Michael Wolff: Why Is the U.K.'s ITV on a Hollywood Buying Spree?
The Brits are buying everything from 'Duck Dynasty' to Weinstein TV as high valuations lead to envy and a potential new ad strategy.
This story first appeared in the May 15 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.
ITV, Britain's largest commercial television group, always has offered schlock TV — the precursor to Three's Company, called Man About the House, for instance, originated there. Vast, popular, lowest-common-denominator shows earned ITV big ad dollars and, for nearly half a century, Britain's biggest audience. Now, more aggressively than many of its broadcast competitors, ITV seems to be either a shrewd market leader or an out-of-control spender in an effort to outrun the end of TV's love affair with advertising and ratings.
Its latest effort involves the planned acquisition of the fledgling TV arm of The Weinstein Co. for what could be as much as $950 million (at least half of this will be an earn-out). The complex deal, which is expected to close in the next four to six weeks, follows various other top-dollar pacts for what might seem like any independent production company up for sale in Europe and the U.S.
Each of these deals has set new price points for independent producers, suggesting to some that ITV is among the dumbest dumb money in a fool's race for content. There is, too, a subplot here, the sure comedy of the mismatch between the high-flying Weinstein brothers — who will continue to run their arm of ITV (as they once did with Miramax, their film company at Disney) and whose TV company has yet to establish a real track record — and the quite unshow-business London banker types who run ITV.
But say this, ITV's frantic-seeming acquisitions pose the TV business question starkly: Is this all a sign of TV's weakness — a buy-anything Hail Mary at new revenue streams — or a sign of its strength, the more television (that is, content) you own, the better off you'll be?
ITV represents television in its most basic and original form: Licensed in 1955 as an independent alternative to the government- supported BBC, it produced ratings-driven entertainment for the British market in perfect harmony with an ad-driven revenue stream — "a catchall of sitcoms representing the worst of British stereotypes," according to Stevan Keane, a former U.K. TV executive and now independent producer. Its effective takeover in 2004 by the combination of Granada and Carlton, two other schlock producers, confirmed its basic TV ecosystem place. Yet in 2005, it lost its top ratings perch to the BBC and began a hard and long-term adjustment to the new competitive broadcast landscape and — under the leadership of British television eminence Michael Grade — took an ad revenue and share price hit.
In 2010, Archie Norman, a businessman and financier with a background in retailing and supermarket chains — but not television — became the chairman of ITV PLC. Adam Crozier, another non-television executive, became CEO. This was a media company now run by what used to be called industrialists, without sentimental attachments to the TV business and no bad habits formed by it. If in the past not being a TV person might have been seen as a serious if not fatal drawback in the industry, it now was possible to argue that being without a TV business bias, as television faced existential transformation, was a curious advantage.
Their premier hire was Kevin Lygo, a programming rather than ad executive who had been running Channel 4 as head of ITV Studios, the company's production arm. Lygo, whose stark white office at Channel 4 contained only a massive image of Sue Lyon, the star of Lolita — and who was, under a pseudonym, the author of the BBC police drama Walter — set about turning ITV Studios into the U.K.'s biggest producer of TV content.
This was at a moment of significant improvement in the ad climate. But Norman and Crozier seemed to view this as an opportunity to hedge on ad revenue reliance, or, indeed, to hasten a more fundamental change: seeing television less in terms of its historical focus on owning distribution, and more about owning product, more about content than broadcast, more about being licensor rather than licensee.
Rather than a closed distributor, ITV strategically was turning itself into a supplier to the new glut of worldwide channels, including by 2014 providing more than 60 shows to U.S. channels, and buying, before the Weinstein play, four other U.S. production companies: Gurney Productions, which makes Duck Dynasty; High Noon Entertainment with Cake Boss; Thinkfactory Media with Hatfields & McCoys; and DiGa Vision with Teen Wolf.
This ramp-up suddenly suggested significant new aspects of ITV's business model. In part it has become a scale business, particularly in unscripted production: The more reality shows you make, the cheaper you can make them for; the more you sell, the more leverage you have to sell even more. No matter that some of these companies don't actually own the shows they produce; the revenue stream and sheer volume of product is enough to scale the business. And, in part, ITV was becoming a venture-type endeavor, spreading investment across a range of bets and counting on the hits to pay for the flops. "The business, different from a broadcast model, and perhaps more comfortable for city-banker types, is about how smart you are at what you buy and how good you are at pricing it," says Michael Jackson, a former Channel 4 and USA Networks CEO and now an independent producer.
But, fundamentally, what these new business models have in common is that they are not directly dependent on, or skirt around, selling advertising, a hedge that, in the age of the DVR, Netflix and challenges measuring viewership, the market suddenly seems eager to reward. ITV's shares are up more than 40 percent in the past 12 months — a jump that can pay for many overpriced deals.
