UK TV Producers Better Placed Than Broadcasters

The legislation turned a `cottage industry` into a `city industry`, said John McVay, chief executive of industry trade association Pact.

Concerns that Britain's independent TV production companies will be hit hard by slashed programming budgets at the nation's broadcasters may be overplayed.

Many of the so-called Indies are less reliant on the broadcaster that originally commissions a show because they can make more money from selling that programme, or format, internationally.

Shares in free-to-air commercial broadcaster ITV have lost more than 55 percent of their value since the start of the year as advertisers cut spending and audiences turn to digital channels and the Internet.

However, Shed Media, the producer of reality show Supernanny which has been successfully exported to the United States, is down only 27 percent, and fellow indie RDF Media was recently taken private at a 73 percent premium.

"Indies are a good play for two reasons: they are not directly exposed to advertising and they create and exploit valuable assets in their programme rights," Canaccord Adams analyst Patrick Yau told Reuters.

The sector is also in consolidation mode as some of the smaller production companies seek to beef up to cope with the straightened economic times and cutbacks in commissioning from UK broadcasters.

State-owned Channel 4, which outsources all production, is slashing budgets in reaction to a funding shortfall which could drive it into the arms of BBC Worldwide or Channel Five, owned by Bertelsmann AG unit RTL. ITV, meanwhile, is aiming to make more of its own programmes.

"The commissioning environment is more difficult, ITV is under pressure, Channel 4 is under pressure and the BBC is always under public scrutiny," Altium Securities analyst Roddy Davidson said.

Broadcasters were set a quota of outsourcing a minimum 25 percent of programming, excluding news, in 1990, and the indies received a further boost in 2003 when they were allowed to retain most secondary rights.

The legislation turned a "cottage industry" into a "city industry", said John McVay, chief executive of industry trade association Pact.

ITV set a target to increase in-house production to near the 75 percent limit from 54 percent a year ago, the point at which it bought indie 12 Yard.

And ITV Chairman Michael Grade has called for a renegotiation of terms that would see the broadcaster retain more of the secondary rights to the programmes it funds, a move McVay said was unlikely to succeed.

"Broadcasters are rubbish at IP rights," he said. "Most of their distribution arms are nothing more than vanity projects."

"I think this is ITV furiously sabre rattling on every front," Davidson added.

INTERNATIONAL STRATEGY

Although UK broadcasters are suffering, innovative programmes could still find an international market.

"(The successful indies) tend to have production and distribution capability in the United States -- there's a huge demand for programming from UK indies from the U.S. broadcasters," he said.

David Green, acting chief executive of independent DCD Media , which made "The Pregnant Man" and has won a commission for "Half Ton Son", said international sales were vital.

"Shock docs have done particularly well in the last year," he said. "(Half Ton Son) is a Channel 4 commission, but we sell it around the world, that's very much where the money is."

"ITV are important but they are not the only game in town," Davidson said. "Indies have added an international dimension, Shed and RDF are good examples -- they are not materially exposed to ITV."

Consolidation has led to the emergence of a number of "super-indies", such as RTL's Freemantle Media, the maker of entertainment hit "X-Factor" and soap "The Bill", and "Big Brother" creator Endemol, which is partly owned by Italy's Mediaset.

"Quite a lot of our suppliers are bigger than ITV," the company's director of television Peter Fincham told Broadcast magazine last month. "Nobody can say Endemol or (Freemantle Media unit) Talkback Thames are dependent on us."

Davidson said he wouldn't be totally surprised if Shed were taken over in a further round of consolidation, naming privately owned All3Media and Shine, the maker of spy drame "Spooks", as possible candidates.

"RDF was taken private at a 73 percent premium, if Shed can achieve that they will be happy," Yau said.