in

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the 1980s famously described as a ‘lifestyle business’ to a growing and increasingly successful component of the television industry and a major exporter of formats and finished programmes.

Peacock, the 1990 Act and Increased Competition In the mid-1980s the Margaret Thatcher-led Conservative Government set up a new enquiry into broadcasting chaired by prominent public sector economist Professor Sir Alan Peacock. The Peacock Committee was tasked with investigating the financing of the BBC but it quickly dismissed the idea that the Corporation should abandon the licence fee in favour of advertising funding and instead turned its attention to question around the organisation and efficiency of the television industry. The Peacock Report undertook the first full economic analysis of the changed ecology of production after the creation of Channel 4. It pointed to the absence of adequate distinction, within vertically integrated broadcast organisations, between broadcasting and programme-making as two separate and distinct economic activities. Peacock lamented the lack of open competition within programme-making and made clear that he was favourably impressed by the entrepreneurialism and efficiency of the independent production sector (Peacock 1986). During its deliberations the Peacock enquiry was lobbied intensively by the independent sector which wanted to open up the BBC and ITV to commissions for programming from its member companies (Darlow 2004). They were pushing at an open door as Peacock was clearly disposed to recognise the need for greater competition within programme supply and the need for production firms to be able to gain commissions from more than one buyer (Peacock 1986). One of the key recommendations in the Report was that there should be compulsory minimum access quotas for programmes made by independent production companies at both the BBC and ITV. Peacock proposed that not less than 40% of output at the BBC and ITV should be outsourced from independent producers (ibid). Harnessing the momentum created by publication of the Peacock Report, independent producers conducted a highly effective campaign in the late 1980s for the introduction of compulsory minimum access quotas of 25% for indie-made programmes (Darlow 2004; Potter 2008; Woodward 1990). The Peacock committee’s warnings to the UK Government that the predominance of vertically integrated broadcasting companies was stifling

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the growth of a strong independent programme-making industry in the UK were heeded by the Thatcher-led Conservative Government of the day (Doyle and Paterson 2008). In a move that significantly expanded demand for programme ideas developed by independent companies, the 1990 Broadcasting Act enacted Peacock’s suggestion that there should be compulsory minimum access quotas. The regime introduced via the Act fell short of the 40% suggested by Peacock but imposed a new legislative requirement that the BBC and ITV commission at least 25% of their programmes from the independent sector (Birt 2002). The 1990 Act introduced a range of other measures designed to greater promote efficiency and competition, including removing financial inter-dependence between Channel 4 and ITV; the creation of the Independent Television Commission (ITC) with a more economics-oriented approach to regulation to replace the IBA; requirements for the ITV network’s collective programme supply arrangements to be scrutinised by competition regulator the Office of Fair Trading (OFT); and, most dramatically, a requirement for the regional ITV (or ‘C3’) companies to engage in a blind auction process in order to secure renewal of their lucrative broadcasting licences. Again, this latter idea stemmed from a suggestion originally put forward in the 1986 Peacock Report that ITV franchises should be put out to competitive tender. Following the 1990 Act, the round of ITV franchise renewals that took place in 1991 resulted in a shake-up of the network. For many years the bulk of ITV’s collective schedule of programmes had been produced and supplied by the five largest companies in the network: Central, Granada, Yorkshire, London Weekend Television and Thames. But the status quo was upset when, instead of being returned to incumbent Thames Television, the large London weekday franchise was awarded in 1991 to relative newcomer Carlton Television. As a publisher-broadcaster, Carlton outsourced most production rather than creating content for itself and for the network. Meanwhile the displaced incumbent, Thames Television, stripped of its broadcasting interests, became a new large independent production company. Another force for change at ITV in the early 1990s was the emergence of a series of reports about ITV’s networking arrangements which highlighted concerns about lack of competition and access for smaller regional companies and for independent producers to processes of supplying content to the collective schedule. Within a couple of years of the 1990 Broadcasting Act, the operation of the newly established ITV (‘C3’)

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Network Centre had been challenged and referred to the OFT. The ensuing report by the Director General of Fair Trading set out how the 1990 Act had changed the landscape of UK broadcasting and how the ITV Networking Agreement needed to comply with a ‘Competition Test’ to ensure no restriction, distortion or prevention of competition (OFT 1992). But, according to the report, the Network Agreement did impose unnecessary restrictions and diminished competition and therefore the OFT specified modifications—a requirement that independents be allowed to contract directly with the Network Centre instead of first having to go through one of the ITV franchisees—that were required in order to open the system up (OFT 1992; Ofcom 2005: 49–50). Arguments that had been made twenty years previously by then regulator the Independent Television Authority (ITA) to a Select Committee on Nationalised Industries that ‘if the responsibility for the production of the bulk of the programmes which are distributed for national showing is fragmented over too many centres, an uneconomic system of working results’ (HoC 1972: 41) were rejected by the OFT. Instead, the Director General’s view, echoing Fraser’s pro-competition sentiments way back in the mid-1950s, was that ‘even with a single network, competition could have existed in the supply of programmes to the network’ but the Authority had ‘decided to pick the main suppliers itself’ (OFT 1992: 22). The suggestion that the practices of the ITV Network Centre were anti-competitive and required reform was an important victory for the independent production sector and its well-organised lobbying efforts lead by PACT. Although appeals were made by the ITC and the ITV Association against the OFT suggestions for a more open system, these were unsuccessful and a slightly revised version of the OFT recommendations was imposed. The agenda of market liberalisation and opening up in-house production to the rigours of greater competition from alternative and external producers was also taken on board at the BBC (Deakin, Lourenço and Pratten 2004). Based on an adherence to fundamentally competing ideologies surrounding, on one hand, market competition and, on the other, public service broadcasting, reforms pushed through at the BBC in the 1990s proved to be both unpopular and somewhat unstable (Deakin and Pratten 1999). Nonetheless, a degree of vertical separation between production and broadcasting was achieved, not least through the ‘Producer Choice’ initiative brought in at the Corporation between 1991 and 1994 by Director General John Birt. Producer Choice effected change by

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creating an internal market for goods and services within the BBC and was intended to promote accountability and cost-efficiency. Driven by external political factors and implemented in a climate of internal opposition, the organisational changes made at the BBC can be seen partly as a response to wider changes in the environment of public services provision in the UK at that time, with internal markets already having been introduced at the NHS, in housing and in education (O’ Dwyer 2014). But they also reflect pressures specific to the television industry which burgeoned from the Peacock Report onwards and drove both the BBC and ITV towards progressively greater openness to using of independent producers (Deakin and Pratten 2000; Deakin, Lourenço and Pratten 2004). By the late 1990s, independent producers had proven themselves to be highly competent suppliers to UK broadcasters. Implementation of the compulsory access quotas contained in the 1990 Broadcasting Act 1990 ensured a proportion of commissions went to stand-alone independent production companies or more narrowly defined ‘qualifying indies’ (QI) that had limited cross-ownership with broadcasters (Lee 2018: 56). One of the main intentions behind the quotas was to allow the vertically integrated broadcasters to ‘more effectively benchmark the efficiency of their programme making capabilities against outside suppliers’ (Deakin, Lourenço and Pratten 2004: 20). At the same time, the quotas fuelled a further phase of expansion in the nascent independent production sector with many start-ups evolving into powerful and valuable companies of a greater scale. The number of indie companies grew from around 250 when Channel 4 started up to around 1000 by end of the 1990s (Deakin and Pratten 2000: 343). However most were still struggling in the face of the long-standing dominance of vertically integrated broadcasters to compete effectively and to achieve terms in negotiations to sell content that were favourable to the successful commercial development of their businesses. A Report carried out by independent consultants for the television industry’s sponsoring Ministry, the Department of Culture Media & Sport (DCMS), pointed to the generally weak performance of British-made television programmes in international export markets (DGA 1999). According to critics, competition in programme-making was still being stifled by ‘the lingering effects of the post-war duopoly’ (Deakin and Pratten 1999). Again well-organised lobbying efforts were called for to raise awareness that further corrective public policy measures would be needed to fully unleash the commercial and creative potential of the UK’s indie sector.

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2003 Communications Act A major problem for most UK independent producers was lack of ownership of residual rights in their programmes. When a programme commissioned by a broadcaster is completed and delivered for transmission, it typically will retain at least some value after its initial transmission because it can be repeated or sold to alternative channels or content services in the domestic market or internationally. Exactly how that residual value is exploited and by whom depends on who owns the rights. The systems of ‘windowing’ through which content suppliers seek to exploit residual value in their assets as systematically as possible are discussed further in Chapter 7 below. Systematic and full exploitation of the value within rights to programming content by the producer is dependent on ownership of rights. A production company with an extensive back catalogue of programmes may well earn revenue streams from its library of content assets that stretch out over many years. By contrast, a company that owns no rights has no residual revenue streams and is dependent solely on production fees—typically, a margin of some 10% of the production budget—to sustain itself. Therefore questions around how, in commissioning transactions, ownership of rights is divided between the commissioning party and the producer and around what exactly the arrangements will be for the exploitation of the value of that content in secondary markets are extremely important to the livelihoods of independent television production companies. The terms on offer from the main broadcast channels in the 1980s and 1990s varied across the sector (Deakin, Lourenço and Pratten 2004). Commissions from the ITV Network usually involved the purchase of UK first transmission rights only but, while this facilitated retention of ownership of residual rights by the producer, it also required producers to shoulder a portion of the financial risks involved in production. The more common model, in operation at the BBC, Channel 4 and Channel 5, was a ‘cost-plus’ one in which the broadcasters covered all production costs and paid a production fee to the producer but ownership of the majority of rights resided with the broadcaster. From the perspective of many small producers, the cost-plus approach, while allowing for little in the way of ownership of IP, was nonetheless attractive in that it minimised financial risks and providing the certainty of a guaranteed fee. For broadcasters, business terms under a cost-plus

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approach that conferred upon the commissioning party substantial ownership of rights in programmes seemed justified not only by their hefty financial contribution to production costs but also by the creative contribution made by broadcast commissioners who often saw themselves as instrumental in shaping programme ideas (Preston 2003). However, the prevalence of these terms meant that very few UK independent producers were in a position where they could negotiate deals resulting in effective exploitation of the residual value in their programmes to the benefit of production companies. Many of the independent companies set up in the 1980s focused on documentary and factual programme-making. The number of drama producing start-ups increased over time, helped along by higher tariffs for drama from broadcasters and, especially in the late 1990s, by several drama producers deciding to leave the BBC and ITV to set up their own companies (Paterson 2017). But, as highlighted by a survey carried out by the European Institute for the Media in 1997 (cited in Deakin, Lourenço and Pratten 2004: 26), the frailty of the position in which many UK television producers found themselves was exemplified by the fact that many were highly dependent on just one channel as a source of commissions and also most—some four-fifths—were single-genre entities producing just one sort of programming. Helped along by intensive lobbying on the part of trade association PACT, the uncertainties and disadvantages that independent producers faced were recognised and eventually addressed through new legislative measures. A study carried out in 2002 on behalf of the ITC about relationships between the production sector and commissioning broadcasters was to be an influential precursor to legislation. The Review of the UK Programme Supply Market (ITC 2002) chaired by Guardian Media Group Chief Executive Bob Phillis, a former Managing Director of Carlton Television and former BBC Deputy Director General, recognised and was sympathetic to producers’ plight. The argumentation and analysis in the 2002 Review were reminiscent of an earlier Monopolies and Mergers Commission investigation into programme supply arrangements at ITV’s Network Centre by the (MMC 1993). The MMC Report, following on an OFT Report which had called for liberalisation of the networking arrangements (OFT 1992), proposed further steps to protect indies including time limits on the standard duration of rights ownership by the commissioning broadcaster, reversion to the producer of ownership of any rights which were not being used by

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the broadcaster plus monitoring of the ITV Network’s programme supply arrangements by the ITC (Ofcom 2005: 49–50). In a similar vein, the ITC Review took the view that the power of broadcasting commissioners was excessive and that this situation required intervention to allow for a more equal negotiation between contracting parties. Although the arrival and growth of cable channels and subscriber-based multi-channel satellite service Sky had brought increased competition within UK programme supply markets, public service broadcasters remained dominant and this was where the Review, led by Phillis, focused attention. It argued that: the independent sector remains fragile - producers lack the scale to diversify their risk, and lack the right base which would allow them to attract external finance - only a few independents have been able to grow sizeable and sustainable businesses at home; and fewer still have made inroads in the international marketplace. (ITC 2002: 5)

The ITC Review advocated a mixed economy of companies in the production sector with a range of independent entities operating alongside vertically integrated firms. The best way to balance the strength of vertically integrated broadcasters and to support the development of independent production companies of scale would be through new and more open negotiated codes of practice between indies and commissioning PSBs overseen by the appropriate regulator. The Review favoured ‘reduced barriers to overseas investment, resources and expertise’ (ITC 2002: 7) as means of encouraging greater efficiency and profitability for the UK production sector. If any concerns were felt that tapping into international investment might entail negative consequences then this was not evident from the Report. Indeed, commenting on the Review the then Secretary of State for Culture, Media and Sport, Tessa Jowell, declared: I particularly welcome the fact that the report supports our view that foreign ownership should be an opportunity, not a threat for British broadcasting. (Jowell, cited in Plunkett 2002)

But not everyone welcomed proposals to change the terms of trade. In deliberations surrounding an ensuing Draft Communications Bill, these ideas were challenged by the then Director General of the BBC, Greg

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Dyke. While use of the BBC’s licence fee money as ‘venture capital for the nation’s creativity’ had been positively advocated by Tessa Jowell (Hol/HoC 2002: 83), Dyke questioned ‘whether it is the BBC’s job to make large numbers of independent producers extremely rich’ (ibid.: 84). His remarks on one of the key side-effects of proposed legislative changes turned out to be prescient. But Dyke’s view was dismissed at the time as ‘dramatically underestimating the difficulties facing the average independent producer’ (ibid.). Evidence from the BBC on the likely impact of foreign capital on the sector also received little attention while the more optimistic views of the 2002 ITC Review, PACT and of City financiers about how changes in the terms of trade would bring opportunities to the entrepreneurial independent sector evidently managed to gain considerable traction. A substantive legislative intervention followed. This took the form of a requirement, set out in the 2003 Communications Act, that Ofcom— the UK’s converged regulatory body for communications, telecoms and broadcasting which was to take over from the ITC in December 2003— should oversee the introduction of new terms of trade and a code of practice governing commissioning negotiations between public service broadcasters and independent producers (Doyle and Paterson 2008). The terms of trade between commissioning PSBs and qualifying independent producers govern arrangements for primary or first transmission of programmes, the scope and duration of rights for secondary windows plus extended uses such as online catch-up and they address how ownership and revenues from exploitation of rights will be shared between the two parties (Oliver and Ohlbaum 2015: 55). Intervention through the 2003 Act greatly improved transparency in negotiations between broadcasting commissioners and independent producers and it also resulted in indies being able to retain a much greater share of ownership in the rights to their productions than previously had been the case. The introduction of regulatory oversight of new terms of trade governing commissions by PSBs was a powerful policy intervention designed to boost the ability of the UK independent production sector to create sustainable businesses and to profit from fuller exploitation of secondary rights in programmes commissioned from them by public service broadcasters. While propelled by the lobbying efforts of producers, it was also driven by ideological and the de-regulatory inclinations of the New Labour government which came to power in 1997 (Lee 2018) and

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its appetite ‘to make the UK home to the most dynamic and competitive communications and media market in the world’ (DTI/DCMS 2000: 16).

Success, Growth and Consolidation Implementation of the provisions of the Communications Act 2003 fundamentally altered the conditions under which the UK television production sector operates. Other policy initiatives such as, for example, subsidies for the production of minority language programmes and, more recently, tax incentives for high-end drama productions have also encouraged the development of independent production across the UK—see Table 3.1 below. Indies benefitted from another shift in the landscape of commissioning opportunities when, in 2006, the BBC introduced, in addition to the statutory 25% access quota for independent productions plus a 50% guarantee for in-house productions, a new so-called ‘Window of Creative Competition’ (WoCC) for the remaining 25% of commissions in which any supplier could compete for commissions. But the BBC’s 50% guarantee for its own in-house production was later dropped as part of a wider shake-up in which production—renamed ‘BBC Studios’— was fully separated from broadcasting and for the first time allowed to compete in open markets for external commissions (Ellis 2014; D’Arma Table 3.1 Chronology of key UK policy interventions 1954 1977 1982 1986 1990 1991 1992 1993 2002 2003 2006 2013 2016 2019

Television Act creates new channel—the ITV network—to join BBC Annan Report recommends setting up another new channel Channel Four launched as a publisher-broadcaster Peacock Report recommends 40% independent access quotas at PSBs Broadcasting Act establishes statutory 25% access quotas ITV franchise auction Office of Fair Trading Report on ITV Networking Arrangements MMC Report on ITV Networking Arrangements Introduction of ‘Producer Choice’ (internal market) at BBC ITC (Phillis) Report recommends changes to terms of trade Communications Act mandates oversight of new terms of trade BBC introduces 25% ‘WoCC’ where any supplier can compete Tax incentives introduced for High-End TV Productions BBC Studios set up; End of in-house guarantees and WoCC Channel 4 sets up regional commissioning offices across UK

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2018). However, by giving producers greater ownership and control over secondary rights to their content, the 2003 Act turned out to be a landmark intervention in favour of indies that has had far-reaching implications for the economics and organisation of the UK independent production sector. The 2003 Act meant that small new market entrants and established companies in the independent production sector were able to increase revenues from exploitation of their content assets and, in turn, invest more in talent and resources thereby gradually building up their businesses. The result was that the UK production sector changed from having been a ‘cottage industry’ in the 1990s ‘where producers operated on a work-for-hire basis’ to, ten years after the implementation of new terms of trade, ‘a very successful sector that in 2014 generated £2.9bn in revenues and generated 30% of its revenues from overseas markets’ (Ofcom 2015: 2). Statistics from a range of secondary sources confirm the transformative impact of new terms of trade on the businesses of independent producers. According to data from Oliver and Ohlbaum Associates (2015) cited by Ofcom (2015: 2) whereas in 2001 only eleven out of around 500 producers that then existed in the UK had revenues of over £10 m annually, by 2014 the number of production companies have halved to 250 and of these some 33 producers had revenues of over £10 m annually. So success has brought about a more concentrated and consolidated market with fewer larger companies. As production companies transformed into business entities capable of generating substantial and growing revenues, this enabled them to expand into overseas markets and encouraged ‘the interest of external investors in providing capital to fuel that growth’ (Oliver and Ohlbaum 2011: 8). Consolidation of ownership was spurred on in the early 2000s as international television groups sought to acquire more significant control over production in domestic and international markets in order to expand their content libraries, build their profits and extend their strategic reach across global markets. Acquisition strategies focused mainly but not exclusively on the UK. UK production companies had become attractive targets thanks largely to the supportive domestic policy measures (Darlow 2004; Chalaby 2010). The series of policy interventions outlined in Table 3.1 proved highly effective in launching, expanding and then strengthening the business performance of UK production companies. Initially, the emphasis of UK policy interventions was on countering the

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market power of the major vertically integrated broadcasters by building numbers of indies and boosting demand for their output (Doyle and Paterson 2008). But a proliferation of competing programme suppliers brought an unwelcome side effect: asymmetry in bargaining power. Resolving this situation called for the newly formed companies and their aspirant owners—entrepreneurs with an effective and well-organised trade association—to mobilise in seeking further changes in UK television policy. While in most other countries across Europe and beyond, the business performance of indigenous producers is hampered by asymmetries in bargaining power between commissioning bodies and independent producers of television content, in the UK this situation was corrected by intervention, via the 2003 Act, requiring PSBs to offer deals to producers where primary transmission rights may be unbundled and priced separately from the additional rights with a greater proportion of the latter left in the hands of producers (Oliver and Ohlbaum 2011). This transformed the business performance of UK independent producers and is credited with enabling many to turn ‘from minnows into sharks’ (Saini 2005). In the four years following the introduction of terms of trade in 2004, the sector’s income from UK television rights and production exports grew at a compound annual growth rate (CAGR) of some 22% (Oliver and Ohlbaum 2018: 10). However, as organic growth contributed to scale and greater commercial success, this triggered a wave of takeovers of many of the UK’s leading independent producers from 2004 onwards, often by US media conglomerates (Campelli 2015; Lee 2018). The development of many larger sized independents or ‘super indies’ with successful track records (Ofcom 2015: 12), in turn, encouraged acquisitions and further processes of concentration of ownership. As the UK production sector has consolidated it has also emerged as a major force in the global television industry with leading companies such as All3Media and Endemol Shine that are key suppliers of an array of high profile content to broadcasters and other television content service providers around the globe (Oliver and Ohlbaum 2019). The espoused objectives which have underpinned historic UK policy interventions to support the development of an independent sector were, first, to extend pluralism and diversity by facilitating new creative voices and, second, promotion of competition (DCMS 2014 cited in Ofcom 2015: 1). Competition has been an important mantra underpinning

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historic policy initiatives aimed at nurturing the development of the independent sector (Paterson 2018). Similar to the US where, from the 1970s until the 1990s, the FinSyn rules were used to counteract the dominance of broadcasters, measures instigated in the UK that protected indies were intended to promote greater competition and, in turn, efficiency (Doyle and Paterson 2008). The aim has been to support the development of robust production companies better placed to harness advantages of scale which are integral to the television business and better placed to compete effectively in international markets. But, in an outcome reminiscent of what Demers has referred to the ‘paradox of capitalism’ where increased global competition results in less competition in the long run (Demers 1999: 48), the eventual result of measures initially intended to promote competition has been consolidation! Broadly speaking, the effect of the 2003 Act in transforming a sector that previously was ‘highly fragmented and dependent of the PSBs’ with ‘little scope to negotiate on production fees’ or to ‘build as asset base’ into, instead, ‘a global leader in TV production’ with annual revenues in the order of £3bn (Oliver and Ohlbaum 2018: 2) has been widely celebrated as a success story for the British media policy-making and for the UK creative economy. However, as the findings set out in later chapters of this book will show, recent restructurings of ownership need to be understood in terms of wider technological and market changes sweeping across the international television industry and in the context of a complex interplay between ownership configurations, strategy, performance, content decision-making and output. The effects of ‘overseas companies com[ing] into the UK market through acquisition’ (Oliver and Ohlbaum 2011: 19) have not been universally celebrated. One area of concern is the potential effect that takeovers of leading UK production companies by broadcasters and by international media and television groups may have on creative decisionmaking and on the sort of content that British television production companies make and that is therefore available to audiences. Another is the impact of takeovers on the economic strength and resilience of the indigenous independent production sector. Although the sector continues to host a broad range of company sizes including many SMEs (Oliver and Ohlbaum 2018: 13), consolidation has led to a significant diminution in the number of UK television production companies over time (Ofcom 2015: 2; Oliver and Ohlbaum 2019).

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Recent waves of consolidation of ownership in the television production industry raise several important questions. To what extent are the forces that have transformed patterns of ownership threatening the sustainability of domestically based independent production companies? What are the economic and cultural implications? What difference does it make if independent production companies are taken over by, say, transnational media conglomerates? What are the implications for public policy? These are the questions this book sets out to address. Drawing on an extensive body of original empirical research findings, in the remaining chapters we provide a searching examination of how recent and ongoing restructurings in ownership across the television industry reflect changing business models, how they affect creativity and diversity of television output, and to what extent they call for a reimagining of regulation and policy in the digital era.

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D’Arma, A (2018), The Hollowing Out of Public Service Media: A Constructivist Institutionalist Analysis of the Commercialisation of BBC’s In-House Production, Media, Culture & Society, 40(3), 432–448. Deakin, S and Pratten, S (1999), Reinventing the Market? Competition and regulatory change in broadcasting, Journal of Law and Society, 26(3): 323–350. Deakin, S and Pratten, S (2000), Quasi-Markets, Transaction Costs and Trust: The Uncertain Effects of Market Reforms in British Television Production, Television and New Media, 1(3): 321–354. Deakin, S, Lourenço, A and Pratten, S (2004), The Liberalisation of British Television Production: A Case of Industrial Change, Centre for Business Research, Judge Institute of Management, Cambridge: University of Cambridge. David Graham Associates (DGA) (1999), Building a Global Audience: British Television in Overseas Markets, London: David Graham Associates. Demers D (1999), Global Media: Menace or Messiah? New York, NY: Hampton Press. Doyle, G, and Paterson, R (2008), Public Policy and Independent Television Production in the UK, Journal of Media Business Studies 5(3), 17–33. DTI/DCMS (2000), A New Future for Communications, December, Cm 5010. Ellis, J (2014), Is this the End for the BBC Production? CST Online, Accessed at: https://cstonline.net/s-this-the-end-for-bbc-production-by-john-ellis/. European Institute for the Media (1999), The Situation of Independent Television Producers in Great Britain, France and the Netherlands. Mimeograph. Freedman, D (2001), What use is a Public Inquiry? Labour and the 1977 Annan Committee on the Future of Broadcasting, Media, Culture & Society, 3(2): 195–211. Goodwin, P (1998), Television under the Tories: Broadcasting Policy 1979–1997, London: BFI Publishing. Harvey, S (2000), Channel Four Television: From Annan to Grade, in Buscombe, E (Ed) British Television: A Reader, Oxford, Oxford University Press, pp. 92– 117. HoC (1972), Select Committee on Nationalised Industries, Second Report, Session 1971–2, Independent Broadcasting Authority (Formerly ITA), London: HMSO. HoL/HoC (2002), Report of the Joint Committee on the Draft Communications Bill: Volume 1 ( Chairman: Lord Puttnam), 25 July, London: TSO. ITC (2002), A Review of the UK Programme Supply Market, (Chair: Phillis, R), London: Independent Television Commission. Lee, D (2018), Independent Television Production in the UK: From Cottage Industry to Big Business, Basingstoke: Palgrave Macmillan. Mediatique (2015), TV Production Sector Evolution and Impact on PSBs (for Ofcom), December.

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Monopolies and Mergers Commission (MMC), (1993), Channel 3 Networking Arrangements: A Report on Whether Arrangements Satisfy the Competition Test Contained in the Broadcasting Act 1990, London: HMSO. O’ Dwyer, T (2014), Managing Change in Broadcast Organisations: BBC Producer Choice Twenty Years On, Journal of New Media and Mass Communications, 1(1): 1–11. Ofcom (2005), Review of ITV Networking Arrangements, 9 June, London: Ofcom. Ofcom (2006), Review of the Television Production Sector, 10 January, London: Ofcom. Ofcom (2015), Review of the Operation of the Television Production Sector: A Report for the Secretary of State for Culture, Media & Sport, 23 December, London: Ofcom. Office of Fair Trading (OFT) (1992), Channel 3 Networking Arrangements: A Consultative Paper by the Office of Fair Trading, London: OFT. Oliver and Ohlbaum (2011), The Role of Terms of Trade on the Development of the UK Independent Production Sector: A Report for PACT , June, London: Oliver & Ohlbaum Advisory. Oliver and Ohlbaum (2014), The Evolution of the TV Content Production Sector: A Discussion Document, September, London: Oliver & Ohlbaum Associates. Oliver and Ohlbaum (2015), Trends in TV Production, December, London: Oliver & Ohlbaum Associates. Oliver and Ohlbaum (2018), The Impact of the Terms of Trade on the UK’s Television Content Production Sector: A Report for the Canadian Media Producers Association (CMPA), December, London: Oliver & Ohlbaum Associates. Oliver and Ohlbaum (2019), UK Television Production Survey: Financial Census 2019, London: Oliver & Ohlbaum Associates. Paterson, R (2017), Early Independent Production Entrepreneurs in UK Television: Pioneering Agents of Neoliberal Intervention, International Journal of Entrepreneurial Venturing, 9(3): 280–298. Peacock, A. (Chairman) (1986). Report of the Committee on Financing the BBC, Cmnd. 9284, London: HMSO. Plunkett, J (2002), Phillis Urges Broadcasters to Help Independents, The Guardian, November 26, Accessed at: https://www.theguardian.com/ media/2002/nov/26/broadcasting.communicationsact1. Potter, I (2008), The Rise and Rise of the Independents: A Television History, London: Guerilla Books. Preston, A, (2003), Inside the Commissioners: The Culture and Practice of Commissioning at UK Broadcasters, Glasgow: The Research Centre for Television and Interactivity. Reith, J (1925), Memorandum of Information on the Scope and Conduct of the Broadcasting Service, Caversham, Reading: BBC Written Archive.

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Saini, A (2005), TV’s Big Indies Aim for a Growth Spurt, Observer, June 12 2005. Sendall, B (1982), Independent Television in Britain, Vol. 1 Origin and Foundation, 1946–62, Basingstoke: Macmillan. Siân, N (2014), The Reithian Legacy and Contemporary Public Service Ethos, in Conboy, M and Steel, J (Eds) The Routledge Companion to British Media History, Abingdon: Routledge, pp. 323–321. Smith, A. (1972), When any Number Makes Four, The Guardian, 21 April. Woodward, J (1990), Day of the Reptile: Independent Production Between the 80s and the 90s in Paterson, R (Ed), Organising for Change, The Broadcasting Debate Series 1, London: BFI Publishing, pp. 14–43.

CHAPTER 4

Business Performance and Advantages of Takeover

In this chapter and the next, focusing on UK production in an increasingly globalised industrial context, we examine how the business performance of television production companies is affected by ownership. As discussed earlier, the UK television production sector developed from a cottage industry back in the 1990s to, now, a world leader in terms of sales. Adjustments in UK public policy that, since 2003, enhanced the position of independent production companies vis-à-vis broadcasters on ownership of IPRs have vastly improved their revenues. In addition, opportunities for UK-based producers have been enhanced in recent years by the introduction of new tax reliefs for television production and by the growth of globalised subscription video on demand services such as Netflix and Amazon Prime. However, since 2006 a wave of takeovers involving many of the UK’s leading independent producers has transformed patterns of ownership in the sector bringing unprecedented levels of consolidation and the emergence of a number of sizeable super-indies. In this chapter, we look at why such changes have taken place focusing on the ways in which, from the perspective of television production companies, takeover is liable to enhance the business performance of the firm. In the following sections of this chapter we, first of all, introduce our case studies and approach to the measurement of business performance. © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 G. Doyle et al., Television Production in Transition, Palgrave Global Media Policy and Business, https://doi.org/10.1007/978-3-030-63215-1_4

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Our findings are based on both quantitative and qualitative evidence gathered from a sample group comprising a dozen leading London-based international television production companies, some of whom have been taken over by broadcasters, some that are consolidated television production entities and/or international media groups and others of which remain stand-alone or true independents. Insights from analysis of quantitative indicators of business performance are presented which bring to light the crucial importance to the economics of television production companies of having as part of their catalogue of outputs so-called returners or re-commissioned series. Drawing on original findings from interviews, we examine how, from the perspective of production companies, takeover and business performance are seen as connected and in what ways takeover is perceived as generating valuable advantages that enhance the business performance of those production companies which are acquired. In Chapter 5 which follows, we analyse the perspectives of buyers and also merger and acquisition (M&A) specialists who have guided investment in the production sector. Thus, this chapter and the next provide a fuller understanding of the nature of the relationship between different sorts of corporate ownership configuration and performance, why this relationship is changing and what this implies for the sustainability of independent production companies.

Performance Measurement In order to examine how the business performance of television production companies is affected by ownership, our research design entailed identifying a number of production companies of differing ownership configurations, grouping them and then exploring any association evident between groups of firms and their business performance over a recent period. Information on the size and corporate configuration of potential case studies was drawn from company annual report and accounts and from secondary sources including the Broadcast survey of the UK production sector, published annual and industry reports such as those commissioned by UK trade association for television producers the Producers Alliance for Cinema and Television (PACT). In order to ensure sufficient in-depth focus, the number of case studies selected for our sample was restricted to twelve. Our research focused

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on the experience of a dozen leading UK-based production companies of differing ownership ‘configurations’, i.e. whether independent, or subsidiaries of conglomerates (either domestic or international), or vertically integrated entities (part or wholly owned by broadcasters)—see Table 4.1. Our selection of individual companies reflected the need to ensure exposure across the main analytical categories that were of interest in our study: the scale of activities; corporate configuration; independent or non-independent status. To ensure a representative cross-section we included drama makers (such as Mammoth and Left Bank), factual entertainment specialists (such as Firecracker) and producers of mixed output. Thus, our selection facilitated extensive evidence gathering on questions around how changes in ownership effect business performance and content. Although mainly London-based, case study companies included entities whose profile and activities extend across many international territories. This is apt since, at a time of increasingly globalised restructurings of ownership across the television industry, questions about how consolidation and takeovers of independent production companies affect performance are clearly of wide international relevance. The time chosen for our analysis—2007–2017—was one in which a considerable amount of M&A activity took place, in some instances involving firms in our sample. At the start of the study period in 2007 more than half of our case studies were classified as true ‘independents’, i.e. they were stand-alone operations in which no broadcaster, super-indie or other consolidated group had a controlling interest. Also, in terms of annual turnover, most of the selected sample groups were categorised either as ‘small’ or ‘medium’ companies in 2007—see Table 4.2. However, by the end of the study period in 2017, a number of changes in ownership had taken place and all of the companies in the sample group had grown organically or developed into larger-sized firms with an annual turnover exceeding £10 m. The changes evident within our sample group in many ways typify a wider pattern across the sector as a whole between 2007 and 2017 of increasing consolidation of ownership. With regard to investigating the association between a firm’s configuration and how well it is performing, one methodological challenge was that of deciding how to measure ‘performance’. Performance is a ‘multi-dimensional’ concept, and especially so in the context of media and other cultural industries (Wirth and Bloch 1995). Performance can only be measured against goals but, where cultural industries are concerned,

1979

1986

1996

2002

1992

2007

1997

2004

1994

Hat Trick

Keo Films

Firecracker

Kudos

Left Bank

Lion

Pulse Films

Blast! Films

Founded

Vertically Integrated UK

Conglomerate Non-UK

Conglomerate UK

Conglomerate UKa Conglomerate Non-UK

Conglomerate UK

Sky (2015)

Vice Media (2016)

All3Media (2004)

Endemol Shine (2006) Sony (2012)

Tinopolis (2012)

Stand-alone Indie n/a

Stand-alone Indie n/a

Factual/Entertainment

Factual/Entertainment

Children’s/Factual/Entertainment

Drama

Drama

Factual

Factual/Entertainment

Comedy/Factual/Entertainment

Drama

Parent company (year Principal genre of takeover)

Stand-alone Indie n/a

Ownership configuration

Case study production companies

Hartswood Films

Company

Table 4.1

Lady Chatterley’s Lover, Sherlock, Dracula Boomers, Episodes, Have I Got News for You? Hugh’s Fish Fight, Skint, River Cottage Dr. Christian Will See You Now, My Big Fat Gypsy Wedding, Hustle, Law & Order UK, Spooks The Crown, Outlander, Strike Back Horrible Histories, Homes Under the Hammer Pillow Talk, Pineapple Dance Studios 999 What’s Your Emergency?, The Supervet

Key outputs

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2006

1997

Mammoth Screen

Red Production Co.

