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Lorraine Ruckstuhl, head of media at Barclays, shares her outlook for the television production sector in 2018 and beyond
These are uncertain times in the television industry, but one thing we know for sure about the year ahead is that the sector will continue to change at an astonishing pace.
In a world of binge watching, ‘social viewing’ and choose-your-own-outcome TV, the future looks bright for production companies that can adapt to changing viewing habits.
With the inexorable rise of on-demand, ever-expanding viewing choice and proliferation of content, the terrestrial channels, cable packages and SVoD platforms will continue to fight for audience share in the year ahead. In addition, we’ll see an unstoppable flow of free content on the likes of Facebook, Twitter and YouTube.
Competition is hotting up
While linear TV is likely to remain the dominant form of consumption in the near term, the quality of content from new players means the UK TV market is becoming more competitive than ever before.
Streaming and catch-up TV will continue to challenge the traditional advertising model of commercial channels, with budgets being directed increasingly towards social media platforms. Therefore, commercial broadcasters will have to work hard to maintain the relevance and pulling power of their flagship interactive reality shows.
Meanwhile, terrestrial broadcasters are starting to look to new technology, as evidenced by Channel 4’s acquisition of a VR business last year, and it will be fascinating to see how this impacts on the sector.
One thing we may see is linear TV increasingly focused on UK-based productions, particularly given the tax benefits available to culturally relevant content, while output aimed at a wider global audience shifts further towards the SVoD platforms.
Content will still be king
The next couple of years could be very interesting for production companies, with the likes of Apple, Facebook and Snapchat all earmarking funds for content production.
While Netflix has the strongest position globally and has reportedly committed US$8 billion to new production in 2018, other major US media and tech players could start to pick at its market dominance in the year ahead.
This includes Disney, which has ended its distribution deal with Netflix and is launching its own streaming services, which will be bolstered by 21st Century Fox’s vast back catalogue, assuming the US$52 billion tie-up goes ahead. Amazon too clearly has grand ambitions (and deep pockets) to further develop its Prime Video offering.
Apple is also set to enter the fray with US$1 billion apparently set aside to invest in original content over the coming year, as well as a big name to drive its content push in the shape of Jay Hunt, the former controller of BBC One and chief creative officer of Channel 4. Apple clearly has the funds, distribution channels and scope to become an increasingly important player in the SVoD sector.
With content being commissioned by so many providers across multiple platforms it will be interesting to see at the end of the year who has succeeded in attracting viewers and whether viewing hours increase along with the greater choice available.
Keeping pace with demand
The unprecedented demand for high quality content presents great opportunities for talented production companies with the right ideas pitched to the right broadcasters and platforms.
Producers may end up spending more time in the US in 2018 in order to get in front of the key players, as well as exploring new opportunities in emerging markets, particularly China, where entertainment is seen as a key strategic sector.
Creating and delivering the scale of content needed to meet demand also, of course, presents a number of challenges. Key among these is the impact of the subscription TV model on payment terms for production.
Many production companies are already familiar with the SVoD model of payment post-delivery, rather than the longstanding model that has typically cash-flowed commissions. Payment on or post-delivery will continue to pose cash flow issues for some. Likewise, UK tax credits – available to qualifying companies producing high-end dramas, animation and children’s television – are also paid post-completion.
Grappling with these changing funding structures, as well as finding sufficient studio space and securing the right talent both in front of and behind the camera are set to remain key challenges for UK producers in 2018.
In a year’s time we may also have a clearer picture of the likely impact of restrictions on overseas talent as a result of Brexit and, conversely, the opening up of training opportunities through the Apprenticeship Levy to address the shortage of homegrown talent in the sector.
Responding to changing needs
At Barclays, we already provide financing for up to three years post-production of a commission and have a number of innovative financing structures to meet producers’ needs, including our contract receivables finance proposition.
These innovations provide much faster access to cash than traditional structures and enable production companies to recycle the money to fund new projects.
We’ll be working hard in the year ahead, as always, to listen to what the industry is telling us it needs. We’ll continue to adapt what we can do to help with funding issues to ensure that good ideas get the financial support they need.
Contact
Lorraine Ruckstuhl
+44 (0)7917 503 442
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