The Business
- Published: 21 September 2008 13:56
- Author: Dominic Schreiber
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- Last Updated: 21 September 2008 15:52
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The distribution sector has shaped up over the past year with company mergers, business consolidation and Hollywood bosses hired, resulting in a business sector better positioned to deliver stronger sales and growth.
After last year's flurry of mergers and acquisitions, the past 12 months have seen a period of considerable change in the distribution sector. A handful of stronger-looking mid-sized players, from newcomer Digital Rights Group to more established companies such as DCD Rights (formerly NBDtv) and Target Entertainment, have emerged.
At the same time, there has also been plenty of change among the larger players, with both ITV and BBC Worldwide appointing former Hollywood studio execs to run their distribution businesses, and sports giant IMG taking on BBC Worldwide's Mark Young to grow its entertainment business.
Young's position at Worldwide was filled by former Disney exec Steve Macallister, who has been busy building up his sales team since his arrival last year.
"There were some obvious gaps within the organisation," says Macallister. "So I made some significant hires within the first year."
The changes at ITV Worldwide have been more wide-reaching, with the merger of Granada International and consumer products division Granada Ventures, as well as the departure of long-serving managing director Nadine Nohr, who stepped down in March.
"It's been a huge and fundamental change in the way we approach distribution," says Peter Iacono, the former Sony exec who was appointed president and managing director of ITV Worldwide in January. "We've become a much more integrated organisation."
How does your business break down?
| Sales* | Co-pros | Formats | Home ent | New media | Licensing |
| 58.7% | 10.7% | 12.1% | 11.5% | 3.8% | 3% |
* Finished programme sales
In many cases, the impact of last year's dealmaking has yet to be fully seen in this year's numbers. DRG only completed its acquisition of C4I at the end of 2007, for example, and it wasn't until June of this year that all the group's companies moved into the same building.
"For us, 2008 was the first time we had everyone together," says DRG chief executive Jeremy Fox. "We're all under one roof."
That said, the C4I deal has already had a major impact on DRG's turnover. "It's a terrific brand," says Fox. "It's certainly the biggest company in the group, and it's performing very well this year."
Target, likewise, has seen strong turnover growth since it acquired Minotaur and merged the two catalogues into one.
"What's been good is having the sales team take a fresh look at the Minotaur catalogue and think about new places where they can pitch shows," notes director of sales and programming Jane Dockery. "It's worked that way for Minotaur people who have come in to sell Target shows."
Top five investors in development
| Company | Invested | |
| 1 | Fremantle Media Enterprises | £2m-£3m |
| 2 | ITV Worldwide | £2m+ |
| 3 | BBC Worldwide | £2m |
| 4 | Power | £1.2m |
| 5 | Hit | £1m |
Streamlining
To manage its expanded catalogue, Target has implemented a new rights management system - Rights Tracker - and added new programme categories to its catalogue, including history and lifestyle.
"It shows our breadth as a distributor in terms of what content we have in the catalogue," says Dockery. "It's really bolstered what we can offer. There's a lot of content that we're able to package and present in new ways."
DRG, on the other hand, is sticking with its strategy of running its various distribution businesses separately, while merging back office functions such as legal and marketing.
"Keeping these brands separate and identifying what the different brands do is really important to us," says Fox.
For some of the other big movers in this year's league table, meanwhile, growth has come from being acquired by larger production groups, rather than being the buyer.
Boutique distributor Bullseye, for example, was a relatively small player until it was acquired by Scandinavia's Zodiak TV last October.
Since then it has taken over the running of Zodiak's formats and drama catalogue and was relaunched as Zodiak International this January.
"It took us a few months to get into the swing because when you integrate two companies it just takes time," admits managing director Jorg Roth. "But it's paying back now. We have done at least double the turnover this year."
The big impact, adds Roth, has come from the addition of drama programming to the catalogue, such as Yellow Bird's Kurt Wallander TV movies, and its forthcoming adaptation of Stieg Larsson's best-selling crime trilogy Millennium.
"Drama is now our biggest source of income," says Roth. "It's going to be the most important part of the business."
Similarly for Outright Distribution, now part of the Shed Media group, taking on dramas like the forthcoming Hope Falls, as well as formats such as Ricochet's Supernanny, has led to a huge increase in turnover.
And while its most recent figures do not include any revenues from Wall to Wall's distribution business, the addition of shows such as Who Do You Think You Are? looks set to further bolster turn-over in 2008/09.
"Wall to Wall has made the biggest immediate impact, because it had an established catalogue of about 400 hours it was distributing itself," says Outright managing director Chris Bonney. "That has added to our portfolio quite substantially."
Access to funds
As well as the access to programming, becoming part of a larger production group has also given companies such as DCD Rights greater funds to invest in third-party product.
This September, DCD set up a rolling fund of £10m to invest in both internal and third-party productions, as part of a push to pick up more programming.
"We're looking for third-party drama, factual series of any kind," says Nicky Davies Williams, chief executive of DCD Rights.
Having access to funds has become vital to the sector, with producers increasingly looking for deficit financing on projects. And it has been a driving factor behind some of the recent consolidation.
"The key to us was always scale and investment," notes DRG's Fox. "You've got to help producers on the deficits, which are growing. Unless you've got the financial weight behind you, you can't do it."
With the backing of Ingenious Media, DRG has been able to cash flow productions such as ITV drama series Kingdom, and the company operates a significant development fund across the group.
Not surprisingly, though, it's still the large distributors that have the deepest pockets. And this year has seen the likes of ITV and Fremantle ramping up their investment significantly.
"We're looking to expand the relationships we have with producers," says Iacono, who announced a tripling of ITV Worldwide's development and acquisitions fund this summer. "We have seriously increased funds to co-finance and gap-finance productions."
Like BBC Worldwide, the company has also been investing in production companies, including Mammoth Screen, 12 Yard and Scandinavia's Silverback.
"It's a two-fold approach," says Iacono. "The fund we have to acquire or co-finance programmes is probably the more immediate way to reach out to producers."
Importance of scale
It is not just access to funds that gives the larger players an edge over their smaller rivals. All four of the largest distributors also boast large global sales forces, with sales people on the ground in North America, Asia and across Europe.
"We have the scale of a major but we're truly independent," notes Dan Allen, COO of Fremantle Media Enterprises, which has 60 sales staff based overseas.
It's that global clout that has enabled the company to secure high-profile product such as Shine's upcoming drama series Merlin, which has already been pre-sold to NBC in the US and CTV in Canada.
"They understand our business," says Allen, who is also keen to make a distinction between Fremantle and some of its other large competitors, such as BBC Worldwide or the Hollywood studios.
"If you're BBC Worldwide, you've got a ton of stuff coming from the BBC, and with a Hollywood major your programming is competing with the network dramas and movies."
Likewise, at IMG, Mark Young is keen to stress the company's boutique approach, despite its global sales force of 150.
"I say small enough to care, big enough to matter," says Young. "The worry producers have at the massive distributors is that their programme will be lost in that £100m or £120m turnover. We can afford to focus on the programmes that matter."