Vertically Integrated Non-UK

Vertically Integrated UK

Vertically Integrated UK

Ownership configuration

Drama

Drama

ITV (2015)

Studio Canal (2013)

Factual/Entertainment

Sky (2014)

Parent company (year Principal genre of takeover) Benefits Street, Great British Bake Off, Great British Sewing Bee And Then There Were None, Endeavour, Poldark Last Tango in Halifax, Ordinary Lies, Scott & Bailey

Key outputs

was completed in July 2020

a After the project study period ended a takeover of Kudos’ parent company, Endemol Shine, by French entertainment conglomerate Banijay Group

2004

Founded

Love Productions

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Table 4.2 Case study companies in 2007 and in 2017 Company types

2007

2017

Stand-alone Indie No cross ownership from broadcasters

Firecracker Hartswood Films Hat Trick Productions Keo Films Love Productions Pulse Films Red Production Company Mammoth Screen (ITV)

Hartswood Films Hat Trick Productions Keo Films

Part-Vertically Integrated (QI) Up to 25% broadcaster owned Vertically Integrated UK +25% UK broadcaster owned Vertically Integrated Non-UK +25% Non-UK Broadcaster Owned Conglomerate UK Horizontally integrated UK Cluster/‘Super-Indie’ Conglomerate Non-UK Horizontally integrated non-UK Cluster/‘Super-Indie’

Blast! Films (Sky) Love Productions (Sky) Mammoth Screen (ITV) Red Production Company (Studio Canal)

Blast! Films (RDF Media) Kudos (Shine) Lion Television (All3Media)

Firecracker (Tinopolis) Kudos (Endemol Shine) Lion Television (All3Media) Left Bank Pictures (Sony) Pulse Films (Vice Media) Lion Television (All3Media)

differing constituencies, such as managers, shareholders, employees, audiences or society at large are apt to have quite different ideas about what the firm’s objectives are, or should be. So any comprehensive evaluation of the performance of television production companies necessitates a range of different aspects, some centred on business performance but others on content, audiences and welfare. As part of our wider project, we studied the effects that ownership has on creative content-making and on the sort of output that production companies make and our findings in respect of these issues are presented and analysed in depth in Chapters 6 and 7 below. But the main focus here and in Chapter 5 is on business and economic aspects of performance and how these are affected by ownership.

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Our approach to quantitative analysis of business performance relied heavily on financial data drawn from the annual report and accounts of selected television production companies. Challenges to processes of data gathering included non-standardised and inconsistent reporting of financial figures and differing levels of transparency within annual financial statements from one company to another and across time. Opacity in financial reports and a reluctance to reveal financial information in greater detail than legally required are sometimes interpreted as signs of careful management of public impressions about how a business is performing (Leung et al. 2015) but being guarded is also a common feature in sectors where disclosures might give rivals valuable information. Another difficulty was that, because many firms in the production sector are part of a complex ownership structure or operate under the corporate umbrella of a transnational parent company, detail about their finances was difficult to access. Notwithstanding such challenges that affected evidence gathering, a full dataset related to the financial performance of our twelve case studies during the period from 2007 to 2017 was constructed based around two key indicators: turnover and operating profits. Trends in turnover are a standard focus in analysis of business growth by companies and investors and our analysis also paid attention to the breakdown over time between domestic and international sources of company revenue. Operating profit margins (a measure of profitability as a percentage of turnover), which are one of the most widely recognised accounting measures of performance and offer an a priori benchmark of operating efficiency, were also analysed. Quantitative financial data considered as part of our analysis of business performance was very heavily supplemented by qualitative evidence. Findings from an analysis of quantitative indicators of business performance were combined with evidence from interviews carried out with senior executives at twelve case study production companies and, as appropriate, with their parent companies and with corporate financiers specialising in takeovers in the television industry. Interviewees at the production companies included Chief Executives, Directors of legal and business affairs and Chief Creative Officers. Integration of interview findings provided a crucially important means of gathering in-depth evidence and of fully probing the business implications associated with different corporate configurations and ownership arrangements at each of the case study firms. Reliance on qualitative

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as well as quantitative approaches facilitated much fuller analysis of the effects of expansion and takeovers and, as set out below, has enabled some important distinctions to be drawn within our analysis, for example, between the perspectives of the acquiring company versus the subsidiary and between the business interests of the production firm versus the private interests of its founding owners.

Determinants of Business Performance Our analysis of financial data revealed that turnover increased at the majority of case study companies in the period 2007–2017 and this was often fuelled by increased revenue from international (typically, overseas sales of formats and finished programmes and overseas commissions) as opposed to domestic sources. This finding accords with results from earlier surveys which have noted the increasing significance of international streams of income for UK-based producers (O&O 2014; Mediatique 2015: 16). As already noted, a wholesale shift occurred amongst our sample group from predominantly true independents to predominantly companies owned by broadcasters, super-indies or consolidated media groups between 2007 and 2017. But, rather than being driven by particular patterns of ownership, growth in turnover appears to have been a widespread and generalised feature across the production sector at this time (Fig. 4.1). With regard to profits, widespread variations and inconsistencies in levels of operating profitability were evident across the sample group during the 2007–2017 period. For some production companies such as Blast!, Hartswood, Left Bank and Love operating profit margins were stable or growing but for others such as Keo and Pulse Films they were characterised by volatility. As well as finding inconsistency in reported operating margins across the sample group, we found no evidence of an association between scale or ownership configuration and levels of profits during the 2007–2017 time frame (Fig. 4.2). On the face of it, quantitative datasets derived from historic trends in reported turnover and profits provide little convincing evidence of a correlation between corporate configuration and business performance for our sample group in the selected time frame. Some companies achieved higher growth and/or superior profit margins than others but this did not correlate with ownership configurations. However, since accounting practices related to content development and cost capitalisation in this sector

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£160 m

True Indie

Conglomerate

Ver cally Integrated

£140 m

£120 m

£100 m

£80 m

£60 m

£40 m

£20 m

£m Hartswood Films

Hat Trick

Keo Films

Firecracker

Kudos

Le Bank

2007

2012

Lion

Pulse Films Blast! Films

Love Mammoth Produc ons Screen

Red Produc on Co

2017

Fig. 4.1 Turnover for case study companies, 2007–2017 OPERATING PROFIT MARGIN (%) Conglomerate

True Indie

40%

Vertically Integrated

34%

30% 25%

25%

20%

18%

17% 13%

10%

7%

6%

5%

13% 11%

10%

10% 10%

7%

6% 6% 4%

3%

10%

9%

8% 6%

3%

5% 3%

3% 1%

0% 0%

-2% -3%

-8%

-10%

-9% -12%

-20% Hartswood Films

Hat Trick

Keo Films

Firecracker

Kudos

Left Bank 2007

Lion 2012

Pulse Films

Blast! Films

Love Productions Mammoth Screen Red Production Co

2017

Fig. 4.2 Operating profit margins for case study companies, 2007–2017

are complex and open to differing approaches (PwC 2013), caution needs to be exercised in interpreting quantitative results. Some earlier surveys have found that larger companies tend to achieve higher margins than their smaller rivals (Oliver & Ohlbaum 2015: 58). But the ways in which independent production companies in the film and television sectors value

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their assets and report their financial performance are prone to inconsistency (Northern Alliance 2009). Therefore an evident lack of correlation between configuration and reported turnover and profits for this sample group may reflect such problematic issues as differing approaches to financial reporting and time lags between expansion or takeover taking place and commencement of subsequent effects on business performance. Whereas quantitative analysis for this sample group provides little compelling evidence that scale is a determinant of business performance (at least in a short time frame), qualitative findings paint an entirely different picture. When findings from interviews are taken into account, the testimony from industry practitioners and financial experts makes it clear that corporate ownership configurations can and do have a powerfully determining effect on numerous aspects of the business performance of television production companies. The disparity between qualitative interview findings, which overwhelmingly point to a causal link between ownership and business performance, and quantitative results, which do not, suggests that further testing of the links between configuration and financial performance could prove insightful, were it feasible at a future point to conduct this via a regression analysis based on standardised financial data and carried out over a longer period. But analysis of financial datasets for our case study companies has nonetheless yielded some interesting findings of the association between performance trends and M&A activity. For independent production companies that were acquired or bought out during the study period, it is commonplace to see a pattern of strong upturn in financial performance directly ahead of takeover. In other words, whereas quantitative evidence that scale impacts on business performance (in a short time frame) may be scant, there is evidence of exactly the opposite: that business performance will affect scale! A pattern that is widely discernible amongst UK production companies that have been taken over is one whereby the business grows significantly in the years leading up to acquisition. This is sometimes, although not always, followed by a brief reversal in fortunes immediately after takeover before growth resumes. For example at Red Production Company turnover and profit margins grew in the years leading up to 2013 when the firm was acquired by StudioCanal but takeover was followed by a brief downturn in revenues before growth resumed. Likewise at Left Bank, in which Sony Pictures Television International acquired a 51% stake in 2012 (see Fig. 4.3), turnover and output grew

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£160 m

70

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59.5

Sony takeover

60

£120 m 50

40

32

35

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25.5

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TX Hours

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24.5 19

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4.5

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0 2008

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2011

2012 TX Hours

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Fig. 4.3 Left Bank Pictures, turnover and total hours transmitted

significantly in the years leading up to acquisition followed by a brief dip immediately after takeover before recovery in growth. A pattern of increases in commissions, revenues and/or profits immediately before being taken over is widely evident amongst UK television production companies that have been acquired. Turnover increased rapidly at Blast! Films in the years immediately preceding being taken over by Sky in 2015. Another production company in the sample group that was taken over by Sky—Love Productions—exhibited a trajectory of very strong growth in turnover in the years leading up to when the satellite broadcaster acquired a majority stake in 2014 followed by a dip after takeover before growth was resumed (see Fig. 4.4). That a link exists between strong financial performance on the part of a production company and acquisition is not altogether surprising. According to evidence from interviews with senior production executives in the television industry, many believe that one of the reasons why financial performance and takeover are connected is because many production companies are highly pro-active in readying themselves for the possibility of being acquired. Susan Cooke, former Head of Legal and Business Affairs at Lion Television, summarises the situation as follows:

G. DOYLE ET AL. LOVE PRODUCTIONS (SKY) TURNOVER & TX HOURS

Sky takeover

Bake Off sold to C4

70

£25 m 62.5

60

56

£20 m

52 50

46.5 Turnover £

63.16

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£15 m 34.4

34.7

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20 £5 m 10 0

£m 2007

2008

2009

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2011 TX Hours

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Turnover

Fig. 4.4 Love Productions, turnover and total hours transmitted

I think certainly in previous times and probably now when people set up an indie their aim is to be bought at some point. It would be quite unusual to set something up and not have that as your ultimate five-year plan or whatever because that’s the way you’ll probably realise your investment. (Cooke, Interview, London, June 2018)

Motives for setting up an independent production company will vary from one to another and potential incentives have changed over time. Back in the 1980s and 1990s when the sector was first emerging in the UK, opportunities for greater autonomy were seen as a significant factor that drove individuals to leave broadcast companies and set up their own production entities. Nowadays, fuelled by increased investor interest, opportunities to make money are a more important stimulus. Sachin Dosani, MD of Wonderhood Studios and who previously worked in corporate finance at Grant Thornton and as a founding member of investment bank About Corporate Finance (ACF), advising in numerous M&A transactions in the production sector, believes that when production companies are set up creative motives are usually likely to outweigh

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aspirations to develop the company for subsequent sale (Dosani, Interview, London, January 2019). But financial motives certainly play their part, according to testimony from many industry executives. According to Nick Catliff, co-founder of Lion Television, which is now owned by All3Media, individuals that establish independent production companies nowadays are ‘setting up with a 3 to 5-year plan to sell and they’re going to sell to whoever pays them the most’ (Catliff, Interview London, May 2018). Most of our interviewees take the view that, because of the perceived benefits of takeover which include a range of possible advantages for the business and also, usually, a substantial windfall for founding owners, many producers regard developing a financial profile that increases the prospect of interest from investors as highly desirable. As Charlie Goldberg of Left Bank Pictures explains: I think there generally has been a mindset amongst people who set up independent production companies that the idea is to get it to a point where it can be sold. That is the standard path … because the alternative is that you’re setting up an ongoing lifestyle business [but] in this industry people start to reach a point in their careers where it’s no longer sustainable. It’s quite a demanding career, to run a company like this. [M]ost execs …their view is, in 5 or 6 or 7 years whatever then they’ll sell. (Goldberg, Interview, London, November 2018)

That takeovers in the production sector have been driven as much by the interests of sellers as buyers is an important finding and one that contradicts standard assumptions that being caught in the cross-hairs of interest from a predatory investor is generally an unwelcome prospect for indies. Although the narrative implied by such headlines as ‘British indie TV producers a victim of own success as foreign owners swoop’ (Sweney 2014) is one of victimhood, many independent producers are in fact clearly very keen to develop their companies to the point where they may attract the interest of investors. It follows that, from the point of view of many indies, achieving a financial track record that is conducive to attracting the interest of investors will be an important aim. Typically, this involves growing the company’s commissions and revenues. Mammoth Screen provides another example of an indie that managed this process successfully—see Fig. 4.5. In the period immediately preceding UK network broadcaster ITV increasing its stake from 25% to a majority holding of 75% of this company in

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£70 m

MAMMOTH SCREEN (ITV) TURNOVER & TX HOURS

ITV 25% founding stake

ITV increase stake to 100%

35 30.1

£60 m

30

£50 m

25 22 20

18 16.5

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£20 m

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20.5 £40 m

11

10

10 7.5

£10 m

5

3

£m

0 2008

2009

2010

2011

2012

2013

2014

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Fig. 4.5 Mammoth Screen, turnover and total hours transmitted

2015, the programme-maker exhibited a very positive trend of growth in commissioned output and in turnover. Our analysis suggests that the financial performance of television production companies is dependent on a number issues, including their capacity to secure new commissions and their ability to retain ownership of and exploit valuable intellectual property rights within their back catalogues. One crucial determinant of financial performance is having ‘returners’ or programmes that are re-commissioned or re-ordered by broadcasters or other content suppliers. Amongst our sample group of television production companies, those that have achieved the most consistent growth in revenues and robust profits over time very often can attribute this success to the fact that they produce programmes or series of programmes that are subsequently re-commissioned by broadcasters or other content service providers and this enables them to operate more cost-effectively. For example, drama producer Left Bank, with 29 re-commissioned series (including Wallander, Strike Back, Outlander and The Crown) and only three one-off productions in its ten-year history, has demonstrated an exceptional capacity to develop returners and this has been reflected in

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growing turnover and profit margins. Mammoth Screen which, according to Head of Business Affairs James Penny (Interview, London, January 2019), had no fewer than 13 returning series in production at one point in 2017, has also relied heavily on a number of dependable returners including Endeavour and Poldark. Love Production’s dependence on a single high-profile returner—Bake Off —plus its various spin-offs is particularly pronounced. By contrast, output at independent production company Keo Films has been comprised primarily of one-off productions. Although the River Cottage franchise owned by Keo Films, and its figurehead Hugh FearnleyWhittingstall, are very well known to UK audiences, this company, unlike all others in our sample group, does not boast a flagship returner such as Bake Off , The Crown or Endeavour. The absence of a bankable returner within the portfolio takes an inevitable toll on turnover and profits which, historically, have been volatile. Re-commissions or ‘returners’ are the stock in trade of a successful television production company. Production companies with a number of returners gain economies of scale because they are able to achieve improved rates of overhead recovery. In a sector characterised by unpredictable demand which makes it difficult to sustain a consistently optimal rate of output, those companies that know in advance what programmes they will be required to make over the coming year benefit greatly in terms of planning, organising and utilising their staff, equipment and resources. As Sachin Dosani puts it, ‘if you’re starting from a blank piece of paper each year, that’s a really, really difficult way to build a business’ (Dosani, Interview, London, January 2019). As earlier research has shown, large-scale production of television content will not necessarily bring about a reduction in input costs through bulk discounts because, in television, ‘talent’ or individual artists tend to comprise the main raw material (Doyle 2002). But, for those companies who manage to achieve re-commissions, economies of scale will accrue through improved overhead recovery and through spreading such costs as initial development, assembling sets, etc. over an expanded output. As Debbie Manners, former Finance Director of several major UK television production enterprises explains: When they’re looking to make profits, [production companies] will be looking to have as many returnable formats or series or whatever…Doing lots of short-run series or individual series that are different every time or

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one-offs is just as much hard work as a returning series and it delivers a fraction of the returns. (Manners, Interview, London, November 2018)

While returners are vital to the economics of television production companies, excessive reliance on individual programme brands can be risky, given the uncertainties which are endemic to audience taste. Given the unpredictable nature of demand, many production companies adopt a portfolio approach which helps to spread risk and also to ensure creative renewal. The evidence of our sample group suggests that production businesses that perform well over time typically have both an array of different programmes in production and in their back catalogue plus a number of returners. According to Jane Turton who is CEO at All3Media, a production company with a ‘bigger’ and ‘broader’ production slate is more likely to be financially resilient than one which is ‘reliant on one show continuing to be commissioned’ (Turton, Interview, London, July 2018). From Turton’s perspective: We would be happier to see a company with more than one big talent or one big programme just simply because we know it makes them a more robust business. (Turton, Interview, London, July 2018)

Advantages Conferred by Takeover The testimony we gathered from leading executives and financial experts in television production suggests that, although the cause-and-effect relationship between changes in the configuration of an independent production company and its business performance is complex, this relationship is strongly influenced by a range of potential benefits for target production companies that commonly result from takeover. Some of these advantages overlap and their relative significance may vary from one instance to the next but, broadly speaking, the following are seen as having a significant and positive determining influence over the business performance of independent television production companies that are acquired.

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Advantages of Scale Economic theory suggests that the presence of economies of scale is usually the main incentive that encourages expansion and consolidation of ownership in any sector of the industry. Consistent with this, the general view amongst producers and financial advisors interviewed in the course of our research is that greater scale and/or being taken over and integrated within a larger group brings significant and varied scale advantages for television production companies. For smaller independent companies, organising the funding needed to carry out production on a day-to-day basis can prove challenging. Therefore a major advantage associated with having additional scale or having a wealthy parent company is greater financial resources and cashflow or, as Ed Coulthard at Blast! Films puts it, being able to operate in a less ‘hand-to-mouth’ way (Coulthard, Interview, London, January 2019). For Andrew Critchley of Red Productions which was acquired by Studio Canal in 2013, part of the rationale for welcoming takeover was an awareness that ‘the market was changing and bigger budgets were required to compete with the big international co-productions’ and the view that ‘being part of a bigger group’ was more likely to provide ‘that sort of [financial] backing’ (Critchley, Interview, Edinburgh/Salford, January 2019). Susan Cooke agrees that the financial support which a parent company provides can be a crucial incentive surrounding takeovers of independent producers. Referring to benefits that followed when Lion Television, was sold to All3Media in 2004, Cooke says: I think the chief one was being able to cash flow [production]…Obtaining financing takes time and it’s expensive. And just to have that cushion [is advantageous]… Inevitably broadcasters always want you to start [production] before their internal processes have really properly gone through… Even when you’ve got the signed contract it can take another month for the cash to come in. (Cooke, Interview, London, June 2018)

David Frank who started up independent production company RDF, which initially was funded by business angels, then through venture capital backing before being listed on the AIM, points out that a common problem for independent production companies is lack of cash flow and lack of access to ‘risk capital’ to fund new programme ideas (Frank, Interview, London, April 2019). An independent production company with

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ambitions to grow the business requires risk capital to fund the development of new content ideas but, as Frank explains, banks are reluctant to lend money to start-ups in the television production sector, except against guaranteed programme commissions. Consequently ‘the only alternative [is] to find investors or pour the money in yourself’ (ibid.). The extra resource or, as James Penny of Mammoth Screen puts it, the ‘safety comfort blanket’ that an investor or parent company can provide to a production subsidiary is recognised as a major source of advantage (Penny, Interview, London, January 2019). Crucially, financial security frees production companies from ‘looking at survival on a daily basis’ and facilitates more focus on production, developing new ideas and taking more creative risks, according to Tim Hincks, Co-CEO of Expectation Entertainment and former Creative Director and then Chief Executive of Endemol UK (Hincks, Interview, London, July 2018). For Sachin Dosani, the extra ‘financial security’ which, in turn, facilitates creativity and more cost-efficient utilisation of resources is a ‘key’ advantage for production companies arising from takeover (Dosani, Interview, London, January 2019). The consensus view amongst producers is that, in a business environment characterised by uncertainty, production companies that are taken over or subsumed within larger entities benefit from the financial security of having a well-resourced parent, and from having the funds to experiment and make more ambitious content. As John Willis, Creative Director of Tinopolis, points out (John Willis, Interview, London, May 2018), having adequate financial means to deficit finance production and therefore to retain ownership of rights for future exploitation in international and secondary markets is a further advantage conferred on those production companies that are acquired by well-resourced parent groups. The advantages that accrue to production companies as they grow in size may partly reflect economies of scale within the programme production process. A content-making company will not, solely on account of being large, be able to ‘produce at a lower cost per hour than companies with little or no production infrastructure’ (Ofcom 2006: 70). But the consensus view amongst experienced producers such as Jane Turton of All3Media is that higher levels of production activity are apt to bring economies of scale because they allow the company to take on, plan and utilise their staff and facilities more fully (Turton, Interview, London, July 2018). In line with earlier studies (Hoskins et al. 2004; Ofcom 2006: 71), our empirical findings clearly suggest that companies with busier production slates and longer production runs are often able to make better

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and fuller use of resources. The presence of economies of scale explains why, as discussed above, long-running and returning series play such an important role in underpinning the profitability of production companies. Echoing the views of many producers, Susan Cooke contends that ‘if you’re only doing one-off programmes or always doing a pilot or a first series of programmes it’s very hard to make anything on those’ and that running a profitable production business is ‘all about having a longrunning returning series’ (Cooke, Interview, London, June 2018). Albeit that every episode of a television programme has to be unique, making a series or even better a returning series allows substantially improved overhead recovery and reduces the unit cost of production, thereby yielding economies of scale. Bigger firms with busy production slates are better placed not only to achieve economies of scale in the production process but also to enjoy the advantages of being able to spread their risks over a number of programme titles and differing genres and titles. As Caves has argued (Caves 2000), television is a business in which because ‘nobody knows’ what will make a hit with audience tastes, uncertainty is an endemic feature. Predicting which programmes are going to be successful and for how long is difficult. Therefore, as with film, companies that have the scale to mitigate risk through operating portfolio strategies will enjoy a competitive edge (Achtenhagen 2012). To participate successfully in strategies of cost-spreading and cross-subsidisation, television companies need to be of a certain size and to have a portfolio of programmes of different sorts and ‘vintages in their inventory’ (Litman 1998: 135). Other sorts of advantages of scale enjoyed by larger-sized television companies include the ability to invest in specialist and/or expensive production facilities and ‘talent’ or staff and being able to forge relationships and a prominent reputation as a reliable and successful supplier of content, as Jane Turton, CEO of All3Media explains: You know through scale that you are able to develop specialist skills. You know through scale that you’re able to develop more. More development tends to generate more opportunity and you get the snowball effect which is a very difficult thing to describe empirically but is a phenomenon. You know through scale you’re just touching more selling points. You’re likely then to be the one Apple or Amazon or Netflix or whatever comes to, versus knocking down the door to try to get in. (Turton, Interview, London, July 2018)

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Market Access Jane Turton’s observations about ‘the snowball effect’ suggest that the scale of development and production at bigger companies and at consolidated super-indies brings advantages in terms of securing commissions and achieving market access for output. So, from the point of view of an independent production company, the strategic motive of securing improved access to markets for content may well play a part in exciting interest in the acquisition. For M&A specialist Thomas Dey, the ‘number one’ advantage of a takeover for a production company is the potential opportunity to increase the value of your content through extending access to it across additional delivery platforms and additional territories. For Dey: If you’re going to make a show you might as well make a show that can appeal to more than your local territories. (Dey, Interview, Edinburgh/LA, February 2019)

When a production company is acquired, if the investment has come from a broadcaster then, consistent with strategic benefits of vertical integration between production and dissemination that are well recognised and long-standing (Lotz 2017), this might result in an increased flow of commissions for new productions from the parent company. From the broadcaster’s perspective, in a world where many distribution channels and points of access to content exist, ownership of production and associated content and IP rights is increasingly regarded as a source of advantage liable to ‘separate the winners from the losers’ (Perette cited in Sweney 2014). This view has underpinned UK broadcaster ITV’s strategy of vertical expansion through numerous acquisitions of independent production companies (Davies 2016). Mammoth Screen is one of several television production companies acquired by ITV over recent years. Some of the advantages of vertical cross-ownership for the production subsidiary may be inferred from analysis of data about Mammoth Screen’s first run output over time which, as Fig. 4.6 shows, has been heavily, although not exclusively, favoured by commissions from ITV. From the production company’s point of view, the promise of assured access to avenues of distribution and, in turn, audiences provides a compelling

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incentive for merging with or being bought by a broadcaster and/or a larger television company with an international distribution network. The opportunity to have a ‘relationship with All3 International, a dedicated distribution company’ was seen as highly advantageous by Lion Television when it was bought up by All3Media, according to former Director of Legal and Business Affairs, Susan Cooke: obviously there are other distribution companies that [Lion] could use but it’s really helpful, particularly in the early days, having somebody who is really motivated to push your content. (Cooke, Interview, London, June 2018)

Cooke’s views about the advantages for individual production subsidiaries or labels of having a parent company with a strong distribution business are echoed widely across the production sector. The potential for improved access to international markets and funding is a particularly compelling incentive for vertical and horizontal mergers. In line with data from a host of secondary industry sources such as the PACT annual survey of the UK production sector, the proportion of income that production companies earn from international sales and commissions has

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grown significantly from around 2005 onwards. Although drawing on international markets and co-production deals to finance content production is nothing new (Chalaby 2012), the current situation of heightened competition between broadcasters and digital service providers such as Netflix has fuelled demand for ‘big statement’ and often expensive programmes and, in turn, increased reliance on international sources of finance (Ofcom 2015; Doyle 2016). For Wayne Garvie, President of International Production at Sony Pictures Television (SPTV), the most significant advantage for a production company of being ‘allied and part of a larger company [is that] you can play immediately on an international field’ (Garvie cited in Sweney 2014). International distribution or, once a show has been developed that is a hit, ‘selling the show abroad’ is vital to business performance, according to Thomas Dey who points to the example of ‘Endemol’s [initial] success [which] was really around Big Brother and the fact that they had built a network in each country to pump out Big Brother into local territories and bring in this huge amount of money…’ (Dey, Interview, Edinburgh/LA, February 2019). Small independent companies or producers that are not owned by a ‘trade’ buyer, instead of being able to turn to an inhouse distribution division to seek production financing, instead have to sell their wares to an external distributor and therefore are typically confronted by the problem that the external international distributor is ‘going to take lots more rights off you than you’d like, unless you have a stonking hit which everyone wants to represent’ (Bazalgette, Interview, London, April 2019). If the production company is a drama-maker, high costs mean that production is likely to entail complicated advance deals with international funders, and therefore the advantages of access to an inhouse international distribution business may well extend beyond funding and/or utilising this network to availability of expertise on packaging of deals and planning of a suitable windowing strategy to maximise the value of IPRs. Bargaining Power Consistent with earlier research which suggests that bigger firms—firms that have scale and/or are a subsidiary of a larger and more powerful parent company and that have financial resources—are better placed to become important suppliers in the television industry and to acquire negotiating leverage in their transactions with broadcasters (North and

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Oliver 2010: 34), our findings indicate that bargaining power can be a significant area of advantage for larger production entities. To build their businesses, production companies need to be able to negotiate favourable terms on programme commissions and, importantly, on retention of ownership of IPRs so that earnings from sales in secondary rights can be maximised. Consequently, as discussed in the previous chapter, an adjustment in UK public policy via the Communications Act 2003 which enhanced the position of independent production companies vis-àvis UK PSB broadcasters on ownership of IPRs significantly boosted the business performance of the sector as a whole. Nonetheless, it remains that negotiations on commissioning terms and on ownership of rights are often shaped by market circumstances and by how exactly market power is distributed along the vertical supply chain that stretches between the producer and the consumer (Doyle 2013: 111). Suppliers of popular content services—traditionally broadcasters but nowadays including SVoDs such as Netflix and Amazon—tend to enjoy positions of dominance in the television supply chain and, in turn, substantial leverage in deals with producers competing for commissions. This means that for individual production companies, scale and corporate configuration are amongst the factors that determine bargaining power and, in turn, ability to strike commercially favourable deals. Achieving orders for programmes is heavily influenced by perceptions about the creative ideas and talent of the production company. As Nick Catliff of Lion Television puts it: In the end the only thing that gives you power in a deal is that the broadcaster or the buyer really, really wants it so have you got a brilliant idea? Have you got a fantastic reputation? Have you got an amazing piece of onscreen talent they’ve just got to have? And having been part of All3Media, and I think everyone would say this it gives you other advantages, like you’re not worried about going broke next week… I mean I would never ever, ever in the UK mention All3 in a pitching meeting ….it would be irrelevant/counterproductive… (Catliff, Interview London, May 2018)

But many production executives acknowledge that leverage in dealmaking is important to the business performance of production companies and that enlarged scale and structure can bring advantages in this respect. Former Legal and Business Affairs Director at Lion Television

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Director Susan Cooke acknowledges that ‘[i]f you’ve got lots of content around, you’ve obviously got more bargaining power’ and ‘it can help if it’s a group and your strategy is to try and do good deals for all your group companies to bring that negotiating power’ (Cooke, Interview, London, June 2018). However, as Cooke explains, the extent to which being part of a larger group enhances leverage depends on a number of factors including the general attitude of differing parent companies towards integrating, shaping and controlling the activities of newly acquired production subsidiaries which is something that varies across the sector. Whereas a consolidated production group such as All3Media (owner of Lion Television), because of their commitment to a federalist approach in which production subsidiaries remain fully autonomous, would not be disposed towards intervening in deal-making, other owners are willing to weigh in where needed or seen as advantageous (Cooke, Interview, London, June 2018). For example at SkyVision, where Jane Millichip oversees and supports Sky’s portfolio of production subsidiaries, the approach adopted is flexible and tailored to the needs of the production subsidiary and the deal in question: There’s another area where I think scale can help in small production businesses. Relatively small businesses that are part of the bigger portfolio can have a little more leverage in the marketplace when negotiating deals. I’m sometimes wheeled in as a bad cop to help them and sometimes I need to be invisible because they need to look and feel small and very indie and you won’t see me for dust. Other times they need big bad Sky to come and hold their hand, metaphorically speaking, in a deal and we’ll dial up or down the good and bad cop-ness of it. (Millichip, Interview, London, December 2018)

While gaining commissions is largely dependent on quality of ideas, there is little doubt that the negotiating leverage of individual production firms is very much influenced by their scale and configuration. Larger production entities which, on account of having subsidiaries all over the world, resources to deficit finance production and create pilots, and ownership of IPRs for significant amounts of attractive content, achieve the status of ‘important’ suppliers in the domestic and international marketplace are naturally much better positioned to negotiate favourable commercial terms than small independent companies. Bigger production companies

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enjoy superior bargaining power in commissioning deals whether the buyer is a broadcaster or, of increasing likelihood, an SVoD service, as Charlie Goldberg at Left Bank explains: Strength in size which is very valuable especially when you’re dealing with the kind of emerging broadcasters like Netflix and Amazon. If you can go in there and say you’re part of Sony or you’re part of NBC or you’re part of All3 I think you can establish better terms than a lot of the smaller indies who are struggling with those kind of relationships. (Goldberg, Interview, London, November 2018)

Informational Advantages Being part of a larger media group is likely to bring the production subsidiary valuable informational advantages. Simon Cox at Endemol Shine International (ESI) believes that production subsidiaries benefit substantially from ‘the intel they get … the noise they get’ about ‘what’s needed’ (Cox, Interview, London, May 2018). Wayne Garvie, who oversees content production at SPTV works ‘hand in hand with … distribution’ but cautions that transmission of views about what is in demand has become more complex and challenging because of changing technologies and ever-evolving shifts in audience preferences that confound traditional models (Garvie, Interview, London, May 2018). Even so, we found plentiful evidence that being part of a global entity can bring useful insights and market intelligence, for example, about what sort of content is in development and demand across the globe. Tim Hincks, now CEO of Expectation Entertainment, explains how, as part of his former role as Chief Executive of Endemol UK, participation in regular meetings of the Group’s global creative team provided ‘a place to share’ creative ideas about programmes that have been successfully developed in one country and therefore might work in others (Hincks, Interview, London, July 2018). Likewise, Susan Cooke attests to how being taken over by and subsumed within All3Media meant access to improved market intelligence for Lion Television: I was the main contact with All3 International. We’d have monthly reviews and it wasn’t just one-way. They would say, “Look, there’s a definite gap in the market for this sort of thing”, you know, feed it back. It’s … a mutually beneficial relationship. (Cooke, Interview, London, June 2018)

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In Peter Bazalgette’s experience, the sector-specific knowledge that a parent company with existing interests in the television industry brings ‘means that you have an active trade oriented owner who understands your business and can help you drive it further’ (Bazalgette, Interview, London, April 2019). For Jane Millichip at Sky Vision, the benefit of the parent company’s operational and commercial expertise is on hand to guide production subsidiaries that need it but many do not because they are already ‘beautifully run’. When it comes to weighing up, as a parent company, how extensively to guide a subsidiary Millichip is clear that ‘[t]he important thing is to add value not to detract from it’ (Millichip, Interview, London, December 2018). Another possible form of informational advantage for subsidiaries of larger groups is improved understanding about the going rates for certain forms of content. SVoD services such as Netflix and Amazon are often criticised for their unwillingness to share data with producers or others about audiences and about prices paid for content (Interviewee C11, London, November 2018). So the insights that an experienced parent company can impart to a production subsidiary, for example about pricing, can help in negotiating a fair deal for content. For Charlie Goldberg at Left Bank, which was acquired by Sony in 2012, the in-depth knowledge that a market-savvy parent company may bring ‘can be invaluable’ (Goldberg, Interview, London, November 2018). Debbie Manners, Consultant at the Ingenious Group and former CEO at indie Keo Films, concedes that securing a well-informed grasp on such matters can be more challenging for indies than for competitors who are part of sizeable, well-connected companies that have a high status in the creative environment (Manners, Interview, London, October 2018). So, in addition to other advantages of scale, production companies that are taken over and become part of larger groups are likely to benefit through informational asymmetries stemming from their superior market knowledge. That production companies subsumed within larger entities frequently attest to important informational advantages accords with earlier research which has pointed to the growing significance of information, knowledge and capacity for learning as sources of organisational advantage (Barney 2000; Namada 2018). The implication is that ownership configuration is an influential determinant of performance in the production sector partly because, in an era of globalised and intensified competition amongst audiovisual platforms, it serves as a vector for transmission of knowledge and intelligence that is crucial to successful planning and management on the part of television production companies.

