Thursday, 5 July 2007

What 's the futureshape for Production companies?

There's been a lot of chatter recently about how Broadcasters and the broadcasting landscape is being disrupted and changing, but the Production Businesses who are making programming are changing too.

In the UK, there are 3 distinct trends at work, two of which are having a major impact on the fundamentals of the industry.

Firstly, Broadcasters are increasingly choosing to narrow down the field of 'indies' they work with, instead of working with whoever has an idea, they have at least a 'preferred list' - people they believe deliver to their multiple internal businesses targets. Therefore one/two man 'lifestyle' indies are finding life increasingly tough. However, I think the broader industry trends, discussed next, are having as much an influence on these small operations. As the industry becomes more sophisticated, working harder to exploits assets, it is moving further from the traditional model of work being commissioned and paid for by one client.

A recent government report highlighted that the UK Creative Industry is now 2nd to The City in terms of its size and importance. City money, either from IPOs, VCs, Private Equity or just High Net Worth Individuals has flooded into the 'visual media' industry. Combined with the improved terms of trade between broadcasters and producers, and freed from the overt reliance on broadcasters the businesses have been better able to exploit their Intellectual Property, as well as hold onto residual value. But the flipside of this, is the pressure to fully exploit these properties on multiple platforms. There is the pressure for the business to expand, to increase revenues and profits year-on-year, to increase the value on the balance sheet through hit formats. There is also the pressure put on you by the hard-arsed 'suits' who expect (well, secretly hope) 10x (return of 10 times investment) on their money. Their lives and jobs are based on putting the pressure on you to do that.

Thirdly, the landscape for Production Companies is changing; they pretty much just used to make TV for TV Broadcasters. Now at the very least, they are content producers and brand builders for distribution companies. The Production business is now increasingly a varied, multi-platform, multi-client task.

We are in a world where TV production companies are increasingly turning into the kind of 'integrated' businesses most comparable to old style Hollywood studios. At the base level Producers sell their stuff to the commissioner, to TV stations abroad, to other platforms like DVD houses and do revenue shares with broadband TV outfits like Babelgum and Joost. Cranking up a level of sophistication you have the likes of RDF who represent artists (people who add value to content) but more importantly are looking at having their own TV internet distribution platforms, taking the middle man of broadcasters out of the loop. Look at Fremantle who do something similar by giving their game shows brands life as web games. I'm currently impressed by Ten Alps who look at a niche and decide to own it with content and distribution delivered via magazines as well as the web and web TV.

The long and the short of it is from Universal Studios working globally, to Two Four in Plymouth, what it is to be a production company is changing.

That's great for the big boys with the teams, finance and infrastructure to explore business opportunities, who can afford risks and have the scale of production to back a move into a new area. There is no right or correct answer for what a producer should be. Serious businesses need to grow and change, and that will be affected by content fashions, by the strengths of current managements, by the wider markets in whatever territories you are big in.

The more interesting question today is, what if you aren't one of the big boys. What if you're not yet big enough, or don't chose to have outside investors with their baggage of golden eggs and golden handcuffs.

To smaller people I'd say you cannot be an island; you can't ignore and not compete in this wider marketplace. Equally I'd say concentrate on what you're good at, where your skills are, and what is the best use of your time. If you can create a great narrative, don't stress if you don't have the killer boardroom tiger inside waiting to be unleashed. Equally the boardroom toughie can't do a lot if he has no successful product to work with. It's a co-dependent relationship.

I would hope that 2 models will grow and flourish to help 'small' and 'super-small' outfits:

1. Take social networking as your example; create a 'web' of related businesses and individuals who have the strength, resources, knowledge and skills you could with. You will need
put ego aside and 'be safe' by getting a clear working methodology/agreement on paper early on if its anything deeper than friendly advice. But network and find people you can trust, don't be afraid to talk about your issues, and listen to other people experiences and advice. But it's not just advice I'm talking about, its operational and practical help too: There are always web companies looking to expand their portfolio and contacts; find an old successful business hand who can afford to give time, advice and contacts or a Mum who used to be a killer businesswoman and wants to ease back into 'the game'.

2. More formally I see the emergence of 'hubs' or 'super-agencies'. Essentially, a half way house to selling out, I'd see a business that contains back office operations, high level business, finance and strategy skills, commercial skills and operational, cross platform capabilities. I can also see these businesses having a more formalised version of the 'mutual help network' mentioned above. These agencies would probably work for a fee, but more likely for a 'cut of the cake' through profit share or an equity stake.

I wouldn't say these 'agencies' are about giving away your business. I'd say they would not only allow people to concentrate what you're good at, it would give you better capabilities to 'play at the big table' with the Endemols and RDFs in terms of apparent size whilst looking for commissions. On the business side you'd be aided in growth and profitability for example by having a hard-arsed MBA type negotiating your contracts and financing, or increased capabilities in selling your format to other countries or developing the show brand into other areas. That's a lot of potential added stability, growth, profit and commissions, all whilst still retaining ultimate ownership and ownership benefits of your business.

No comments: