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Over the last decade, independent producers have thrived in the genre of reality programming, with studios like FremantleMedia and Endemol churning out mass hits such as American Idol andBig Brother and smaller shops like Gurney Productions striking it big with cable hits like Duck Dynasty. But in the more expensive (and lucrative) genre of scripted series, indies have been largely shut out.
That is changing, however, in part due to the seemingly insatiable demand for content in Hollywood. This year alone, cable networks Discovery, History, Bravo, E!, Pivot, WGN America and OWN have all announced moves into scripted programming. Netflix has launched four new original series and Amazon greenlit five pilots to start premiering later this year. With the major studios not in a position to absorb all that production demand—especially when they may be relatively risky initial financial propositions—an opening has been created for smaller independent producers.
“With every year two or three or four more domestic channels are wanting to do original programming, and now a lot of them looking at different models, the traditional studios aren’t willing, for the most part, to take them on as partners,” says Michael Rosenberg, executive VP of U.S. Television, Entertainment One Television, which produces series including ABC’s Rookie Blue and DirecTV’s Rogue.
To capitalize on the growing opportunity, international independents like Endemol, Gaumont and Shine have all opened U.S.-based scripted divisions in the last few years. Earlier this month, Temple Street Productions, the Canadian studio behind BBC America’s Orphan Black, announced plans to open a Los Angeles office and establish a scripted division there. Such investments would have been foolhardy just a decade ago, when indies were written off as dead.
A Storied History
But it wasn’t always that way. In the 1970s and ’80s, independent production thrived, with prolific and successful studios like MTM Enterprises (The Mary Tyler Moore Show, Hill Street Blues), Norman Lear’s Tandem Productions (All in the Family, Diff’rent Strokes), Carsey-Werner (The Cosby Show, Roseanne) and Lorimar (Dallas, Full House) dominating the ratings. Fueling their rise were the Financial Interest and Syndication rules, which the FCC imposed in 1971 to prevent the Big Three networks from owning any of their primetime programming. When Fin-Syn was repealed in 1993, content became vertically integrated, with each network owning its own studio and distribution arm to supply itself, and indies got squeezed out.
“There were a lot of people who their opinion was, as we were getting into the TV business, you should just entirely get out of the TV business and it’s over unless you’re a giant broadcaster and own your own studio,” says Kevin Beggs, president of Lionsgate Television Group, which was founded in 1997.
But that began to change with the introduction of original programming on cable. FX, which burst onto the scene in 2002 with The Shield, became an early beachhead for indies. While The Shield was produced by Fox Television Studios and Warner Bros. produced its next hit, Nip/Tuck, both did so with a very small deficit. “They just didn’t have a lot of faith in the value of these shows, because they were unproven,” says John Landgraf, CEO of FX Networks and FX Productions.
Landgraf, who was a producer on the small-budget Comedy Central series Reno 911 before joining FX, started FX Productions and opened his door to indie studios because he wanted to create a production experience that was markedly different from that of a large broadcast network or major studio.
FX was attracted to the same attributes of independent studios that uniquely position them for today’s competitive content ecosystem. For one, indies are more cost-efficient, often spending 10%-25% less than the major studios because they don’t have the same overhead and are not enslaved to the pricey network pilot development cycle.
But even more so than price, indie producers’ biggest differentiator is that they offer more flexibility in the deal structure. While big studios have to own all the rights in order for a hit to finance all of their losses, indies tend to be more open to giving up a little back-end in addition to charging lower license fees.
“They tend to be more open than the big studios on co-ownership or joint ventures where the risk and reward is shared,” says Ed Carroll, COO of AMC Networks,whose flagship network has three indie-produced series: Mad Men (Lionsgate), Hell on Wheels (eOne) and the upcoming Low Winter Sun (Endemol). “So for some types of programming, that can be attractive for us.”
Breaking Into Broadcast
Even broadcasters, whose scripted slates are dominated almost exclusively by the major studios, have started to open up to the indie model. With advertising dollars moving to cable and digital, the networks are increasingly looking for cost-effective programming models for summer and off-cycle. NBC has gone as far as creating a new unit to focus on international coproductions like Hannibal and the upcoming Dracula and Crossbones.
“They’re recognizing they also have to spread their risk and they don’t want to be financing everything on their slates,” says Electus founder/chairman Ben Silverman, who was cochairman of NBC Entertainment and Universal Media Studios from 2007-09. “In an up market, when everything you do is a hit, you wish you owned it all. But in a kind of medium market, which it is today, you want to be able to have as many shots as possible and spread the risk.”
Cable has the higher success rate and therefore makes a more realistic home for indies. But broadcast offers the best chance to accumulate a volume of episodes and therefore the opportunity for studios to make the most money. Creative deal-making can improve the odds on broadcast; though Hannibal only averaged a 1.3 rating with adults 18-49 and 3.2 million viewers in its first season (meager even by NBC standards), its financial model made it possible to continue into a second season.
