The future of UK high-end TV production

LONDON SCREENINGS: As belt-tightening at the US streamers and local broadcasters’ financial woes expose how reliant on Hollywood the UK’s high-end TV drama industry has become, will the sector bounce back or plateau?  

The term ‘high-end TV’ (HETV) became widespread in the UK over a decade ago following the introduction of a game-changing tax break in 2012, available to any project with a budget of more than £1m (US$1.3m) per episode.

It helped create the ‘golden age’ of UK drama financing that we enjoyed until not so long ago, when commissions and co-commissions from local broadcasters and US streamers drove investment in UK TV drama to record levels during the pandemic.

This helped grow local business activity and jobs across the UK. However, it also led to a shortage of studio space, concerns over a ‘crew crunch’ and the introduction of schemes to grow the UK’s production talent base to meet the demand.

The fact that one hour of scripted TV in the UK is now categorised into four budget bands (band one: up to £1.25m, band two: £1.25m – £4m, band three: £4m-£7m, band four: £7-8m+) only goes to highlight how flush the sector has become. Or should that be became?

Because since then, US streamers have pulled back on spending, the ad market is turning away from TV and dual Hollywood strikes in 2023 combined into a triple-whammy to bring the UK’s once high-flying HETV industry back down to earth.

Inward investment in UK film and HETV production spend halved in 2023 from 2022 because of the strikes in the US last year, according to stats released by the British Film Institute (BFI) at the beginning of this month.

The inward investment spend, foreign money coming into the UK’s domestic economy generated by film and HETV production during 2023, totalled £3.11bn (US$3.97bn), down from £6.27bn in 2022. Film contributed £1.04bn of the total, with HETV making up the remaining £2.07bn. In 2022, the figures were £1.97bn for film and £4.3bn for HETV.

The dramatic drop in spend has been attributed to the dual US writer and actor strikes in 2023, which suspended production halfway through the year. Meanwhile, recent Ampere Analysis data has revealed that the appetite for new scripted television series is between 30% and 40% down from its peak two years ago.

“There was optimism that after the strikes everything would return to the boom time,” says Bianca Gavin, who is head of production at UK-based Pulse Films and responsible for its feature and HETV slate, which includes Gangs of London, now shooting its third season for Sky in the UK and AMC+ in the US.

“But the market is still unpredictable. Finding American partners is really challenging right now. We’ve all had the messaging from studios that they’re tightening their belts. Money has to go further,” adds the former senior production executive for EU scripted originals at Amazon Studios.

“But what I feel we can rely on, which gives me a sense of optimism, is that the UK will remain such an important hub because it is a very desirable place to work and we have so much talent here,” says Gavin, who is also chair of the Production Guild of Great Britain.

Gavin’s hope is that this current quiet period is simply part of the cyclical nature of the business. But, as thousands of freelancers consider their futures, the industry must do its best to get through this period of turbulence while holding on to as much talent as possible.

“I worry that we opened the doors to freelancers from low socio-economic backgrounds and they haven’t been able to sustain quieter times in our industry like during last year’s strikes. It’s so important we don’t become an industry that’s only for people who can afford to work in it. There’s more that we need to do,” says Gavin.

But with ‘peak TV’ in the rear-view mirror, according to FX chief John Landgraf, could this quiet period be the beginning of a long-term problem for HETV production in the UK?

Adrian Wootton, chief executive of Film London and the British Film Commission (BFC), agrees times are tough: “Globally, the environment for film and TV production has become challenging for a number of reasons. However, despite this, the UK remains a leading global centre for film and TV production, attracting international and domestic producers to make their content here.

“Due to industrial action in the US last year, most inward investment productions halted in July 2023, accounting for the 49% decrease in inward investment. Although a significant decrease, the UK inward investment total for 2023 is comparable with the full year total for 2022 in which production continued as usual.”

Wootton believes there are further reasons to be cheerful: “As studios and streamers continue to review their commissioning strategies, it is to be expected that we will see a reduction in the rate of commissioning globally. Even if this leads to a natural decrease in the rate and number of productions filmed in the UK – and globally – the trend remains high.”

With buyers from around the world in the UK for this week’s BBC Studios Showcase and London TV Screenings, there’s no doubt the UK’s reputation on the international stage, as well as the UK as a place to film, remains undimmed.

But some do see trouble coming down the lens. Sarudzayi Marufu, whose prodco Euras Films aims to increase representation for underprivileged filmmakers and has several feature-length films under its belt, believes that British film and TV production is staring down the barrel of an acute financing crisis.

To mitigate this, Marufu has urged British independent film and TV producers to embrace private sector cash to survive what she believes could be “an imminent sector cull.”

Marufu’s argument mainly focuses on the dangers facing the perennially challenged independent film sector in the UK – which didn’t benefit as much as HETV from the streaming boom and has faced the added challenge of getting audiences back into cinemas post-Covid.