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References Achtenhagen, L (2012), Media Product Development: Strategic and Organisational Challenges, in: Picard, R (Ed), Media Product Portfolios, New York: Psychology Press, pp. 41–62. Barney, J (2000), Firm Resources and Sustained Competitive Advantage, in: Baum, J and Dobbin, F (Eds), Economics Meets Sociology in Strategic Management, Bingley: Emerald Group Publishing, pp. 203–227. Caves, R (2000), Creative Industries Contracts Between Art and Commerce, Cambridge, MA: Harvard University Press. Chalaby, J (2012), Producing TV Content in a Globalized Intellectual Property Market: The Emergence of the International Production Model, Journal of Media Business Studies, 9(3): 19–39. Davies, R (2016), Adam Crozier Pursues International Vision for ITV with Acquisitions, Guardian, August 10. Doyle, G (2002), Media Ownership: The Economics and Politics of Convergence and Concentration, London and New Delhi: Sage. Doyle, G (2013), Understanding Media Economics (2nd Ed), London and New Delhi: Sage. Doyle, G (2016), Digitization and Changing Windowing Strategies in the Television Industry: Negotiating New Windows on the World, Television and New Media, 17(7): 629–645. Hoskins, C, McFadyen, S and Finn, A (2004), Media Economics: Applying Economics to New and Traditional Media, Thousand Oaks, CA: Sage. Leung, S, Parker, L and Courtis, J (2015), Impression Management Through Minimal Narrative Disclosure in Annual Reports, British Accounting Review, 47(3): 275–289. Litman B (1998), The Economics of Television Networks: New Dimensions and New Alliances, in Alexander A et al. (Eds), Media Economics: Theory and Practice (2nd Ed), London: LEA, pp. 131–50. Lotz, A (2017), Portals: A Treatise on Internet-Distributed Television, Michigan: Michigan Publishing. Mediatique (2015), TV Production Sector Evolution and Impact on PSBs, December, London: Mediatique. Namada, J (2018), Organisational Learning and Competitive Advantage, in: Malheiro A, Ribeiro F, Jamil GL, Rascao GP, and Mealha O (Eds), Handbook of Research on Knowledge Management for Contemporary Business Environments, Hershey, PA: IGI Global, pp. 86–104. North, S and Oliver, J (2010), Manager Perceptions of the Impact of Consolidation on the UK Independent Television Production Industry, Journal of Media Business Studies, 7: 21–38. Northern Alliance (2009), Analysis of the Corporate Finance of SMEs in the UK Film Industry: A Report for the UK Film Council, London: Northern Alliance.

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Ofcom (2006), Review of the Television Production Sector, January 10, London: Ofcom. Ofcom (2015), Review of the Operation of the Television Production Sector: A Report for the Secretary of State for Culture, Media & Sport, December 23, London: Ofcom. Oliver and Ohlbaum Advisory (2014), The Evolution of the TV Content Production Sector, Prepared for Ofcom. Oliver & Ohlbaum (2015), Trends in TV Production, December, London: Oliver & Ohlbaum Associates. PWC (2013), Making Sense of a Complex World: Content Development and Cost Capitalisation by Media Companies, Media Industry Accounting Group Issue 5, London: PWC. Sweney, M (2014), British Indie TV Producers a Victim of Own Success as Foreign Owners Swoop, Guardian, August 10. Wirth, M and Bloch, H (1995), Industrial Organization Theory and Media Industry Analysis, Journal of Media Economics, 8(2): 15–26.

CHAPTER 5

Scale, Independence and Economic Sustainability

We have seen in Chapter 4 that acquired production companies typically enjoy a range of advantages which strengthen their ability to conduct business. Takeover may also bring unwelcome constraints in the form of accountability to a parent company. The implications of takeover for the creativity, content-making and output of production companies are examined in Chapters 6 and 7. In this chapter, we seek to build a fuller understanding of the relationship between corporate ownership configuration and business performance in the television production sector. The central focus here is on what motivates buyers to acquire television production subsidiaries. Which attributes of independent production companies are most appealing to prospective buyers? How does acquisition enhance the performance of the enlarged corporate entity? Comparing and contrasting the experience of different sorts of buyers—predominantly broadcasters, consolidated television production entities and/or multinational media groups—allows us to probe in greater depth the nature of the relationship between, on the one hand, expansion, scale and differing sorts of corporate configurations and, on the other, economic performance and capacity to engage in business strategies that sustain growth in a digital multiplatform distribution environment.

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 G. Doyle et al., Television Production in Transition, Palgrave Global Media Policy and Business, https://doi.org/10.1007/978-3-030-63215-1_5

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In the sections that follow, we first of all examine the market context in which merger and acquisition (M&A) activity involving television production companies has flourished in recent years. We assess the crucial role played by advisors and specialist financial intermediaries in encouraging and facilitating M&A transactions and in setting the terms on which buyers and sellers are matched. The views of such advisors provide valuable insights into which characteristics are seen by investors as lending the greatest appeal to production companies as investments. We also analyse in-depth evidence gathered from production firms and parent companies about the main business and economic motives that have driven M&A strategies. Our findings highlight the importance, in an increasingly competitive and supra-territorial landscape of media provision, and from the perspective of differing categories of buyers, of advantages of scale, vertical integration and international expansion as key economic motives that have encouraged takeovers of production companies. Finally, we consider the implications for the sustainability of stand-alone production companies and why it is that many struggle to scale up and remain independent.

Specialist Financial Intermediaries and M&A Activity Takeovers of leading UK television production companies are often perceived as being driven purely by the predation of investors or larger media or television companies but, as discussed earlier, our findings clearly suggest that acquisitions are in fact often propelled by ambitious producers who want to cash in and procure the benefits of takeover. Many independent production companies embrace acquisition and actively prepare for it. The process of preparing for takeover involves seeking out appropriate expert guidance on how to attract investment. Typically, a production company’s efforts to attract investment will be facilitated by specialist financial intermediaries who act as brokers in M&A activity in the sector. Intermediaries with experience in the sale of mediarelated businesses are likely to be favoured (Brauer et al. 2014). Through their role in brokering acquisitions and in advising target companies on how to prepare themselves for sale, financial intermediaries have prospered while, at the same time, acting as facilitators in the transformation

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of ownership patterns across the television industry. Jes Wilkins of Firecracker describes the thinking that surrounded his company’s engagement of one the leading M&A specialists in the area of television production: There was them and three or four other similar organisations […that…] are in the business of selling independent production companies. They are a commission business so it’s in their interest to get you the best possible price, in the same way that an estate agent would. (Wilkins, Interview, London, June 2018)

Television companies in the UK have a long history of engaging financial consultants, intermediaries and advisers. Investment banks and financial advisers historically played a central role, for instance, in raising finance for commercial broadcasters and in facilitating sales of their shares on the London Stock Exchange. Financial advisers and consultants have been deployed regularly by, for example, ITV regional broadcasters during preparations for the auctioning of Channel 3 franchises in 1991 and by PSBs such as the BBC which has used consultants to advise on a range of internal restructurings and reorganisations at the Corporation over the years (Birt 2002). The landscape of M&A activity is complex and populated by numerous different sorts of intermediaries who help manage risk and uncertainty in interactions between buyers and sellers (Battisti and Williamson 2015). While traditionally dominated by major investment banks, legal firms and management consultancies, the business of offering M&A advice has been transformed over recent decades by a process of restructuring in which many independent ‘boutiques’ or small advisory firms have emerged and gained market share (Noonan 2017). Typically, boutique advisors focus on specific industrial sectors and develop specialist knowledge and relationships with communities of potential investors that enable them to guide sellers through the M&A process. Boutiques are often set up by individuals who have first of all built up their knowledge, reputational profile and networks at one of the traditional institutions before leaving to establish their own firms offering clients advice on M&A activity and financial strategy (Agnew and Schäfer 2014). In the television production sector, a number of specialist advisory boutiques have emerged prominent amongst which is About Corporate Finance Investment (ACF) which was set up in 2010 by CEO and President Thomas Dey, former Head of Media Investment Banking at global accounting firm Grant Thornton in

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conjunction with Sachin Dosani. Now with offices in Los Angeles as well as London, ACF has advised on numerous transactions in the media and entertainment sector and has brokered scores of sales and acquisitions of UK-based independent television production companies, including, amongst our sample group, the sale of Mammoth Screen to ITV plc, Love Productions to Sky and Firecracker to Tinopolis. The relationship between financial intermediaries such as ACF and production companies that wish to sell themselves is mutually dependent. The financial advisor draws on their sector-specific knowledge and network of investment clients to provide an essential service to the production company: that of identifying what criteria potential buyers are especially interested in and ensuring a match between the seller’s profile and the requirements of prospective investors. The value of this expertise is acknowledged by producers such as Andy Zein at Warner Bros International TV Production who attests to the importance of the financial advisers’ knowledge in particular of ‘what you can push people on and deal structure’ (Zein, Interview, London, March 2019). The independent television production company in turn provides the M&A advisor with an opportunity to earn sizeable fees and to reinforce its reputation as a sector specialist. Servicing the requirements of independent television production companies who want to attract investment is the raison d’être for advisory boutiques in this sector and, for Sachin Dosani, it is very much the ambitions of independent production companies that drive M&A activity: Indies in my mind are not there as just sitting ducks waiting to be gobbled up. It very much tends to be a proactive choice. Which is why you have companies like ACF that are broking dealers, because indies are coming to ACF and saying, “Right, I’m now thinking about potentially selling my business.” (Dosani, Interview, London, January 2019)

The financial advisor drafts a set of documentation known as the Information Memorandum (IM) which gives an overview of the firm’s core business and products, its management and its financial track record and is used to market the business to prospective buyers (Dey, Interview, Edinburgh/LA, February 2019). Valuation of a company for M&A purposes, while based on an array of considerations, is often guided by the transaction multiples (such as the ratio of the purchase price to annual net

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profits) that have prevailed in recent transactions for similar companies (Arzac 2004). The way in which the company, its products, its financial record, its management vision and its prospects are described in the IM is intended to motivate potential investment and so the intermediary’s sector-specific expertise and awareness of what buyers want are vital in enabling it to scope out convincingly those attributes of a target company that are likely to fit with investors’ requirements. The role of the financial intermediary is not merely to identify success factors and market the target’s business but also to guide the target company’s strategy in preparation for the marketing process in order that, once the interest of one or more suitable buyers has been secured, the value and appeal for investors of the business can be maximised. Thomas Dey, CEO of ACF, explains: Buyers sit down with us endlessly and they look at these businesses and they rate a number of factors about these businesses that make them attractive or non-attractive […]. We can use this information to assist our clients and guide them in their growth plans […] So, we go into these companies and we say […] “We know what the buyers are looking for, how do you rate against their score card?” […]. “You’ve got a good management profile, you don’t have enough PR presence, you’re not in the press enough so, you might want to up your press. Your profitability is not in line with similar businesses your size so lets do some analysis and see what we can do to improve it. You’ve got two returning series; you’ve got one on Netflix so that’s going to be attractive.” It is like a corporate health report, using our intrinsic knowledge of the sector versus our internally created buyer score card. (Dey, Interview, Edinburgh/LA, February 2019)

Dey’s reference to rating companies against a scorecard relates to the notion of key success factors or, as Bullen and Rockart put it, the small number of specific ‘key areas where “things must go right” in order for the business to flourish’ (1981: 7). Theoretically, key success factors exist in every sector of the economy but distinguishing and isolating these reliably is very difficult because all firms are in some ways unique and the context in which they operate is often dynamic and complex. So the knowledge that a specialist financial intermediary such as ACF can provide concerning which aspects of the business are seen as driving value is clearly of immense worth to sellers (Zein, Interview, London, March 2019).

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As far as the UK television production sector is concerned, earlier research has identified three factors that ‘appear to be especially crucial in determining performance in this sector in the digital era. These are: capabilities in production; ability to exploit content assets; and corporate configuration’ (Doyle 2018). Findings from interviews with advisors that have specialised in M&A deals in this area provide much more granular detail on success factors that are specific to the television production sector. According to the experience of Dey and Dosani, both of whom have shepherded through numerous transactions involving television production companies, the key attributes that drive the success of a business in this sector and therefore that appeal to investors centre around being able to produce hit programmes, having so-called returners, the company’s relationships with commissioners of content, making output that resonates with international as well as domestic audiences, having ownership of intellectual property (IP) in a back catalogue of appealing content, and being well managed, as evidenced by financial results. But, as Dey observes, ‘most of these businesses are run by creatives, not financial types’ and so they ‘aren’t always run that efficiently in terms of financial control’ but ‘if you do get a business that is running well then buyers are pleased with that because they can be guaranteed a return on their profit’ (Dey, Interview, Edinburgh/LA, February 2019). Notions of the worth of a target company are determined in part by financial calculations (such as, typically, a multiple of annual earnings) but also by other factors including, not least, the identity, profile and ambitions of the buyer. The economic motives that drive different sorts of buyers are analysed further in the next section. But setting aside such motives, the impetus to grow via acquisition may at times simply reflect the relentless demands placed upon managers to achieve business growth continuously and by any and all means (Steinbach et al. 2016). According to Thomas Dey: …[achieving] organic growth in today’s competitive market is much harder than acquisition growth. There is a lot of pressure on managers of these businesses to grow. Why not buy your competitors instead of going head to head and losing your own margin? You can buy in the new ideas and bring the change you need. Mature businesses are also more stable and established than a new department. With an abundance of financing options, buying these assets is a real option […]. (Dey, Interview, Edinburgh/LA, June 2018)

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The pressure to make acquisitions and a limited supply of production companies which appeal strongly as investments has fuelled competition amongst buyers for what are perceived as the best-performing UK independent television programme-making companies. For Dey, ‘clients are hiring us into get them the maximum price the market will deliver’ and ‘the way this is achieved is by putting a number of buyers together in a process who are keen to buy the asset, and running a limited auction process’ (Interview Edinburgh/LA, February 2019). Auctions provide a good way of selling an asset at maximum price where asymmetric information or differing perceptions exist in relation to value of the resource (Fisher et al. 2010: 343). Participants in an auction are exposed to the risk of paying too much but high bids, as well enhancing the commission paid to the sell-side intermediary, are usually desirable from the sellers’ point of view. However, for many production companies money will not be the only consideration. According to Jes Wilkins, ‘We did have a choice. And we liked the fact that Tinopolis were British. But ultimately most people are going to go with the best deal, aren’t they?’ (Wilkins, Interview, London, June 2018). But because terms (e.g. contractual tie-ins and performance incentives) vary, figuring out what is the ‘best’ deal is not always straightforward (ibid.). Numerous factors need to be considered including prospective strategic fit, likely creative autonomy and availability of financial support. The catalysing role played by the financial intermediary involves two-way matching to ensure a suitable fit between buyer and seller, as Thomas Dey explains: We say to our clients “this is a two-way process; you should be rating your buyers as well. […] We’re going to put you in front of five buyers and you should be asking yourself the question, who are they, what are they like to work with, how do they help their investee companies, do they get you something you don’t have already?” (Dey, Interview, Edinburgh/LA, February 2019)

Therefore, it is not just the target company but also the buyer which is under pressure to sell itself and its vision effectively. For industry lawyer James Penny who is responsible for commercial and business affairs at ITV-owned production subsidiary Mammoth Screen, ‘different buyers sell themselves on quite different strengths’ and, for example, while ‘venture capitalists will offer a lot of money but very little expertise’ an

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experienced television company can offer ‘a long standing and very useful knowledge base’ to tap into (Penny, Interview, London, January 2019). According to Jane Turton who, as CEO of All3Media, has overseen many acquisitions of independent production companies: You sit there ostensibly as the buyer ready to cut a very large cheque and hand it over. But actually you’re selling yourself as the best home the place they can be most productive, happiest since the intermediary will have established … [alternatives where] … they will make the same amount of money. In this scenario the competing buyers are selling your vision of the future … You’re getting into conversations around the centre, the relationship, the distribution, the value added, support, the federal model, the geographic footprint… (Turton, Interview, London, July 2018)

Trade Buyers Versus Professional Investors A successful acquisition depends on the willingness of the target company’s management to embrace a new owner, share their vision, build a positive long-term relationship and facilitate transition (Mellen and Evans 2018). Management’s attitude to takeover will depend on their perceptions about the buyer, the buyer’s strengths and the potential for a good strategic fit. In the production sector, buyers generally fall into one or other of two broad categories: either professional investors such as private equity firms or else ‘trade’ buyers—insiders to the business that already have strategic interests in the television or wider media industry. For a trade buyer, strategic complementarity will be a key consideration, as is reflected in Jane Turton’s description above of a two-way process of match-making in which buyers as well as sellers are promoting their attractions to the other party (Turton, Interview, London, July 2018). Whereas trade buyers will evaluate the opportunity to acquire a production company in the context of how it fits with their existing assets and how adding the new unit might make ‘the corporate whole add up to more than the sum of its business parts’ (Porter 1987), professional investors such as private equity firms or venture capitalists typically are more single-mindedly focused on prospective financial returns. For Jon Thoday, MD of Avalon, one of the few remaining sizeable and successful independent production companies, much corporate activity in the television production sector reflects the profit-seeking instincts of

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venture capitalists or private equity investors. According to Thoday (Interview, London, April 2019), ‘[i]t’s the City smelling an opportunity to buy something and sell it on for something more than they bought it for…’. The growth of private equity investors over recent decades and their use of debt to sometimes overpay for assets as well as their relentless focus on extracting financial returns—as distinct from building the value of an acquired company—has previously attracted criticism (Froud and Williams 2007). But television production is a sector in which banks are generally wary of the risks involved and reluctant to provide funding for programme development (Frank, Interview, London, April 2019). Professional investors such as private equity firms or venture capitalists offer risk capital that often otherwise would not be available to producers plus they are generally far less likely than a trade investor to try and exert control over key strategic and operational areas. Production companies that are bought over in full or in part by professional investors will find themselves accountable for delivering on the, at times, demanding expectations regarding business performance upon which the investment was predicated. Given the uncertainties of the television business environment, this can be problematic, as exemplified by the experience of one our case study companies, Hat Trick Productions. Set up in 1986 by Jimmy Mulville and Denise O’ Donoghue, Hat Trick specialises in comedy, drama and light entertainment and is one of the UK’s leading independent television production companies. The company, which has won numerous awards and forged an enviable reputation for its content with titles including Have I got News for You, Father Ted and Derry Girls, is renowned for successfully managing and exploiting intellectual property rights (IPRs) in its shows. In 2003, Mulville and O’Donoghue sold a 45% stake in the firm for £23m to London-based private equity firm August Equity. But the structure of the deal left Hat Trick indebted and, due to the cancellation of some its most popular shows, including The Kumars at No 42 and a slowdown in new commissions, earnings subsequently went into decline (Armstrong 2009). While management at Hat Trick struggled with pressure from banks about the company’s financial performance, its owners struggled with accepting the risks and uncertainties that characterise the commissioning environment and the fact that ‘there is no formula’ for churning out television shows that will work (Mulville cited in Armstrong 2009). Hat Trick’s situation was resolved when, in 2009, Mulville completed a management buyout to purchase back, at a higher price, the stake which was sold six years earlier.

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Achieving independence again was viewed as a major relief and meant that ‘the management were fully incentivized now, because the shareholding rests with us and not with an outside investor’ (Mulville cited in Plunkett 2009). Jimmy Mulville describes as ‘hideous’ the experience of being partly owned by private equity investors who ‘in order to reconcile their bottom line they would have happily destroyed my company and sold it off cheaply’ (Mulville, Interview, London, April 2019). A key lesson learned was that ‘this business shouldn’t get involved with purely financial institutions’ (Mulville, cited in Armstrong 2009). Mulville’s perspective underlines important differences in approach between professional investors versus trade buyers. Whereas the professional investor’s position was exemplified in comments from August Equity to the effect that ‘[w]e’re always looking for profitable investments for our investors and looking to realise a profitable exit in the future—that’s been our policy with Hat Trick’ (Green, cited in Armstrong 2009), trade buyers generally tend to exhibit a more strategic and nurturing attitude towards development of an acquired subsidiary.

Strategic Complementarity Trade buyers or investors who are themselves industry participants will evaluate the opportunity to acquire a television production company in terms of its potential to create competitive advantage for the enlarged corporate entity. Trade buyers are generally concerned less with immediate financial returns and profitable exits than with identifying and exploiting potential areas of strategic complementarity (Porter 1987). How might the production company fit with existing assets? How might it enhance the value of the enlarged business? Notwithstanding the potential for challenges surrounding integration of the subsidiary within the wider business, a trade buyer generally brings much more understanding than a private equity investor of the specificities of the television business environment and, in turn, more willingness to be flexible in supporting an acquired production subsidiary through the inevitable ups and downs (Penny, Interview, London, January 2019; Wilkins, Interview, London, June 2018). Buyers who are already active in the media or television industry come in a variety of corporate shapes and sizes and, according to the extensive evidence we gathered in the course of our research, their motives for

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acquiring a television production company, while always strategic, vary in ways that reflect their existing configuration (Doyle 2018; Doyle and Barr 2019). As M&A specialist Dey puts it, ‘buyers often are trying to fill in a jigsaw’ (Dey, Interview, Edinburgh/LA, February 2019). Many takeovers of UK independent production companies have been driven by ambitious production entities (e.g. All3Media) who, sometimes backed by financing from professional investors, want to develop into consolidated super-indies that command a sizeable presence in the market and enjoy associated advantages of scale. Takeovers have also been driven by acquisitive conglomerates (e.g. Warner Brothers and Sony Pictures Television) that already have extensive interests across television content-making, and/or delivery and/or distribution, some of which are UK-based but the majority of which are international which means that acquisition extends global reach. As Jon Thoday (Interview, London, April 2019) observes, sustaining a globally leading market position requires constant creative renewal. Another key category of buyer is the broadcaster (e.g. ITV or Sky) who may wish to expand their operations into the vertically upstream activity of programme-making. A corporate strategy based on acquiring television production subsidiaries can only succeed where it results in tangible benefits that add value to the combined business. In the following sections, we draw on the experience and views of a range of producers, parent companies and independent financiers who have specialised in advising on M&A activity in the television production sector in order to explain the main sorts of advantages that accompany acquisition strategies. Three themes or major sources of advantage and/or strategic complementarity emerge as being especially pertinent to understanding the relationship between corporate configuration and performance. Some of these overlap and their relative significance may vary from one instance to the next but, broadly speaking, these themes have been central in driving recent transformations in the ownership structure of the UK television production sector: scale, vertical structure and international reach. Building Scale Evidence gathered from parent companies that have acquired production subsidiaries confirms that advantages of scale, which come in a variety of forms, serve as a key motive for takeovers in this sector. The presence of economies of scale within the production process itself, as touched upon

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already in Chapter 4, means that growth, whether organic or through acquisition, is usually very advantageous. But findings from interviews confirm that the benefits which accrue to companies with a large scale of production activities and outputs and with a sizeable market presence are typically very wide-ranging. Production is a risky business and therefore one of the chief advantages of expansion and of achieving scale is risk mitigation. Given the unpredictable nature of the business, owning several companies allows for cross-subsidisation and smoothing out of the overall financial performance of the group over time, allowing for better planning. As John Willis of Tinopolis puts it, a significant advantage of greater scale through cross-ownership of several productions subsidiaries is that: peaks and troughs which are inevitable in TV production can be evened out so that if one of the major companies is having a bad time… someone else is doing well … it enables you to not panic about it, in a short term way, but actually take a slightly longer view. (John Willis, Interview, London, May 2018)

Cross owning a portfolio of several different production companies or labels clearly helps to spread risk. If the portfolio includes production companies that specialise in differing types of programme output (e.g. drama, factual, non-factual entertainment, etc.) then this guards against the risk of unexpected downturns in the popularity of one or other genre. For Jane Turton having a balanced portfolio in terms of genres is ‘a huge positive’ and therefore All3Media’s acquisition strategy of recent years has entailed acquiring additional ‘very good scripted businesses’ to ensure a suitable balance ‘between scripted and non-scripted’ in the parent company’s portfolio (Turton, Interview, London, July 2018). In an industry where creative replenishment is important, owning a range of production companies helps to ensure access to the best talent across each genre specialism. For Jon Thoday of Avalon, creative renewal is in fact the key motive driving investment from trade buyers (interview, London, March 2019): big entertainment organisations find it hard to have interesting ideas. And so they pay what appear to be high multiples because they believe they’re buying a future idea that will turn their business.

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Tim Hincks agrees that consolidated cross-ownership of a large portfolio of production subsidiaries helps defend the company against risk and, through supporting creative renewal and replenishing IPRs, it increases the ‘chances of the next hit coming from your company’ (Hincks, Interview, London, July 2018). Jane Featherstone, former chief executive of Kudos and co-chairman of Shine UK, now part of Endemol Shine Group, argues that the role played by specific creative individuals in leading production companies naturally inhibits their scope for organic growth and by implication makes ownership of a portfolio of production subsidiaries or labels the only way to achieve sustained growth: I’ve witnessed this over many [creative] companies because I’ve been Chairman of 6 or 7 of them at Shine. There is a limit to the growth of any creative company. They can’t go beyond a certain limit. I don’t think they can just exponentially keep growing because [of the importance of] individuals… Organic growth is limited by the nature of the creative process… it’s not about finance; it’s entirely about the human being. (Featherstone, Interview, London, April 2019)

For Jane Turton, greater scale through ownership of a broad and balanced portfolio of outputs and production subsidiary is central to the strength and sustainability of a television production business: [Scale] makes you more resilient. Your broader portfolio which you will tend to have in a bigger business means that if you lose a piece of IP or a commission or a piece of talent, you can bounce back because you have other things that pay the bills. So, to an extent it is about risk management spread over a broader portfolio of people and programmes. And it is definitely helpful being bigger in that respect. It just simply makes you more resilient. (Turton, Interview, London, July 2018)

Consolidated production entities with a spread of subsidiaries and a large scale of production activities also tend to fare better than smaller ones because of opportunities for greater cost-efficiency through sharing of back-office functions such as legal affairs and finance (John Willis, Interview, London, May 2018). But one of the main sources of advantage for a super-indie is that, thanks to its secure financial position, it can provide each of its production subsidiaries with secure funding to finance

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development of new shows. Since access to financing is relatively difficult for smaller independent production companies, the ability to deficit finance development and production counts as a crucially important benefit (Dosani, Interview, London, January 2019). The view that, in a business environment characterised by uncertainty, producers benefit from the financial security of having a well-resourced parent and this helps with making more ambitious content is widely broadly corroborated by producers. James Penny at Mammoth, which was bought out by ITV, says that ‘one of the big attractions to having an acquirer … was having a pot of money to develop our own projects (Penny, Interview, London, January 2019). According to Charlie Goldberg, Senior Business and Legal Affairs Manager at drama producer Left Bank Pictures which was bought by Sony Pictures TV International, when ‘you have the backing of a large corporation that gives you a bit more clout [and] security. It gives you the ability to run at some big projects without too much concern’ (Goldberg, Interview, London, November 2018). For Hincks, former President of the acquisitive Endemol Shine Group, aggregated ownership fosters success by facilitating the position of individual subsidiaries through: providing a cushion, because ultimately you’re not looking at survival on a daily basis… [and] you might get some leverage through existing relationships …You will get more investment and be able to take more risks in your ideas. (Hincks, Interview, London, July 2018)

In short, larger production firms and consolidated super-indies enjoy a range of advantages that stem not only from economies of scale, riskspreading, knowledge sharing and opportunities for creative renewal but also from being able to deficit finance production, build up substantial library of IPRs and acquire the status of being important suppliers in the television industry with associated negotiating leverage. Vertical Expansion Important though advantages of scale may be, M&A activity in the television production sector is frequently predicated less on scale advantages than on strategic motives related to the need of broadcasters,

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other content service providers and distributors to secure access to good content and/or the need for content-makers to secure access to markets. For broadcasters who are faced with increasing competition and encroachment on revenues from digital rivals, upstream vertical expansion into television content creation makes great strategic sense (Esser 2016). From the perspective of broadcasters, the view that ownership of content-making capability and content rights are a source of competitive advantage has become increasingly prevalent. Therefore many, including the US major networks, have become ‘laser focused’ on the need to acquire ownership of content production and IPRs in order to sustain ‘maximum control over multiplatform distribution’ (Littleton 2016: 42). Likewise UK free-to-air broadcaster ITV and UK-based pay-TV platform Sky have acquired numerous independent production companies over recent years (Davies 2016). Some broadcasters, in setting out to acquire independent production companies, are strongly motivated by a desire for greater control over supplies of content, not only in order to service the needs of their own channels but also in order to keep that content away from rivals. Kevin Lygo, Director of Television at ITV, highlights the advantages for a broadcaster of cross-owning production subsidiaries both in the form of additional revenues from exploitation of IPRs and also through acquiring greater strategic control over a pipeline of attractive content: the way we looked at it was, in a perfect world …you want to own the content that you’re commissioning. And from the moment you commission this programme through to the end of its life you want to be continuing to earn off that intellectual property… And for the parent company ITV, almost as important as the money – though probably not as important – is the control that you have over it. So the broadcaster can say, “Right, I don’t want this appearing on another channel for x years.” Whereas if you’re dealing with an independent, that’s a negotiation. (Lygo, Interview, London, December 2018)

Strategic ownership of rights has become very important in the era of streaming services. As Lygo acknowledges, until recently broadcasters such as ITV were happy to sell large quantities of older programming material to SVoD services such as Amazon and Netflix who would ‘hoover up libraries’ (Lygo, Interview, London, December 2018). But with leading SVoD services increasingly perceived as posing a threat to the core

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business of broadcasters, and with broadcasters themselves now setting up their own subscription-based streaming services, this has brought a change in strategic approach and a reluctance to sell back catalogue material. In short, broadcasters have realised that ‘…we were feeding them [Netflix and Amazon] our lunch!’ (Lygo, Interview, London, December 2018). The rationale underlying upstream vertical expansion into production can vary from one broadcast organisation to another. Whereas ITV’s strategy of acquiring independent production companies has been driven at least partly by a wish to diversify revenues and underpin the competitive position of its broadcast channels, for UK pay-TV broadcaster Sky, the primary impetus has been to strengthen its international distribution business, Sky Vision. Jane Millichip who, since assuming her current role as Managing Director at Sky Vision in 2013, has led a series of acquisitions of television production companies explains that whereas Sky’s pay-TV channels had historically relied on ‘rented’ US-made content, a move towards more investment in origination of content meant it became ‘strategically sensible’ to develop a complementary business model based on ownership and exploitation of television content rights (Millichip, Interview, London, December 2018). Investment in a number of IPRgenerating production companies such as Love Productions and Blast! Films has enabled Sky to build and develop its international distribution business. Feeding the distribution arm of the business is frequently the main motive in acquisitions of independent production companies by consolidated ‘super-indies’ or larger television groups. Tim Hincks believes that one of the main drivers of recent consolidation in the sector has been the ambition of vertically integrated distributor-producers ‘trying to move up the value chain so that you keep as much of the value of the IP that has been created as you possibly can’ (Hincks, Interview, London, July 2018). The strategic coherence of cross-ownership of a range of IPRgenerating production companies that can provide an ever-replenishing supply of content plus distribution interests is explained by Sachin Dosani as follows: The big groups, the consolidators, have certainly seen [acquisitions of indies] as strategic because the way they have typically operated is that they have a distribution business in the middle. Like, All3Media has something called All3Media International. And the job of All3Media International is

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to take the content or the IP which is owned by that group and sell it around the world. And so if you’ve got that in the middle - if you can buy independent companies who are effectively feeding content to the centre and then the centre is selling all around the world - that’s where they see it as a sort of a ‘2 plus 2 makes 5’. (Dosani, Interview, London, January 2019)

Many senior executives who have worked at acquisitive production entities such as Endemol Shine and All3Media, confirm that a strategy of takeovers helps to diversify the business and support distribution. For Jane Turton of All3Media, a key motive for building scale through acquisition is to ‘replenish the IP catalogue’ which feeds through to the international distribution business (Turton, Interview, London, July 2018). Simon Cox of Endemol Shine International confirms that ‘the free market for IP …is very small’ and, since ‘you need a large amount of content to drive your distribution machine’ ownership of production companies is vital (Cox, Interview, London, May 2018). As Cox explains: You need to own that supply chain and that’s what it’s about. Owning those companies is just filling your [distribution] pipeline at lower risk. (Cox, Interview, London, May 2018)

International Reach Wider international distribution has been a particularly compelling incentive for vertical and horizontal mergers. As Esser has argued, such strategies have been fuelled by ‘cheap money’, the success of international TV formats and a multiplication in distribution platforms (Esser 2016). Media groups involved in distributing and retailing content at an international level need a constantly replenishing supply of IPRs for material that can be exploited beyond its country of origin. At the same time, improved access to international markets can massively increase the earnings of a television production business. Consequently, one of the major drivers of M&A activity in the television industry over recent has been pursuit of value through marrying IPR generation with increasing opportunities for distribution across international territories. Peter Bazalgette, former CEO of Endemol UK, producer of many internationally successful formats including Big Brother, attests to the fact

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that for creators of hit television shows ‘having a ready made network’ inhouse which facilitates international distribution of hit shows is a major source of advantage (Bazalgette, Interview, London, April 2019). But securing wide international distribution for content and maximising international exploitation of IPRs in all back catalogue material is a priority for all profit-seeking production companies. The strategic complementarity between IPR generation and international distribution may explain why a programme of acquisitions of independent television production companies at the BBC was led not by the broadcasting division but rather by the corporation’s international distribution arm BBC Worldwide (BBCW). In speaking about the advantages of acquiring and integrating independent producers, the CEO of BBC Studios (formed through a merger between BBCW and BBC Productions in 2018) Tim Davie believes that both scale and ‘exceptional international reach’ in distribution are key to the BBC’s ability to derive value from this strategy (Davie, Interview, London, April 2019). Specialist M&A Adviser Thomas Dey explains the business advantages enjoyed by enlarged television production conglomerates with welldeveloped in-house international distribution arms and their production subsidiaries thus: If you’ve now got a big international distribution team, you’re going to be invited along to the fairs; you’re going to go to MIPCOM and MIPTV; they’re going to push your content into international markets and hopefully you’re going to get access to more international markets through the [group’s] network. So [for production subsidiaries] there’s definitely going to be an increase in exposure on the international front. (Dey, Interview, Edinburgh/LA, February 2019)

Jes Wilkins of Firecracker points out that whereas ‘making significant money on production is very hard’, international sales of rights yield a high profit margin or are ‘pure bottom line, particularly if you are working with an in-house distribution company’ (Wilkins, Interview, London, June 2018). The advantages of being part of a group that offers wide international reach extend beyond more effective exploitation of IPRs to, also, gathering and sharing market intelligence across the group. As discussed in Chapter 4, the findings of our research underline the significance of knowledge to media organisations. Being part

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of a global production entity brings useful insights and market intelligence, for example, about what sort of content is in development and in demand across the globe. So as earlier research has suggested the formation of transnational television production conglomerates has been propelled both by ‘pursuit of profitable, reproducible practices and IPRs’ (Van Keulen et al. 2020: 14).

