U.K. Drama Walks Thin Line To Profitability

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PREMIUM: A successful U.K. television drama costing £1 million to produce covers about 60 percent of its budget from the primary broadcaster and will not make a profit without strong DVD sales, according to a stylized example of programming economics provided to a government-backed review of the future of copyright protection.

By far the biggest chunk of revenue for the hypothetical drama show would come from the initial broadcast window, with a contribution of £579,000. Television syndication would provide a further £217,000 in income, according to a submission by ITV to Professor Ian Hargreaves, who delivered his recommendations on reforming IP laws last month.

Co-production finance of £204,000 would complete the coverage of the initial budget and edge the project into a small profit. The bulk of the profit would kick in with DVD sales. If DVD revenue reached an expected £170,000, the profit would hit £186,000, for a return on investment of about 19 percent across all the distribution windows.

The ITV figures on drama production show the importance of secondary TV windows and DVD sales, which presumably might be undercut by loosening the current regime of IP protection. The Hargreaves Review tackled problems around the use of copyrighted material on the internet. British broadcasters have been fighting to keep the likes of Google and Apple from using their content under U.S.-style “fair use” principles. The report said, “Importing fair use wholesale was unlikely to be legally feasible in Europe.”

David Wheeldon, BSkyB’s director of policy and public affairs, tells World Screen that the fair use principle needs to be tested in court on a case-by-case basis and that if it were adopted, Internet aggregators would basically be in a position to use content while the cases dragged through the legal process.

As big investors in entertainment content, broadcasters in the U.K. are naturally worried about erosion of their control of the value chain as content aggregators become more important. These intermediaries will provide an alternative route for consumers to find content, “but in doing so will expect a share of the value generated by such content, either in consumer payments (e.g., iTunes) or a share of advertising revenues (e.g., YouTube),” according to a recent report on production economics commissioned by ITV, Channel 4, Sky and PACT.

“Traditional broadcasters are readily embracing new-media technologies and offering viewers ever greater choice and flexibility in the way they access content,” Wheeldon stated. “However, in order to continue to invest and to innovate we need an IP framework that provides choice and flexibility for investors in content and does not mandate the way content rights are exploited.”

The Hargreaves Review recommended the formation of a Digital Copyright Exchange by the end of next year “to make it easier for rights owners, small and large, to sell licences for their work and for others to buy them.”