Clive Whittingham looks at how independent distribution companies fit into a rapidly consolidating UK television industry.

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The mergers and acquisitions (M&A) activity in the UK television business has been frenzied of late and the implications of this wave of consolidation are still to be fully felt.

One of the areas that could be impacted most is independent distribution, thanks to growing broadcaster interest in the sector. For instance, BSkyB bought ^[2] Parthenon Entertainment in 2012 and turned it into Sky Vision to distribute its original content, while Discovery Communications and Liberty Global this year came together to buy ^[3] All3Media, including its sales arm, All3Media International.

Production groups are doing likewise – Tinopolis bought ^[4] Passion Distribution, for example – as they look to create a single point of sale for their content. The BBC now wants ^[5] its in-house teams to be able to pitch to other broadcasters, with its commercial arm BBC Worldwide no doubt waiting in the wings. And many commissions these days have international rights already sewn up by prodcos’ US or European parents.

If this trend continues, where are independent distributors going to get their content? It’s a tough climate that could potentially have damaging consequences, according to Yvonne Body, head of acquisitions at London-based Beyond Distribution, who says: “It’s leading to some distribution guarantees being paid that will not be recouped.”

It’s a view echoed by Don Taffner Jr, president at DLT Entertainment, which has bases in New York and London. “We’ve seen mid-size companies go under,” he says. “You need a big new product every market as a tentpole and sometimes you’ll pay over the odds for that. Then you see companies like Target Entertainment go under because it’s a model that does not work in the long term.”

Louise Pedersen, MD at recently acquired All3Media International, believes the current climate is making it increasingly difficult for totally independent sales houses. “Distributors being hungry for content means lots of people with money to spend, so from a young indie producer’s point of view, that’s very good,” she says. “But from the distribution side, it’s now more competitive.

“It’s quite hard to be a totally independent distributor because where once you could pick up things without an advance if you came up with a strong distribution plan, now you’re often having to put up an advance, first-look money or development money, which can be quite pricey.”

But some have taken the plunge and launched independent distributors, with some success. Paul Heaney, formerly CEO of Cineflix Rights, started TCB Media Rights in 2012 and has been growing his team and catalogue ever since. “The general consensus is that all distributors are going to be controlled by broadcasters. But that’s wrong,” he says. “Producers will need the big boys sometimes; they’ll need that big fat advance. But the bigger distributors are getting a bloody nose from indie distributors as often as ever.

“For every week a major distributor concentrates on factual, there’s another week where the latest Nordic noir comes in and their attention is grabbed by that. You can’t tell me that 52 weeks a year they’re going to be focused on the show that an indie distributor, if playing cleverly, can base his whole life on.”

Distributors specialising in a genre, like Heaney with factual, are finding they can grow a slate and be an attractive option for an independent producer that doesn’t want its content to be lost among a large catalogue.

David Johnson, chief operating officer at rights and IP advisor Compact Media, says: “If you have a really strong programme you might not want it to get lost in the catalogue at one of the major distributors and be better off with an indie distributor who can give it all their attention. Because they’re fighting for content, you know they’re going to have to really work their catalogue, sweat every dollar from every programme.

“The advantage of going with the big boys is they have big output deals, access to all the major broadcasters, might be able to get you a better transmission spot or might be able to put it into a bundle that it wouldn’t get into otherwise.”

Nicky Davies-Williams, CEO of DCD Rights, part of Bridezillas prodco DCD Media, has been aggressively growing her catalogue by 300 hours a year and enjoyed sales success by looking abroad for content, notably Australian dramas The Slap and Rake.

“A lot of our programming is Australian, US and Canadian. We look at formats from Eastern Europe and Israel. We work with South African producers,” she says. “The rule of thumb is to work with quality producers and productions, and you can find them anywhere.”

Electric Sky, based in the UK city of Brighton, has gone one step further, opening an office in Hong Kong in 2011 to give it a real foothold for sales and acquisitions in the Far East.

Another strategy, one that distributors like Electric Sky, Off The Fence (OTF), 3DD Entertainment and others have at their disposal, is running a production company alongside their sales teams to help guarantee a flow of new content.

This comes with its own drawbacks. After all, producers also want market intelligence from their distributor – could there be a conflict of interest?

Sally Miles, CEO at Tinopolis-owned Passion, says: “Given the relationship we have with prodcos like World of Wonder, it was always paramount to me that we kept the lines of distribution and production very clean and clear.

“We sit in development meetings with producers and share ideas. We don’t feel we can do that with freedom and confidentiality if we’re producing as well. I used to be a producer. I worked with distribution companies and I never wanted to work with one that produced as well.”

And for the smaller companies, library sales are becoming increasingly important. Body at Beyond says: “We’ve heard from producers lately that some of the bigger distributors don’t concentrate on catalogue sales, they just concentrate on that year’s new launches. There is still a space for indie distributors, as an alternative to organisations with massive catalogues that are only going to get bigger.”

Bo Stehmeier, MD at European distributor and producer OTF, says he, too, is finding tremendous value in older shows in developing territories. “We really work with our long tail,” he says. “Shows we acquired 10 years ago are still selling. There are lots of new DTT stations needing large amounts of content and we can give them a start-up pack of 700 hours.”

That’s echoed by Taffner at DLT, who adds: “The bigger companies are putting advances up for shows all the time; that’s their model. They’re not well-placed to deal with a three-year-old show that’s not selling because it gets lost in the shuffle.”

The launch of US channels internationally – such as those from the Discovery and A+E Networks stables – is seen as another threat to distribution because they come with a ready-made schedule of US exports to which they retained the rights. But DCD’s Davies-Williams and Stehmeier at OTF paint a more optimistic picture.

“There’s an enormous number of networks going global but there is always localisation of their programming. They find that the original, indigenous programming always persists and rates well, so that’s an opportunity for us,” Davies-Williams says.

OTF has been working with US cablenets Smithsonian, WE TV and now English-language Hispanic channel NuvoTV. Stehmeier says the trick is to monetise the territories the channels don’t want rights for.

“We identify the pockets around the world where we can turn these into finished programme deals and work alongside these channels with their roll-out strategy,” he says. “We’ll sell them in a way that if the channel ever does decide to launch in a territory, we can supplement that business too.”

And production consolidation can even be an opportunity. We’ve seen, notably with Endemol’s acquisition of Darlow Smithson and Shine’s purchase of Dragonfly, that the talent involved often exits at the end of their earn-out periods.

Stella Briley, head of acquisitions at Electric Sky, says she is constantly looking for talent returning to the market and seeking indie distribution. “We keep our eyes and ears open for producers coming out of the other end of that tunnel,” says Briley. “We’re working with new indies all the time, so there is content around.”

OTF is also working on using ‘big data’ to provide all manner of extra services to broadcasters and producers, making it an indispensable partner – which is essential to the success of indie sales houses, according to Stehmeier.

“Long-term, the opportunity is big data,” he says. “Adding metadata to the content and getting to the point where you can write your own algorithms gives you intelligence in a genre. This is vital when you consider the speed-to-market of a broadcaster in DTT or OTT. The decisions are made quickly, they’re often on-air within three months, and sometimes there are three execs feeding 16 channels. By giving them all this information, we become a must-have.”

So fear not, indie distributors – despite the M&A frenzy, there are opportunities, content and coping strategies aplenty. The bigger players may do well to watch out for Heaney’s left hook.