Reconfiguring for the Digital Era Our research underlines the central importance, in the television production sector, of ownership configuration as a key determinant of business performance. Evidence we gathered from production companies, trade buyers and investment specialists alike attests to the fact that the configuration of a production company—i.e. its scale, whether it operates as a stand-alone independent or a subsidiary of a larger conglomerate, the vertical structure of the parent organisation, and whether its activities are domestic or international—exerts a major influence over its business performance. Being subsumed within a larger television company generates valuable advantages that enhance the business performance of those production companies which are acquired. Benefits are often related to scale. Larger production firms and consolidated ‘super-indies’ benefit from economies of scale in production, greater financial clout and their ability to spread risk. Knowledge sharing is also important. Configuration is a key determinant of business performance partly because in an era of globalised and intensified competition amongst audiovisual platforms, it serves as a vector for transmission of knowledge and intelligence that is crucial to successful planning and management on the part of television production companies. In addition, the relentless growth of globalised systems of distribution for television content has magnified the business advantages for production companies of being part of entities that are vertically integrated and of adopting configurations that enhance international reach. Earlier work in economics has highlighted how marketplaces characterised by uncertainty in transactions between the differing vertical stages tend to incentivise the development of vertically integrated organisational forms (Williamson and Winter 1993). Television production, which is inherently uncertain, is no exception and, as our findings show, the growing competitive threat posed by online content service providers has

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reinforced incentives for broadcasters such as ITV or Sky in the UK to mitigate risk through upstream vertical expansion into production. Intensified competition from globalised television content service providers has also increased pressure towards achieving wide international reach. In the digital era, configuring for sustainability requires prioritisation of access to international broadcast markets and international distribution. These are the forces which explain why transformations characterised by relentless consolidation, takeovers and the growing controlling presence of non-domestic parent groups have proliferated across the UK television industry over recent years. Scaling up and Remaining Independent: The Challenges An inevitable corollary of the many ways that takeover and consolidation within enlarged corporate entities are apt to enhance the business performance of a production business is that companies which choose to remain as stand-alone operations and that forego the benefits enjoyed by acquired rivals find themselves at a disadvantage and often struggle to grow their businesses organically. At a time when Governments around the globe are highly attuned to the potential for creative industries to boost wider economic growth (CBI 2019), any perceived impediments to the development of creative firms are apt to meet with political concern. In the UK, for example, a recent report by the department of Trade & Investment (UKTI) and industry partners lamented the fact that creative businesses which achieve early success are frequently bought up by international players and indigenous creative companies find it difficult to scale up and remain independent (Create UK 2014). Do the difficulties faced by small independent television producers suggest that this is an area where survival is impossible if your activities are below a certain minimum size? In industrial organisation, the concept of minimum efficient scale (MES) or efficient scale of production refers to the lowest level of activity that a production firm needs to engage in in order that it can produce cost-efficiently or in such a way as that its long-run average costs are minimised (McEachern 2018: 158). MES is the lowest output level necessary in any given sector to achieve all the economies of scale required in order to operate efficiently. In the motor manufacturing sector, for example, a production company that wishes to operate sustainably needs to be producing output at a large scale. Since economies of scale are an

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inherent feature of television programme-making, does it follow that a high MES exists in the television production sector? Although our empirical findings support other recent studies (Oliver and Ohlbaum 2015: 59) in finding that scale is generally advantageous in the television production sector, it is notable that some earlier research has questioned whether it should be assumed that scale always confers advantages (Bourreau et al. 2002). Focusing specifically on independent producers in the UK, North and Oliver have argued that, whereas both larger sized ‘super-indies’ who have ‘scale and financial resources’ and small niche players who are ‘streamlined enough’ to eke out a living from a handful of commissions are well placed for survival, it is medium-sized television production companies that are likely to struggle for a living in an increasingly competitive landscape (North and Oliver 2010: 35). Most production executives interviewed in the course of our research take the view that, despite the many advantages associated with scale and with being part of a larger group, television production is an activity in which small niche players can survive well and therefore the concept of a MES does not apply to this sector. Wayne Garvie points to the distinction between ‘lifestyle’ and ‘business’ orientated production companies or small companies that ‘treasure their independence and want to do one or two projects a year’ versus companies that are ‘ambitious for scale’ and therefore ‘have to be part of a bigger organisation’, noting that both approaches work ‘absolutely fine’ (Garvie, Interview, London, May 2018). Charlie Goldberg agrees that small ‘production companies that consist of a handful of people’ can operate successfully on a commercial basis (Goldberg, Interview, London, November 2018). In sectors of the economy that have a high MES a particular concern is that this is inextricably associated with high barriers to market entry and monopolisation (Hirschey 2008: 300). However, as far as the UK television production sector is concerned, abundant empirical evidence exists to suggest many new set-ups occur every year which in turn suggests that any MES which exists is low. According to data from UK regulator Ofcom, in each year between 2009 and 2014 an average of 31% of all television producers were new entrants to the market. Despite consolidation, ‘the production sector remains characterised by high levels of new market entry’ (Ofcom 2015: 19). Despite the many advantages associated with scale, the television production sector remains open to new voices and to creative renewal. Earlier research into cultural industries has suggested that because ‘the

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conception stage of texts remains small scale and relatively inexpensive’ this can at least partially explain the continued presence of small companies, even as large corporations become more dominant (Hesmondhalgh 2013: 209). But, as Lee has observed, setting aside ‘high-profile commercial success stories among the “super-indies” and “mega-indies”’ (Lee 2018: 43), it remains that many smaller indies struggle for financial survival. What is clear is that an ‘unlevel playing field’ exists between production companies that, as part of enlarged entities, enjoy advantages when it comes to financing, distribution, access to international markets, information, etc. versus small indies. While the business advantages associated with expansion and takeover are widely recognised, some production companies nonetheless prefer to remain as small stand-alone players. Jane Featherstone of Sister Pictures and formerly Chairman at Shine argues that because production companies are structured around creative individuals their scope for organic growth is inherently limited and they must remain small entities (Featherstone, Interview, London, April 2019). For Jon Thoday who is joint founder and Managing Director of one of the few sizeable and successful UK-based production companies that has remained independent, the reasons why Avalon has resisted takeover are partly that ‘we really like doing what we do and don’t want to be told what to do by an investor’ and partly that the primary motivation for setting up the company was ‘to help creative people realize their vision’ without having to worry about ‘paying the bills’ (Thoday, Interview, London, April 2019). That takeover is likely to bring increased pressure to produce financial returns is widely acknowledged. Even so, and as reported in fuller detail in Chapter 6, our findings suggest that few if any producers who have experienced takeover, either as the acquirer or the acquired, believe that curtailment to creative freedom or other adverse implications for content are a necessary corollary. Most take the view that while ownership will affect accountability for the performance of the business, it is very unlikely to impress itself on the creative pipeline or on content (Hincks, Interview, London, July 2018). For Nick Catliff of Lion Television, finding the optimum size is about weighing up the advantages of scale versus those of remaining small and independent: [Takeover] gives huge advantages and it gives you a few disadvantages. The obvious advantage is that you’ve got more creative brains working away..

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It [also] means you have got in-house resources which are important… you can go out and invest in people and so on… [W]hen you get into deal making we have a legal and business affairs department… But the flip side of course is when you get to our size, you’re carrying a bloody big overhead! So we know we need turnover - we’ve got to sell our new shows every year just to keep our head above water. It cuts both ways definitely. I would rather be bigger than smaller because it gives you that bit of a cushion…. [But] as companies get older they take on… weight… [Y]ou can lose your edge… (Catliff, Interview, London, May 2018)

References Agnew, H and Schäfer, D (2014), Boutique Banks Take Market Share from Bigger Rivals, Financial Times, Accessed at: https://www.ft.com/content/ 7de5e8dc-214d-11e4-a958-00144feabdc0. Armstrong, S (2009), The BBC are Like Undertakers, Guardian, May 4. Arzac, E (2004), Valuation for Mergers, Buyouts and Restructuring, New York: Wiley. Battisti, M and Williamson, A (2015), The Role of Intermediaries in the Small Business Transfer Process, Small Enterprise Research, 22(1): 32–48. Birt, J (2002), The Harder Path: The Autobiography, London: TimeWarner Books. Bourreau, M, Gensollen, M and Perani, J (2002), Economies of Scale in the Media Industry, Working Paper, Paris: ENST. Brauer, M, Mammen, J and Luger, J (2014), Sell-Offs and Firm Performance: A Matter of Experience? Journal of Management, 43(5): 1359–1387. Bullen, C and Rockart, J (1981), A Primer on Critical Success Factors, Cambridge, MA: Center for Information Systems Research, MIT. CBI (2019), Centre Stage, Keeping the UK’s Creative Industries in the Spotlight, Report 12527, October 23, 2019, London: CBI. Create UK (2014), Creative Industries Strategy, London: Creative Industries Council UK, at: www.thecreativeindustries.co.uk/media/243587/cic_report_ final-hi-res-.pdf. Davies, R (2016), Adam Crozier Pursues International Vision for ITV with Acquisitions, Guardian, August 10. Doyle, G (2018), Television Production: Configuring for Sustainability in the Digital Era, Media, Culture & Society, 40(2): 285–295. Doyle, G and Barr, K (2019), After the Gold Rush: Industrial Re-Configuration in the Television Production Sector and Content, Media, Culture & Society, 41(7): 939–957.

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Doyle, G and Paterson, R (2008), Public Policy and Independent Television Production in the UK, Journal of Media Business Studies, 5(3): 17–33. Esser, A (2016), Challenging US Leadership in Entertainment Industries? The Rise and Sale of Europe’s International TV Production Groups, International Journal of Communications, 3585–3614. Fisher, T, Prentice, D and Waschik, R (2010), Managerial Economics: A Strategic Approach (2nd Ed), London: Routledge. Froud, J and Williams, K (2007), Private Equity and the Culture of Value Extraction, New Political Economy, 12(3): 405–420. Hesmondhalgh, D (2013), The Creative Industries (3rd Ed), London: Sage. Hirschey, M (2008), Managerial Economics, 12th Edition, South Western Cengage. Lee, D (2018), Independent Television Production in the UK: From Cottage Industry to Big Business, Cham: Palgrave MacMillan. Littleton, C (2016), Inside Endemol-Shines Ambitious Plan to Conquer Global TV, Variety, March 29, 2016: 42–43. McEachern, W (2018), Contemporary Economics (4th Ed), Boston: Cengage Publishing. Mellen, F and Evans, C (2018), Valuation for M&A: Building and Measuring Private Company Value (3rd Ed), New York: Wiley. Noonan, L (2017), Boutique Advisers Maintain Appeal Despite Big Bank Criticism, Financial Times, Accessed at: https://www.ft.com/content/23221ff8de2c-11e6-86ac-f253db7791c6. North, S and Oliver, J (2010), Manager Perceptions of the Impact of Consolidation on the UK Independent Television Production Industry, Journal of Media Business Studies, (7): 21–38. Ofcom (2015), Review of the Operation of the Television Production Sector: A Report for the Secretary of State for Culture, Media & Sport, December 23, London: Ofcom. Oliver & Ohlbaum (2015), Trends in TV Production, December, London: Oliver & Ohlbaum Associates. Plunkett, J (2009), Jimmy Mulville Completes Hat Trick Management Buyout, Guardian, December 2. Porter, M (1987), From Competitive Advantage to Corporate Strategy, Harvard Business Review, 65(3): 43–59. Steinbach, A, Devers, C, McNamara, G and Li, J (2016), Peering into the Executive Mind: Expanding Our Understanding of the Motives for Acquisitions, Advances in Mergers and Acquisitions, 15: 145–160. Van Keulen, J, Bauwens, J and Krijnen, T (2020), “Everyone Working a Little More Closely Together”: Transnationalization of Creative Production in TV, Television & New Media.

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Williamson, O and Winter, S (1993), The Nature of the Firm: Origins, Evolution and Development, Oxford: Oxford University Press.

CHAPTER 6

Configuration and Content

In this chapter and the next, we turn from economic analysis to the question of how changes in corporate configuration affect creative decisionmaking and content. Critical press coverage surrounding takeovers of independent producers points to enduring public concerns about the effects on content of differing forms of custodianship of these businesses. But prior to our study little or no evidence-based research has been carried out which actually investigates the connections between ownership and content. In this chapter, we present and analyse the findings of a systematic investigation, based primarily on findings from interviews with executives at our sample of London-based international television production companies plus analysis of their content, of the connections between differing sorts of corporate configuration and the quality and nature of content outputs in the television production industry. The first section below explains our approach to measuring and evaluating content. Later sections dissect evidence from our research into the relationship between corporate ownership and content. In Chapter 7 which follows, we reflect more widely on the socio-cultural significance of recent transformations affecting the television industry, including the growing significance of transnational distribution and we ask whether concerns about potential marginalisation of indigenous cultures remain valid in an increasingly © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 G. Doyle et al., Television Production in Transition, Palgrave Global Media Policy and Business, https://doi.org/10.1007/978-3-030-63215-1_6

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globalised environment for television content. But in this chapter, our focus is on presenting and analysing evidence that addresses the question of how changes in organisational configuration in the television production sector (i.e. whether part of a consolidated super-indie, owned by a multinational parent company, vertically integrated or a stand-alone indie) affect the sort of content that each organisation produces.

Measuring Content In order to examine how content is affected when independent television production companies are taken over, our research entailed two methods of research. First, we conducted an extensive analysis of the content outputs of our sample group of production companies over an eleven-year period and second, we carried out interviews with a range of producers and industry experts. As noted earlier, our sample group comprised twelve leading UK-based production companies some of whom have been taken over and subsumed within larger conglomerates, some of whom have been acquired by broadcasters and some of whom are stand-alone or true independents—see Table 6.1. This approach allowed us to investigate the potential effects of differing sorts of ownership configurations, i.e. whether independent, or subsidiaries of conglomerates (either domestic or international), or vertically integrated entities (part or wholly owned by broadcasters) on the content made by production companies. For our content analysis, all outputs or television programmes produced by our sample case study companies were tracked, coded and then analysed in order to gauge patterns of continuity and/or change over the time period of 2007–2017. Each programme made was analysed according to genre classification; who commissioned it; how much of it was produced in terms of hours, episodes and series; where and when it was initially transmitted; and its wider distribution. One important methodological challenge for our research was to decide which attributes of content to focus on and measure in order to capture, as meaningfully as possible, qualitative changes in the nature and quality of that company’s content over the study period that might or might not correlate with changes in the company’s ownership configuration. Judgements about the quality of television content are notoriously subject to ‘the troubling matter of critical judgement’ (Cardwell 2007) and no suitable ready-made framework existed that our study could draw upon to fulfil its mission. So in the analytical framework which we

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Table 6.1 Case study companies by specialism and key outputs Company

Ownership Configuration

Principal Output

Commissions 2007–2017

TX Hours 2007– 2017

Hartswood Films

Stand-alone Indie

Drama

14

46

Hat Trick

Stand-alone Indie

NonDrama

140

632

Keo Films

Stand-alone Indie

NonDrama

84

237

Firecracker

Conglomerate UK

NonDrama

118

291

Kudos

Conglomerate UK

Drama

77

461

Left Bank

Conglomerate Non-UK

Drama

42

248

Lion

Conglomerate UK

NonDrama

145

1408

Pulse Films

Conglomerate Non-UK

NonDrama

33

86

Key Outputs

Lady Chatterley’s Lover, Sherlock Boomers, Episodes, Have I Got News for You? Hugh’s Fish Fight, Skint, River Cottage Dr Christian Will See You Now, My Big Fat Gypsy Wedding Hustle, Law & Order UK, Spooks The Crown, Outlander, Strike Back Horrible Histories, Homes Under the Hammer Pillow Talk, Pineapple Dance Studios

(continued)

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Table 6.1 (continued) Company

Ownership Configuration

Principal Output

Commissions 2007–2017

TX Hours 2007– 2017

Blast Films

Vertically Integrated UK

NonDrama

88

386

Love Productions

Vertically Integrated UK

NonDrama

127

160

Mammoth Screen

Vertically Integrated UK

Drama

36

149

Red Production Co.

Vertically Integrated Non-UK

Drama

40

178

Key Outputs

999 What’s Your Emergency?, The Supervet Benefits Street, Great British Bake Off, Great British Sewing Bee And Then There Were None, Endeavour, Poldark Last Tango in Halifax, Ordinary Lies, Scott & Bailey

constructed we focused on two parameters seen as especially pertinent in the context of our investigation: first (as a proxy for indigeneity) to what extent content exhibited local versus global characteristics; and second (as a proxy for quality) the extent to which it was primarily critically or commercially orientated. To assess indigeneity or Britishness, we drew partly on elements of the design of the cultural test which is applied to UK high-end television content to check its eligibility for UK-based tax incentives (BFI 2019)— a framework introduced in the UK to comply with EU rules on state aid. Using this approach, content in our study was analysed and coded according to its ‘localness’ or ‘globalness’ as measured in terms of setting; location of production; regional specificity of the narrative, and makeup of off-screen talent and ‘above the line’ on-screen talent. To assess levels

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of commercial and critical success, content was also coded and analysed according to its market performance and critical reception. Market performance was assessed by calculating, for each transmitted programme, its audience ratings relative to slot average and by assessing the wider territorial reach achieved through secondary distribution of that output. In order to gauge critical performance we assessed and measured a range of proxies including reviews, based on printed press and online review aggregators, plus award nominations and wins. Findings from our quantitative analysis of content were combined with an extensive body of qualitative evidence gathered from interviews. These were conducted with senior executives—Chief Executive Officers (CEOs) with responsibility for overall strategy, Chief Creative Officers (CCOs) with frontline responsibility for developing and producing content and also directors of legal and business affairs—at our case study companies and, as appropriate, with their parent companies. We also drew on findings from interviews with corporate financiers specialising in takeovers in the television industry. This approach enabled us to assemble a robust body of evidence on the core question of how changes in ownership effect content. It is worth noting that although our case studies are mainly London-based, the wider relevance and resonance of our findings is strengthened by the fact that several of these companies have profiles and activities that extend across many international territories. Adopting this focus is appropriate because, at a time of increasingly globalised restructurings of ownership across the television industry, questions about how consolidation and takeovers of independent production companies might affect content are clearly of wide international relevance.

Ownership, Control and Content: A Complex Relationship Concerns about the rise of large, diversified and transnational media organisations and about accompanying potential for abuses of power have been a central theme in earlier research in the realm of media sociology and media political economy (Bagdikian 2014; Herman and McChesney 1997; Hesmondhalgh 2019; Tunstall and Palmer 1991). The main worry surrounding the development of enlarged media enterprises is that, because ownership is connected to control over content, the emergence of monopolised patterns of ownership poses a threat to media plurality.

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The concept of pluralism is comprised of two aspects (Doyle 2002). Political pluralism is about the need, in the interests of democracy, for a range of political opinions and viewpoints to be represented in the media. Democracy would be threatened if any single voice within the media, with the power to propagate a single political viewpoint, were to become too dominant. Cultural pluralism is about the need for a variety of cultures, as reflects the diversity within society, to find expression in the media. Cultural diversity and social cohesion may be threatened unless the cultures and values of all groupings within society (e.g. those sharing a particular language, race or creed) are reflected in the media. Because the need for political and cultural plurality is widely recognised, most developed countries have measures in place that seek to promote and secure diversity within media provision such as constraints and upper limits on ownership. Curbs on ownership are a widespread feature of media regulation but a range of other measures are also used including for example in some territories grants and public subsidies for content suppliers whose output extends diversity of media provision. Restrictions on ownership and cross-media ownership are common and are predicated on the general assumption that ownership relates closely to control over media content and therefore over the ideas that shape and influence consumers and citizens (Klimkiewicz 2005). However, ownership and control over content are clearly not the same thing. The extent to which, and the precise point at which, ownership of a media organisation will translate into influence over the content of its products has been the subject of analysis, debate and many divided opinions (Achtenhagen et al. 2018; GAH 1994; Picard and van Weezel 2008). In some cases, regulations create a measure of separation between ownership and editorial control (Cheffins 2001; Gibbons 2000). For example, the content of (particularly broadcast) media may be subject to direct and detailed regulatory prescriptions concerning the range and quality of output, which sorts of content must be included and what steps must be taken to avoid political bias. Alternatively, permission to own certain media products may involve a specific undertaking not to interfere with editorial matters. But, the problem remains that ‘whatever regulatory measures are in place, the opportunities for media owners to assert an indirect influence over the content and the agenda of products they own seem so comprehensive as to defy any absolute guarantees of separation’ (Doyle 2002: 19). For example, an owner’s influence may make itself apparent in the choice of key personnel—which in turn may set the

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tone for content decision-making—or in strategic decisions about which resources to reduce or invest more in, or in arrangements for sourcing or distributing content. Because the ways and means for a determined owner to shape the content of a media company that s/he owns are so extensive and varied, curbs over ownership of influential media outlets remain at the forefront of regulatory efforts to preserve plurality and diversity of content (ibid.). Despite transition to the digital era, concerns remain about the power wielded by dominant media organisations in relation to production and circulation of news, ideas and cultural and political values within contemporary societies (Valcke et al. 2015). But measuring concentrated media ownership or indeed its affects on content and public opinions is notoriously difficult (Iosifidis 2010; DCMS 2013). As discussed in this chapter, our research findings reinforce those of earlier studies which have underlined the complexity of the relationship between ownership and control over content (Doyle 2002; Baker 2006; Hesmondhalgh 2019). But research that actually tests the connections between ownership and content empirically is surprisingly limited. Such empirically based studies as have emerged in recent years have tended to focus primarily on news provision and many have rightly highlighted the dangers posed for plurality and democracy by homogenisation of news content (Doyle 2015; Fenton 2010; Lund et al. 2009). When it comes to the television production sector, the issue of how custodianship affects content sits of the heart of much recent research—as Esser argues, ‘there can be no doubt that ownership matters’ (Esser 2016: 3609). But, while some earlier research has examined the effects of consolidated ownership on the experiences of acquired television producers (Fernández-Quijada 2013), little or no earlier research has drawn upon systematic and comprehensive content analysis to test out how exactly changes in ownership affect content-making and content outputs. In examining the effects of ownership on content, our research builds on earlier studies that have examined creativity within media organisations and the relationship with autonomy (Amabile et al. 1996; Bennett and Strange 2014; Bilton and Cummings 2014; Georgiades 2015) and, similarly, work on cultural industries where, as noted by Hesmondhalgh (2019), levels of control reflect not only ethical but also commercial priorities. Our work has been informed by limited but valuable earlier research into connections between ownership, content and business performance in the television production sector (Chalaby 2010; Doyle 2018; Doyle

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and Barr 2019; Esser 2016; Fernández-Quijada 2013; Van Keulen et al. 2020). But our research, by distilling the findings of a wide-ranging empirical investigation involving testimony from industry professionals plus quantitative content analysis, has been able to extend understanding of the interplay between organisational custodianship and other key factors likely to affect content.

Corporate Configuration and Content: Findings Most of companies in the sample group of a dozen leading producers whose content we analysed between 2007 and 2017 were acquired during the study period—see Table 6.1 above—but three of our sample companies remained as stand-alone indies. With this spread of case studies we were able to examine content trends both before and after takeover at many production companies. The main finding which emerged from our content analysis is that when independent production companies are acquired, this does not immediately disrupt or change the sort of content that the company is making. Although it is widely assumed that takeover tends to have an adverse effect on creativity and content, the results of our extensive analysis of content data suggest little evidence that takeovers have any immediate, significant or sustained effect, individually or by group, on such characteristics of content as its ‘Britishness’ or its performance in terms of awards and critical acclaim or on its popularity or ratings (Doyle and Barr 2019). That takeover generally has little or no harmful effect on content is widely and comprehensively corroborated by findings from interviews. Being bought up can have positive or negative effects for production companies but very often there are few if any direct implications for content, according to the views of a range of producers, parent companies and independent financiers who have specialised in advising on M&A (merger and acquisition) activity in the television production sector. As one experienced corporate financier who preferred to remain anonymous put it, when television production companies are taken over: buyers generally look for some financial information, collect the cash, and do little else … The vast majority [of production companies] continue [with existing content strategies] in quite an unaffected way. (Interviewee F3, May 2018)

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Evidence from interviews with a range of television executives suggests that, rather than stifling creativity, having the backing of wealthy owners brings considerable advantages in terms of being able to finance production, including larger, more ambitious and challenging projects. For Charlie Goldberg, Commercial Director at Left Bank Pictures which was acquired by US media group Sony in 2012, where ‘you have the backing of a large corporation… it gives you the ability to run at some big projects without too much concern… you can take those risks more freely than if you are an independent’ (Goldberg, Interview, London, November 2018). Jane Turton of All3Media, an entity which has acquired several UK-based production companies and that, in turn, was taken over by US media groups Liberty Global and Discovery in 2014 points out that, for production companies, having the necessary financial backing to develop programmes and employ talent is clearly beneficial and she argues that ‘we should not be parochial about where the capital comes from’ (Turton, Interview, London, July 2018). Our findings suggest that the sort of content that a production company makes will be strongly influenced by the vision of its creative leadership. Such leadership is typically provided by the founding owners of the company, for example, Hat Trick Productions—a company renowned for its comedy output—was founded by a group of comedians. The specialisms of many companies in our study reflect the background of founders. However, a central finding is that the notion that takeover has undesirable and negative impacts on the content made by acquired production companies has no empirical basis. When it comes to the television production sector, there is no immediate correlation between changes in corporate ownership and content. Indeed in this sector, where success is strongly associated with the skills and capabilities of individual creative leaders, consolidation has few if any implications for content because, as is discussed in further detail below, takeover typically is accompanied by arrangements that incentivise creative leaders to remain within the company and carry on making content of exactly the sort and in exactly the ways that have previously earned them success. Individual production companies or labels that are acquired by parent companies such as Sky generally retain their ‘own colour, their own feel, their own personality’ (Millichip, Interview, London, December 2018). The results of our investigation cut across standard managerial notions that when takeovers occur existing executives are quickly ousted and replaced by more effective managers who can unleash additional value

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from the business (Jensen 1988; Parrino and Harris 1999). They also challenge standard assumptions in media theory that ownership and dayto-day control over content are closely intertwined and therefore that consolidated ownership and ownership by non-domestic parent companies is likely to be harmful for content. While some earlier research has acknowledged that takeovers can enhance creativity within production subsidiaries (Fernández-Quijada 2013), more generally it is widely assumed that consolidation and takeovers of indigenous and independent television production companies by large groups and, especially, by foreign multinationals are detrimental for content (Abraham 2014; Presence 2017). But our research, firmly grounded in an empirical analysis of content outputs for a range of sizeable UK production companies over an eleven-year-period ending in 2017, clearly suggests that being acquired by a consolidated super-indie or an international media conglomerate results in no disruption to content nor perturbation to content-making strategies. Changes in parental ownership generally leave content unaffected. However, as the evidence presented in the following sections shows, the cause-and-effect relationship between corporate ownership and content is often complicated and multi-dimensional. Part of the reason for complexity is that the sort of content that a company makes is generally shaped by factors other than ownership, for example, market demand. The important role played by buyers in shaping the content outputs of the independent production sector is analysed in further detail in Chapter 7. But the most essential force governing the sort of content that a company makes is likely to be its creative leadership.

Creative and Business Leadership Amongst our interviewees there was widespread agreement that within any individual television production company the guiding vision of the firm’s leadership, often its founders, is typically the dominant force impressing itself upon content and content decision-making. For Jimmy Mulville, MD and co-founder of independent production company Hat Trick, irrespective of the corporate ownership of a production company, it’s content ‘is all dependent on the personalities involved. This is a people business’ (Mulville, Interview, London, February 2019). The creativity of individuals such as scriptwriters is important but so too is the guiding

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and coordinating role of the firm’s leadership, as is evident in this reflection from Jane Featherstone, former Chief Executive of Kudos and who recently set up a new production company called Sister Pictures: when I was setting the company up it was about working with three or four writers who I really, really loved working with and whose work I really respected. And it’s not super strategic honestly. It’s about instinct and following the stories that they want to tell and being able to guide them in a direction that I think is going to work. (Featherstone, Interview, London, April 2019)

So the outputs of a production company will reflect the ambitions—both creative and commercial—of its leadership. According to Sachin Dosani, a corporate financier who has been active in overseeing and advising on numerous acquisitions of television production companies, investors recognise that this is a ‘people business’ in which individual talents and capabilities are key to sustaining the value of the enterprise (Dosani, Interview, London, January 2019). Consequently, a key priority following acquisition will be to ensure continuity in the firm’s creative leadership so as to maintain its creative brand, identity and value. Thomas Dey, another experienced corporate financier, confirms that, whereas in many sectors of the economy, takeover is often followed by replacement of senior management, acquisition deals in the television production sector are deliberately structured in such a way as ensures that creative leaders are ‘financially incentivised’ to remain within and grow the company for a period of time after acquisition, usually 4–6 years (Dey, Interview, Edinburgh/LA, June 2018). Continuity of creative leadership militates against disruption to content.

