UK distributors: growth on pause

While the industry is still generating more than £1bn a year, its headline figure for the financial year is £1.1bn, down from £1.16bn in 2014.

At first glance, this is the first time since the survey started that the overall figure has gone into reverse.

But that’s not the whole picture. A lot of the lost value can be explained by the withdrawal of Zodiak Rights, which elected not to participate this year following the recent merger of its parent company with France’s Banijay Group.

Assuming Zodiak Rights is still generating around £45-50m in distribution revenues (as it has done for the past few years), its inclusion would have made this year’s figures much closer to last year’s.

Other non-participants such as DCD Media and Power Entertainment take another £10-15m out of this year’s survey.

So, overall, we are probably looking at a flat market, in which new selling opportunities, such as SVoD and emerging economies, are offset by unfavourable exchange rates, volatility in Europe and the rising cost of acquiring quality content.

The companies in our survey are so diverse that analysing individual performances is the only way to get a really clear insight into the health of the sector.

BBC Worldwide, for example, did well enough to suggest there is still strong demand for UK-originated content. With a catalogue that is 94% originated in the UK, it grew its revenues by 2.4% to £321m, firmly reaffirming its position at the top of our table.

Strong result

“We are very pleased with our achievement,” says BBCW global markets president Paul Dempsey. “If you factor in the adverse impact of currency exchange and the economic travails in various parts of the world, it’s a strong result that really underlines the advantages of BBCW being a diversified global business.”

Dempsey says competition for the best shows is increasing. “This is good news for BBCW, because we have many strong brands, including Doctor Who, Top Gear, Sherlock, Luther and the Natural History Unit’s output. There’s also growing demand for proven formats – another area where we do very well with shows like Bake Off.”

A key factor is BBCW’s aggressive pursuit of digital business – 26% of its revenues now come from nonstandard platforms. “Sales of long-form programming to SVoD services are our biggest digital revenue driver, and DTO [download to own] is also increasing in significance,” says Dempsey. “Short-form is nascent, but we expect it to grow.”

For companies just below BBCW in the table, the situation is more volatile. Following a surprise drop in revenues for Fremantle Media International (FMI), the recently merged Endemol Shine International (ESI) has leapfrogged it into second place.

As a merged business, ESI reported revenues of £211m, citing Home & Away, MasterChef and The Bridge as its top-selling shows.

There’s no direct year-on-year comparison for ESI, which didn’t exist last year. But adding together the revenue totals supplied by the two pre-merged companies in 2014 gives a total of £209.5m. That translates to a modest increase of less than 1%.

Although ESI’s catalogue is 80% non-UK in origin, chief executive Cathy Payne reinforces Dempsey’s support for British content: “British drama continues its strong performance with innovative concepts and strong talent,” she says. “It has never been so well packaged, with truly transatlantic talent.”

FMI’s 14% drop in revenues to £186m is one of the biggest reversals in our table this year. Chief executive Jens Richter, who took over the company after the last financial year, points to a number of factors at play in 2014.

The axe fell on The X Factor USA and Merlin, both of which were popular worldwide (The X Factor USA travelled to more than 150 countries and Merlin to more than 180), while American Idol suffered a fall in revenues.

FMI has, Richter says, been preparing for this, reinforcing its content pipeline by taking stakes in 495 Productions, Miso Film, Corona TV and Wildside.

In addition, he says: “We are working closely with our in-house producers to identify projects with international appeal that we can help develop, fi nance and creatively nurture for international audiences.”

UFA Fiction’s Deutschland 83 was co-produced by Sundance in the US and sold to several other international territories; Fremantle Media Australia’s prison drama Wentworth sells well worldwide; and FMI is now working with US arm FMNA to sell its adaptation of Neil Gaiman’s American Gods around the world.

FMI has also invested in third-party relationships with producers such as Fresh One, AbbottVision, Kudos, Arrow Media and Playtone. “The result is a more diverse portfolio to ensure long-term growth, so we are very optimistic,” says Richter.

The final member of the big four distributors is ITV Studios Global Entertainment. In line with its parent company ITV, it has become more aggressive in recent years, acquiring independent producers, building up their US content businesses and investing in the global rights to high-end third-party dramas such as Texas Rising.

All of this is now paying off: ITVS GE’s headline revenue figure is up 6.7% to £144m, making it the fastest-growing firm in the top four, with drama titles such as Mr Selfridge leading the way.

The ITVS GE figures do not include revenue for Twofour Rights (ITV bought Twofour Group in 2015).

The big four companies generated a total of £862m – 78% of the table’s total. After them, there is a big drop to All3Media International, which reported revenues of £51m, up 4.1% year on year.

Steve Macallister, who became chief executive of All3M International earlier this year, says: “With our strong pipeline and supportive shareholders, we are well placed for the future. We are increasing our content budget and coproduction capability, investing in our research resource, and have opened a

US office to give us greater access to the content coming from that market.”

The shareholders he refers to are Discovery Communications and Liberty Global, which completed their acquisition of All3Media via a 50-50 joint venture in September 2014. “They have been very supportive and engaged, but they let us get on with business,” says Macallister.

Zodiak withdrawal

Macallister’s former company Zodiak Rights would normally sit just below All3Media in the table. Whether it returns next year will depend on how the merged company decides to configure its enlarged distribution operations.

Both Zodiak and Banijay have strong distribution divisions in the UK, so if the merged entity is a UK-registered company then it will probably re-enter the table in fifth position (barring further consolidation).

With Zodiak Rights not featuring this year and Endemol Shine now one entity, Cine flix Rights has risen from eighth to sixth in the table, despite a 2.2% drop in revenues to £46m.

Chief executive Chris Bonney remains upbeat, attributing the dip to currency fluctuations and the timing of revenue collection. “Essentially, it is business as usual. All the signs are that we’ll return to growth next year,” he says.

Cineflix has made modest moves into drama in recent years but key to its success is its strength in long-running factual entertainment.