The Weinstein acquisition, while it might not bring a proven TV slate, brings Harvey and Bob themselves. In some sense, the deal resembles when the brothers joined their then-company, Miramax, to Disney, in the 1990s, becoming part of Disney's effort at the time to break new content categories and give it new creative bona fides. While the Weinsteins have some reality shows (including Project Runway) on the air and in development, it is their creative talent that arguably bolsters ITV next-stage growth into scripted shows (the company produced Marco Polo for Netflix) with their bigger budgets and higher margins. (ITV has had, as an ancillary business, several major international hits over the years, including Downton Abbey and The Jewel in the Crown; and it has other scripted ventures, including a deal between ITV's U.S. production arm, run by Orly Adelson, and producer Marty Adelstein for scripted shows, including NBC's new David Duchovny series Aquarius.)
The Weinstein deal involves television (and leaves ownership of the company's movie arm to the brothers), but it is, in a sense, part of ITV's new movie business model: While the movies came to supply television, it is a new sort of television business (a vastly larger notion than just the television distribution business) that will supply the ever-growing digital, as well as traditional broadcast, cable and satellite personal entertainment outlets — the screens, platforms, packages and delivery methods now known and those yet to be imagined.
The bet at ITV — and one spreading throughout the content industry — is that even as advertising's future becomes more uncertain and its profitability decreases, the outlets and appetite for narrative entertainment — that is, premium video — will continue to expand, fueling higher production and licensing fees.
Michael Wolff is the author of several books, including the upcoming Television Is the New Television.
ITV's Buying Bonanza by Paul Bond
Acquisition: Leftfield Entertainment
Date: May 2014
Price: $360 million for an 80 percent stake, with the potential for more depending on profit growth.
Description: The company owns Sirens Media and has stakes in Loud Television and Outpost Entertainment, accounting for 300 hours of unscripted programming including Pawn Stars, American Restoration, Real Housewives of New Jersey and Counting Cars.
Acquisition: DiGa Vision
Date: February 2014
Price: Undisclosed sum for a 51 percent stake with an option for the additional 49 percent in three to six years.
Description: Former MTV executives Tony DiSanto and Liz Gateley launched the production company in 2011, and its shows include Teen Wolf, Girl Get Your Mind Right, Celebrity Home Raiders and Ke$ha: My Crazy Beautiful Life.
Acquisition: Thinkfactory Media
Date: June 2013
Price: $30 million for a 65 percent stake with an option for the remaining 35 percent in three to five years.
Description: Founded in 1992 by producer Leslie Greif, it earned Emmys for History's Hatfields & McCoys miniseries, and its portfolio includes R&B Divas, Preachers' Daughters and Marriage Bootcamp: Bridezillas.
Acquisition: High Noon Entertainment
Date: May 2013
Price: $25.7 million for controlling stake.
Description: Co-founded in 1997 by former Liberty Media executive Jim Berger, it produces more than two dozen shows, including Cake Boss, Guinness World Records Gone Wild and Tough Love.
Acquisition: Gurney Productions
Date: December 2012
Price: $40 million for a 61.5 percent stake with an option for the remaining portion over the next three to five years.
Description: The production company is best known for Duck Dynasty as well as Auction Hunters, American Digger and Haunted Collector.
Acquisition: Talpa Media
Price: $532 million, plus future payments based on perfor- mance that could drive price to $1.2 billion.
Description: ITV's biggest purchase has been the Dutch producer of TV formats including The Voice, Utopia and I Love My Country. It owns the rights to 75 different shows.
Date: February 2014
Description: Based in Denmark, the company specializes in the production of such "factual" and reality shows as Legal Aid, Ski School and The Modern Mother.
Date: October 2012
Description: The Finnish company founded in 1997 produces about a dozen shows including Antiques, Antiques and Dragons' Den.
Date: July 2012
Description: Founded in Norway in 2006, it has produced more than 40 shows including Come Date With Me.
Acquisition: Big Talk Productions
Date: July 2013
Price: $19.3 million, with the potential for an additional $26.7 million depending on financial targets.
Description: Beyond TV shows Rev, The Job Lot and Friday Night Dinner, the company produced such films as Shaun of the Dead, Hot Fuzz and The World's End.
Acquisition: The Garden
Date: April 2013
Price: $27.4 million, with a further payment dependent on the performance of The Garden.
Description: The company produces 24 Hours in A&E and Inside Claridge's.
Acquisition: So Television
Date: August 2012
Price: $15.8 million, with potential for an additional $11 million depending on financial targets.
Description: The company, founded in 2000, produces The Sarah Millican Television Programme and The Graham Norton Show, which is broadcast in 100 countries.