Commercial Ambitions, Content Strategies and Continuity It makes sense that buyers are reluctant to interfere in creative decisionmaking. An interesting and unexpected finding of our research is that M&A activity in the UK television production sector has been as much a reflection of ambitious producers who want to cash in and procure the benefits of takeover as it has strategic predation on the part of larger media groups or broadcasters. Takeovers have been driven as much by the interests of sellers as buyers. As discussed in Chapter 4 above, many

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independent producers are very keenly interested in developing their companies to the point where they may attract the interest of investors and this is reflected in their content strategies. Independent production companies who become targets for takeover generally do so on the strength of having already achieved a proven and sustained track record of commitment to and success in implementing content strategies that conduce to commercial success, according to leading corporate financier Thomas Dey (Interview, Edinburgh/LA, June 2018). Indies that appeal to investors have already embarked on commercially minded content strategies prior to takeover, such as focusing on material that appeals to international markets and on ‘returners’ or programmes that are re-commissioned and long-running series. For example, Mammoth Screen exhibited a positive pattern of business growth in the run-up to being fully bought out by ITV in 2015, built upon success in making such re-commissioned series as Poldark (BBC) and Endeavour (ITV) see Fig. 4.5 above. Mammoth’s appeal as an investment accords with Thomas Dey’s analysis of the key attributes that prospective buyers of independent production companies are interested in: a strong business profile; a good strategic fit to that investor’s aspirations and, above all, a track record of making compelling programmes that are ‘returners’ or re-commissioned: Number one is what kind of programmes are you producing… A buyer wants to see that you’ve got, two or three different programmes that have gone to season three and maybe even are a bit longer. So a layered approach of programmes that are enduring, have life and have continued success. (Dey, Interview, Edinburgh/LA, June 2018)

Pursuit of a predominantly commercial approach to content-making may sit somewhat uncomfortably with notions of creativity founded around artistic integrity and public good. However, ‘entrepreneurial leadership’ is strongly inscribed as an objective for contemporary creative industries policy-making (Bazalgette 2017: 16) and our research suggests that successful entrepreneurship has been a major driving force behind recent transformations in ownership in the UK production sector. Many independent producers, prior to takeover, have already embarked on content strategies that are primarily geared towards commercial success and growth. And content is largely unaffected by takeover because no

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self-interested investor will want to interfere with the creative mechanisms through which, under circumstances of autonomy, an earlier track record of business growth has been successfully accomplished. The fact that content is relatively unaffected by takeover is explained by three logically interwoven factors (Doyle and Barr 2019). First, creative content production is an activity governed by uncertainty or, as US economist Richard Caves puts it, the law of ‘nobody knows’ (Caves 2000). The primary motive for acquiring a production company, therefore, will be to reduce risk by buying an enterprise that has already managed to achieve a sustained track record of making commercially successful content. Albeit that uncertainty spurs investors on to pursue ‘that elusive nugget of gold in the production company’ (Dey, Interview, Edinburgh/LA, June 2018), investors who acquire production companies are generally, in the words of Jes Wilkins of Firecracker, ‘buying a graph of the money. So that success is there already’ (Wilkins, London, Interview, July 2018). Interference with the operating strategy of a subsidiary that has already demonstrated its capacity for business success would make no commercial sense. Second, similarly, many independent producers are keen to attract investment and see it as a means of countering the challenges posed by a highly uncertain business environment. As discussed in Chapter 5, it is widely recognised that takeover offers benefits for the business, including improved financial stability, distribution and information as well as bringing financial windfalls for founders. Many production companies want to be taken over and, far from pursuing content strategies that are unlikely to bring commercial success, ‘most producers do want people to watch their shows and do want to have large audiences’ (Wood, Interview, London, June 2018). In essence, production companies that become attractive targets for investment usually do so because they are already embarked on and committed to content strategies that are commercially orientated. Third, television production is a ‘people business’ in which value is centred around specific creative leaders. Earlier studies have pointed to the importance, for creative leaders, of autonomy (Amabile et al. 1996; Bennett and Strange 2014; Bilton and Cummings 2014; Hesmondhalgh 2019). Our research has found that, to preserve the stability and success of content-making businesses, retention and reward structures for key creative individuals are normally critical aspects of acquisition deals.

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These factors, which provide a natural insulation against medium-term top-down interference in creative content-making, support our conclusion that changes in the custodianship of television production companies are very unlikely to impact adversely on content. But, even if takeovers don’t bring direct or immediate interference in content strategies, it remains that acquisition may entail indirect, wider or more enduring longer-term effects on a production subsidiary.

The Corporate Behemoth The extent to which ownership actually translates into influence over content depends on numerous inter-related determining factors including the ideological and commercial motivations of owners. Individual owners have to decide which approach towards integration of operational and strategic activities is most likely to help the business (Haspeslagh and Jemison 1991). In the television industry, the general attitude of parent companies towards integrating, shaping and controlling the activities of production subsidiaries varies. This reflects not only differing organisational cultures but also the challenges that are naturally inherent in finding a suitable balance between allowing autonomy and pursuit of any cost efficiencies that closer integration might yield (Bodner and Capron 2018). The positive economic outcomes of close integration, such as more cost-effective shared support services, are sometimes referred to as coordination effects (Puranam et al. 2009). Our findings suggest that trade investors in independent production companies want and expect to achieve at least some coordination effects through sharing or merging of resources and activities. Most are contented to remain ‘hands off’ when it comes to operational decisions but one or two parent companies are seen, in the words of one executive (Interviewee C2, London, May 2018), as ‘real aggregators’ that are prone to exerting excessive centralised control in ways that alienate staff and ‘crush the value of the company they’ve bought’. Earlier research focused on sectors other than television has highlighted the ways that excessive centralisation and control by parent companies or ‘headquarters hierarchy syndrome’ can impair the performance of acquired business units (Bartlett and Ghoshal 1986). In the context of the television production sector, a particular problem in such circumstances can be loss of motivation for ‘these entrepreneurial individualist creative

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people who thought they were masters of their universe and now have to report to someone’ (Lygo, Interview, London, December 2018). While a small minority of acquiring companies are regarded as too zealous in their pursuit of coordination effects, for most television producers that are taken over, any subsequent efforts by parent companies to centralise and streamline are typically focused on support functions such as finance, human relations and legal affairs where there are no detrimental consequences for content. According to our interviewees, closer integration can and does often bring improvements in costefficiency but without detriment to core programme-making activities. John Willis, Group Creative Director at parent company Tinopolis identifies a number of ‘real advantages of scale’ that stem from, for example, ‘sharing back-office functions’ but is clear that for the individual production subsidiaries ‘creatively everyone has their own space and their own identity’ (John Willis, Interview, London, May 2018). This accords with earlier research which suggests that when production companies are acquired ‘the autonomy of local actors’ is usually preserved (Van Keulen et al. 2020: 15). For Wayne Garvie, President of International Production at Sony Pictures Television International: ‘if you’re ambitious for scale you have to be part of a bigger organisation’ but then the key to motivation for production subsidiaries is: to keep the corporate behemoth away from people so that they can do what they should do which is developing, selling and making great pieces of content. (Garvie, Interview, London, May 2018)

Acquiring companies decide from a spectrum of possibilities which approach towards integration stands the best chance of enhancing corporate performance and value. When television production companies are acquired, parent companies are faced with ‘a contradiction between the corporate ambition to bring these businesses into their fold and the … [need to] … keep them motivated’ (Dey, Interview, Edinburgh/LA, June 2018). The trade-off between gains from coordination effects and potential losses from suppression of autonomy, diminished motivation, etc. is sometimes referred to as the coordination-autonomy paradox (Puranam and Vanneste 2016). An optimal outcome will ensure that gains achieved through coordination effects are not outweighed by losses through, for example, suppression of experimentation and creativity.

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For creative companies, a high level of operational autonomy is generally seen as a built-in requirement (Amabile et al. 1996; Bilton 2006). But the consensus view amongst our interviewees is that, for the vast majority of television producers who are taken over, autonomy is not threatened. Acquisition, whether by a domestic or by a foreign conglomerate, has not resulted in any efforts to directly interfere in creative processes. Indeed, as suggested in an earlier comparative study of consolidation in the production sector (Fernández-Quijada 2013), our findings indicate that takeovers may well result in television producers experiencing a sense of creative liberation rather than oppression as responsibility for backoffice activities is taken off their hands. Jes Wilkins, Chief Creative Officer (CCO) of Firecracker Films, which was bought by British-owned superindie Tinopolis in 2012, explains how perceptions about the effects on creativity are often misguided and excessively pessimistic: Some people fear losing autonomy, creatively. That is not really the case at all. But it is how you see it. (Wilkins, Interview, London, July 2018)

The views of Andrew Critchley of Red Production Ltd, acquired by Studio Canal in 2013, are typical of the wider consensus that ‘the decisions that we make [about content-making] haven’t been changed by our becoming part of that group’ (Critchley, Interview, Edinburgh/Salford, January 2019). Speaking of criticisms advanced by David Abraham and others about the potentially harmful effect of takeovers on production companies, Tim Hincks, former Group President of Endemol Shine and now CEO of Expectation Entertainment says: I broadly think it is overstated, that notion of ownership having an effect on the creative pipeline. I mean yes, a shareholder will of course look at the numbers and look at the performance. But the leap from that to “are we making the right shows?” is quite a big leap. (Hincks, Interview, London, July 2018)

Many consolidated television production groups, including for example Tinopolis and All3Media, have adopted a federal model in which, while finance and other support functions are at least partly centralised or shared amongst subsidiaries, each production company retains full autonomy and creative independence. For the CEO of All3Media Jane Turton, having a

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federal structure means ‘you’ll get a bigger butcher more independently minded creative … because they know they will have complete authority and autonomy’ (Turton, Interview, London, July 2018). Although the concept of ‘autonomy’ is complex (Banks 2010; Hesmondhalgh and Baker 2011) it is widely acknowledged, both by theorists and practitioners, that independence is crucial in sectors where creativity is at the heart of the business. Across the UK production industry there is widespread agreement that allowing creative subsidiaries freedom to get on with the task or, as the Chief Creative Officer at Sony Pictures International Wayne Garvie puts it, ‘keep[ing] the corporate behemoth at bay’ is essential (Garvie, Interview, London, May 2018). Jane Turton of All3Media is adamant that the ability of television producers to remain indigenous, independent and essentially British in outlook is not affected nor threatened by having an overseas parent company (Turton, Interview, London, July 2018). The views of Nick Catliff, Managing Director of All3Media production subsidiary Lion Television fully corroborate this point of view: We’ll talk through our programmes and she’ll [Turton] go to the awards ceremony. She watches the programmes, she understands them but she’s not telling you how to make them… (Catliff, Interview, London, May 2018)

Many strongly agree with Tim Hinck’s assertion that, while being acquired inevitably brings some accountability to the parent company for the performance of the business, it is not likely to translate into groundlevel interference in creative decision-making. Such interference is unlikely because, as one leading corporate financier points out, a track record of creative success and of autonomously producing commercially viable programmes is precisely the reason why any independent production company becomes a target for takeover in the first place (Dey, Interview, Edinburgh/LA, June 2018). Concerns that production companies, following acquisition, may be subject to intensified commercial pressure misses the point that commercial ambition is often endemic within production companies that are packaged for takeover. However, acquisition can result in adversities for production companies that indirectly affect content. Short-term resentments amongst commissioning broadcasters towards companies that have been seen to capitalise on the takeover ‘goldrush’ is one possibility (Goldberg, Interview,

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London, November 2018). Andy Harries, Chief Executive of Left Bank Productions has spoken of being ‘a bit frozen out by the BBC and ITV’ in the period immediately following acquisition by Sony (Harries cited in Clarke 2017). Another problem area is that acquired companies are subject to oversight by new owners and, for some producers, the disciplines involved in being accountable may impact on motivation, as Kevin Lygo explains: I think the evidence would be that when you give someone £10m and you say, “You now work for me”, then you don’t get the best out of them and they feel a bit less motivated, a bit less special… I don’t think there is some weird corporate thing that happens sort of, “You can’t do this, you can’t do that”. But there is something psychological that happens to these entrepreneurial individualist creative people who thought they were masters of their universe and now have to report to someone…Now it’s like, “Right, we want the accounts on April the 3rd ”. (Lygo, Interview, London, December 2018)

Acquired television production companies are confronted with pressures that previously had not existed to produce high financial returns. Earlier research has highlighted how pressures placed by parent companies on dependent subsidiaries to conform to high expectations may result in ‘acculturation stresses’ and poor post-acquisition integration outcomes (Berry 1980; Birkinshaw et al. 2000; Monin 2002). The effects on television production companies of such pressures can vary. As discussed in Chapter 5, when Hat Trick Productions was acquired by a private equity investor its Managing Director Jimmy Mulville found the experience of being pressurised to generate high financial returns ‘hideous’ (Mulville, Interview, London, February 2019). Charlie Goldberg of Left Bank Pictures observes that operating ‘under corporate scrutiny’ and the expectation of high returns can reduce latitude for negotiation and mean that an acquired drama producer, unlike a smaller independent company which can be flexible on margins, will find it very ‘challenging’ to produce content at prevailing UK broadcaster tariff (£’000 per hour) rates (Goldberg, Interview, London, November 2018). For Debbie Manners, it is inevitable that accountability to a parent company changes the modus operandi of an acquired production company: all [acquired] companies will have clear profit targets and all of that in a way that they won’t have had as a pure independent… And I think as soon

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as you have got an annual target that you’re accountable to someone else for, you have got to think long and hard about what the easiest way or the most efficient way of delivering that is. (Manners, Interview, London, October 2018)

That takeover involves greater oversight and accountability in terms of business performance is widely acknowledged. But, not least since television production is a sector where firms are generally run by creative types who are not prone to prioritising efficiency in financial control (Dey, Interview, Edinburgh/LA, June 2018), it is not surprising that post-acquisition integration might involve closer attention to financial discipline. Organisational theorist Peter Drucker first pointed out that a federalist approach to management offers advantages and is often better suited to modern organisations, with their complex networks, alliances and multinational dimensions, than traditional hierarchies with topdown lines of control (Drucker 1974). Although coercive isomorphism within organisations is often associated with poor outcomes (Brannen and Peterson 2008), the experience of most acquired UK production companies suggests that post-acquisition benefits arising from complementarity can be and usually are reaped without coercion and without unwelcome involvement in day-to-day operational decision-making on the part of parent companies. According to our research findings, few if any television producers who have experienced takeover have found that it results in curtailments to creative decision-making. Most share Tim Hincks view that concerns about ownership impacting negatively on the creative pipeline are generally overstated (Hincks, Interview, London, July 2018). While the need for parent companies to respect the creative autonomy of subsidiaries is very widely acknowledged, it remains that production companies can often benefit from judicious interventions and, especially, from the resources of an experienced and well-funded parent company. The backing of a parent can positively enhance the creative options open to a production company, as James Penny of Mammoth Screen (owned by ITV) explains: …Having a safety comfort blanket of the broadcaster or the buyer means that once you get to a certain size and you have that safety net then you’re much more willing to spend significantly on development and take risks in development that you might not otherwise have done. So once

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our turnover hit a certain amount and we had cash in the bank we used a significant proportion to start acquiring rights to books and other sorts of things knowing that it might take two, three, four years or sometimes longer for that project to even have a chance of being green lit…You might be willing to wait a cycle until that idea comes back into fashion… You can afford to wait and that is a luxury that only money buys you and this security of having a buyer [owner/investor] … (Penny, Interview, London, January 2019)

Many consolidated television groups have opted for a federal model but levels of integration between parents and subsidiaries vary. Most parent companies recognise that, in line with corporate management theory (Haspeslagh and Jemison 1991), the most effective way to create value for the enlarged group is not to adopt a blanket approach but rather to respect that differing circumstances and subsidiaries call for individually tailored approaches. This is reflected, for example, in how Jane Millichip, Managing Director of SkyVision explains how the numerous independent production companies her company has acquired have been integrated and managed: Don’t meddle where you are not wanted is my view and don’t have a ‘one size fits all’…There are some companies in our portfolio where we are very …involved because they need …operational guidance. There are other companies that are beautifully run and what they need is [just] strategic guidance… You’ve got to be prepared to recognise where the needs of the company are and work with them to fill that. (Millichip, Interview, London, December 2018)

Strategic Function and Content Individual parent companies vie for competitive advantage by trying to create more value from their acquisitions than their rivals would (Porter 1987; Campbell et al. 1995). One important issue that shapes how those in the television industry are likely to approach integration of production subsidiaries is strategic fit. What is the logical fit between the function of the production subsidiary and the parent company’s other resources and wider ambitions? Is the main aim, for example, to diversify and spread risk? Is the purpose of the acquisition to feed an internal supply chain? Perceptions of expected function may well have a bearing on a subsidiary’s approach to its core activities. So one of the key determinants of how

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the relationship between ownership and content will play out in individual instances of takeover in the television production sector is strategic complementarity or the logic which incentivised the acquisition in the first place. As discussed in Chapter 5, our research findings suggest that the main strategic motives which have propelled recent transformations in the ownership structure of the UK television production sector are pursuit of scale, vertical structure and international reach. Acquisitions of production companies by vertically integrated broadcasters, consolidated clusters or super-indies, combined production plus distribution entities and transnational media conglomerates are usually driven by one or more of these motives. But complementarity, business strategy and content are all closely interwoven, according to the findings we gathered from a range of producers, parent companies and independent financiers who have specialised in advising on M&A activity in the television production sector. So, although evidence of direct interference by owners in the creative decisions of subsidiaries is sparse, it remains that changes in ownership, driven by differing models of strategic complementarity, may entail indirect effects for content. Horizontally Integrated Super-Indies For super-indies that acquire clusters of production subsidiaries, an important advantage of scaling up operations in this way is that it enables risk-spreading. Creative renewal may also be a motivating factor. As Jon Thoday of Avalon (Thoday, Interview, London, April 2019) observes, sustaining a globally leading market position requires constant replenishment of hit-making capabilities. Acquisitions of indies are fuelled by ‘the continuous search for creative talent and innovative ideas’ (Van Keulen et al. 2020). But given the uncertainties of the television production business environment risk-spreading is also a crucial imperative. According to the CEO of All3Media Jane Turton, the financial strength and resilience of a consolidated production entity is improved by acquiring and owning a range of production subsidiaries or labels, thereby relying on ‘more than one talent’ and a diverse production slate (Turton, Interview, London, July 2018). Buying up an array of differing production subsidiaries helps ensure that the content outputs of the consolidated super-indie are spread across a range of talents and genres. In line with what the resource-based view (RBV) in strategic management might suggest, super-indies compete

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on the basis of their portfolio of creative resources and their strategies of acquiring production subsidiaries allows them to plug gaps, spread risks, diversify, renew and refresh their creative resources (Barney 1986; Teece 1980). Since sustaining diversity within the portfolio of subsidiaries hinges on facilitation rather than suppression of creative leadership, acquisitions based on the super-indie model of strategic complementarity are very unlikely to impact adversely on autonomy in content-making. Recognition of the need for a ‘hands off’ approach is reflected in the explicitly federalist structures and approaches adopted by many successful superindies such as All3Media and Tinopolis. Earlier work has likewise found a preference for decentralised structures amongst consolidated production companies and that synergies are rarely developed within content-making activities (Fernández-Quijada 2013). Indeed, our findings suggest that, for production companies that become subsumed within consolidated clusters of production companies or super-indies, this entails only positive implications for creative programme-making. Most acquired production companies point to the ways in which the ‘cushion’ of support provided by a parent company facilitates programme development, experimentation and generally frees producers up to take greater creative risks in content-making (Cooke, Interview, London, June 2018; Goldberg, Interview, London, November 2018; Hincks Interview, London, July 2018). The view that, in a business environment characterised by uncertainty, producers benefit from the financial security of having a well-resourced parent and that this helps with making more ambitious content is widely corroborated by producers. Vertically Integrated Broadcaster Producers Another key category of buyer is the broadcaster (e.g. ITV or Sky) who may wish to expand their operations vertically into programme-making. The strategic benefits of vertical integration between production and dissemination within the television industry are well-recognised (Doyle 2013; Esser 2016: Lotz 2017). Broadcasters may well acquire production subsidiaries in order to have an assured supply of appealing content. Acquiring greater control over the supply of necessary upstream inputs— i.e. in this case content—is the classic strategic logic underlying strategies of vertical integration (Martin 2002). Reducing uncertainties and other transaction costs is another benefit (Lipsey and Chrystal 2007). However,

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vertical expansion has also been motivated by a desire on the part of broadcasters, at a time of growing competition for audiences and advertising within the content service provision stage of the supply chain, to diversify and sustain profits. As the competitive threat posed by SVoD services grows, investment in production offers broadcasters a way of diversifying profits. For adviser Thomas Dey, diversification into production by broadcasters functions as a way of ‘future-proofing the businesses. It’s saying: we’re not quite sure how people are going to consume content in the future, but what we are sure is they’re going to watch content’ (Dey, Interview, Edinburgh/LA, June 2018). However, as Director of Television at ITV Kevin Lygo points out, broadcasters may invest in production subsidiaries not only to diversify the business by harnessing and exploiting IPRs and not only to ensure they have a steady supply of the sort of attractive content that they need but also to keep that content away from rivals (Lygo, Interview, London, December 2018). Ownership of production subsidiaries is not merely about control over content but also creative talent. The strategic importance of UK talent, whether on or behind the screen is exemplified each year in awards at the Oscars and Golden Globes and has long been acknowledged as a major factor in the success of British creative industries. Some evidence of poaching of UK talent following a recent period of co-productions between the UK PSBs and the SVoD platforms, alluded to by Greg Brenman, Managing Director of Drama Republic as a ‘talent squeeze’ that has become ‘crazy’ (Brenman, cited in Parker 2019: 6), reflects ongoing intensification of competitive pressures between broadcasters and cashrich SVoD service providers. While poaching talent may be less costly than buying up production companies, hiring solo performers does involve risk and acquiring companies brings the advantage of accrued ownership of intellectual property assets. As discussed in Chapter 5, the reasons why individual broadcasters decide to acquire programme-making subsidiaries vary and in some cases are less to do with feeding their own channels than with synergies with other in-house businesses such as distribution. However, with regard to implications for content-making, when a production company is acquired by a broadcaster then one possible outcome is that this might sometimes result in a greater flow of commissions or orders for new productions from the parent company to the subsidiary. In practice, such a pattern can be found in some but by no means all cases where UK broadcasters have invested in or acquired production subsidiaries. For example, Mammoth

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Screen, maker of dramas including Poldark (BBC), Parade’s End (BBC) and Endeavour (ITV), is one of several television production companies acquired by ITV, the oldest and largest commercial television network in the UK and, and as discussed in Chapter 4, commissions from ITV have featured strongly in the Mammoth’s first run output over recent years (see Fig. 4.6 above). So acquisitions based on the vertically integrated broadcaster model of strategic complementarity may result in some inflection within contentmaking at the production subsidiary towards the needs of the parent. The requirements of the acquiring broadcaster may to some extent become inscribed within production planning. But, according to our interviewees, far from acting as a curtailment, a greater flow of commissions is generally viewed as something that strengthens and enhances a production company’s content-making activities and capabilities. To the extent that vertical integration brings a steadier and more predictable production slate, this favours the production company allowing it to plan and use its production resources, equipment, technicians and personnel more efficiently (Doyle 2013: 50). Distribution Plus Production Often the strategic rationale underlying acquisitions of independent television production companies is to combine production with distribution activities. The parent company’s ownership strategy is based not on complementarity between production and broadcasting but on complementarity between production and distribution. Complementarity with distribution exists because once a television programme has been made, with all the attendant costs and risks involved, it generally makes sense to exploit the value that resides in that content property by distributing it not just to a single broadcaster or streaming service but through as many channels and to as many differing audience segments or ‘windows’ as possible (Doyle 2016). As Jes Wilkins of Firecracker observes, production subsidiaries are liable to benefit from the presence of an in-house distribution business because of the high margins that secondary sales of programming can yield (Wilkins, Interview, London, June 2018). At the same time, from the perspective of a parent company that owns substantial in-house distribution activities, cross-ownership of a range of IPR-generating production companies is attractive because it helps ensure a large and perpetually

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self-renewing supply of content for the content distribution business to exploit. For super-indies such as Endemol Shine and All3Media that own substantial in-house distribution activities, this inherent logic has been the driver behind many acquisitions of production companies. In the words of Simon Cox of Endemol Shine International ‘you need a large amount of content to drive your distribution machine’ (Cox, Interview, London, May 2018). But does the distribution arm ever seek to shape or influence content-making? Doug Wood, Head of Research at Endemol Shine, describes the relationship between head office and the production subsidiaries thus: The purpose of the group set-up functions are to be relatively unobtrusive. They’re not to interfere with the day-to-day creativity that happens at the rock face…. It’s a way of liberating the creatives from that day-to-day admin and saying ‘we’ll support you, we’ll always look after the probably less interesting bits of your business and let you focus on the nuts and bolts of the creative process.’ Obviously there’s a certain expectation that they will be creative and produce those popular shows that we can then go on to sell either as a finished tape or format! (Wood, Interview, London, May 2018)

One way in which the ‘production plus distribution’ model of strategic complementarity might result in implications for content-making at the production subsidiary is through the distribution business providing knowledge to the production subsidiary. Our findings suggest that being part of a larger group often brings valuable information to the production subsidiary about what sort of content is in development across the industry and market intelligence about what is in demand across the globe. Simon Cox at Endemol Shine International suggests that production subsidiaries benefit substantially from their relationships with the in-house distribution arm through ‘the intel they get … the noise they get’ about ‘what’s needed’ (Cox, Interview, London, May 2018). As Tim Hincks and others explain, consolidated production groups such as Endemol Shine operate as networks across which intelligence and information is conveyed and ‘a place to share’ ideas about what has worked in other markets (Hincks, Interview, London, July 2018). As other research has found, consolidated production groups, through enabling ‘everyone working a little more closely together’, result in useful opportunities for ‘creative cross-fertilisation’ (Van Keulen et al. 2020).

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So production companies that become subsumed within sizeable, wellconnected companies are likely to benefit from insights about new creative ideas in development and emerging areas of market demand (Manners, Interview, London, October 2018). A further way in which access to knowledge is likely to benefit a production subsidiary is in negotiation of fees. The insights that an experienced parent company can impart to a production subsidiary, for example, about pricing, can help in negotiating a fair deal for content (Goldberg, Interview, London, November 2018). Such input may indirectly affect the content strategies of subsidiaries but, as Susan Cooke points out, processes of information sharing within consolidated production groups which yield insights, for example, about what sort of material is currently in popular demand, are emblematic of the ‘mutually beneficial’ nature of the relationships between parents and subsidiaries (Cooke, Interview, London, June 2018) and unlikely to have any adverse implications for content-making. Transnational Groups Another key category of buyer of UK production companies is the transnational media group which may wish to extend or strengthen its toehold in the UK. Much M&A activity in the UK production sector has been driven by acquisitive transnational companies such as Warner Brothers and Sony Pictures Television that already have extensive interests across television content-making and/or delivery and/or distribution, some of which are UK-based but the majority of which are international. As processes of globalisation diminish national boundaries, transnational television groups that own a portfolio of IPR-generating production subsidiaries in a range of territories are well placed to generate value by feeding content across the group and into international distribution businesses that, through strategies of windowing, make sure to ‘get their products to the maximum (preferably global) geographic audience’ (Christophers 2012: 142). The formation of transnational groups fosters ‘transnational creative pipelines, knowledge flows and interdependencies’ within and across television production conglomerates (Van Keulen et al. 2020). For international players, UK-based production companies have proven especially attractive as targets for acquisition because of the favourable position enjoyed by UK producers on rights ownership thanks to the terms of trade.

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Is the content produced by indies affected when they are taken over by international groups? Few if any of our interviewees take the view that the nationality of a parent company is likely to have any significant bearing on the performance or the content made by an acquired television production subsidiary. As Richard McKerrow, Creative Director of Love Productions puts it, ‘it totally depends on your owners… you could have a crap British owners and a brilliant American owner’ (McKerrow, Interview, London, December 2018). As discussed earlier, the culture of the acquiring company and its preferences in relation to centralising versus allowing a more federalised structure are much more likely to be germane factors in whether parental ownership has implications for content-making than nationality per se. The influential Bartlett and Ghoshal model (1989) in management theory suggests that, in choosing between different approaches towards management of international operations—whether multidomestic (decentralised), global (centralised) or international cooperation (somewhere in between)—parent companies usually have to find a balance between two competing pressures: local responsiveness versus global integration. When it comes to television production, the evidence of our research suggests that most international parent companies prefer to take a multi-domestic or decentralised approach in which the importance of preserving the operational autonomy of subsidiaries and allowing them to serve local market needs is respected. This finding accords with other recent research (Fernández-Quijada 2013; Van Keulen et al. 2020) and a predisposition towards federalism reflects awareness of the general importance of knowledge of the local television ecology, audiences and such resources as relationships with commissioning editors as potential sources of advantage in the television industry (Oba and Chan-Olmsted 2007). Given that all UK production businesses, irrespective of ownership, tend to rely on and benefit from programme commissions from domestic UK public service broadcasters and from ownership of accompanying IPRs, it is not surprising that international parent companies generally prefer to take an approach which allows subsidiaries the latitude needed to serve local markets. Acquisitions of independent production companies by international television groups are generally predicated on the expectation that this will allow the intellectual property assets of the production subsidiary to be exploited more fully. For M&A specialist Thomas Dey, the ‘number one’ advantage of a takeover is the opportunity it provides to increase the

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value of the production subsidiary’s content through extending access to it across additional territories (Dey, Interview, Edinburgh/LA, June 2018). As Sachin Dosani explains, the strategic model is to: buy independent companies who are effectively feeding content to the centre and then the centre is selling all around the world. That [creates]… a ‘2 plus 2 makes 5’. (Dosani, Interview, London, January 2019)

Should acquisitions executed in accordance with this model of strategic complementarity encourage a perception that content is being made purely to be ‘sucked into’ US-based or international distribution then potentially this could erode motivation on the part of the creative leaders of a production subsidiary (Turton, Interview, London, July 2018). But in practice a prior track record in making content which is suited to international exploitation is typically the primary reason why a production company will be targeted for acquisition in the first place by an international group. Our findings suggest that although takeover often boosts post-acquisition levels of international distribution for a production company’s content outputs, the general impetus which exists within many ambitious programme-making companies for production decisions to be inflected by ambitions to sell finished wares across a number of international territories is one that exists irrespective of whether or not that production company has been acquired by an international parent and is therefore unaffected by ownership. All the interviewees we spoke with that have experience of working at the production subsidiaries of international and US-based groups were adamant that acquisition has not led to any unwelcome interference by owners in content decision-making. In short, the findings of our investigation, based both on findings from interviews with executives across a range of London-based television production companies plus analysis of their content, suggest that changes in corporate configuration have little or no adverse effect on creative decision-making and content. This accords with some earlier research which has cast doubt over suppositions that consolidation in the production sector impacts negatively on content (Fernández-Quijada 2013). Some owners are more predisposed than others to centralise, share or control aspects of the functioning of subsidiaries but, amongst those parent companies that are inclined towards pursuing coordination gains, integration is usually confined to back-office and support activities and,

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importantly, it does not effect content-making. While the nature of the strategic fit between acquiring parent and subsidiary may influence how a production company understands its sense of mission as a supplier of content, there is scant evidence that acquisition results in any immediate or medium-term detrimental implications for content-making or content. On the contrary, being part of a large group evidently brings a number of advantages in respect of content-making. For example, producers that are owned by bigger groups, as opposed to indies, are likely to benefit from superior market knowledge and this may be reflected in the profile of the content that they create. The problem of informational asymmetries and of an unlevel playing field between stand-alone indies versus the subsidiaries of multinational and/or vertically integrated media groups is a theme we return to in Chapter 8 below which focuses on policy implications.

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CHAPTER 7

Cultural Production, Indigeneity and Globalisation

Having looked at how ownership configuration affects content, this chapter provides a broader analysis of the economic and socio-cultural significance of changing market conditions surrounding the production of television content. As discussed in Chapter 6, the relationship between ownership and content is complex, partly because the sort of content that a company makes may be shaped by a range of factors other than ownership. Prominent amongst these is market demand or producers’ perceptions about what commissioning broadcasters and other television service providers are interested in at present. In this chapter, we focus on the role of market demand or commissioning as a powerful force shaping production of television content. The growing influence of globalised and multinational content service providers and their role both as a force for disjunction in commissioning practices and also as an agent of continuity in advancing processes of transnationalisation of television are considered. Taking account of the differing experiences of producers of differing genres of content, we examine the challenges that surround distinguishing local from global productions. A key question we consider is to what extent notions of ‘national’ content and concerns about potential marginalisation of indigenous cultures remain valid in an increasingly globalised environment for television content. In the final section of this chapter, we consider how © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 G. Doyle et al., Television Production in Transition, Palgrave Global Media Policy and Business, https://doi.org/10.1007/978-3-030-63215-1_7

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the rise of SVoD services and other transnational suppliers of content are affecting production financing and the dynamics of rights markets in ways that have significant implications for the future economic sustainability of independent television content producers.

