Over the next 12 months in the U.K., the balance of power between producer and broadcaster will change radically when the government-supported ‘Programme Supply Review’ recommendations are implemented. Broadcasters will no longer be able to impose their choice of distributor on the producer and will not be able to link their broadcast rights with any secondary rights. Production companies will be able to build up an asset base, enabling them to bring in outside investment and capitalize the company. This in turn will tilt the balance from a buyer’s to a seller’s market.
But, for many small and medium-sized prodcos it could also be a poisoned chalice and signal the end of their independence. Broadcasters will be aiming to lower the percentage of a program they finance. Producers who lack the expertise to value and subsequently exploit programming internationally may end up deficit-financing programs with no real international potential, in order to get the business. Before they do this, they should look at what has happened to indie distribs.
Over the past three years the U.K. distribution market has been decimated. The independents who were around five years ago often built up their catalogs by paying significant distribution advances. Many of them no longer exist, having merged (ITEL), closed (Docstar, Winstar, Jane Balfour, NVC, RM Associates) or been swallowed up (Minotaur).
Distribs are having a hard time, because it’s difficult to make the international market profitable for finished program sales. Markets remain fickle, hits rare, and the demand for back catalog titles is shrinking. Building up catalogs of program rights led many distributors to overinvest in minimum guarantees, hoping to benefit from an expanding marketplace that has never materialized. And, the long-term value of these assets is limited, particularly considering the costs of exploiting them.
Fixed costs in finished program distribution have, if anything, increased. Websites are useful promotional and backup tools, but do not replace direct selling. Markets remain expensive and numerous; costly, inefficient sales trips are still the best way of getting the fickle attention of buyers. Shipping, invoicing and reporting remain laborious, particularly since distribs must deal with a large number of small clients for even smaller sums. And, talk of consolidation has come to nothing as new niche distributors keep appearing, because the cost of entry to the market is comparatively low.
The few distribution companies that have developed in the past years tend to be producer/distributors (RDF International, TWI, Fremantle) or niche players that avoid investing in production. There are few indie distributors ready to put up money to cover production deficits.
The major broadcaster/distributors (BBC Worldwide, Granada International, Channel 4 International) continue to rule the nest and to have significant market advantages, because of the reciprocal deals they can structure with other broadcasters. C4I, for example, has a reciprocal agreement with Mainz, Germany-based ZDF Enterprises in which the U.K. broadcaster/distributor takes ZDF programming in return for ZDF taking C4 programming. No independent distributor can do this.
Perhaps indie producers will dabble in distribution themselves. If this happens, they could go the way of those independent distribs who overestimated the marketplace, overinvested in program rights, failed to control their fixed costs and disappeared. There may be a mini short-term boom as new distributors and investors attempt to buy their way into the market. But, the canny smaller indie will either want to stay friendly with a broadcaster’s distribution arm or look at joining the bigger producer/ distributor groupings that will now grow rapidly.
Any opinions expressed are those of the author and do not necessarily represent those of Alliance Atlantis Corporation.