“Surviving until 2025”: British TV production companies fight for survival in the crisis | Television industry

TThe UK television production sector has adopted the mantra of “surviving until 2025” after a perfect storm of market pressures created a £400m financial hole and left hundreds of small businesses fighting for survival this year.

This week, industry body Pact, which represents 850 television production companies, announced that cash-strapped British broadcasters cut their spending on commissioning programmes last year to their lowest level since the height of the pandemic.

The impact has left hundreds of small, independent television producers, or “indies”, who make up 85 percent of the UK production sector, fighting for survival and hoping for a market recovery this year.

Despite a historic record income of almost £4 billion in 2022, driven by post-Covid spending by broadcasters and streamers looking to replenish and polish their programming catalogues, the financial downturn has been abrupt and steep.

More than 70 percent of indie developers who responded to a recent survey by industry association Indielab said they faced closure by May next year if market conditions did not improve.

Over the past two years, many companies have either closed, merged with other labels, or stopped hiring staff to produce new content and instead focused on monetizing their back catalog.

Among them are the names behind a whole host of hits. In recent weeks, independent drama production company Euston Films, which made The Sweeney and Van der Valk in the early 1970s and more recently Nightsleeper, which airs Sundays on BBC One, has laid off all its staff, while Label 1, which produced the long-running BBC Two documentary Hospital, closed its doors. In February, RDF closed after 31 years of producing popular, high-rating films including Wife Swap, Faking It and The Crystal Maze.

The slump has sparked a wave of layoffs, while others have had to reduce their working hours. Freelancers have been hit particularly hard. A survey by the Bectu union in July found that more than 50 percent of them are unemployed and 38 percent plan to leave the sector in the next five years.

“It's pretty bad out there,” says Victoria Powell, Indielab's CEO. “We've had a perfect storm of problems that have led to this decline. If we don't act and address the challenges, it could be too late for many to continue in a sector that has thrived for the past 20 years.”

The combined pressures on UK television production include the worst decline in TV advertising since 2008, soaring inflation affecting broadcasters' costs, and the end of a period of wasteful spending in the race for viewers fuelled by the global streaming revolution.

“The era of 'peak TV' brought budgets and volumes that reached unsustainable levels,” says Fred Black of media analyst Ampere. “There was a gold rush in content and production companies were taking the money on the table, but it wasn't going to last forever. It was a shock to see this change so quickly in the last year.”

Market conditions have led to brutal layoffs across British broadcasting. Earlier this year, ITV cut 200 jobs as part of a £50m restructuring programme. Separately, Channel 4 announced it would sell its £90m London headquarters and lay off 240 staff – the biggest wave of redundancies in more than 15 years.

The BBC, which has implemented a wave of job and programme cuts in the wake of the licence fee freeze, said in March that it would need to make annual savings of £700 million after its revenue fell by around 30 per cent between 2010 and 2020.

International broadcasters have also been cutting back on productions in response to declining ratings for traditional TV and the need to support loss-making streaming services. Disney, for example, cut its content budgets by $3 billion (£2.3 billion) and Warner Bros Discovery is in the midst of a $5 billion budget cut.

The knock-on effect on UK programming allocation by domestic and foreign broadcasters has hit the production industry hard. According to Ampere, around 1,400 new TV series were approved in the UK in the boom year of 2022. Last year, that number fell to just over 1,200, exacerbated by strikes by Hollywood writers and actors that halted production of US-funded titles in the UK.

“The question is whether there has been a rebound and we are now returning to a more normal way of life, or whether we are going backwards,” says David Abraham, founder of Wonderhood Studios, which has produced shows such as “Super Surgeons” and “Evacuation” for Channel 4 and “Dodi: Last Days of a Playboy” for Paramount+.

“The UK is above average in terms of creativity and impact. It's an incredibly successful market. Shows like Baby Reindeer show that reviving creativity in the UK system can find a global audience and have a global impact. I wouldn't say the market is easy or straightforward, but it's adapting.”

However, this shift is not affecting UK producers to the same extent, with smaller companies being disproportionately affected. One production industry executive points out that daytime and lifestyle programmes, despite being cheap to produce, are under significant pressure as broadcasters hope to minimise budget cuts to premium shows that have a better chance of standing out and selling internationally.

“This middle ground, the bread-and-butter sector, is coming under pressure,” says the executive, who wishes to remain anonymous. “We are also seeing an increased focus on 'affordable drama series' as value for money becomes more and more important.”

Pact's figures show that more than half of commission revenue in the two biggest genres, drama and entertainment, went to the biggest producers. And 90% of spend on drama commissions last year went to independent producers with revenues of more than £25 million.

“The impact was asymmetrical. The larger production companies didn't feel much of an impact, while the smaller producers felt it significantly,” says John McVay, Pact's managing director.

The decline in initial commissions has hurt small and medium-sized companies, which are more reliant on new commissions, while larger companies, which can rely more on returning series, have proved more resilient, says McVay. “Even in difficult times, Channel 4 will still commission a Gogglebox, right?”

Powell of Indielab would welcome the government's introduction of appropriate regulations. In her view, the government is more interested in the boom in Hollywood productions than in the “serious shrinkage of the domestic market”.

Top of the list is the introduction of a quota system for major streaming providers such as Netflix, similar to France's, requiring them to reinvest 20 to 25 percent of their domestic revenues back into French productions. There are also calls to extend the tax credit system, which heavily favors films and high-profile dramas, to all genres and to remove the over-£1 million per hour criterion for dramas.

To mitigate the impact of the downturn, production companies have sought to diversify their businesses. Pact reported a 51 percent increase in non-TV revenues from activities such as management and event production last year.

The question is how many will make it to the other side and whether the last two years mark the beginning of a permanent downward trend or merely a post-Covid correction.

“I don’t know if 2023 is about returning to normal pre-pandemic numbers or if it’s an indicator of a further decline in investment. [ahead] from 2022, which saw major spending,” McVay says.

However, early signs of a possible recovery are emerging. In July and August, there were more orders for unscripted shows than in the same months last year, the first months of this year that show year-on-year growth, according to Ampere. At the same time, orders for scripted shows in August were higher than in the same month last year, as well as in 2022 and 2021.

January to August were also Netflix's busiest commissioning periods in the UK, while Channel 4 resumed commissioning after a cost-cutting pause.

“There's a saying in the industry: 'Survive until 2025' – hopefully things will improve then,” says Black of Ampere. “We're starting to see glimmers of hope that this could well be true.”