He Who Pays the Piper Calls the Tune In challenging the idea that ownership of production companies is a major influence over content, many of the production executives that we interviewed point out that what is desired in the marketplace is actually a major determinant that shapes content. As highlighted in seminal work by Alan Peacock on the application of public choice theory to the arts, demand in the cultural industries is routinely shaped by input from the state as well as the market (Peacock 1993). This is true in the marketplace in television content where, since some of the key buyers are public service broadcasters (PSBs) adhering to their public remits, demand is not governed purely by commercial forces. Nonetheless, a cause-and-effect relationship exists between what buyers—in this case commissioners of content—want and what producers make. For Andrew Critchley, Managing Director of Red Productions which was taken over by Studio Canal in 2013, ‘creative decisions are not affected by being part of the group. They’re affected by awareness of the market and what else is going on’ (Critchley, Interview, Edinburgh/ Salford, January 2019). Nick Catliff, CEO of Lion TV which was acquired by All3Media, affirms that it is buyers that exert a significant influence over what sort of content gets made by television production companies: If you’re a production company your owner doesn’t influence what you make very much, even if you’re an integrated company. It’s the buyer – they’re the ones who influence it… All that matters is the buyer. What they’re trying to work out is what their audience wants. (Catliff, Interview, London, June 2018)

What buyers want is crucial and, for most of the lifetime of the UK production sector, domestic PSBs were typically the only buyers interested in commissioning content from UK-based producers. An imbalance between the small number of UK buyers and the large number of producers eager to supply them with content has meant that historically, and especially prior to the imposition of terms of trade, broadcasters

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have had the upper hand in negotiations with producers about prices and about ownership of secondary IPRs (Doyle and Paterson 2008). Since the Communications Act 2003, closer oversight by UK regulator Ofcom has encouraged a more transparent and fairer approach to apportionment of rights ownership in commissioning transactions between PSB and independent producers but the situation remains that commissioning editors at UK broadcast organisations wield enormous power over what sort of UK content producers make. According to James Penny of Mammoth Productions: Some broadcasters… would say that some of the groups have too much power and I think that’s complete nonsense. It is still unquestionably the case that the broadcaster still holds the leverage. They’re the ones who say ‘yes’ or ‘no’ to a programme going on air and everything flows from that. All the distribution, all the turnover to a production company rests on the ability of one entity to say ‘yes’ or ‘no’ to a programme. You know it doesn’t matter whether you’re independent or Sony Pictures, you still need a ‘yes’. And for so long as they’ve got the power to say ‘yes’ or ‘no’, you will doff your cap and bend the knee and do whatever the hell it takes. And that ensures competition [between producers] and a thriving market. (Penny, Interview, London, January 2019)

In recent years the number of buyers has expanded considerably and SVoDs such as Netflix have become more significant investors in content. According to the 2019 PACT UK Television Production Survey, of the £2.3bn of total primary commissioning revenue that the UK television production sector received in 2018, some £280 m (12%) came from SVoD services and this category is growing (Oliver and Ohlbaum 2019: 24). The changing television landscape has encouraged a ‘mixed economy’ approach on the part of production companies where commissions and revenues are sought from a range of sources, as described by Jane Featherstone of new production start-up Sister Pictures: if you’re going to be an independent producer, I suspected that the public service involvement in commissioning here would go down and tragically it has but that the opportunities would be broader and that I shouldn’t tie myself to one broadcaster or one distribution arm because that would just limit the places I could take content and that we would be better able to negotiate deals but also really to put the content in its right creative home and take advantage of this market growth which is what’s proven to be the

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case and I’ve got a very mixed economy here. You try and keep it broad so that there’s always one [commission] that’s working hopefully. (Featherstone, Interview, London, April 2019)

Even so domestic public service broadcasters (PSBs) are still the largest customers for original television content made by UK independent production companies, accounting for a hefty £1.3bn (55%) of the sector’s commissioning revenues in 2018 (Ofcom 2015: 14; Oliver and Ohlbaum 2019: 16). It follows that the buying power of domestic broadcasters and, in turn, their concern to address the needs and interests of domestic audiences will be heavily inscribed in the sort of content made by UK-based independent production companies. The supposition that PSBs play an effective role in securing the creation and supply of content that truly reflects the interests and concerns of UK audiences, in all its diversity and including at regional levels, is seen by many as central to the raison d’être for organisations such as the BBC. Tony Hall recently described the BBC as ‘an engine of ideas, risk-taking and ambition that powers the whole of our creative industries. We are the leading incubator of the UK’s storytelling talent, and what we do to back British ideas and content beyond the mainstream helps define the success of the whole sector’ (Hall 2020). According to our findings many producers agree that, in an increasingly globalised television environment, a crucial stimulus to the continued production of British content is demand from PSB buyers. Most believe that domestic PSBs have a vital role to play in investing in British content-making and in supporting ‘that sense of British storytelling’ (Hincks, Interview, London, July 2018). Sir Peter Bazalgette, former Chairman of Endemol UK, which merged with the Shine Group to become Endemol Shine in 2015, and now Chairman of ITV, summarises the special importance of the role of PSB’s as follows: The real key to what you might call indigenous content – the real issue here in terms of public interest is do we have programmes that are about us, for us, made by us? That’s why you have PSBs…. What we do need to make sure is that we have lots of commissioning of shows that are about our country, that contribute to our culture and our national conversation, which is what you get with PSBs and, to be fair, you get a fair number of those programmes from Sky. And you even get a few from Netflix… (Bazalgette, Interview, London, April 2019)

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Non-scripted Factual and Entertainment Factual and entertainment production company Lion TV offers a useful example of the ‘mixed economy’ approach which is typical of many UKbased producers where, as part of the mix, there is a heavy reliance on commissions from domestic broadcasters, especially PSBs. Lion creates a number of shows that involve stories or narratives and subject-matters which are primarily UK-focused, including the Horrible Histories series based on the best-selling books by Terry Deary. Much of the company’s output is tailored towards the UK market and, in terms of distribution, has a territorial reach that involves initial transmission and repeats on domestic channels and catch-up platforms plus, in some cases, secondary transmissions on domestic UK cable channels. But in addition some of Lion TV’s output, such as historical programmes about Pompeii or the Roman Empire, is not UK-specific band and has a far more wide-ranging geographical focus and appeal. The dispersed nature of Lion TV’s output, with emphasis on both UKfocused and internationally appealing material can be seen in Fig. 7.1 which shows the company’s output throughout the 2007–2017 study period, plotting the relationship between the ‘story’ or narrative focus (on the horizontal or x-axis) and the market reach of each piece of content (y-axis). The stronger the UK-focus within the content the higher the positive value on the x-axis and, conversely, a negative value signifies a more international focus within Lion’s content. The y-axis depicts ‘reach’ or the extent to which programmes are sold to channels and platforms in differing international territories, with a low value signifying exposure to domestic audiences only. As Fig. 7.1 shows, Lion’s output is characterised by a clustering of British-focused storylines which achieve only limited reach outside the UK (in the lower right quadrant). At the same time, those elements of Lion’s output whose storylines are more globally oriented (i.e. at minus 3 on the x-axis) generally achieve more extensive international reach than material that is strongly UK-focused. In other words, material which has a strong UK flavour is usually confined in terms of reach whereas content which is less UK-specific tends to travel further. To an extent this is an intuitive, common-sense finding: local content appeals to local audiences and global content appeals to global audiences. However, it is worth noting that the analysis here suggests that while producing factual content whose subject matter and narrative focus is

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Fig. 7.1 Lion Television, story and reach

more global in flavour may improve its chances of achieving wide international reach, this is certainly not guaranteed. Much of Lion TV’s factual output whose ‘story’ or subject matter is international, as opposed to British, fares no better in international markets than UK-focused material. Even so, producers are well aware that selling content across international markets has the potential to vastly increase the profitability of a programme. Susan Cooke, former Head of Legal and Business Affairs at Lion, echoes Nick Catliff’s view about the importance and centrality of the UK commissions and acknowledges how a tension may exist between producing material for UK broadcasters versus international markets: You still need to get that UK commission normally. And increasingly, certainly on the factual side, [that] has become more UK focussed; very British in subject matter. And increasingly I have found that you go to All3 and say you’ve got this and they’re like “well … It’s okay, but it’s

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…British people on holiday or it’s British people in their gardens. It’s not got the sort of international feel”. (Cooke, Interview, London June 2018)

A tension between producing content that primarily fits with the needs of domestic commissioning broadcasters versus making content that is mainly intended to appeal to international markets is widely acknowledged. Production companies need to gain commissions from UK broadcasters but, in order to build their revenue streams, they also need to develop material that sells in international markets. According to Sachin Dosani who recently set up production company Wonderhood Studios with David Abraham, the best way to ensure that a new production company is ‘a financially secure business’ is to develop returning series and/or content that sells internationally (Dosani, Interview, London, January 2019). International sales are attractive because they bring high operating profit margins but, as alluded to by Jes Wilkins, who runs Firecracker, gaining a commission from a UK broadcaster is usually the main challenge in the first instance and one that is not always compatible with the aim of developing material for international distribution: ..what is selling well in the distribution market is not always a straightforward equation in terms of how you win a commission in the UK which is the hardest bit really. (Wilkins, Interview, London, June 2018)

Even so, many UK producers have achieved success in creating material that works well both for home-based and international buyers. This applies both to producers of non-scripted factual and entertainment content such as Lion TV, Firecracker and Love Productions and to producers of scripted (drama). For the former, the standard vehicle for export success is the ‘format’ in which global audiences are built up through production of national variations of the same basic show for differing specific national territories (Waisbord 2004). As noted by Chalaby, the exceptionally strong track record of the UK production sector in exporting formats is indicative of how Britain is playing its part in advancing processes of globalisation of media (Chalaby 2016). Usually the starting point for an international format is to produce a show that makes a hit with audiences in the domestic market but sometimes formats

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that travel will emerge even without an initial success in the home market, as Lion TV’s CEO Nick Catliff explains: the easiest way for a UK company to sell a show internationally is to create it in the UK, make it in the UK, it’s a hit, great, you’ve got a format, it’s on the BBC everyone wants to be on the BBC, you then sell it round the world. [For example] Cash Cab is a quiz show in a taxi. Marvellous show. We created that in the UK for ITV…We retained the rights because that was the deal. It flopped in the UK but Richard [Bradley] then very cleverly sold it in the States where … it did really well. (Catliff, Interview, London, June 2018)

Our research findings broadly support Chalaby’s analysis of the development of the global format industry in the 1990s which showed that programmes which are successes in their home territory and then succeed with local refinements in another market are apt to became a major influence across many territories because formats are ‘inherently transnational’ enabling ideas to cross boundaries and to be localised, adapting as they travel (Chalaby 2011: 95). Chalaby summarised this direction of travel by arguing that, for consolidated production groups, ‘the challenge is to make the local global—identifying local formats that have the potential to go around the world—and then make the global local by assessing the degree of adaptation a format needs in a specific market’ (Chalaby 2015: 112). Corroborating this argument, our research has found numerous instances of programmes initially developed by a production subsidiary for a specific local market then being developed into a format that percolates across the distribution footprint of the wider company. For example, talent competition format Big Bounce was initially developed by a German-based Endemol Shine production subsidiary and subsequently has been developed as a format that has sold in several countries, an example which, for Doug Wood, confirms the importance of local content-making as a pipeline for ideas for international formats (Wood, Interview, London, June 2018). For Wood, ‘domestic (i.e. individual to that country) production and creativity is a really important part of what we do… because it feeds the global picture as well’ (ibid.). Baking competition programme The Great British Bake Off provides another example of locally specific content serving as the starting point for development of a wider international franchise. Despite every appearance

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of being quintessentially British in terms of the set, location, recipes, etc. (Bradley 2016), the Bake Off format has successfully sold in a number of international territories. Richard McKerrow of Love Productions, owned by Sky, attests to how entertainment programming that appears to be steeped in the particular may in fact have universal appeal: Bake Off although it’s got a British cover, it’s sold in 30 territories. Baking is as old as the bible if not before and it’s done everywhere in the world. (McKerrow, Interview, London, January 2019)

Scripted Content When it comes to scripted content, the impetus to develop material that is suited both to domestic and international markets is even stronger because of the expense involved in drama production. It has long been recognised that making such content is generally both an expensive and a risky business (Caves 2000; De Vany 2004). This creates a natural incentive to try and spread costs and risks by extending consumption of the output to as many paying audiences as possible across multiple platforms and—of particular pertinence here—across multiple international territories (Doyle 2016b). In essence, high production costs have encouraged the internationalisation of television content (Chalaby 2012; Negrine and Papathanassopoulos 1991). Many of our interviewees acknowledge that because making scripted content requires ‘deep pockets’, development is usually predicated on expectations of international distribution (Hincks, Interview, London, July 2018). As Executive Producer at the Forge and former Head of Drama at Chanel 4 Beth Willis (Beth Willis, Interview, London, October 2018) put it, in drama production ‘everybody’s addressing a global audience’. The nature of market demand for television programmes has altered in recent years driven by the growing presence of SVoD services such as Netflix and Amazon Prime as major investors in original content. According to forecasts from BMO Capital Markets (cited in Spangler 2020), Netflix spent around $15bn on content on 2019 and the planned spend for 2020 is $17bn. As highlighted in earlier research (Doyle 2016a), the need for SVoDs to establish their reputations and build up subscriber levels across multiple territories has resulted in highly strategic investment both in locally specific and in wider ‘big statement’ content

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that has a strong appeal globally. Most UK programme-makers are optimistic about the emergence of SVoDs and other multi-territory television content service providers who, as well as adding to demand, are often willing to pay high fees in return for global rights. Strategic investment in content by SVoDs and other competing subscriber services has significantly boosted demand for one particular genre—high-end drama. As far as the makers of high-end drama are concerned, producing content that works for international audiences is nothing new and this is confirmed by the evidence of our research. Examination of content trends for the drama production companies included within our sample group—Hartswood, Kudos, Left Bank, Mammoth and Red Productions—between 2007 and 2017 reveals that all have been focused on making content that works for international as well as domestic markets throughout the whole study period. Analysis of how the output of these UK-based drama producers has performed over time suggests a consistently high degree of success in terms of international reach and that, albeit that being subsumed within an enlarged group can assist with distribution, wide international reach is usually a pre-existing condition for production companies that are acquired. In short, our findings confirm that the programming outputs of drama producers tend to have a strong international appeal and this holds true irrespective of ownership arrangements and is unaffected by takeover. Although some earlier research underlines the potential for globalised streaming services to impact negatively on national broadcasters (Davis and Zboralska 2017), the relationship between SVoDs, national television industries and national content is complex (Steemers 2016). The perceived impact on content of the growing commissioning power of SVoDs has met with an ambivalent response in some quarters. Directors UK, the professional association for UK-based screen directors, in evidence to a 2019 House of Lords Select Committee Inquiry into public service broadcasting, welcomed the ‘boom in content production with a growth of inward investment from international companies making content in the UK’ while at the same time lamenting the downside …that on-demand providers are frequently seeking to create content that appeals on a global scale …in order to get a good return on

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their investment they have to be appealing to the largest possible audience, i.e. a global audience… rather than specifically providing domestic content for domestic audiences. (Directors UK 2019: para. 16)

Concerns about the adverse implications of a re-balancing in commissioning power, perhaps unsurprisingly, are echoed by broadcasters. In a speech to the Royal Television Society in September 2018, the DirectorGeneral of the BBC Tony Hall warned that ‘British content’ could be swamped by high investments in new programmes being made by companies such as Amazon Prime and Netflix. He pointed out that while Netflix is reported to have spend up to £100 m on the first two series of The Crown, such high investments in UK-focused dramas constitute exceptions rather than the norm because most of time what SVoDs want to commission is not UK-specific but rather whatever can be relied upon to attract large global audiences (Hall 2020). But worries about the implications of SVoD commissioning on content are not confined to broadcasters alone. Doug Wood points out that: as a TV viewer what slightly worries me is not so much the international production conglomerates but the global subscription services like Netflix and Amazon that I think are producing global television, in probably a true sense - thinking about just what will work in every market and that is quite different. But, having said that, they also do commissions for remarkably creative interesting ideas. (Wood, Interview, London, June 2018)

Earlier studies have raised critical questions about the extent to which online streaming services are increasing demand for transnational and global content and are reshaping international flows of television content (Cunningham and Silver 2013; Steemers 2016). But as Chief Creative Officer at Sony Pictures Television International Wayne Garvie argues, the idea that SVoD services’ investment threatens the nationally specific nature of television content and, in turn, audience’s sense of national identity is wrong-minded because, in fact, SVoDs are generally keen to buy culturally specific content (Garvie, interview, London: May 2018). Streaming services of course want material that appeals internationally but they also particularly want culturally specific content that will help ‘open up’ new markets:

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the one thing all these (SVOD) services want, first of all, is they commission a piece of content to work in the domestic market which they’re commissioning it for. That’s their key thing. So when Netflix commissioned Marseille in France it was because they wanted to do something in France that’d work in France. If it works beyond France that’s just gravy. The key thing is, will it work in this domestic marketplace? So the notion that … Netflix, Apple, etc. are going to go and start commissioning a load of stuff from British companies that doesn’t have a British theme to it is slightly, you know… It’s just not going to happen because … you’re going to start by commissioning something that works in Britain. (Garvie, Interview, London, May 2018)

Is There Such a Thing as British Content? While the success of British programme producers in selling their wares in overseas markets is much lauded for its contribution to economic growth (Pact/3Vision 2019), it is also widely expected that the content which they make should reflect UK society and culture in all its diversity and should resist the encroachment of globalising influences. The worry that SVoD commissioning is diverting UK content-makers towards production of globalised or essentially non-British content raises a question about what exactly British content is? What makes content truly British? Over the years, cultural theorists and researchers working in the realm of screen studies have identified a range of tropes, images, symbols and concerns that typify British national content (Morley and Robins 2001; Higson 1995; 2001; 2006). Yet what ‘British’ content really means remains a vexed question. Recent work in media and cultural theory has emphasised the effects of globalisation on flows of content (Giddens 2003; Kuipers 2012; Thussu 2006) and, given that nations are no longer bounded spaces and the open nature of culture, the difficulties that attend notions of ‘national culture’. Even so, having television content that is home-grown is recognised as being of socio-cultural importance both generally (Hartley 2004) and in specific areas such as children’s programming (Steemers and D’Arma 2012). Politically, indigenous content is regarded as important to national culture, a fact attested to for example by the availability of fiscal incentives for production of British films (Street 2009) and likewise, as discussed in Chapter 6, the use of tax incentives for British high-end drama that passes a ‘cultural test’.

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For Peter Bazalgette, British television content is ‘programmes that are about us, for us, made by us’ (Bazalgette, Interview, London, April 2019). His definition involves three components, two of which overlap with key elements of the cultural test framework administered by the BFI to check whether content qualifies for tax breaks intended to incentivize the production of British material. The requirement for content to be ‘about us’ overlaps with the awarding of points, under the UK cultural test, based on the location, setting, subject matter and language of the content in question. That British programmes should be ‘made by us’ also overlaps with standard UK cultural test requirements which focus on the nationality of principal creative personnel and lead actors. However, Peter Bazalgette’s third requirement—that, in order to be British, programmes should be made ‘for us’ or for UK audiences—is not part of the official framework. And, albeit that commissioning by domestic broadcasters for domestic audiences has an important role to play in sustaining production of a range and diversity of indigenous content, whether a British-made production created for a globalised streaming service or created with international as opposed to local audiences in mind is somehow less ‘British’ is open to question. Drama series The Crown, made by one of our case study companies, drama producer Left Bank Pictures (which was acquired by Sony Pictures Television International in 2012) represents a good case in point. Focusing on the British monarchy—an institution as central to British culture as it is possible to be—this drama unquestionably passes all the requirements of the UK cultural test and in many ways conforms with the standard tropes associated with quintessentially British heritage dramas with their nostalgia and fantasies about Englishness (Caughie 2000; Higson 1995). But, according to Abbiss (2020), The Crown deserves analysis within what Monk (2001) terms a ‘post-heritage’ framework because of the way it innovates, goes beyond standard British costume dramas and breaks with previous representations of royalty in contemporary society. This drama was commissioned by Netflix in 2016 with a reported production cost of some £5 m per hour (Martinson 2016). On the question of whether being commissioned by Netflix diminishes the programme’s Britishness, Head of Business and Legal Affairs at Left Bank Pictures Charlie Goldberg suggests:

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[i]t doesn’t get more British than The Crown, I think. Simply because our content is now potentially available worldwide doesn’t mean it’s not British content anymore. (Goldberg, Interview, London, November 2018)

It is debatable whether the level of indigeneity of television content should be judged based on the outlets on which it is distributed. However, anxieties surrounding the commissioning of The Crown by Netflix reflect wider concerns about international buyers as gatekeepers to national content. Commissioners of television content, as prominent cultural intermediaries, ‘are responsible for what Pierre Bourdieu (1993) called the ‘production of belief’ (Kuipers 2012). Netflix’s move into commissioning British costume drama provided a high-profile demonstration of ‘the changing nature of the television industry where the BBC faces increasing competition from better resourced and more nimble international rivals’ (Martinson 2016). The then Head of BBC drama commissioning Danny Cohen acknowledged that the BBC wanted to make The Crown which is regarded as a ‘classic BBC subject’ but simply could not match the budget that Netflix offered (Burrell 2015). While earlier criticisms of transnational SVoD services’ commissioning have emphasised their extensive reliance on US-originated content (Hesmondhalgh 2019), another concern is that high-quality locally relevant non-US content may end up on subscriber-only platforms to which access for audiences with greatest cultural proximity is limited. ‘Looking for local’ has recently become the buzzword for ‘all the SVoD platforms’ according to Andrew Critchley of Red Productions (Critchley, Interview, Edinburgh/ Salford, January 2019). This is corroborated by Netflix which in written evidence to a House of Lords Committee inquiry into PSB affirmed that ‘[l]ocalised content is increasingly a priority to our service’ (Netflix 2019). That SVoDs want local content which can extend their appeal across multinational territories as part of their offering is not surprising (Lotz 2021). But this trend is not confined to SVoD services. Zai Bennett who is in charge of commissioning content across Sky’s channels confirms that ‘in scripted, localisation it seems, at the moment, is on the front foot and becoming more and more important’ (Bennett, Interview, Edinburgh/London: December 2018). Greater emphasis on localised material, while opening the door to criticisms of cultural appropriation, underlines the fact that local material often works well for both

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domestic and international audiences. As Doug Wood from Endemol Shine argues, when it comes to television content, ‘local’ and ‘global’ are by no means incompatible: thinking about Bron, The Bridge or Broadchurch or Black Mirror or Big Brother - things that work locally do work globally. Certainly, in our experience a great story is a great story, global or regional. One of our biggest hits of last year was Dark, the German drama for Netflix. That just surprised us all and Netflix loved it… So, I don’t think the two are incompatible really. I could be wrong. But I don’t know what a ‘global’ hit is? Is a global hit … to be good on Netflix? Is that a global hit? Or is that an American hit? (Wood, Interview, London, June 2018)

Irrespective of locale, storytelling that allows the universal to be drawn out from the local often has a wide appeal for television audiences (Mahon 2019). Andrew Critchley of Red Productions suggests that, whereas setting out deliberately to make content that has broad international appeal or that tries ‘to please too many’ can back-fire, ‘the projects of ours that have had the biggest impacts have been the most insular inwardlooking in a way, say Happy Valley, because people see and appreciate good work’ (Critchley, Interview, Edinburgh/ Salford, January 2019). His observation accords with Alexander Korda’s view, expressed in relation to feature film production in an interview back in 1933 that ‘[t]he greatest folly is to set out to try and suit everybody … The result will be a mongrel film which belongs to nobody’ (quoted in Puttnam and Watson 1997). Some forms of content that are ‘very British’ have a high appeal in international markets (Bennett, interview, Edinburgh/London: December 2018). Amongst the key successes of prominent UK drama producers including Hartswood, Left Bank and Red Productions are several programmes such as Sherlock or The Crown that involve exaggerated and highly stylised depictions of Britishness and which have sold well across global territories. Given it’s wide appeal it is not surprising that, as James Penny of Mammoth Screen argues, ‘there’s no dearth, nor is there a sign of a potential dearth, of so-called British content’ (Penny, Interview, London, January 2019). British drama, which is ‘increasingly produced to be exported and exportable in a global marketplace’ (Knox 2012: 43), is both fuelling and benefitting from increasing international demand for localised content.

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Home Versus International Markets Wayne Garvie of SPTVI argues that over recent years ‘audiences are moving towards two forms of content, which is either local content which they love because it talks about them and their culture’ or ‘premium’ content, in particular high-end drama such as Game of Thrones which, in contrast to earlier phases of perceived colonisation of screens by USoriginated content, is now typically ‘more complex difficult fare than the American networks offer’ (Garvie, Interview, London, May 2018). With the ever-growing presence of globalised streaming services as buyers of content, demand for premium material that works well for audiences in multiple territories has never been higher. The Chief Executive of Channel 4, Alex Mahon, in a speech to the Royal Television Society (RTS) Cambridge Convention in September 2019 suggested that, as power ebbs from domestic to transnational commissioners: …the direction of travel is not local, it’s all about scale, it’s about control.. to be the biggest…getting content to work trans-territory, scaling it right round the world with as little need to adapt it for each market as possible. (Mahon 2019)

Competition between rival SVoDs and other subscription services for premium fare has boosted demand for and inflated the costs involved in making high-end scripted content. The result is that production budgets for some television dramas are now comparable to those for independently made feature films. At the same time the fees available to drama producers from domestic commissioning broadcasters are generally far below the real costs involved in making expensive drama series. Therefore, just as with films, strategies that allow costs to be spread across international audiences are vital to recoupment of production expenses. According to Charlie Goldberg of drama producer Left Bank: The truth is that developing content for the domestic market …is very challenging at the moment because the licence fees … from our broadcasters have remained relatively stable but our costs have all soared… Creating content for the British market has become a lot harder than it used to be. I’m not saying that creating content for the international market is any easier because you’ve got a lot of competition out there. Simply put, if you’re looking to generate revenues you can’t produce

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parochial content which is not going to make it beyond the British Isles … you have to make content that will travel. (Goldberg, Interview, London, November 2018)

Jane Millichip of Sky Vision agrees that inflation in production costs has encouraged an orientation towards content that travels and an increased reliance on international sources of finance (Millichip, interview, London: December 2018). Earlier research has pointed to the role of international co-productions in facilitating sharing of risks and costs (Morawetz et al. 2007). Co-productions have become ‘the new normal’ for expensive television content, in particular high-end drama and documentary and, as Hilmes cautions, are not merely about co-financing but also involves reconciling or taking account of differing national audience tastes with potential for unhappy ‘collisions’ (Hilmes 2014). However, for Jane Millichip, whereas in the past co-productions were often associated with unwieldy and unsuccessful efforts to combine and reconcile differing cross-cultural requirements and interests, producers have become much more adept at crafting content that works for international markets: Production budgets and ambition have risen dramatically in the last five years but [domestic] license fees have not. So you need someone else to come in and help you pay for the damn show. You’re not going to make a cheap show anymore because it’s going to have to stand up against the ambition of the SVoDs. So …we need co-production again in the way that we needed co-production 20 years ago. And 20 years ago we got it wrong and we made nasty “Europuddings”….This time round we’re getting it right. This time round we’re making good content. We’re making content that is territorially relevant at the same time as it is internationally appealing (Millichip, Interview, London, December 2018)

The fact that financing and distribution strategies for expensive content are centred around international markets will naturally be reflected in production decisions. Simon Cox, Head of Acquisitions at distributor Endemol Shine International points out that a domestic commissioning broadcaster is usually the lead funder of a production project and therefore their vision and requirements will usually outweigh those of international funding partners, although that depends on the structure of the deal in question (Cox, Interview, London, May 2018). However, it remains that obtaining international finance is often an imperative and, as earlier research has suggested, one that inevitably impresses itself on

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‘creative decisions about which stories are selected for production, how narrative is scripted, casting and where production will be located’ (Doyle 2016a). Whereas one manifestation of the growing importance of international sources of financing is the rise of formats (Chalaby 2012), another is the emergence of television dramas that appear disconnected from any specific or distinct place of origin or where location is unspecified. For example, Sex Education which, according to Peter Bazalgette, is ‘a bloody good series’ commissioned by Netflix and shot mostly in Wales but ‘appears to be completely stateless’ (Bazalgette, Interview, London, April 2019). While the location may be muted in some productions, it remains that content which is firmly anchored in the local is often imbued with a wider appeal. Wayne Garvie of SPTVI, in emphasising the readiness of global audiences to embrace well-made British content, adds a reminder that, however much opportunities from SVoDs may inflect content towards international markets, the continued presence of domestic PSBs is an important bulwark supporting production of ‘truly British stuff’ which reflects the diverse cultures in the UK: I was in Mexico talking to the guy who runs Azteca, which is a Mexican channel, and he said to me, “I’m a Mexican Jew, why am I obsessed with The Crown?” And why is he obsessed with it? Because actually, it’s really well made etc. But there’s no show that’s more about Britain than The Crown. It’s shot through with British talent and British things and that … We’ve got this great ability to take our culture and our icons and put them around the world… I don’t really believe that British stories won’t find an audience around the world. And there is a place for the BBC and Channel 4 to still do truly British stuff that won’t necessarily export particularly well, although it’s always surprising to find out how well it does export. (Garvie, Interview, London, May 2018)

Many sorts of localised content are flourishing in international markets, not just British. For example, the success achieved by Danish television crime dramas over recent years has been widely documented and analysed (Bondebjerg and Redvall 2015). Similarly, the growing international popularity of Latin American telenovelas has received attention (Medina and Barron 2011) and, likewise, the practice of tailoring or adapting this material into differing local versions that match local interests in order to extend its international reach (Stijn et al. 2017). The upsurge in Korean cultural exports often referred to as the ‘Hallyu’ or Korean Wave which

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started around 1997 and has focused especially on regional neighbours China, Korea and Japan to some extent reinforces the idea that audience prefer material to which they experience closer ‘cultural proximity’ (Straubhaar 2007). The related concept of a ‘cultural discount’ was developed by media economists to describe how prices for television content suffer a reduction when traded across international borders because material produced and rooted within one culture tends to be less appealing to viewers in other markets (Hoskins and Mirus 1988). Historic viewing data bears out the assumption that audiences, while often very contented to watch imported programmes, tend to prefer national or home-grown content—programmes that are in their own language, rooted in their own cultures and that focus on issues, concerns and stories which are relevant to their own lives. After all, as Kuipers points out ‘in the 20th century, television replaced print media as the focal point of national imagined communities’ (2011: 541) and national storytelling. But the emergence of transnational services alongside national television channels in the twenty-first century has increased the sense that television is ‘simultaneously very national and very international’ (ibid.: 542). As globalised platforms have reshaped both the landscape of content provision and patterns of consumption, traditional assumptions about audience preferences and even audience understanding of what constitutes ‘local’ content seem increasingly open to question. The growing international success of diverse forms of indigenous content seems to offer support both for nationalist and globalist ideological claims (Conversi 2010). Contrary to the notion of discounts, alternative conceptions suggest that as cultural products circulate beyond their place of origin they take on, through adaptation, translation, etc., a new dynamic which adds to rather than detracts from their value (Lee and LiPuma 2002). Ongoing changes in viewing patterns suggest that, while the range of indigenous material that domestic PSB broadcasters commission is highly valued by viewers, they also enjoy watching what is supplied to them by SVoDs and other transnational subscription services—viewers continue to shift towards what on offer from online global video providers in preference to broadcast television (Ofcom 2019: 4). For one interviewee, it needs to be recognised that both domestic broadcasters and international streaming services have a place and a role to play in satisfying audience needs in the emerging digital television landscape:

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…We know that audiences like unusual grainy UK content that speaks to them and their lives and that feels indigenous… But that’s not to say there isn’t room for [SVoD services] … it’s not an either/or. People love Netflix, okay? …They do fantastic things and they also expose us to the types of content we would never get, such as Black American underbelly stuff that we would never get… We should absolutely embrace it …it does a completely different job. (Interviewee R4, March 2019)

A number of our interviewees refer to the ways that the rise of globalised platforms has encouraged changes in audience tastes and a growing appetite for locally specific material, much of which hails from countries other than the US. SVoD platforms such as Netflix have demonstrated how material that is very culturally specific, from dramas about drug cartels in Colombia to tales about the British monarchy, often has just as much appeal for international as local audiences. Producer Beth Willis underlines the point that contemporary tastes have become more cosmopolitan, thanks to the emergence of SVoD platforms, and this has helped the international circulation of more diverse forms of locally specific content: …I think everybody’s addressing a global audience … because drama is now a global thing. Ten years ago, if you had an American show it would feel like an acquisition. And if Americans were buying into a British show they’d say ‘Can we have 3 characters who are American, please?’ So you’d try and stitch different cultures together because audience awareness was not as global as it is now. A fully British show would feel ‘other’ to an American audience. But now it’s just Netflix, it’s just Amazon, people watching Spanish shows and you know French shows… (Beth Willis, Interview, London, October 2018)

Such trends may be viewed in some quarters as a welcome countervailing force to historic patterns of diffusion often characterised by largely unidirectional cross-border flows in audiovisual content emanating from the US outwards. But recent empirical research has shown how the model adopted by transnational SVoD services such as Netflix, while facilitating wider global availability for products emerging from small markets, still fundamentally favours US-originated content (Aguiar and Waldfogel 2018). As Esser has argued, while flows of content have become more multidirectional across the globe in recent years and have weakened ‘the

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long-lasting core-periphery structure of television program trade’, US media conglomerates continue to wield significant power and control over production and distribution (2016: 3608). Pertinent to the legitimisation of media policies in many countries whose continued purpose is to protect and foster domestic television production industries in the face of so-called globalising forces, it is worth noting that, notwithstanding evolving audience tastes and more diverse patterns of cross-border flows of content, all available data on international trade in audiovisual confirms the ongoing predominance and success of US-based suppliers when it comes to exports of film and television (WTO 2010; USITC 2018; EAO 2020).

