ESG dominates after merger

The stark effect of financial consolidation in the indie sector is plain to see at the top of our 2015 owners’ table, as the merged Endemol Shine Group (ESG) reports combined turnover for the first time. Its figure of £409.8m is 53.5% higher than the biggest earner in last year’s table (the pre-merger Endemol, at £267m), even if it falls short of the two firms’ previous combined total as separate entities.

All3Media also made huge strides in 2015, thanks to its takeovers of Neal Street and New Pictures: its £340.2m turnover, up 26%, would put it at the top of the table were it not for ESG.

The fastest-growing indie owner is Marcus Evans Group, whose sole producer – Line Of Duty indie World Productions – posted a 285% increase in turnover to £15.4m. Among the bigger players, NBC Universal reported the biggest growth, with Downton Abbey producer Carnival Films powering it upwards by 103% to £61.4m – due in part to a clearer, separate group submission from NBCU.

The merged Endemol Shine Group dominates the US consolidators table, beating nearest rival All3Media by £69.6m. But ESG’s £409.8m UK turnover is down on the combined £425m figure reported by the separate Endemol and Shine last year.

“Underlying that, profits actually increased,” says Endemol Shine UK chief executive Richard Johnston. “We’ve had a pretty successful year – particularly in drama. Across the group, we have 19 dramas in various stages of production, which is unprecedented.” That includes Fortitude series two, from Tiger Aspect label Fifty Fathoms, and series three of Kudos’s Broadchurch.

ESG does not disclose its profit figures, but Johnston indicates they are up around 10% year on year. He says there is still “a great culture here, great people”, despite the departure of several senior creative figures. With BBC Studios chief Peter Salmon replacing group president Tim Hincks, ESG has pulled off a high-profile scalp.

“Everyone here’s very excited,” says Johnston. “Peter has a reputation as a very nice person to work with. He and Tim are both good with talent, and plugged in at the highest levels.” And the most urgent thing in Salmon’s in-tray? “As ever, how we grow the business; how we build it. The normal challenges of running an indie.”

All3Media progress

All3Media’s figures, in its first full year since being taken over by US firms Discovery and Liberty Global, show progress, despite a few blemishes. As well as an increase in overall turnover, fuelled mainly by the Neal Street and New Pictures acquisitions, like-for-like turnover increased by 1.7%, from £269.5m to £274.2m.

But is that enough growth to satisfy chief executive Jane Turton’s US bosses? “We’d like – and will have – bigger organic growth in the future,” she says. “A couple of the businesses, where we’ve now made some changes, were part of the reason for that relatively low figure. We’ve now got Layla Smith, Moira Ross, Deborah Sargeant and Ben Farrell at Objective, Michelle Buck at Company – and new Maverick chief executive Simon Knight is getting into his stride. You can see that coming through in development projects.”

Turton brushes off the view – expressed by many in the industry – that she overpaid for both Neal Street and New Pictures. The purchase price wasn’t disclosed for either deal, but was rumoured to be around £40m each.

Is Turton confident that she paid the right price for them? “Yes,” she says. “They are unbelievably strong companies. Their development pipelines are stronger even than when we bought them. With the types of programmes they’re making, there are transformational opportunities, so we could do things with those programmes, with those pieces of talent, to get into the American market and onto some of the new platforms.”

Next in the table is Warner Bros UK, which now submits a global figure rather than individual figures for its subsidiaries Wall to Wall, Twenty Twenty, Ricochet, Renegade, Head- strong and Yalli. Its 2015 total of £100m is a 17.6% increase on 2014 – but doesn’t take it back to its 2013 total of £110m.

Close behind is Sony, which recently streamlined its operations by closing Victory Television. Much of its success is down to Left Bank, which posted a 79% increase in turn over to £93.6m.

Sony’s chief creative officer for international production Wayne Garvie points to Left Bank’s deal with Chinese broadcaster CITVC – under which it is developing scripts for a drama series in the English language, but set in China – as steps on the path to continued growth. “We’ve been helped by having an office in Beijing, with people on the ground who can help us understand the culture and politics of China – and help Left Bank understand the kind of content that works there,” says Garvie.

Among the US owners, NBC Universal places sixth in terms of size but first for growth, in percentage terms, on the strength of Carnival Films’ Downton Abbey and Monkey Kingdom’s Made In Chelsea. Michael Edelstein, president of NBC Universal International Studios, highlights NBCU’s deep-pocketed ability to deficit-finance big productions.

