Tim Davie, the clubbable boss of the BBC, treated several TV production bigwigs to lunch in the Vanessa Bell Room of the Charlotte Street hotel in Fitzrovia, central London, shortly before Christmas.
Among the assembled guests were the creative and business minds behind some of Britain’s proudest shows. They included Andy Harries, whose company Left Bank Pictures made The Crown; Jimmy Mulville, the boss of Hat Trick, which makes Have I Got News For You; Sally Woodward Gentle, executive producer of Killing Eve; Tim Hincks, the co-chief executive of Expectation, which makes Clarkson’s Farm; and Jane Featherstone, whose company, Sister, made Black Doves.
But this gathering was not about reliving past glories. Instead, many of those present used the lunch to vent their fears about a mounting funding crisis that they believe is preventing many British programmes from being made — and to brainstorm potential solutions. “If we don’t do something soon then, before we know it, our British stories will simply disappear,” said one attendee.
Keira Knightley and Ben Whishaw starred in Black Doves
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To many, this will sound like a TV luvvie melodrama playing out in the W1A bubble. To the average British viewer, there remains an excess of domestic programming to wade through on television channels and streaming platforms such as Netflix, Amazon Prime and Disney+.
But there is a growing consensus among programme makers that the business of making UK shows for domestic audiences is dying out as the economics of British broadcasting falter.
Even Patrick Spence, executive producer of ITV’s surprise megahit Mr Bates vs The Post Office, believes that financing his four-part series, which captured the public’s imagination last year, would be a struggle if he were trying to make it in the current environment. “This is not a bunch of producers whingeing; it’s a very serious issue,” he said. “The evidence I can personally offer is that, if you ask me if we’d make Mr Bates vs The Post Office today, the answer is, ‘absolutely not’.”
Toby Jones in Mr Bates vs The Post Office
REX
The recent struggles of Britain’s broadcasters, in the face of new competition from streamers, YouTube and TikTok, are well documented. With the BBC’s licence fee income growing at below the rate of inflation, Davie has been in cost-cutting mode for years.
Meanwhile, a weak and volatile advertising market has hit the finances of both Channel 4 and ITV, which last week enjoyed a rare bounce on the stock market after cost-cutting helped chief executive Dame Carolyn McCall to report profits growth.
Despite that good break for ITV, the revenues of the traditional British broadcasters are not growing nearly as fast as at their streaming rivals.
At the same time, the cost of making television programmes has grown significantly in recent years. Spence estimates, for instance, that making a good TV drama would have cost £1.3 million per hour-long episode ten years ago; now it would come in at closer to £2.5 million.
In part, this has been caused by general inflation in the domestic economy — the rising cost of energy and materials — but many in television also say that big-budget streamers have driven up prices and wages in the sector. “Netflix and Disney are able to spend big budgets per show because they can recoup it globally,” said Alex Mahon, the boss of Channel 4. “So the revenue they can earn per hour means they can pay a higher cost per hour.”
The upshot is that the UK’s embattled broadcasters, which offer funding to production companies in exchange for domestic TV rights, can often only cover about half the total cost of a programme. The producer is then forced to find a co-investor to offer an advance payment in exchange for the rights to distribute a show internationally.
The would-be saviours are, naturally, the streamers. Netflix and its peers have invested vast sums in British programming, including co-productions such as Wallace & Gromit, The Bodyguard and Peaky Blinders — all made with the BBC. But the concern of Spence and many of his peers is that they will only fund shows that are likely to perform well outside the UK.
There is also a suspicion that streamers are increasingly wary of co-funding productions and that they would prefer to control all of a show’s intellectual property (IP). As a result, strictly domestic, UK-focused stories — ones that can stir and unite the nation — may not get made.