Master of the Digital Domain
Just as cable was the new frontier 10 years ago, the current proliferation of digital platforms has created another buyer and growth opportunity. Three of Netflix’s first four original series came from independent studios—Media Rights Capital’s House of Cards, Gaumont’s Hemlock Grove and Lionsgate’s Orange Is the New Black. (20th’s Arrested Development was a revival.) Amazon, Hulu and Xbox are all developing scripted content as well. While the legacy studios may have qualms about supplying content for a service that competes with them as a distributor, indies are in a position to be early adopters.
“It’s a world where independents are probably going to become more relevant, because the studios are just going to take longer to figure out the financial model,” says John Morayniss, Entertainment One Television CEO.
The rise of SVOD platforms has also changed the TV syndication market, in the process swinging the balance of power away from legacy studios. When the off-network landscape was robust, studios held an upper hand because they had entrenched relationships with station groups that were needed to recoup the deficit. Now that the syndication market is soft, studios are often making back their deficit through one or two SVOD companies (Amazon, Netflix) or global sales—greatly simplifying the sales proposition and leveling the playing field for indies. In a sign of the times, earlier this month Fox realigned its syndication and distribution arm from its Fox Television Stations to its studio, 20th Century Fox Television Studios.
Broadening Creative Horizons
Though major studios still house the big-name writers and producers that networks must be in business with, an indie can benefit from casting a wider net, or partnering with talent that doesn’t want to be tied to studio deals. And as the bar for breaking through the clutter is set continually higher, finding new talent can be a big advantage.
“I think independent producers are more likely to look at people who are newer in the marketplace or people who have sometimes been overlooked in the marketplace. Those always provide for opportunities: fresh voices, people who have a passion project that perhaps others aren’t that interested in,” says Gail Berman, co-owner/founding partner of BermanBraun and former president of entertainment at Fox Brodcasting. “All of my successes as an independent producer came from people who were not on most people’s radars at that time.” (While head of Sandollar Television, Berman developed Buffy the VampireSlayer, which put Joss Whedon on the map.)
Indies can also bring intellectual property to the table that a network might not have otherwise identified or have access to, as in the case of Electus’ upcoming Killer Women on ABC (Electus was also able to attach Sofia Vergara as an executive producer). Endemol did the same with the Dutch format Penoza (ABC’s Red Widow) and AMC’s upcoming Low Winter Sun, which was originally produced as a U.K. miniseries by its subsidiary Tiger Aspect Productions.
“For these independents that operate globally and are producing shows in other territories, they’re bringing IP to the table too, which is their unique advantage,” says Ted Miller, television agent at Creative Artists Agency.
Though there are more opportunities for indies now than there have been in decades, the big studios are still big. Of the 50 pilots ordered by the broadcast networks at the upfronts last May, only three included indie auspices. In other words, the rise in independent production has not come out of their business—there’s just a lot more being produced. And without a volume of projects to lean on, the biggest enemy to the independent studio may be failure, as the economics of scripted television can quickly become unsustainable for an indie.
“It’s not about season one for us, it’s not about the sale. It’s about producing shows that have a tail. We were very focused on getting season-two pickups on both of our shows.” says Katie O’Connell, CEO of Gaumont International Television, which produces Hannibal and Hemlock Grove.
The difficult economics may lead to more consolidation, or overall deals, like the path chosen by BermanBraun, which had a deal with NBCUniversal for five years and last month inked a new pact with MGM Television.
“If you’re going to be in scripted programming, to deal with deficits, you sort of need a partner in that regard,” Berman says. “It’s much easier to approach it from unscripted as an independent than it is from scripted. Sooner or later, you’re going to have to get in business with someone.”
One persistent threat to indies, of course, is the cyclical nature of the TV business.
“When you look at the explosion of the production of television dramas on broadcast or cable today, the international audience’s appetite for American drama has been fueling that production growth,” says Philippe Maigret, CEO of Endemol Studios. “If the audience in Germany, the U.K. and France starts turning to local programming or to a different genre, that would immediately impact the economics of the business that we’re in.”
And even if the audience keeps up its appetite, many players worry about a looming saturation point for scripted programming. Unlike the Fin-Syn change of a generation ago, this time it could be the very factors that have revived independent studios in recent years winding up undermining it.
“There’s too much content being produced,” Landgraf says. “The playbook has become so successful, you’d be hard-pressed to find any channel that’s not pursuing a scripted television series. Once that happens, I think you can be assured that not everybody will succeed.”
Landgraf adds, “Ultimately what you’ll see is expansion, which we’re in the middle of, and then you’ll see consolidation. Many networks will still be doing it. The question is, can many networks do it with some success? I’m skeptical that there is enough audience and enough brand equity to go around.”
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