“We intend to build out our scripted slate, which will be driven in part by some of our new scripted entities, such as Heyday Television, and our tri-partite production co-venture with RTL and TF1,” says Edelstein. “On unscripted, we are looking to create programmes specifically for the US market. Monkey Kingdom already has two commissions from Bravo: Tour Group and returning series Newlyweds: The First Year.”

The European table is looking a little short this year because Zodiak UK – fresh from completing its merger with French production house Banijay – declined to provide turnover figures. Adding up the turnover of its subsidiaries (RDF, IWC, The Foundation, Bwark, Touchpaper, The Comedy Unit and Bookhouse) suggests a slight overall decline – but that’s not the case, says Zodiak UK chief executive Rod Henwood.

“Those numbers all exclude the contribution made by rights, which is pretty critical – not just from the distribution company perspective, but also from the point of view of the bottom line of the individual production companies,” he explains.

Henwood points to a number of successful programme launches in 2015 that will only bear their full financial fruit in 2016 and onwards. With BBC1’s Eat Well For Less?, BBC2’s Six Puppies And Us, ITV’s 100 Year Old Drivers, Channel 4’s The Secret Life Of Four Year Olds and Sky 1’s Wild Things, Zodiak had a top-five programme in the 8pm slot on every major network.

Still firmly at the top of the European table is RTL-owned Fremantle Media – despite a 1.8% drop in revenues from £147.1m to £144.4m.

“We were anticipating that – American Idol ending has had a big impact on our numbers,” says Caroline Murphy, director of strategy and M&A. “We always knew we were going into a period of refocusing the business away from some of these big entertainment formats – though they are still holding up pretty well. We’ve been reinvesting.”

Fremantle has recently taken minority stakes in start-up indies Full Fat TV and Naked Entertainment. Murphy says “everybody’s on our radar” for acquisitions, but the market for established drama production companies “has been very frothy”. Fremantle won’t “spend silly money”, she adds.

The turnover of Studio Canal’s UK subsidiary Red Production Company dropped in 2015 after a stellar 2014 – but it is still one of the hottest drama indies around, with Happy Valley currently airing on BBC1 and a new joint venture, Final Twist Productions, recently announced with best selling US author Harlan Coben.

Tinopolis once again tops the UK consolidators’ chart, despite reporting a fall in income from £140m to £125m (which is still higher than 2013’s £110m). Executive chairman Ron Jones explains the fall by reference to the cyclical nature of TV projects – particularly sport, the bread and butter of the group’s biggest subsidiary, Sunset+Vine (which had a stellar 2014 thanks to its coverage of the Commonwealth Games).

In 2015, Jones says, there was “organic growth across the group in the UK and the US”. For future growth, he points to US subsidiary A Smith & Co, which makes American Ninja Warrior and the upcoming Spartan – Ultimate Team Challenge for NBC.

“US broadcasters are seeing the huge impact of sport, particularly live sport, as a way of attracting audiences in a fragmented market,” he says. “Sports entertainment is the closest to that they can find – we’re seeing huge growth in those genres.”

More generally, Jones says, the Tinopolis group won’t join the industry’s rush towards drama. “Our strategy has always been to have a company based around as many territories, genres and customer relationships as possible,” he explains. “Not because we suffer from megalomania, but because that’s what keeps us safe in an uncertain world. We’re not high-risk investors – that’s why we don’t really do that much drama, which we perceive as being higher risk.”

Second in the table, with UK production revenues up 5.8% to £61.8m, is Avalon Group after Twofour, last year’s number two with a £77m turnover, was swallowed up by ITV Studios for a healthy price. Avalon joint managing director Jon Thoday seems in no mood to follow suit.

“I’m an entrepreneur and I look for opportunity. If you run a successful business, there’s always the opportunity to sell it,” he says. “But there’s also plenty of opportunity to sell television shows – which is much more fun. I like TV shows, I like live shows, and I like seeing talent grow. We’ve managed [HBO’s Last Week Tonight host] John Oliver since he left university, and it’s very exciting to see that happen.

” With Twofour now gone from the list, the UK owners’ table loses a giant – but gains a new entrant, in the shape of Curtis Brown Group Holdings. Its subsidiary, Cuba Pictures, posted a respectable £8.6m turn over in 2015, thanks mainly to BBC1 drama Jonathan Strange & Mr Norrell.