The producer says independent UK filmmakers are “in survival mode,” relying on a “broken” model of public financing and need to think more internationally and lean on the private sector.

The British HETV industry, meanwhile, already draws from a variety of funding sources, both domestic and international, public and private. Crucially, as recent hits such as Mr Bates vs The Post Office on ITV and ITVX and The Way on BBC One and BBC iPlayer highlight, it is also still able to command huge audiences and deliver a massive impact.

Meanwhile, finance companies such as Anton have successfully invested in high-end TV content, including the BBC’s The Pursuit of Love, His Dark Materials, Gentleman Jack and Around The World in 80 Days, and distributors are now well-versed in providing early investment in shows to retain rights.

Indeed, last month at the UK government’s inquiry into the challenges facing the British film and HETV, the conversation overwhelmingly focused on the plight of the independent film sector, rather than TV.

“My TV drama producers work for British broadcasters and they own the rights because of the terms of trade, but they also work for Netflix and they make a nice margin. They can choose what they want to do and that makes the ecologies healthy,” John McVay, CEO at UK producers alliance Pact, told the committee.

Kaye Elliott, director of HETV at UK industry training body ScreenSkills, agrees with McVay about the healthy condition of HETV in the UK but admits this might go against the general feeling in the industry given how much negativity has surround it so far in 2024.

“We went through what you could call a gold rush during Covid and could that really last? Probably not. It’s certainly not fallen off a cliff from our perspective. There are still a huge number of shows being made and within budget bands two and three in particular. In the last financial year, we supported 199 productions in total.

“This year, even with the strikes, it’s only 25 shows fewer,” says Elliott, who last year celebrated 10 years of the HETV Skills Fund, which has invested over £36m in skills and training since 2013. ScreenSkills trainees recently worked on Boarders, the recently launched six-part series produced by Studio Lambert for BBC Three and BBC iPlayer.

Nevertheless, Marufu is adamant that British TV companies, facing rising costs, more selective commissioning and government belt-tightening, must look to diversify their funding sources and turn more to the world of bonds and private equity partners to avoid becoming over-reliant on so-called ‘soft’ money.

The founder and executive producer at Euras Films says: “Private equity is viewed as this massive giant that could swallow you up and leave you with a product that has nothing to do with your original vision. But creative freedom and integrity are possible if you use contracts to determine the relationship. Private equity partners are an untapped resource,” says Marufu.

Meanwhile, there’s no doubt that ‘soft money’ continues to help keep the cameras rolling on UK HETV and without these financing tools, the industry would be looking at a greater problems. A new Audio-Visual Expenditure Credit (AVEC) comes into effect in 2024, replacing the high-end TV tax relief and further strengthening the UK’s tax credit offer by making high-end TV eligible for a credit rate of 34%.

Government-backed organisations such as Creative Wales, meanwhile, have been established to promote and grow the creative industries where they are based, offering funding, support and guidance across a range of sectors including TV and film.

While the pandemic saw a boom in activity for the organisation, there’s no mistaking the universal sign for a rollercoaster ride that its deputy director Gerwyn Evans makes on our Zoom call to describe the up-and-down nature of the industry in recent years.

Since 2020, Creative Wales has awarded £18m in capital funding to a range of projects including high-end TV, film, animation and games, with an overall estimated impact to the Welsh economy of over £200m from productions such as Netflix and Eleven Film’s Sex Education; Wolf by Hartswood for the BBC; Black Cake by CBS/Hulu on Disney+; and Men Up by Boom for the BBC.

“It’s a very cyclical industry from our perspective. The success in Wales over the last 10 or 15 years has been in high-end TV drama on the back of Casualty and Doctor Who relocating to Wales and shows such as Bad Wolf’s His Dark Materials leading to a growth in studio space,” says Evans.

There’s more studio space in Wales than anywhere in the UK outside London and the south east of England at the moment and those studios need to be kept full. This is something Evans admits can be hard when most high-end TV series are not guaranteed to be renewed with same reliability of a show like Doctor Who, which Evans describes as a “whole ecosystem by itself” due to its multi-million-pound budget per episode, reportedly between £5m-£10m.

US streamers, as the industry has learned in recent years, can be unpredictable. Creative Wales learnt this lesson after Disney+ decided to not only cancel the US$100m-budget Willow after one season, but to remove it from its streaming service entirely. Creative Wales had invested £4m to bring the Lucasfilm project to Wales (with a £44m return spend from the Mouse House in Wales) and Disney’s decision was reflective of a drastic course-correction in the streaming market.

While recent investment from US streamers such as Disney+, Amazon’s Prime Video, Netflix and Apple TV+ (which filmed its US$250m+ big-budget ‘miniseries’ Masters of the Air in the UK) are no doubt appreciated, ScreenSkills’ Elliott emphasises the importance of the UK’s domestic broadcaster ecosystem to the long-term viability of the country’s HETV sector.

