U.S. sales boost U.K.'s TV indies

Int'l accounts for big chunk as sector grows nearly 10%

LONDON -- Revenue from the U.K.'s independent television production sector grew 9.8% to £1.9 billion ($3.8 billion) in 2006, according to figures published Monday by producers' trade body Pact, the Bank of Ireland and KPMG.

Although commissions from such U.K terrestrial channels as BBC1, ITV1 and Channel 4 remain the biggest source of income for indies, international revenue driven by an increase in U.S. commissions accounted for almost 20% of revenue in 2006, up from 14.1% in 2005.

Factual and factual entertainment commissions for the U.S. market -- including "Dancing With the Stars" and "Hell's Kitchen" -- accounted for the biggest chunk of international revenue, delivering £202 million ($403 million) or 60.5% of the total international tally.

Commissions from the multichannel sector also proved a growth area, more than doubling to 9.4% of total revenue from 4.2% last year.

The survey of 138 indies found that the sector has continued to prove a magnet for investment cash, with 45% of the companies surveyed receiving a takeover approach in 2006 and 36% of firms attempting to raise equity or debt financing during the period.

The top 10 companies in the sector accounted for 57% of total revenue, with average revenue per company up 17.4% in 2006 and average margins growing by 8.4%.

The Independent Production Census survey also predicted that a further round of industry consolidation is still on the cards for 2007-08, with 33% of companies with revenue of £5 million-£10 million ($10 million-$20 million) citing their intention to grow through mergers and acquisitions. Pact chief executive John McVay hailed the report as a vindication of the U.K.'s independent production market.

"This is the first comprehensive report on the performance of one of the world's leading program markets," he said. "It demonstrates that, by empowering creative businesses to exploit their intellectual property rights, it is possible to build scale businesses that can compete in the global markets."

KPMG LLP corporate finance partner David Elms said the sector was likely to enjoy growth, but highlighted concerns about the ability of Britain's major terrestrial players to continue financing high-quality commissions.

"The outlook for the independent production sector is very positive. Whilst there are concerns from the sector about falling budgets from traditional broadcasters, other sources of revenue present clear opportunities for continued growth," Elms said. "With the demand for content increasing, across different platforms and international markets, the trend for consolidation is likely to accelerate as the benefits of scale become more important in a fast changing media and content rich environment."