Booming UK production industry reaches £3.5BN | Media Analysis | Business
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While Brexit-based uncertainty persists, International funding into UK TV sector is projected to continue to grow for the next few years according to Broadcast Intelligence's inaugural UK Production Trends report.
MBI UK production 15Feb2018
The report collates five years of historical data (2013-2017) supplied from a number of sources and includes detailed analysis of the top nine groups covering label performance, hours of production, genre trends and key drivers. Groups include All3Media, Avalon, Banijay, BBC, ESG, Fremantle, ITV Studios, Sky Vision and Tinopolis.

Top-line results in the report indicate strong market growth; 2017 saw 7% growth year-on-year, while the five-year period from 2013 to 2017 saw slightly faster growth at a 7.4% CAGR. True indies — defined as those not owned by broadcasters or global conglomerates — largely kept pace with the market, growing at a 6.6% CAGR for the same period. Spend on drama, driven both by SVOD as well as the linear broadcasters, has outpaced the growth of every other genre on a per hour basis. It leapt from an average of £916,000 in 2013 to £1.29 million in 2017. This represents an average rise of 9% per year.

The survey also showed that the average revenue for an hour of drama has increased by a third over five years, helping to drive 2017’s production sector revenue to £3.5 billion. Factual also helped propel the industry; while per-hour costs have remained largely flat, hours have soared, increasing total revenues by two-thirds over the same period. International revenues have provided a boost to the industry with funding from international commissions reaching just under £1 billion and representing 32% of total revenues generated by UK companies.

The analyst noted that the influx of revenue has also caused a flurry of investment activity. Deals are at a five-year high, with 43 separate investments in production companies across 2017 alone. Spiralling drama budgets are one reason behind the level of M&A activity in the genre.

The report also shows the positive effect of SVOD whereby many production groups have now re-positioned themselves to create permanent relationships with such suppliers. It adds that it is likely that increased SVOD competition will enhance overall original spending, rather than supress it. The relative size of the SVOD operators’ budgets was shown by data suggesting that in 2017 they were responsible for just 3% of commissioned hours across all genres internationally despite generating 15% of international revenue.

Many sectors of the industry have remained consistent across the five-year period. Scripted accounts for 30% of indie sector revenue, excluding BBC Studios and ITV Studios, which is up from 28% in 2017. Unscripted programming - factual, factual entertainment and entertainment combined – continues to dominate, generating almost half (48%) of revenue, compared to 52% in 2013.
Factual programming accounted for 22% of revenue, up from 17% in 2013. Yet the report cautioned that the bulk of producers (67%) generate considerably less than £200,000 per hour for factual content, with 32% paid less than £100,000.

The UK Production Trends report said that due to its per-hour budget rises over the years, a producer only needs to keep drama commissions relatively steady. However, in any other genre, adding volume is key is to growth as each hour produced brings in a similar amount to five years ago. “UK production is booming and will continue to do so over the next few years,” commented Jonathan Broughton, lead analyst at MBI. “Both domestic and international sources are contributing, but we see strongest growth coming from the US and the FAANGs in particular. As more of the limited commissioning budgets is poured into fewer drama hours, less money has to fill more slots in the schedule – and factual is the prime candidate to fill that gap. If it continues to grow at a comparable rate, factual programming will overtake drama revenue within two years.”