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UK production industry reaches £3.5bn

February 15, 2019

The average revenue for an hour of UK drama has increased by one-third over five years, helping to drive 2017’s production sector revenue to £3.5 billion (€3.9bn). 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, according to a report from Broadcast Intelligence.

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.

Jonathan Broughton, Lead Analyst at MBI comments: “UK production is booming and will continue to do so over the next few years. Both domestic and international sources are contributing, but we see strongest growth coming from the US and the FAANGs in particular.”

According to Broadcast Intelligence’s inaugural UK Production Trends report, 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 – an average rise of 9 per cent per year.

Top line results indicate strong market growth; 2017 saw 7 per cent growth year-on-year, while the five-year period from 2013 to 2017 saw slightly faster growth at a 7.4 per cent CAGR. ‘True’ indies (those not owned by broadcasters or global conglomerates) largely kept pace with the market, growing at a 6.6 per cent CAGR for the same period.

International revenues have provided a boost to the industry; funding from international commissions has reached just under £1 billion and represents 32 per cent of total revenues generated by UK companies.

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.

While the influx of international finance, and SVoD funding in particular, has been called out by some as a possible bubble, data obtained by media research firm Broadcast Intelligence suggests that overall international funding will continue to grow for the next few years. Many groups have now re-positioned themselves to create permanent relationships and it is likely that increased SVoD competition should enhance overall original spending, rather than supress it.

Despite the budget boom, many sectors of the industry have remained consistent across the five-year period. Scripted accounts for 30 per cent of indie sector revenue, excluding BBC Studios and ITV Studios, which is up from 28 per cent in 2017. Unscripted programming – factual, factual entertainment and entertainment combined – continues to dominate, generating almost half (48 per cent) of revenue, compared to 52 per cent in 2013.

Both average tariffs and the volume of shows commissioned have expanded as broadcasters scramble to order more high-volume, low-cost content to offset the expense of costly, short-lived dramas. Average tariffs have increase at around 7.2 per cent per year to reach £118,400 in 2017, while volume is up 9 per cent over the five-year period from 2013 to 2017.

“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,” said Broughton.

Factual programming accounted for 22 per cent of revenue, up from 17 per cent in 2013. “If it continues to grow at a comparable rate, factual programming will overtake drama revenue within two years.”

The authors note that the bulk of producers (67 per cent) generate considerably less than £200,000 per hour for factual content, with 32 per cent paid less than £100,000.

The relative size of the SVoD operators’ budgets is laid bare by Broadcast Intelligence data suggesting that in 2017 they were responsible for just 3 per cent of commissioned hours across all genres internationally – despite generating 15 per cent of international revenue.

“Even as the SVoD commissions become more commonplace and look for more ‘catalogue’ titles, these commissioners will spend more than the average, and contribution in terms of value will remain significant.”

Finally, the current downturn in the pound plays to the industries advantage. Losing roughly 15 per cent of its value against the dollar over the past three years, UK production companies are now more competitive than ever, and dollar commissions are worth slightly more.


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