IPRs and Windowing At a time of growing opportunities to export content into international markets, the issue of ownership of intellectual property rights (IPRs) has become more important than ever. Production companies that are UK-based have proven to be particularly attractive as targets for investment over recent years and, according to our findings, a key part of the explanation for this lies in the unique role played by UK public policy in encouraging high levels of ownership of rights for producers. As discussed in Chapter 3, historic policy interventions have proven effective in supporting the development of what is now recognised to be, comparatively speaking, an exceptionally commercially strong television production sector in the UK (Oliver and Ohlbaum 2019). In particular, the 2003 Communications Act which required UK regulator Ofcom to oversee new ‘terms of trade’ in commissioning negotiations between public service broadcasters and independent producers played a key role in promoting a more favourable business performance by the sector through enabling UK indies to retain a greater share of ownership in the rights to their productions (Doyle and Paterson 2008). According to our findings producers are very aware that ownership of rights and of an asset base have been pivotal to improvements in commercial performance across the sector over time and that rights ownership has enabled companies to raise capital, secure investment and foster businesses that are truly sustainable over the longer term. One executive summarised the connection between ownership of rights, commercial success and takeover succinctly:

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Once [UK production] companies were able to retain IP and create a company full of assets then they created something worth selling… Suddenly the company was a valuable property that people wanted to buy. (Goldberg, Interview, London, November 2018)

M&A advisors who have specialised in takeovers in the sector are in agreement that the instigation of terms of trade following the 2003 Communications Act has been the single most important force driving takeovers (Dosani, Interview, London, January 2019; Dey, Interview, Edinburgh/LA, February 2019). Producers such as Debbie Manners are clear that waves of takeovers starting around 2008 onwards have been propelled by an improved position for producers on rights ownership plus US companies ‘wanting to get in at an earlier stage in ownership of creative IP’ (Manners, Interview, London, November 2018). In short, rights ownership has been a key driver of corporate activity in the production sector with parent companies seeking to ‘move up the value chain so that [they] can keep as much of the value of the IP that has been created as possibl[e]’ (Hincks, Interview, London, July 2018). A commissioning environment in the UK that has supported independent producers’ ownership of content assets has clearly encouraged M&A activity but it has also helped to sustain and support the viability of small as well as large market incumbents (Ofcom 2015: 4). However, the growing presence of SVoDs and other transnational television services as buyers of content is changing the commissioning environment and gradually shifting audiences and financial power away from broadcasters. While additional demand is a boon for programme-makers, the emergence of buyers who need content on a multi-territory basis and who want exclusive access to it over extended time periods is problematic in respects to one very key issue—rights ownership. The terms of which television programmes are commissioning by buyers vary and can be very complex but, broadly speaking, the sort of deal on offer to producers who are commissioned to make original content will frequently conform with one or other of two basic sorts of models: ‘deficit financing’ or ‘cost plus’. Under the deficit financing approach, which originated in the US and in recent years has become commonplace in the UK, when a show is commissioned the producer is expected to fund a portion of the production budget (the ‘deficit’) but gets to retain the potentially valuable residual rights for later exploitation following first transmission (Litman 1998: 140). By contrast, the cost plus

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system which was commonplace in the UK up until the terms of trade and which still remains prevalent elsewhere across Europe and beyond is one in which the buyer—typically a domestic broadcaster—tends to pay all production costs plus a small fee, so that producers are not exposed to any financial risk, but in return the commissioning body also retains the majority of secondary rights (Doyle and Paterson 2008). Whichever of these two models is prevalent—which, in turn, determines apportionment of rights ownership—can have very significant implications for the business performance and economic viability of firms engaged in producing and supplying television content. Making programmes for SVoD services generally takes place on a costplus basis which means that producers receive production fees but are left with few residual rights. One of the noted features of SVoD commissioning is the willingness of services such as Netflix to pay high fees to producers in exchange for exclusive ownership of rights over a lengthy period of time for attractive ‘big statement’ content’ that helps to raise their profile, particularly high-end drama. But, although the commissioning terms on offer from SVoDs may be attractive on account of high fees, they do not offer the protections related to ownership of secondary rights that UK producers currently enjoy under domestic PSB commissioning models. The problem is that, without ownership of IPRs, producers are not well placed to build their businesses through processes of systematic exploitation of secondary rights, sometimes referred to as ‘windowing’ (Doyle 2016a). Windowing refers to the process of segmenting audiences by platform and territory and then arranging the release sequence for an item of content to differing segments in such as way as maximises overall returns (August et al. 2012; Owen and Wildman 1992; Shay 2015; Ulin 2014). The spread of globalised and digital distribution platforms has made it much more challenging than in the past to organise the planned roll-out of content across differing windows into a pattern that builds audiences while avoiding overlaps and potential cannibalisation of revenues (Kuhr 2008; Napoli 2011). As audiences increasingly migrate towards digital platforms and outlets whose footprints are diffuse and boundaries are porous, modelling the range and optimal sequencing of distributive outlets is more complex. Even so the principles of windowing continue to guide suppliers of television content as they seek to capture, exploit and maximise the value in their assets (Doyle 2016a).

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It is widely acknowledged that sale of first window rights to an SVoD service is apt to reduce the opportunities available to content suppliers to exploit any residual value in their intellectual property assets in subsequent release windows. An additional drawback is that SVoDs are reluctant to share data about their audiences which adds to the difficulty producers face in trying to plan optimal widowing strategies. Whether, on balance, the sort of commissioning terms on offer from SVoDs are advantageous or not depends on circumstances. According to Saul Venit (cited in Doyle 2016a: 15), COO of leading UK independent drama production and distribution company Lookout Point ‘this is the big question really at the moment in the industry—if you are creating programming for these big SVoD platforms, are you doing it in a way where those platforms end up owning the entire content? [Secondary exploitation] become[s] a bit less important there when you are just dealing with one client who wants to own the world’. Rather than prioritising ownership and control over rights just for the sake of it, it is worth remembering that the business model for television production companies is to make content that audiences want to watch and then maximise revenues from licencing that content. So sometimes a commissioning deal that involves imparting all the rights to one outlet— say Netflix—may, because the fee is so high, result in a greater overall return for the producer than the alternative strategy of selling that same content ‘from territory to territory’ across a protracted series of windows (Goldberg, Interview, London, November 2018). A commission from an SVoD service involves ‘front loading revenue recognition as opposed to the old model’ of exploitation via sequential windowing (Turton, Interview, London, July 2018). Conversely, sometimes a commissioning deal that allows the producer to retain ownership of all of the secondary rights may, because the wider appeal of the content in question is so limited, yield a relatively poor return for the producer compared with an up-front cost plus fee. As Jes Wilkins of Firecracker points out: If you are making something that is so British, whether politically or what have you, you can have 100 percent of the rights and its still worth nothing. (Wilkins, Interview, London, June 2018)

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So, commissions from SVoDs entail both potential advantages and disadvantages and the correct windowing strategy for any programme always depends on the specific features of that content and the wider market context. Nonetheless, as the television environment evolves and as commissioning power shifts from broadcasters to globalised SVoD platforms who are ‘pushing us back into the world [of the] cost plus model’ (Goldberg, Interview, London, November 2018), many producers are wary about the implications for the model of rights ownership which has underpinned an exceptional level of business success for the UK independent production sector from 2004 onwards. The lessons provided by the history of the sector suggest that programme-makers are right to be skeptical about being enticed by large up-front fees back into an approach towards production financing which inevitably will erode their ability to develop businesses predicated on exploitation of self-owned portfolios of intellectual property assets.

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CHAPTER 8

Conclusions and Implications for Policy

Throughout this book we have examined the effects of recent transformations in patterns of ownership in the television industry on UK-based production companies and on their business prospects and content. In disentangling the connections between ownership configuration, strategy, performance, content decision-making and output, our aim has been to build understanding, at a time on ongoing restructurings across the wider global television industry, of the challenges involved in developing a local production sector that is both economically successful and independent. In this chapter, we draw together the findings of our analysis and consider the implications for policy. To what extent are the market and technological forces that have propelled recent changes in ownership across the television industry threatening the sustainability of domestically based independent production companies? What are the economic and cultural implications? How, if at all, does public policy need to change?

Changing Corporate Ownership Configurations As discussed in Chapter 7, expansion in digital distribution platforms, increasingly globalised trade in television, and growth of subscription video on demand (SVoD) services have created unprecedented opportunities for television content creators. But the ability of indigenous © The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 G. Doyle et al., Television Production in Transition, Palgrave Global Media Policy and Business, https://doi.org/10.1007/978-3-030-63215-1_8

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production companies to harness such opportunities is dependent on being able to adjust successfully to unfolding market conditions. A key aim of our research has been to build understanding of how changes in technology have altered the corporate ownership configurations which conduce to economic success in the production industry. Therefore in our research we focused centrally on the relationship between, on the one hand, expansion, scale and differing sorts of corporate configurations (whether owned by a multinational parent company; vertically integrated or not) and, on the other, economic performance and capacity to engage in business strategies that sustain growth in a digital multiplatform distribution environment. As set out in Chapters 4 and 5, our findings suggest that recent transformations in ownership in the production sector have been mainly propelled by three potential sources of strategic and economic advantage that arise from expansion and consolidation: namely, scale, vertical structure and international reach. Many takeovers of UK independent companies have been driven by the aspirations of ambitious production entities whose aim is to become consolidated super-indies that can harness and exploit advantages of scale. In a number of cases the defining motive for acquisition is vertical integration, for example, combining content-making with complementary downstream broadcasting or distribution activities. Takeovers have also been driven by acquisitive major transnational (often US-based) media and television conglomerates whose strategic aim is to extend their global reach. These findings, while partly in line with what earlier theorisation has suggested are the economic gains from enlargement and vertical expansion (Jacquemin and de Jong 1977), also add to knowledge specifically in the realm of industrial organisation as it applies to the television industry. Our results show that when it comes to the television production sector corporate ownership configurations can and do have a major and powerfully determining effect on numerous aspects of economic and business performance. Although the exact cause-and-effect relationship between changes in configuration and performance are complex and vary by individual case, what is clear is that, broadly, production companies that are taken over enjoy a range of benefits including advantages of scale, improved market access, increased bargaining power and informational advantages. We conclude that ownership configuration is an influential determinant of performance in the production sector partly because, in an era of globalised and intensified competition amongst television

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providers, the advantages conferred by greater scale and by a vertically expanded structure have become more pivotal to success in the key activities performed by television production companies: pitching, developing and making programmes and subsequently maximising exploitation of associated content rights. In addition, the continued growth of globalised distribution platforms has intensified the advantages for production companies of having a configuration that extends reach across a multiplicity of international territories. To the extent that takeover and consolidation within enlarged corporate entities enhances the business performance of television production companies, it follows that companies which forego such benefits by remaining independent are at something of a competitive disadvantage. Evidence that transnational companies enjoy competitive advantages (Pesalj 2011) and that the subsidiaries of multinationals with strong vertical linkages tend to exhibit greater resilience than their local independent counterfactuals has been found across other sectors too (Alfaro and Chen 2012). Yet the experience of the UK production sector suggests that some television production companies prefer to remain as stand-alone players. What difference does it make, as far as audiences and the wider public are concerned, whether or not a production company is independent? Do takeovers by large and often non-domestic media conglomerates of independent producers matter? Does the concept of ‘national’ television content still have any relevance in the digital era? An important objective of our research has been to examine how changes in corporate configuration affect creative decision-making and content. Despite emergent threats to the paradigm of globalisation which has been predominant since the 1980s (Iosifidis and Flew 2020), a good deal of influential work in media and cultural theory over recent decades has emphasised how processes of globalisation pose an impossible challenge for such notions as state sovereignty and ‘national’ culture (Giddens 2003; Kuipers 2012; Thussu 2006). At the same time, research in the tradition of media political economy has rightly raised concerns about the rise of large transnational media organisations and related implications for diversity, pluralism and market power (Bagdikian 2014; Herman and McChesney 1997; Hesmondhalgh 2019; Tunstall and Palmer 1991). Much earlier academic research is predicated on the assumption that production of cultural content, including television content, will be shaped and influenced by differing ownership arrangements and national settings (Croteau and Hoynes 2014; Hesmondhalgh

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2019) and, following on from this, that ownership of industries devoted to cultural production is a matter of concern for public policy within nationally bounded states (Harvey 2015). In addition to concerns raised by scholars and some policy-makers, the generally critical tenor of press coverage surrounding takeovers of UK-based independent producers, with its narratives of ‘victimhood’ at the hands on foreign predators (Sweney 2014), points to an enduring and widely held belief that certain forms of custodianship of businesses that involve creation of cultural outputs are likely to run contrary to societal interests. While earlier theorisation points to a strongly assumed association between corporate ownership and content (Doyle 2002; Freedman 2008; Garnham 1990; McChesney 2008; Tunstall and Palmer 1991), research that actually tests the connections between ownership and content empirically is surprisingly scarce. Therefore, the findings of our empirical investigation into the relationship between, on the one hand, expansion, scale and differing sorts of corporate configurations (whether owned by a multinational parent company; vertically integrated or not) and, on the other, the sort of content that production companies make, as set out in Chapter 6, by investigating a neglected dimension represent an important and original contribution to research-based knowledge. A key finding—that may well run against conventional wisdom—is this: when independent television production companies are taken over, a change of control does not automatically bring about changes in the sort of content that the company is making (Doyle and Barr 2019). When the content made by production companies is coded and analysed, both individually and by group, over extended time periods according to such key attributes as its ‘Britishness’, its ratings and popularity, awards received and levels of critical acclaim, we found no evidence that takeover results in any disruption or other significant or sustained effects on content. While immediate effects are negligible, it is worth acknowledging that the ways in which differing corporate ownership arrangements might filter through and impress themselves on the sort of content that a production company is making are varied and could in some cases take time to unfold. For example, as we found in our study, changes in corporate ownership configuration may, in some but not all cases, result in improved market knowledge which, in turn and over time, is apt to influence the company’s approach to content decision-making. Increased accountability to a parent company following takeover might, in some cases but not all,

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result in a redirection of creative energies towards achieving high financial returns. As Tim Hincks, former Group President of Endemol Shine and now CEO of Expectation Entertainment put it ‘a shareholder will of course look at the numbers and look at the performance. But the leap from that to “are we making the right shows?” is quite a big leap’ (Hincks, London, Interview, July 2018). Takeover often brings an improved position for the production company enabling it to finance more ambitious and creative ideas for content. So the relationship between corporate ownership and content outputs is complex and somewhat multi-layered. According to the testimony we gathered from industry practitioners and financial experts, being bought up can have both positive and negative effects for a television production company. But in most cases there are few if any direct or immediate implications for content. If content is relatively unaffected by changes in ownership, this begs a question. Do we still need independent producers? What are the grounds for having a policy regime that gives special support to independent producers? Promoting and preserving the existence of a television production sector that is independent and indigenous has been a long-standing aspiration for public policy in the UK and in many other countries. Consequently, recent waves of consolidation of ownership have triggered concerns about the ability of the independent production sector to flourish in an increasingly globalised and competitive digital environment for television (Doyle and Paterson 2008; Campelli 2015). Throughout the remaining sections of this chapter, and focusing on the UK as an example, we ask do we still need television production companies that are independent in a digital world and if so why? How effective are current policies that are intended to underpin independent production? And, looking ahead, what role can and should public policy play in supporting the sustainability of an independent sector?

Do We Need TV Production Companies that Are Independent? The term ‘independent’ is open to differing interpretations. In the context of media, independence might be taken to refer to freedom of speech, or freedom from state control or freedom from market forces. Independence is often associated with an entity’s freedom from interference or persecution by entrenched institutions, in particular the state (Bennett and Strange 2014). What is meant by an ‘independent’

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television producer has a very specific meaning in the context of our study—it means one that it not cross-owned by a broadcaster. The term ‘independent television producer’ acquired legal significance in the UK when the 1990 Broadcasting Act introduced compulsory access quotas for transmission of ‘independently’ made programmes on PSB channels. What is meant by an ‘independent’, under UK law, is one that was not part of nor allied to a UK broadcaster.1 Likewise, independent producers are defined under the auspices of EU legislation (AVMS Directive 2018/1808/EC) for the purposes of ensuring compliance with compulsory quotas contained in the European Broadcasting Directive (CEC 2018). As discussed in Chapter 3, the need for a definition of independents and the use of public policy interventions in the UK to support their development harks back to a period before the 1980s when television was dominated by a handful of broadcasters who made all their own programmes in-house. Promoting and bringing into existence production companies that were separate from the all-powerful broadcasters was seen as a desirable goal for public policy both on cultural and economic grounds. The cultural case stemmed from a desire to promote diversity and pluralism as reflected in the ‘let a thousand flowers bloom; let a thousand voices be heard’ philosophy which prompted the setting up Channel 4 as a ‘publisher-broadcaster’, i.e. one which was required to commission all of its programmes from outside suppliers instead of making them inhouse, in 1982 (Channel 4, 1985: 6). The economic case for promoting indies was predicated on the perceived need for greater competition in the television industry as a spur to cost-efficiency. So the notion that we need producers who are independent has long been driven by a wish to promote diversity and competition within the television industry. The Peacock enquiry (Peacock 1986), which called for greater diversity and competition, paved the way for compulsory access quotas for independents on PSB channels which, in turn, significantly expanded demand for programme ideas developed by diverse emergent independent companies following the UK 1990 Broadcasting Act

1 In line with the Broadcasting (Independent Productions) Order 1991 (as amended), an independent producer is: (i) not employed by a broadcaster; (ii) does not have a shareholding greater than 25% in a UK broadcaster; or (iii) in which no single UK broadcaster has a shareholding greater than 25% or any two or more UK broadcasters have an aggregate shareholding greater than 50%.

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(Birt 2002). Circumstances in the UK independent sector have changed dramatically since the early 1990s and what was then a ‘cottage industry’ has transformed into a powerhouse of global television production in respect of its largest players (Oliver and Ohlbaum 2014). Yet the idea that we need an independent sector is still solidly supported in the UK and this viewpoint reflects both cultural and economic concerns. A review of policies for the independent production sector carried out by the UK regulator Ofcom in 2015 re-affirmed that the guiding objectives which shape governance of this sector and which have historically justified such measures as compulsory access quotas are: ‘- to promote cultural diversity and to open up the production system to new energies and voices; - to stimulate the growth of small and medium sized enterprises (SMEs), promoting creativity and fostering new talent; and - to tackle vertical integration within the UK programme supply market’ (DCMS, 2014 cited in Ofcom 2015: 1)

According to evidence we gathered from senior executives across the UK television industry, there is still wide support for the idea that Britain needs to have production companies that are independent in the terms discussed. The view expressed by Jes Wilkins of Firecracker (Wilkins, London, Interview, June 2018) that independent producers add to the diversity of the UK sector which, in turn, enriches its creativity is widely shared. For most if not all, the existence of independent producers is essential in fostering competition as well as creativity (Cooke, London, Interview, July 2018). Ed Coulthard of Blast! (Coulthard, Interview, London, January 2019) argues that there is something special about the ‘independent model’ which promotes individuality and originality in programme-making and means that broadcasters benefit from being able to ‘tap into those different streams and get the different flavours that they need’ to supply audiences with a range and diversity of content. If levels of vertical integration and control over production by domestic broadcasters are excessive then ideas may become stifled because ‘people just get demoralised and you get caught up in the politics of creative management within large organisations’ (ibid.). In essence, indies are needed to promote a diversity of creative ideas as Jane Turton, CEO of All3Media explains:

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it’s good to have as much choice as possible and you get choice where you have multiple people from different types of backgrounds developing programmes. You’ve got in-house PSB; you’ve got external independents. Yeah, of course it’s good, it’s richer. It’s more varied (Turton, Interview, London, July 2018)

Indies are also needed to promote competition. Despite the growing importance of SVoDs as commissioners of television content, buying in the UK’s programme supply market is still heavily dominated by the main PSB terrestrial broadcasters—the BBC, ITV and C4 (Oliver and Ohlbaum 2019). Therefore sustaining production companies that are separate from broadcasters is important in promoting competition and cost-efficiency. For indies, the imperative of financial survival is everpresent and accordingly, for Sachin Dosani (Interview, London, January 2019), ‘independents will always try that much harder, they hustle that much more and are … likely to come up with the new big thing’. As Sue Vertue of Hartswood puts it, independents ‘have to be lean’ (Vertue, Interview, London, January 2019). According to Jane Featherstone, ‘the entrepreneurial spirit that underlies the good [independent companies] is incredibly valuable in keeping the industry healthy and honest and sane actually’ (Featherstone, Interview, London, April 2019). So there is a strong economic case for supporting the market presence of independents. As Mark Oliver explains, having independent producers is important because: … it stops broadcasters trying to block out production by trying to take [the] production [sector’s] margin and put it back into broadcasting as they used to do. [It avoids] … too much buyer power… but also too much corporate, conglomerate power. It’s a safety valve that makes the rest of the market honest. (Oliver, Interview, London, April 2019)

The consensus view across the UK television industry that independent production still needs to be supported is one that accords with the conclusions offered by the most recent review of the production sector carried out by Ofcom in 2015. The main reasons identified both by the regulator and by industry for wanting to preserve indies reaffirm what earlier theorisation has highlighted as the chief concerns for media policymaking—on one hand, content and its potential political, creative and

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cultural significance and, on the other, the economic value and importance of media industries (Freedman 2008; Hesmondhalgh 2019). It is widely felt that promoting a healthy independent sector contributes to diversity of content, in the interests of national and local audiences, and to economic growth. Not only does the success of the UK television production sector contribute directly to employment and output but also exports of programmes stimulate economic growth directly and indirectly, as explained by Peter Bazalgette: Where we export British programmes, trade will follow. We all know that. Where you export culture, that’s why we have international students come and work here. Then trade follows from it. All of these things are very important to Britain plc. (Bazalgette, Interview, London, April 2019)

When it comes to judging how effective the current policy regime is in fulfilling its intended objectives, it is widely acknowledged that, as well as achieving exceptional economic growth and success over recent years, the UK production sector has, despite consolidation, managed to remain diverse and that it ‘continues to host a range of company sizes, mostly SMEs’ (Oliver and Ohlbaum 2018: 13). To date, diversity and competition have been preserved. However, as the landscape of media provision evolves, the way in which independent producers are presently defined is becoming increasingly debatable.

Is the Definition of Independents Still Valid? Ofcom’s latest regulatory review of the UK independent television production industry (Ofcom 2015) recognised that this is an area which has undergone significant change, including consolidation and the acquisition of some of Britain’s most successful production companies by global media players. In the face such developments an obvious question is whether the current approach towards defining independent producers, which focuses only on whether or not they are in the same group of companies as a UK broadcaster, goes far enough in directing protection towards those production entities which most deserve and need public support?

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The current definition is designed to deter vertical cross-ownership between UK broadcasters and producers. Since, despite the competitive threat posed by the rise of SVoD services (Jenner 2018), buyer concentration amongst UK broadcasters remains a feature of the UK programme supply market, the objective of deterring vertical monopolisation by curbing cross-ownership between powerful broadcasters and production companies also remains valid, in the interests of both avoiding market dominance and promoting plurality. As Doug Wood, Director of Research and Insight at Endemol Shine puts it: I think ITV and the BBC have proved that if you [only] commission things in-house then it can sometimes make for a derivative approach. Things are stifled in terms of new ideas coming through. It’s always good to pull in ideas from a wide variety of sources … (Wood, Interview, London, June 2018)

However, the problem is that nowadays vertical integration is not the only form of consolidated ownership. Successive surveys of the UK television production sector, for example, the annual census published by PACT which reports on the characteristics and evolution of the production landscape, have identified major shifts in ownership characterised by increasing consolidation and the growing controlling presence of nondomestic parent groups. The growing scale and power of consolidated production groups and super-indies has encouraged some to argue that the way in which policy interventions are currently framed needs to change. For example, Adam Crozier, CEO of broadcaster ITV from 2010 to 2017, argued that ‘[i]n the UK we’re massively over-regulated and it is distorting the market in a number of different ways. Some of the programme suppliers we deal with are every bit as big and powerful as ITV’ (Crozier, cited in Brown 2010). One illustration of the way that the sector has consolidated is that, when it comes to the money that UK PSBs spend commissioning external producers every year, the proportion of that expenditure which is accounted for by just a handful of major suppliers has steadily increased over time. According to industry data, the slice of external commissioning revenues accounted for by the largest ten television production companies grew from 19% in 1993 to 45% in 2003 and to 66% in 2014 (Mediatique estimates, Broadcast, Televisual, Pact cited in Ofcom 2015: 18). Many of the very large production companies that predominate in

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domestic commissioning also enjoy substantial cross-ownership of downstream content distribution activities, in many cases involving multiple international territories around the globe. The current definition of independent producers means that larger production companies—so-called super-indies and hyper indies—and also production companies that are owned by US media groups qualify for and enjoy the protection of the regulatory regime. Is this fair? The acquisition of leading British production companies by global media players and their ongoing eligibility for independent status has attracted criticism. For example, Presence (2017: 258) has argued that processes of consolidation have resulted in an independent television sector ‘which now more closely resembles the film industry with an ever-decreasing number of smaller producers struggling to survive in an industry dominated by “independents” that are in fact subsidiaries of major multinational corporations’. An especially prominent critic was David Abraham, former CEO of Channel 4 who in a speech at the Edinburgh TV Festival in 2014 warned that consolidation and takeovers of indigenous and independent television production companies by US or other foreign multinationals were liable to be detrimental to content, for example, by stifling creativity (Abraham 2014). Our research findings suggest that criticisms that foreign takeovers impact adversely on creativity and content are misplaced. Nonetheless, it is widely understood that the basis for supporting an independent production sector centres around promoting the interests of domestic audiences and of the domestic creative economy. So even if foreign takeovers have little or no short-term effect on content, high levels of non-domestic might trigger other sorts of concerns about indigenous industrial development. As Peter Bazalgette points out: In one sense it doesn’t matter who owns them as long as they’re still cleverly and creatively driven to produce great content. [But] if all your production companies were owned by foreign companies you’d have to say, “What’s wrong with British entrepreneurialism?”, wouldn’t you? (Bazalgette, Interview, London, April 2019)

The fact that the current definition of independent producers, while curbing domestic broadcasters, fails to impose any constraints over acquisitions of UK production companies by overseas media groups, attracted critical comment during a meeting of the House of Commons Culture

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Media & Sport Committee in October 2014. The purpose of the meeting was to make a minor amendment to the Broadcasting (Independent Productions) Order 1991 to remove provisions around so-called ‘connected’ persons that might disqualify companies owned by non-UK broadcasters from satisfying the test of being an independent producer (Parliament 2014). Labour MP Susan Elan Jones (cited in Hansard 2014) raised the point that: In a way, British [television] is a victim of its own success… Some of our largest independent companies have been scooped up by media giants… If the order is accepted in total, it will send out the message that we are comfortable with increasing global vertical integration and the narrowing of media plurality.

However, the amendment was voted through and, in his response to Jones, the then Conservative Minister for Culture and Digital Economy Ed Vaizey dismissed concerns about plurality and the integrity of local production while emphasising the economic advantages, in terms of jobs and potential wealth creation, of inward investment (Hansard 2014). For Ed Vaizey (cited in Hansard 2014), foreign investment in UK television production companies was something to be welcomed rather than condemned: What does it mean to be British? I take the implied challenge… on the ownership of British companies … In all seriousness, we are an open economy and we attract a lot of foreign investment and it is worth remembering that that brings jobs and opportunities to this country.

Earlier academic research has raised concern about how acquisitive transnational corporations have reshaped media systems (McChesney 2008) including in the television production sector (Esser 2016; Presence 2017). At the same time, however, economic theory has pointed to the competitive advantages that accrue through multinational expansion (Dunning and Lundan 2008) and benefits for the local economy brought about by foreign direct inward investment (Driffield and Munday 2000). Ed Vaizey’s response exemplifies how, fuelled by increased awareness of the potential for positive spillover effects in such areas as knowledge and employment (Görg and Strobl 2001), attitudes amongst politicians in the

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UK as elsewhere towards inward foreign investment have become increasingly positive in recent decades with many countries vying to introduce incentives or liberalise policies that might help attract inward investment from multinationals. Vaizey’s argument about the importance of inward investment in creating opportunities for UK-based production companies to develop and flourish was also widely echoed in responses we gathered from interviewees across the UK television industry. Many producers readily acknowledge that takeovers by international media groups have helped the performance of individual firms that are taken over and have boosted the performance of the UK independent sector as a whole. Debbie Manners of Ingenious Media, former CEO of indie Hat Trick Productions and also former MD of indie Keo Films, emphasised how inward investment benefits both the multinational parent companies and the local UK subsidiary, to the benefit of local audiences: I think that argument that the Americans are benefiting from the terms of trade… is pointless and it doesn’t address the issue. That’s not the problem. The big thing that the UK should be thinking about is what’s good for the UK and the UK audience and the UK economy. And the Americans coming in and buying those production companies and therefore getting in at an earlier stage on the IP has been really good for the British viewer because something like Downton Abbey probably wouldn’t have happened without [US] backing for instance. So it is a two-way street, you know. And they are still in the UK. They’re still British companies. They’re still providing all sorts of benefit to the UK economy. (Manners, Interview, London, November 2018).

Setting aside questions around foreign ownership, another potential criticism of the way that UK law defines independent producers is that it fails to take any account of the size of an independent company. Rather than directing support solely towards smaller entities, the current definition allows large production companies and consolidated so-called super-indies also to benefit from such special support measures as the compulsory 25% access quotas and the terms of trade (ToT). The latter ‘are still protected by the quota and the ToT, whereas many argue that their scale gives them significant negotiating strength with commissioners with no need of policy protection’ (Mediatique 2015: 48). At its last review of the sector in 2015, Ofcom considered the potential for complete deregulation—for scrapping restraints on vertical cross-ownership—but concluded that this would be undesirable since a

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protective regulatory regime is still supporting diversity and competition. At the same time, the possibility of tightening up the current definition by introducing a size cap for qualifying indies (e.g. £50 m in annual revenues) was considered (Ofcom 2015: 35). This approach would help ensure that only SME producers would qualify but would also entail a number of problems, such as weakening the incentives for companies to grow and the ‘risk of companies gaming the system and changing company structures in order to try to continue to qualify’ (ibid.: 36). The regulator concluded that, while matters should be kept open to reconsideration, there was no need at present to adjust the definition of indies nor to reform any of the main support measures for the sector.

Sustaining Renewal Ofcom’s conclusion that ‘the current regulatory regime has largely succeeded in meeting the objectives set for it’ (Ofcom 2015: 27) appears justified in that, despite ongoing transformations in the television landscape, an abundance of evidence exists which confirms that levels of diversity and new market entry within the UK independent production sector remain high (Ofcom 2019; Oliver and Ohlbaum 2019). Even if the current framework disregards issues around scale, non-domestic ownership and the rise of SVoDs, it nonetheless has succeeded in its main mission of sustaining plurality and competition. Evidence that, despite consolidation of ownership over the last 10–15 years, the UK production sector continues to support a diverse array of incumbents, including ‘a long tail of smaller indies’ (Mediatique 2015: 4), is abundant. For example, one recent study confirmed that smaller companies make up the majority of the sector; those making between £1 m and £10 m per year account for 66 per cent of the sector— this has been broadly stable since 2011, contributing to the sector’s diversity. There are also approximately 250 producers making less than £1 m per year. (Oliver and Ohlbaum. 2018: 2)

Underlying and supporting such diversity within the sector is an ongoing process of new company formation and new market entry. Television production is characterised by low barriers to entry and, as a number of studies over the years have confirmed, levels of new market entry in

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this sector are very high (Ofcom 2015; Mediatique 2015). According to Oliver and Ohlbaum (2018: 15), newly set up production companies accounted for around 30% of the market (for UK PSB’s external commissions) every year in the period from 2008 to 2017. It is clear that the UK production sector is continuously renewing itself. As pointed out by pioneering economist Joseph Schumpeter, processes of renewal in which new firms enter the market, at times threatening to displace incumbents, are key drivers of innovation and of wider economic growth (Schumpeter 1942). New firm formation is generally seen as a spur to and beneficial for economic development (Van Stel et al. 2005). So the high rate at which, in the UK independent production sector, new firms are setting themselves up and struggling to achieve viability represents a positive marker both in relation to levels of entrepreneurship in the sector and as a force for economic growth. While the attractiveness of market entry for new independent production firms is no doubt partly attributable to the sector’s appeal as what has been sometimes been termed a ‘lifestyle industry’ (Darlow 2004: 541), it also reflects awareness of the availability of financial rewards. As suggested by former specialist financial adviser and co-founder of independent production company Wonderhood Sachin Dosani, awareness of the potential to make good money at the same time as creating programmes operates as a powerful incentive: There are certainly strong incentives for people setting up their own independent because it’s an industry where you can create some real value and amazing content. So creatively and financially the ingredients work. (Dosani, Interview, London, January 2019).

