U.K. 2013 in Review: Royal Baby, 'Star Wars,' New BBC Boss and Phone-Hacking Trial

1:01 AM PST 12/30/2013 by Georg Szalai , Stuart Kemp
Kate Middleton and Prince William taking Prince George home from the hospital.

Production incentives, a studio capacity crunch, ITV acquisitions and John Malone's deal for Britain's largest cable operator also drew headlines during a busy year for the U.K. media and entertainment industry.

LONDON – Big changes at the BBC, acquisitions and increased competition in the pay TV industry, and the introduction of new production incentives -- those were just some of the major shifts in the U.K. entertainment industry this past year.

Meanwhile, the royal baby, the start of the phone-hacking trial and the arrival of the new Star Wars film at one of the big studio facilities near London were among the top industry events making headlines well beyond British borders.

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Here is THR's closer look at the big news and trends that affected the U.K. entertainment industry in 2013.

Production Incentives
The British government pressed on with its tax credit system, which gives productions incentives to shoot in the U.K. amid fierce global competition for projects. April saw the introduction of the tax relief system for high-end TV shows, video games and animation projects go live.

And in December, the government said it would bolster tax credits available for bigger-budget movies and extend the incentives to the VFX business.

The government said it would make relief available at 25 percent on the first $32.7 million (£20 million) of qualifying production expenditures, and 20 percent thereafter, for both small- and large-budget films starting in April 2014.
 

New Leadership at the BBC

In late 2012, the BBC was in disarray. Amid sexual abuse allegations against late BBC host Jimmy Savile and revelations that its own news division had dropped a report on the issue, director general George Entwistle resigned after only 54 days in the top executive post.

But before the end of the year, Tony Hall, the CEO of the Royal Opera House and the BBC's former director of news, was chosen to replace him.

Hall started his post in April, promising to make the U.K. public broadcaster less bureaucratic and more entrepreneurial and innovative. And he said he was "committed to ensuring our news services are the best in the world." 

He later also outlined his vision for a more "bespoke" broadcaster

Among key promotions, Hall named BBC One controller Danny Cohen head of BBC Television and he hired former Times of London editor James Harding as director of BBC News

With his first nine months under his belt, most industry observers give Hall positive marks for steadying the ship and allowing staff to turn away from the mistakes of the past and toward new opportunities.

Star Wars: Episode VII Arrives Amid Studio Capacity Crunch
The arrival of Star Wars: Episode VII at the Pinewood Shepperton studio complex near London for pre-production work and the news that director J.J. Abrams and producer Kathleen Kennedy had thrown the casting net across the U.K. for the project sparked headlines and new hopes in the U.K. for front-of-camera talent, crews and studio facility operators.

But while even the U.K. government crowed about the arrival of the Disney/Lucasfilm mega-production to shoot here, it did nothing to allay concerns that the British tax credit system to help attract Hollywood shoots was proving almost too successful, leading to a strain on existing facility space.

Pinewood Shepperton, the U.K.'s best-known studio facilities operator and home of the James Bond franchise, had ambitious expansion plans blocked by local government authorities, while at the same time they succeeded in opening a new soundstage.

BBC Severance Scandal and Governance Changes
A report by the National Audit Office, Britain's financial watchdog, in July found that 150 senior BBC managers had in recent years received severance payments totaling $40.8 million (£25 million) beyond contractual promises. The revelation caused a public uproar given that British households pay an annual broadcast license fee to help fund the public broadcaster. Among the critics was BBC talk show host Graham Norton

Hall reacted swiftly, unveiling payout caps and other measures to avoid severance deals that go beyond contractual guarantees in the future. He acknowledged that the BBC had "lost the plot" on the issue. 

BAFTA Opens Awards to Netflix
BAFTA, the British Academy, marked 2013 by making several radical changes to its voting system for its awards and the film and television categories. Among them was a change that makes content from web-based companies such as Netflix, which has invested in original shows like House of Cards, eligible to enter for the first time. BAFTA also has prepared a big China push for 2014, which will see the U.K. media industries attempt to cozy up to China as the two nations look to finalize a movie production treaty after refreshing cultural ties late in 2013.

John Malone's Liberty Global Acquires Cable Giant Virgin Media
Cable pioneer John Malone's international cable operator has been on an acquisition spree in recent years. In June 2013, it closed its biggest takeover ever, buying British cable firm Virgin Media in a $24 billion deal. The deal made Liberty Global the world's biggest pay TV firm in terms of video subscriber figures, overtaking Comcast. Longtime News Corp. top executive Tom Mockridge was named CEO. Said Liberty Global CEO Mike Fries: "Together we now provide over 47 million video, voice and broadband services to 25 million customers located principally in 12 European countries."