“There’s a lot of consolidation and change happening in the streaming area. That has led to them becoming more cautious. We work to whatever the market is commissioning. But if you look at the past, domestic broadcasters are the people who keep making things and are key to workforce development,” she says.

Creative Wales is now determined to bring in projects with strong chances of returning while ensuring any production supports a pipeline of new talent from diverse backgrounds, alongside making sure it supports the country’s independent TV production sector by helping fund local dramas such as Men Up, The Way and Lost Boys & Fairies on the BBC.

“We don’t rely on the US streamers as much as other parts of the UK and have focused on developing Welsh-portrayal content,” says Evans.

These tend to be medium-sized shows with £10m to £15m budgets made with the BBC, Channel 4 and Welsh pubcaster S4C. But with these broadcasters’ budgets squeezed, major inward investment productions – “the big shiny things from the States,” as Evans calls them – remain a necessity to keep the studios filled.

“We try and get two or three big shows a year if we can. That obviously dropped off last year with the strikes and hasn’t really come back yet. Our numbers were down substantially last year because we didn’t have any big streamers in. It’s that stark. If we don’t have any streamers our numbers are down and if we do they’re up, because their shows are bigger.

“I look at some of the studios they’re planning to build now in England and Wales and I’d be very worried if I was behind them. Not just because supply and demand seems to be tipping too much to the supply side, but the issue around increasing business rates. That’s going to pause a few people’s development plans,” says Evans.

Concerns around an over-abundance of studio space are not restricted to the UK, with US actor, filmmaker and studio owner Tyler Perry recently putting his US$800m studio expansion in Atlanta on hold after seeing the potential of OpenAI’s impressive and terrifying text-to-video model Sora. “Jobs are going to be lost,” Perry told The Hollywood Reporter last week.

Adds ScreenSkills’ Elliott: “It does feel like we’ve perhaps reached a point where we probably don’t need to be building new spaces. But maybe there is need for further space in areas outside of London and the southeast.”

Film London and the BFC’s Wootton is again bullish on the UK’s ability to fill its studios: “Long-term investments have been made into the UK’s studio infrastructure, with streamers and studios committing future productions to stage space facilities in the UK. Recently, I visited LA with BFC colleagues to meet with a range of studios and streamers, who not only greeted us with enthusiasm, but confirmed that the UK remains a key destination of choice for their scripted content.”

And with the US crew union IATSE saying it’s prepared to strike later this year if it is unable to get a satisfactory new deal with the US studios and streamers, there’s also the potential for the UK industry to be rocked by strike of its own, as Pact and British performing arts and entertainment union Equity prepare to begin contract negotiations in April.

The impact of artificial intelligence (AI) on the HETV industry is already being discussed by Pact and Equity, McVay said last month while downplaying the potential for strike action.

“We have a much more ongoing discussion. Indeed, before the American strikes happened, we were sitting down with Equity, the actors union, and talking about AI. Clearly it will throw up issues and challenges for us as producer creatives, but also for performers and other creatives. We must find a way to navigate all that in an intelligent way,” said McVay.

“If there are strikes, I would hope everybody understands the importance of resolving them as soon as possible in order to still have a workforce at the end of it,” says Pulse Films’ Gavin.

The exec adds: “Change is going to accelerate. Maybe the last few years have just been a warm-up for what it’s going to be like to be nimble, because AI does hint at a lot of revolutionary approaches to things. Hopefully we have protections where protections are best placed.”

HETV may be safe for the time being, but it’s only a matter of time before a TV soap is made entirely by generative AI, James Hawes, director of Apple TV+’s hit UK HETV drama Slow Horses, told the British Film & High-End TV Inquiry earlier this month.

“Someone will say, ‘Create a scene in an ER room where a doctor comes in and he’s having an affair with a woman and they’re flirting, and someone is dying on the table,’ and [AI] will start to create it. Maybe it won’t be as polished as we are used to but that is how close we are getting,” Hawes said.

During the same inquiry, Hawes also pointed to the reliance on inward investment from major US players within the UK HETV industry. “There are downsides because it has inflated costs and therefore domestic production is finding it hard to compete for the best practitioners. It’s been very busy out there, although not right now,” said Hawes.

Everyone at the London TV Screenings this week will be crossing their fingers the recent negative cycle is already over and a new, more buoyant one is about to begin. Evans at Creative Wales says this could be evidenced by recent conversations he’s had with potential investors.

“Probably over the next weeks and months it’ll start speeding up. We find ourselves in a difficult position, the same as everywhere else. But over the past couple of weeks the phone has started to ring again,” says Evans.

Elliott, who doesn’t sense an “appetite” for a strike in the UK industry, adds: “The future looks really positive. It might not be that crazy time where you couldn’t find people. I don’t necessarily think that’s a bad thing because it means we can develop and grow people in a much more careful way and people can have long-term sustainable careers. HETV in the UK isn’t going anywhere.”