Getting creative with finance

As 2011 draws to a close, UK independent producers must be hoping it was not a one-off.

The past 12 months has been the light at the end of the tunnel after the hard times of 2009 and 2010, with more commissions (not a lot, but some) coming through as broadcasters replenished their relatively bare programming cupboards and Channel 5 fired up its commissioning engines.

The financial gap between the broadcasters’ contribution and the total cost of a commission also stayed relatively stable, according to anecdotal evidence from Pact.

Although the absolute number of UK independent commissions was relatively flat, UK indies were much more proactive about international co-productions, programme sales and formats.

“The world is beating a path to our door for good content and we are taking advantage of that,” says Pact chief executive John McVay.

However, the anticipated flood of paid-for product placement on UK TV screens after a rule change took effect at Easter has so far resulted in only a few deals, including Nationwide’s bank-branded ATM in Coronation Street.

But making product placement legal has kick-started more activity around advertiser-funded programming (AFP). A new financial benchmark was set recently with the announcement of a £5m deal between Discovery, Shell Oil and ad agency JWT for an adventure series to be produced by North One Television.

“The change in product placement rules has put content on more agency and brands’ radars and makes the initial conversations about ad-funded content much easier,” says Sally Quick, head of commercial partnerships at UKTV, which this year signed a six-figure product placement deal with genealogy brand Find My Past for an eponymous series on its Yesterday channel.

“We have done five ad-funded series this year, up from three in 2010, but the big change is the value, which is up 65%. The game-changer for us was getting AFP on a Freeview channel with Find My Past and Rebel X Fighters [funded by Red Bull] on Dave.”

“Product placement has brought the two sides together,” says Lime Productions managing director Sean Marley.

“We have had conversations with a number of brands about Hollyoaks for 2012. I am confident we’ll do a couple of big deals soon, and once one or two hit the market, others will follow.”

Tax breaks

Smaller indies, meanwhile, are searching out new sources of programme finance and taking advantage of tax breaks and funding deals in Canada, Australia and Ireland (via Section 481), as well as tapping the biannual European broadcaster funding lottery run by the European Media Fund, according to rights.tv managing director Andrew Baker.

International co-productions are also in a healthy state - Death In Paradise, the British detective drama set in the Caribbean, for example, was co-produced by BBC1 and France Télévisions and made by Tony Jordan’s Red Planet Pictures, Kudos Film & TV and Atlantique Productions, with BBC Worldwide negotiating the funding.

“People are being more creative about putting budgets together,” says Andrew Ledger, relationship director at Barclays Corporate, which holds the production account for Death In Paradise and mitigates the foreign currency risk.

Barclays says it has cash-flowed twice the amount of money for TV productions this year compared with 2010, largely the result of more commissions from ITV and Channel 5, which traditionally only pay out on delivery.

Some indie producers are also expanding their merchandising activities. It helps if you have a hot show: Lime had to appoint a licensing agent this summer to deal with the demand for products related to The Only Way Is Essex, from clothing and beauty products like make-up and hairdryers to the more standard DVDs, books and calendars, most of which will hit stores this month.

The opportunity is worth more than £500,000 but, of course, it doesn’t all go to Lime’s bottom line.

“We suddenly feel at home in the licensing world,” says Marley.

Catch-up and VoD revenues are also becoming more signifi cant for producers and Baker says both C4 and C5 are willing to look at secondary windows for programmes that are closer to the primary transmission, giving rights owners the potential to earn more, sooner.

With the much-heralded YouView and Netflix launching in the UK next year, even more digital money could be on the table.

Twofour managing director of digital media Lisa Opie says producers need to think more like creative agencies that work on retainer fees and take a bigger margin on the project.

She adds: “Of course, creating intellectual property and exploiting it down the line isn’t going to go away, but I think delivering a well-structured idea and crafting that for various platforms is very important.”