In September, Virgin Media announced 600 job cuts to become "more agile and efficient."

Observers have wondered if Malone could rekindle an old rivalry with Rupert Murdoch, whose 21st Century Fox owns a 39 percent stake in Virgin Media competitor BSkyB. But management has emphasized that the two also collaborate on such things as offering BSkyB networks in Virgin Media homes.

Phone-Hacking Trial Starts
After some delays, the first phone-hacking trial kicked off in October with media focused mostly on former News of the World editors Rebekah Brooks and Andy Coulson, along with several other ex-staffers of the U.K. newspaper arm of Rupert Murdoch's News Corp. The trial focuses on allegations that employees of the tabloid, which Murdoch shuttered in 2011 after 168 years in operation, eavesdropped on the voicemails of celebrities, royals, crime victims and others in their search for exclusives.

In the opening statement of the trial, which is expected to last up to six months, the prosecution said that it could prove that senior editors were part of a phone hacking conspiracy and argued that other top editors must have known about it. In addition to hacking charges, some of the eight defendants in the trial also face charges of bribing public officials and hindering the course of justice.

The defendants deny the charges.

Among the bombshell revelations by the prosecution early on in the trial was that Brooks and Coulson had an affair that lasted at least six years. The handling of Prince Harry and other celebrity stories also was an early focus. 

Royal Baby Draws Global Media Coverage
It could be argued that the single biggest media event of 2013 in the U.K. was delivered when Kate Middleton gave birth to an 8-pound, 6-ounce baby subsequently named George Alexander Louis.

So frenzied was the run-up to the birth of Middleton and Prince William's baby, likely the future king, that it dominated news agendas at home and abroad, often beating out the Pope and President Obama's second inauguration for headlines.

The deaths of former British prime minister Margaret Thatcher and former South African president and anti-apartheid freedom fighter Nelson Mandela also occupied U.K. headlines, generated acres of copy and affected the movie and TV industries in 2013.

ITV Acquisitions of U.S. and U.K. TV Production Firms
U.K. TV giant ITV acquired several U.S. and U.K. TV production firms as it continued to diversify its revenue streams beyond advertising. In July, ITV struck a deal, worth $19.3 million-plus, to acquire U.K. TV and film producer Big Talk, known for such TV shows as Friday Night Dinner, Him & Her and Rev, as well as such films as Shaun of the Dead, Hot Fuzz and The World’s End.

"Building a strong international content business lies at the very heart of our transformation plan, and the acquisition of Big Talk represents another important milestone as we continue to grow our production base and invest in creative talent," said ITV CEO Adam Crozier at the time.

In June, ITV paid $30 million for a 60 percent stake in Hatfields & McCoys producer Thinkfactory Media, which is based in Los Angeles. That followed a June agreement to acquire a 60 percent stake in High Noon Entertainment, the U.S. producer of Cake Boss and other nonscripted entertainment shows, for $25.65 million. And in April, ITV had announced a $27 million deal for U.K. reality and factual.

Late in 2012, ITV had agreed to acquire a controlling stake in Duck Dynasty producer Gurney Productions in the U.S. for $40 million. 

ITV's ITV Studios unit in 2012 made an operating profit of $162 million (£107 million), up 29 percent from 2011, and is expected to once again post an improved performance this year.

BSkyB Versus BT: Competition Escalates
British pay TV providers BSkyB, in which Murdoch's 21st Century Fox owns a 39 percent stake, and BT were headed for a showdown late in 2012 after the telecom giant acquired the TV rights to some English Premier League soccer games, most of which BSkyB has been airing for years.

In February, BT agreed to acquire the U.K. and Ireland TV channels business of ESPN, including key soccer rights, to further boost its position. BT then launched its two own branded sports channels, with soccer as a core offering along with rugby and other coverage, during the summer of 2013 and reached more than 1 million subscribers by mid-August. 

In November, BT also outbid BSkyB and ITV in a $1.4 billion deal for the rights to European soccer tournaments Champions League and Europa League starting with the 2015/2016 season. BSkyB's stock dropped 10 percent as Sanford C. Bernstein analyst Claudio Aspesi said the deal signals the end of peaceful co-existence in U.K telecom and pay TV." 

Monty Python Reunion
On a lighter note, fans of British comedy rejoiced late in 2013, when Monty Python made a long-rumored revival of their classic brand of humor a concrete reality. Remaining members John Cleese, Terry Gilliam, Eric Idle, Terry Jones and Michael Palin have announced a string of show dates for 2014.

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