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It is in this TV environment that Spence said Mr Bates nearly came a cropper. ITV swiftly bought up the domestic rights for £1 million per episode, but the executive producer said he struggled to find an international distributor that would put up the additional money needed to reach his budget of £2.4 million per episode. Spence later managed to persuade ITV Studios to buy the international rights. But, he added, the show was made at below budget — £2.2 million an hour — meaning actors and producers worked for below the market rate. And, despite its roaring domestic success, Mr Bates only recently broke even on international sales.
(In defence of the likes of Netflix, its co-chief executive, Ted Sarandos, said last year of Mr Bates: “We definitely would have made that show.”)
Part of the solution to the funding problem for new British productions could be for the broadcasters to improve their business models and online revenues. Both Channel 4 and ITV are seeking to better challenge the streamers, and gain more young viewers, by using YouTube, which is growing fast in the UK and eating into the TV viewing times for both linear channels and the streamers. In 2023, the average UK adult spent 38 minutes watching YouTube at home, versus 21 minutes on Netflix, according to Ofcom’s latest Media Nations report.
ITV recently joined Channel 4 in sharing entire television episodes on YouTube. To many, it might appear a strange decision to give pricey content away on a competitor service to ITVX and Channel 4’s streaming platform. But both broadcasters have struck deals with YouTube under which they can gain access to user data and sell their own adverts. Many YouTube creators only keep 45 per cent of revenues from their videos, but ITV and Channel 4 have special arrangements.
McCall also said the platform was creating new audiences for ITV, rather than drawing existing consumers away from its channels and towards YouTube. “It’s very beneficial to us because the viewers on YouTube are not viewers of ITV,” she said. “They are very complementary, highly separated audiences — much younger, much more male, on YouTube.”
This long-term bet may pay off and help broadcasters rebuild their budgets. But in the production sector, there is a feeling that a form of government intervention might be required in the near term.
The idea that has attracted most attention is a streaming levy proposed by Peter Kosminsky, the director behind the BBC’s Wolf Hall and Channel 4’s The Undeclared War. His proposal is for the government to impose a 5 per cent tax on the US streamers’ UK subscription revenues, with the proceeds being set aside “exclusively for high-end drama of specific interest to UK audiences but which doesn’t necessarily have cross-border appeal”.
While Kosminsky’s plan has the support of some industry peers, including Harries and Spence, others disagree with the approach and point out that Toxic Town, Baby Reindeer and Fool Me Once are among the UK shows made recently by Netflix. “The idea that you should take the money from a streamer because the streamer’s successful seems odd,” said Jon Thoday, the co-chief executive of Avalon Entertainment. Paolo Pescatore, the media analyst: “The harsh reality is that the UK free-to-air broadcasters have been slow to react and have been left behind. Their failings should not be compensated by a so-called streaming tax.”
Baby Reindeer was a big hit for Netflix
ALAMY
A rival proposal is for the government to enhance tax credits for the sector, so making commissioning more affordable for broadcasters. Featherstone at Sister and Kenton Allen, boss of the production company Big Talk Studios, are understood to be drawing up the details for this proposal and have called a meeting of British production bosses with the aim of forming a united front to lobby Westminster. Kosminsky, however, is concerned that enhanced tax credits could drive up costs still further for the broadcasters.
Some more business-minded members of the production sector are relaxed about the cultural effect of a higher proportion of programmes being commissioned from the US. “I don’t have a problem with Americanisation,” said one.
But Harries, whose Left Bank Pictures benefited significantly from Netflix’s investment in The Crown, said it is important that the UK doesn’t just become a nation creating TV shows for other countries to enjoy. “We don’t want to become kind of the Taiwan of television, do we? That’s the fear — that we’re just a very upmarket service department, if you like, or a service industry for American global production companies.”
He added: “You know, we can’t look back in ten years and think, why on earth did we allow global, international, American-based companies to just literally clean us out? Yes, lots of us work for them. But, you know, it’s been at the expense of our own industry. And the UK industry has basically just fallen apart because of a lack of finance. We need to put money back into the sector.”