For some new entrants coming into the sector an important motivating factor is the opportunity to build a production company that attracts interest from potential buyers. As the research findings presented in Chapter 6 show, takeover is regarded as a desirable prospect by many producers because as well as bringing a range of advantages to the business including greater financial security it usually also results in founding owners receiving substantial windfalls. According to Hat Trick CEO and founder Jimmy Mulville, new independent companies are often set up by individuals:

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in an age group of between mid-40’s to mid-50’s who are thinking “I’ve done my time, working for larger organisations. I’m very experienced. I’ve access to commissioning editors. I know how to make a programme. I’m an executive producer. I want to express myself across the globe and I want to become an owner. I want to have an equity share in what I do so I can reap the benefits of that” (Mulville, Interview London, February 2019).

Renewal is seen as ‘vital’ to the growth and success of the television production sector (ibid.). Constant replenishment ensures a flow of new creative ideas and promotes competition. Therefore sustaining a business environment where there are strong financial incentives for new production companies to set up is extremely beneficial, as All3Media CEO Jane Turton explains: The incentive models are an important part of all of this … It’s all about the green shoots and the younger companies and newer companies coming through. They have to be helped. (Turton, Interview, London, July 2018)

The economic theory of contestable markets suggests that just the threat of entry into the sector by new firms is usually enough to keep existing firms behaving competitively (Baumol et al. 1982). In line with this idea, our findings suggest that contestability operates as a powerful spur in the television production sector. In an industry where fads and fashions come and go, the possibility of being usurped by new creative start-ups can serve to galvanise and motivate existing producers. For James Penny of ITV-owned drama production company Mammoth: The barriers to entry are not that high and, while some companies disappear or wither, you’re constantly kept on your feet. And that is the result of unleashing a true competitive arena… We’ve been going 12-13 years and one of our biggest fears has been being seen to be complacent or flaccid and the ones to be overturned and undermined… Anything older than 5 years in this land suddenly you become ‘old hat’. It’s deeply irritating but it’s just the way it is. We took full advantage of that when we started. And we can see competitors who are trying to do the same to us and that’s just the way it is. (Penny, Interview, London, January 2019)

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It is widely acknowledged that new start-ups help to promote diversity, creativity and competition. But is there a point at which the presence of too many competing suppliers operates against the interests of production companies? For Charlie Goldberg of Leftbank Films (Goldberg, Interview, London, November 2018) while the intention behind UK public policy was to create a healthy and robust production sector with a diverse mix of players including independent companies: …where it starts to become an issue, is when you have too many. And I think we probably see too many now. I think you have too many drama producers competing for the same slots. That spreads them very thin and that’s going to mean that some will thrive and some won’t. (Goldberg, Interview, London, November 2018)

The ‘let a thousand flowers bloom’ philosophy that underpinned the setting up of Channel 4 in 1982, while successful in helping to counter the dominance of broadcasters’ in-house production departments in UK programme-making, also promoted such a multiplicity of market entrants that this diminished the negotiating leverage of individual production companies and prevented them from properly managing and exploiting their intellectual property assets and building their businesses (Doyle and Paterson 2008). As discussed in Chapter 3, the introduction of regulatory oversight of terms of business between broadcasters and independent producers went a long way towards correcting this problem. Even so, and despite ensuing consolidation of ownership, the formation of many eagerly competing small new indies every year contributes to ongoing fragmentation and a situation where, aside from the leading players in the sector, relatively few are well placed to make the most of ever-increasing opportunities for programming assets to be exploited across new digital platforms and multiple international territories. Renewal is pivotal in bringing fresh ideas into programme-making. Large production companies rely on being able to replenish their creativity and sustain their globally leading positions by acquiring smaller indies (Thoday, Interview, London, April 2019). Renewal is also important in promoting business innovation. Earlier research has pointed to the role played by risk takers and creative individuals who start new businesses in driving entrepreneurship and innovation (Hébert and Link 1988). For most new start-ups in the production sector, ambitions to innovate are likely to be centred around creative ideas for content-making

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(Lai, Interview, Brussels, May 2019). But, as exemplified by the launch of TRX Media in 2015—a pioneering online television rights distribution platform set up by David Frank who earlier had founded (before selling) leading UK independent production company RDF Media— some start-ups have brought an innovative approach to business models (Frank, Interview, London, April 2019). TRX (The Rights Exchange), which provides buyers and sellers with a means to connect and complete licensing deals for content that otherwise might be difficult to find and trade in, represents a bold inception of a new sort of intermediary in a ramifying market. Overall, it is clear that public policies which have helped indies to flourish commercially have also encouraged sustained renewal, growth and innovation. In practice as in theory (Schumpeter 1942), processes of new market entry, competitive threats to existing players and wider economic advancement are closely intertwined. As Sachin Dosani argues: If everything was owned by big groups then we’re back to a world where there isn’t so much innovation or radical thinking. It’s a bit more sleepy. [Advancement is built on] those people that are willing to be daring, you know… that will jump out and set up something else that will really revolutionise the industry. (Dosani, Interview, London, January 2019)

Digital Transformations and the Challenges for Policy As our study has shown, technological and market changes in the television industry have transformed the corporate configurations which conduce to economic success in the programme-making sector and encouraged many takeovers of independent production companies, often by transnational media groups. The appeal of owning one or several successful IPR-generating production companies has increased massively thanks to growth in digital distribution which has fuelled a proliferation in channels, outlets and platforms for television content, including rapidly growing SVoD services, bringing with it increased international demand for attractive content. UK producers have been especially well placed to capitalise on market developments because of a history of public policy interventions that is unique to the UK (Lee 2018; Potter 2008).

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While the wave of takeovers and consolidation which followed on from improved business performance has sparked concern in some quarters (Chalaby 2010; Campelli 2015; Lee 2018), the UK sector’s transformation from a cottage industry back in the 1990s to one that is now thriving in terms of international sales of finished programmes and formats and its growing contribution to the economy are widely fêted as a ‘success story’ for British creative industries (Pact/3Vision 2019: 2). Our findings suggest that, while those forces which have propelled acquisitions have naturally resulted in increasing levels of consolidation and non-domestic ownership, implications for content are negligible and these forces pose little or no threat to the impetus amongst up-and-coming producers to set up new domestically based independent production companies. It may be argued that the danger posed by restructurings in ownership is ‘not that British content will disappear…[but rather that British talent] …will work for companies owned by US or other foreign interests, on projects chosen by non-British commissioners and aimed at global audiences, and that the lion’s share of the economic benefits of their work will accrue to major international players’ (Thompson 2018: 21). The possibility that, as has long been the case with feature film, television production may increasingly be dominated by a handful of US-based major players is certainly real. As ownership continues to consolidate and with the rise of US-owned SVoD services, concerns about US dominance of screen industries and associated potential for national production sectors in the UK and across Europe to be relegated to a subsidiary supply role (Esser 2016: Jarvie 1992; Puttnam and Watson 1997; Richeri 1986), which have a long history, are prone to re-ignition. As discussed in Chapter 7, despite recent trends of growth in exports from, for example, the UK, China, Brazil, Turkey and Scandinavian countries (Eichner and Mikos 2016; Pact/3Vision 2019; Yong Jin 2007) which are increasing levels of plurality, international trade in audiovisual content is still dominated by US suppliers (EAO 2020: 60; USITC 2018). Even so, as a counterweight to concerns that acquisitions of production companies may fuel US-led cultural imperialism, most of our interviewees, whether at acquired or stand-alone indie firms, are clear that the creative projects which they choose and their approaches to content-making are largely unaffected by the nationality of their owner. While one or two interviewees express anxiety about the possible effects of foreign ownership on the ‘the central DNA’ of subsidiaries (John Willis, Interview, London, June 2018), most producers take the view that

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inward investment by US and other international groups, while leaving content unchanged, has brought positive spillover effects and contributed to a healthy and vigorous domestic television production ecology. The predominant view is that the current UK policy regime has brought about not only an economically successful sector but also one that is diverse and continuously renewing itself. If the mission of facilitating a vigorous and self-sustaining UK independent production sector has been achieved, what if any challenges for future policy-making are posed by recent transformations in ownership? Amongst our interviewees there was a wide consensus that, despite consolidation, the current UK regulatory regime is generally fit for purpose. This viewpoint is buttressed by awareness that ‘the production sector remains characterised by high levels of new market entry’ (Ofcom 2015: 19) which means the system remains open to new voices and creative renewal. Earlier studies have suggested that ‘the widespread existence of small companies in the cultural industries’ is at least partly explained by the relatively inexpensive nature of conception and production of some forms of cultural works which facilitates the continued presence of smaller players, even as large corporations become more dominant (Hesmondhalgh 2019: 91). Our evidence confirms that television production is indeed a sector in which barriers to entry are low and, as many interviewees were keen to point out, one in which, thanks to public policy, the financial incentives for new production companies to set up are strong. As John McVay, Director of UK trade association PACT argues, UK public interventions have helped to ‘craft a sector that is easy to get into and easy to fail in…the Darwinian nature of it [being] absolutely fundamental’ (McVay, Interview, London, March 2019). However, compared with the subsidiaries of international media groups and super-indies, many smaller independent production companies struggle for financial survival (Lee 2018: 43). The plight of such companies was highlighted in a Creative Industries Council Report in 2014 which implied that more should be done to support the position of domestic indies that want to achieve growth without being taken over: Often, companies that achieve early success are acquired by a large international player, rather than building sustainable businesses in the UK. While

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we want the UK to continue to be an attractive country for inward investment, it is vital that those companies that want to grow organically have the means to do so. (Create UK 2014: 6).

As discussed in Chapters 4 and 5, our research indicates that television production companies that are taken over and subsumed with enlarged corporate entities enjoy a range of advantages that are liable to enhance their business performance relative to companies that remain as small or stand-alone operations. Since an unlevel playing field exists, one important challenge for future research is to build understanding of how, if at all, indigenous and independent production companies can potentially replicate the advantages, discussed above, that are conferred by being taken over by multinational and/or vertically integrated media groups while avoiding takeover themselves. It is notable that many of the initiatives instigated by the UK trade association PACT in recent years focus on helping producers in areas where SMEs are likely to struggle such as in accessing finance and sharing market knowledge (McVay, Interview, London, April 2019). Given that public policy has been a major catalyst for the commercial success of the UK production sector, it is unsurprising that our interviewees were keen to emphasise the importance of sustaining a protective regulatory regime, in particular for small companies entering the sector and striving to build their businesses. The general weight of the evidence we collected suggests that two measures are particularly important in sustaining growth and renewal: first, the commissioning strategies of public service broadcasters and, second, the so-called terms of trade which have helped producers own and exploit IPRs in their output. Domestic public service broadcasters (PSBs) are still the largest customers for original television content made by UK independent production companies, despite growing investment in content by SVoDs over recent years (Ofcom 2015: 14; Oliver and Ohlbaum 2019). The UK has a unique PSB system comprising the BBC, ITV, Channel 4 and Channel 5, which operate throughout the UK, and STV, S4C and UTV (owned by ITV), which operate in Scotland, Wales and Northern Ireland, respectively. Current regulations require that PSB channels must

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allocate a minimum proportion of their transmission time to productions made by independent producers.2 Formal requirements to support national and regional production are written into the BBC’s Operating License agreement (Ofcom 2017: 2–3). An abundance of academic and industry research highlights how, encouraged by public policy, PSBs are major investors in original creative content to the benefit of audiences at national, regional and local levels (Harvey 2020; Ofcom 2019; Oliver and Ohlbaum 2019; Steemers 2017). As discussed in Chapter 7, the growth strategies of global streaming services have involved investment in some high-profile locally relevant television content such as The Crown, but it remains the case that UK PSBs are responsible for commissioning and producing a far greater range and depth of original programming across all genres that reflect and resonate with the concerns, past and present, of UK audiences, including minorities (Freedman and Goblot 2018; Ofcom 2019). UK PSBs focus a significant proportion of their expenditure on commissioning content from smaller producers which is important from the point of view of renewal within the production sector. The BBC focuses more of its external spend on smaller producers than other PSBs (Oliver and Ohlbaum 2019: 17). Not surprisingly then, it is widely agreed by UK producers and broadcasters that, as part of the infrastructure of public support for independent producers, PSBs such as the BBC have an ongoing and important role to play. In line with earlier research which has flagged up the significance of PSBs as gatekeepers to the development of local creative talent (Boyle 2018) the consensus amongst our interviewees is that, through the everyday commissioning decisions that they make, UK PSBs function as important catalysts in nurturing indigenous productions and in fostering the development and renewal of the UK independent television production sector. Media policy-making in the UK and elsewhere has long accorded PSBs special responsibilities that include boosting local content creation industries (Picard and Siciliani 2013). Some might argue that a focus on domestic PSBs is out of step with the needs of an increasingly globalised era and that digital transformations necessitate a review of the scale and scope of PSB provision (Weeds 2013). However, the evidence we gathered strongly affirms an ongoing and very wide consensus of support

2 Communications Act 2003, section 277.

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for Ofcom’s assessment that, through commissioning programmes which reflect local culture and communities, PSBs occupy a pivotal role as part of the ecosystem underpinning the success of the UK independent production sector (Ofcom 2015). The second measure widely seen as being particularly important in sustaining growth and renewal in the sector is the regulatory framework governing terms of business between commissioning broadcasters and independent producers.3 The so-called terms of trade intervention, introduced in 2003, has been highly effective in enabling UK indies to retain a greater share of ownership in the rights to their productions thus greatly improving their business performance. According to Thomas Dey, introducing regulatory changes that enabled producers to own and exploit their IPRs was a particularly ‘smart move’ because, coinciding as it did with technological and other shifts in market demand, it paved the way to: this perfect scenario where suddenly these companies which really up until that point have been lifestyle-created companies …suddenly becomes an industry. (Dey, Interview, Edinburgh/LA, June 2018)

The fact that independent producers in the UK can potentially achieve high commercial returns is in large measure attributable to changes in public policy brought about through the Communications Act 2003. Amongst the television executives we interviewed, the instrumental role played by the current regulatory framework in incentivising new start-ups and therefore in promoting renewal and growth is strongly recognised. In the words of Charlie Goldberg (Goldberg, Interview, London, November 2018) ‘we’ve had a sector that’s profited off the back of government legislation for sure’. While higher levels of rights ownership have undoubtedly fuelled takeovers and consolidation (Campelli 2015), they also continue to incentivize new entrants and rights ownership remains a key driver of business growth. Consequently, the vast majority of our interviewees agree that ‘if we ever got rid of the terms of trade… it would be a fundamental mistake’ (Garvie, Interview, London, May 2018). Susan Cooke, former Director of Legal and Business Affairs at Lion Television agrees that removing 3 Communications Act 2003, section 285.

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the terms of trade, which ‘help foster creativity and competition’ and which ‘work tremendously well’ to promote the business performance of independent producers, would be a step backwards (Cooke, Interview, London, July 2018). As Jane Turton of All3Media argues, there are many small independent production companies providing diversity and indigeneity who rely on the protection afforded by terms of trade to retain ownership of rights and to build their businesses: I think the producer is the best person to exploit the rights. They get them. They understand them. They created them. And they’re very good at being commercial. But we need to have the space to do it in and some protection around those terms of trade. (Turton, Interview, London, July 2018)

At a time of concern about how incumbent television production companies can adjust successfully to advancing technology and about how public policies ought to change to ensure that domestic independent production continues to flourish on the ‘global stage’ (Bazalgette 2017; Javid 2014), our research suggests that, while most in the television industry are satisfied with the current UK regime, they also are emphatic about the need for a continuation of key protective interventions. But continuity is imperilled by a number of uncertainties, including the burgeoning growth of new and powerful streaming services, the implications of new datadriven tools for content selection and the longer-term effects of Brexit on opportunities to exploit UK-made content and on mobility of labour. Many producers express concern that, in particular, the two key measures which have historically underpinned commercial success and renewal in the production sector now appear to be under threat. The terms of trade intervention which has facilitated ownership and exploitation of rights for producers is under threat because, as discussed in Chapter 7, SVoDs such as Netflix, who lie outside the scope of 2003 Communications Act, have become more important as buyers of new content and they generally want to purchase it outright on a cost-plus basis rather than allowing producers to retain and exploit secondary IPRs. However, the history of the UK production sector clearly shows that, for those television companies who have managed to achieve significant commercial success, retention of copyright ownership and systematic exploitation of rights have been key features. Ownership of rights and of an asset base are pivotal to raising capital, securing

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investment and fostering businesses that are truly sustainable over the longer term (Doyle 2016). Therefore we would argue that programmemakers need to be very circumspect about being lured by big fees into a cost-plus model of production financing in which the outlet that is commissioning the content expects to take ownership of almost all the rights. The problem with this approach is that it cuts across the ability of indigenous production companies, small and large, to build up their catalogues of revenue-generating intellectual property assets and to use windowing strategies to build their businesses (ibid.). The importance of ownership of rights for the business prospects of independent production companies is inescapable. However, the rise of SVoDs and other transnational television services with requirements for content on a multi-territory and extended temporal basis militates against content producers being able to operate business models that are reliant on full ownership and exploitation of secondary rights. Therefore, at a time when the audiences, subscription revenues and commissioning power of global streaming services are growing, it makes sense to review how regulation can be extended in order to bring improve alignment between the commercial strategies of SVoDs and wider public purposes. Regulation of globalised platforms, although a site for contested views and values (Cammaerts and Mansell 2020), is certainly not impossible as demonstrated by recent EU initiatives including revisions to the Audiovisual Media Services Directive which require SVoDs to ensure prominence within their catalogues for European-made works (Apa and Gangemi 2019; Harvey 2020). As recent research has shown, areas ripe for consideration include how to encourage more investment by SVoDs in content that truly reflects the interests and concerns of UK audiences, including at regional level, how to prevent unhealthy monopolisation of data and ensure that the design of algorithmically generated recommendation systems takes account of societal aspirations, and—of particular pertinence—how to extend the terms of trade governing commissioning of content from independent producers to ensure that the latter can retain a greater share of ownership in IPRs in programmes that they make for SVoD platforms (Ampere Analysis 2019; Doyle 2019; Hesmondhalgh and Lotz 2020; Milano et al. 2020; Potter 2018). PSBs—another pillar of the support regime for independent producers—are also under threat. PSBs are the largest commissioners of original content made by UK independent producers (Oliver and Ohlbaum 2019) but, as pointed out by Jon Thoday (2018: 24) of Avalon

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TV, the UK’s PSB ‘model is now under existential threat as never before’ because of such factors as market forces, the rise of commercial rivals and ‘the political class with their concerns about bias’. Misgivings on the part of the UK’s Conservative Government about the publicly funded model of television were amply demonstrated when, in October 2019, the then Culture Secretary Nicky Morgan stated that she was open to ‘replacing the BBC licence fee with a Netflix-style subscription charge’ (Duthie 2019)—a position at odds with the long-standing principle of universality which lies at the heart of PSB (Born and Prosser 2001)—and again in February 2020 when the Department for Digital, Culture, Media and Sport launched a consultation on decriminalising non-payment of the licence fee which has been the long-standing linchpin of BBC finance. Any threat to the funding and commissioning power of PSBs clearly also has implications for the production sector. It may be argued that indies will enjoy at least some protection against declines in PSB funding because globalised streaming platforms are spending more every year on commissioning new content. However, it is important to remember that the special socio-cultural remit of PSBs is what ensures that a substantive quantity of programmes are made which reflect the culture and communities of domestic markets and audiences. This approach to commissioning clearly contrasts with that of SVoDs who are focused on extending their audiences around the globe. PSB models of production funding, with their primary focus on domestic audiences, stand in contrast to the ‘export-driven’ models of globalised content services (McElroy and Noonan 2019). As television distribution and consumption patterns shift, the question of whether content aimed primarily at local audiences is available in adequate quantities to meet audience needs will be at the forefront of concerns for media and cultural policy-making (Doyle 2019; García Leiva and Albornoz 2017: 10; Joly 2017). Media policy has long been characterised by compromises and trade-offs between economic and cultural aspirations (Iosifidis 2011) and likewise the construction of policies for the television production sector inevitably involves some tension between promoting growth and business success in globalised markets and, on the other hand, the need to encourage production of content aimed at the specific interests of national audiences. Since, as our findings confirm, PSB commissioning is pivotal both to maintaining diversity of content and creative renewal of the sector, our conclusion is that the

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growing economic power of SVoDS unquestionably strengthens rather than weakens the case for sustaining well-funded domestic PSBs. In terms of re-imagining support policies for independent production for the digital era, one clear lesson from the experience of the UK sector is the enduring importance of ownership of rights and of ensuring that indigenous creative producers, writers and publishers retain control over their own IPRs. Another insight is that, despite globalisation, national policy-making can exert a major influence. The domestic policy environment can—and in the case of the UK does—make a substantial difference in setting the framework for British production companies to thrive. But in a complex and ever-evolving landscape for television where, as one producer puts it, national success stories ‘could be squashed quite easily with a few accidental levers pulled in the wrong direction’ (Manners, London, Interview: November 2018), policy-makers face an unending challenge in reviewing and ensuring that the framework which supports growth and renewal remains in step with ongoing technological and market transformations.

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Index

A Abraham, David, 8, 11, 138, 144, 169, 203 Act, 1990 Broadcasting, 27, 60, 62, 198 Act, 2003 Communications, 3, 66, 183, 184, 216 Advantages of scale, 70, 91, 93, 100, 104, 113, 116, 124, 143, 194 Advantages of takeover, 75, 76, 87, 90, 124 All3Media, vii, 28, 69, 87, 90–93, 95, 97–99, 110, 113, 114, 118, 119, 137, 144, 145, 149, 150, 153, 164, 199, 208, 216 Amazon Prime, 4, 40, 41, 75, 171, 173 Annan Report, 3, 56 Asia, 27, 34, 35 Autonomy, 7, 86, 109, 135, 141–145, 147, 150, 155 Avalon, vii, 110, 114, 124, 149, 217 AVMS Directive, 198

B Baidu, Alibaba and Tencent (BAT), 37 Bargaining power, 27, 69, 97–99, 194 Baumol, William, 208 Bazalgette, Sir Peter, vii, 33, 96, 100, 119, 120, 140, 166, 175, 180, 201, 203, 216 BBC Studios, vii, 67, 120 BBC Worldwide (BBCW), 120 Beveridge, William, 54 Birt, John, 60, 61, 105, 199 Blast! Films, vii, 85, 91, 118, 132 Brazil, 37, 38, 211 British Broadcasting Corporation (BBC), 7, 9, 28, 40, 41, 54–57, 59–67, 105, 120, 140, 146, 152, 166, 170, 173, 176, 180, 200, 202, 213, 214, 218 Britishness, 132, 136, 175, 177, 196 Broadcaster producers, 150 Broadcast indie survey, 82

© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2021 G. Doyle et al., Television Production in Transition, Palgrave Global Media Policy and Business, https://doi.org/10.1007/978-3-030-63215-1

249

250

INDEX

C Caves, Richard, 25, 93, 141, 171 Chalaby, Jean, 3, 7, 8, 23, 33, 39, 42, 68, 96, 135, 169–171, 180, 211 Channel 4, 3, 55–60, 62, 63, 178, 180, 198, 203, 209, 213 China, 32, 35–37, 181, 211 Coase, Ronald, 42, 54 Comcast, 28 Commissioning, vii, 3, 17, 27, 41, 57, 63–67, 69, 97, 99, 111, 117, 145, 155, 163–166, 169, 172–176, 178, 179, 183–187, 202, 203, 208, 213–215, 217, 218 Competition, 28, 36, 37, 41, 42, 53–56, 59–62, 65, 69, 70, 96, 100, 109, 117, 121, 122, 151, 165, 170, 176, 178, 194, 198–201, 206, 208, 209, 216 Conglomerates, 7, 13, 28, 29, 32, 35, 69, 71, 77, 113, 120, 121, 130, 131, 138, 144, 149, 154, 173, 183, 194, 195, 200 Consolidation, v, 3, 4, 8, 10, 11, 17, 24–26, 28, 29, 43, 53, 68, 70, 71, 75, 77, 91, 118, 122, 123, 133, 137, 138, 144, 156, 194, 195, 197, 201–203, 206, 209, 211, 212, 215 Convergence, 16, 39 Corporate behemoth, 143, 145 Cost-plus, 58, 63, 184–187, 216, 217 Cultural discount, 181 Cultural proximity, 32, 38, 176, 181 Cultural test for high-end drama, 132, 174

D Deficit financing, 184 Denmark, 33

Department of Culture, Media and Sport (DCMS), vii, 1, 62, 67, 69, 135, 199 Diagonal integration, 29 Digitisation, 39, 40 Disney, 28 Distribution, vi, 2, 5, 7, 10, 11, 13, 16, 17, 22, 25, 28, 29, 33, 39, 41, 94–96, 99, 103, 110, 113, 117–122, 124, 129, 130, 133, 141, 149, 151–154, 156, 165, 167, 169–172, 179, 183, 185, 186, 193–195, 203, 210, 218 Doyle, Gillian, v, 3, 5, 8, 11, 22–25, 29, 33, 39–42, 55–57, 60, 66, 69, 70, 89, 96, 97, 108, 113, 134–136, 141, 150, 152, 165, 171, 180, 183, 185, 186, 196, 197, 209, 217, 218 Drama, 5, 13, 27, 32–36, 38, 64, 67, 77, 88, 96, 111, 114, 116, 131, 132, 146, 151, 152, 169, 171–173, 175–180, 182, 185, 186, 208, 209 Duopoly, 36, 55–57, 62

E Endemol Shine, vii, 32, 69, 99, 115, 116, 119, 144, 153, 166, 170, 177, 179, 197, 202 Entertainment, vii, 5, 13, 29, 35, 40, 77, 92, 99, 106, 111, 114, 144, 167, 169, 171, 197 Esser, Andrea, vii, 7, 8, 28, 29, 33, 34, 39, 41, 43, 117, 119, 135, 136, 150, 182, 204, 211 Europe, 8, 16, 21, 24, 27, 29–31, 33, 34, 38, 39, 69, 185, 211

INDEX

F Facebook, Amazon, Apple, Netflix and Google (FAANG), 29, 37 Financial Interest and Syndication Rules (FinSyn), 27, 28, 70 Financial intermediaries, 17, 104, 106, 107, 109 Firecracker, vii, 77, 105, 106, 120, 131, 141, 144, 152, 169, 186, 199 France, 30, 31, 174 Freedman, Des, 57, 196, 201, 214

G Globalisation, vii, 9, 12, 16, 21, 22, 25, 26, 30, 39, 42, 154, 169, 174, 195, 219

H Hall, Tony, 166, 173 Hartswood Film, vii, 131 Harvey, Sylvia, 10, 58, 196, 214, 217 Hat Trick, vii, 111, 112, 131, 137, 138, 146, 205, 207 Hesmondhalgh, David, 6, 29, 42, 124, 133, 135, 141, 145, 176, 195, 201, 212, 217 Higson, Andrew, 174, 175 Hilmes, Michele, 23, 26, 27, 179

I Independent Television Authority (ITA), 54, 61 Independent Television (ITV), vii, 4, 6, 7, 28, 41, 55–57, 59–65, 87, 94, 105, 106, 109, 113, 116–118, 122, 140, 146, 147, 150–152, 164, 166, 170, 198, 200, 202, 203, 208, 213

251

Independent television production, 2, 11, 31, 42, 63, 90, 106, 111, 120, 130, 138, 152, 196, 201, 203, 214 Indies, 3, 6, 57–59, 62, 64–70, 86, 87, 98–100, 106, 118, 124, 130, 131, 136, 140, 149, 155, 157, 183, 198–200, 203, 205, 206, 209–212, 215, 218 Informational advantages, 99, 100, 194 Information asymmetry, 100, 109, 157 Intellectual property rights (IPRs), 3, 5, 7, 10, 41, 58, 75, 88, 96–98, 111, 115–121, 151, 152, 154, 155, 165, 183, 185, 210, 213, 215–217, 219 International reach, 113, 120–122, 149, 167, 168, 172, 180, 194 Iosifidis, Petros, 26, 135, 195, 218 ITV Studios, vii

J Japan, 24, 34–36, 181

K Keo Films, 89, 100, 131, 205 Korea, 32, 181 Kudos, 115, 131, 139, 172

L Leadership, 137–140, 150 Lee, David, 3, 5, 7, 8, 56, 58, 62, 66, 69, 124, 210–212 Left Bank, 77, 82, 84, 88, 99, 100, 131, 146, 172, 177, 178 Left Bank Pictures, vii, 35, 85, 87, 116, 137, 146, 175 Liberty Global, 28

252

INDEX

Liberty Global/Discovery, 137 Lion Television, vii, 10, 28, 87, 97, 124, 145, 215 Lotz, Amanda, 28, 29, 39, 94, 150, 176, 217 Love Productions, vii, 85, 89, 106, 118, 155, 169, 171

M Mammoth Screen, vii, 87, 89, 92, 94, 106, 109, 140, 147, 152, 177 Market access, 94, 194 Market power, 58, 69, 97, 195 Mergers and acquisition, 2, 11, 40 Minimum efficient scale (MES), 43, 122, 123 Minimum efficient size, 17 Monopoly, 54, 55, 64

N Netflix, 3, 4, 29, 40, 42, 75, 93, 96, 97, 99, 100, 107, 117, 118, 165, 166, 171, 173–177, 180, 182, 185, 186, 216, 218 New Labour, 66 Nobody knows, 93, 141 Non-scripted factual, 167, 169 Nordic-Noir, 33 Nye, Joseph, 9

O Ofcom, vii, 3–5, 8, 40–42, 58, 61, 65, 66, 68–70, 92, 96, 123, 165, 166, 181, 183, 184, 199–202, 205–207, 212–215 Office of Fair Trading (OFT), 60, 61, 64 Ownership configuration, vi, 5, 7, 8, 11–13, 17, 70, 76, 82, 84, 100,

103, 121, 130, 163, 193, 194, 196 P Paradox of capitalism, 70 Paterson, Richard, v, 3, 5, 8, 16, 27, 56, 57, 60, 64, 66, 69, 70, 165, 183, 185, 197, 209 Peacock, Alan, 55, 59, 60, 62, 164, 198 Phillis, Bob, 64, 65 Picard, Robert, 39, 134, 135, 214 Porter, Michael, 2, 43, 110, 112, 148 Potter, Ian, 27, 57–59, 210 Producer Choice, 61 Producers’ Alliance for Cinema and Television (PACT), v, vii, 1, 58, 61, 64, 66, 76, 95, 165, 202, 212, 213 Professional buyers, 110, 112 Public Service Broadcaster (PSB), 3, 6, 8, 26, 27, 30, 35, 54, 55, 65, 66, 69, 70, 97, 105, 151, 155, 164–167, 176, 180, 181, 183, 185, 198, 200, 202, 207, 213–215, 217–219 Pulse Films, vii, 82, 131 Q Qualifying indies (QI), 62, 206 Quotas, 3, 6, 27, 30, 31, 34, 59, 60, 62, 67, 198, 199, 205 R Red Productions, vii, 32, 84, 91, 132, 144, 164, 172, 176, 177 Rest of the World, 34 S Scandinavia, 33, 211

INDEX

Schlesinger, Philip, vii, 8, 9, 39 Schumpeter, Joesph, 39, 207, 210 Sky, vii, 4, 28, 41, 65, 85, 98, 106, 113, 117, 118, 122, 137, 150, 166, 171, 176 Sky Vision, vii, 98, 100, 118, 148, 179 Smith, Anthony, 9, 56 Soft power, 9, 35, 37 Sony Pictures Television (SPT), vii, 28, 35, 84, 96, 99, 113, 143, 154, 173, 175 South America, 21, 24, 29, 38 South Korea, 34–36 Steemers, Jeanette, 8, 23, 26, 40, 172–174, 214 Straubhaar, Joseph, 26, 37, 38, 181 Studio Canal, 32, 91, 144, 164 Subscription video on demand (SVoDs), 2, 4, 16, 17, 40–43, 75, 97, 99, 100, 117, 151, 164, 165, 171–174, 176, 178–182, 184–187, 193, 200, 202, 206, 210, 211, 213, 216–219 Super-indies, 5, 7, 28, 69, 75, 77, 82, 94, 113, 115, 116, 118, 121, 123, 124, 130, 138, 144, 149, 150, 153, 194, 202, 203, 205, 212

253

T Telenovela, 38, 180 Televisual Production 100, 8, 202 Thussu, Daya, 26, 29, 174, 195 Tinopolis, vii, 92, 106, 109, 114, 143, 144, 150 Trade buyers, 110, 112, 114, 121 Transnational groups, 154 Turkey, 32, 211

U US, 8, 21–24, 26, 33, 34, 40, 70

V Vertical expansion, 41, 94, 117, 118, 122, 151, 194 Vertical integration, 94, 104, 150, 152, 194, 199, 202, 204

W Williamson and Winter, 42, 121 Windowing, 63, 96, 154, 185–187, 217 Window of Creative Competition (WoCC), 67