Having won animation and then live-action kids TV tax breaks, UK kids producers have new mechanisms that provide real assistance, but with commissioning outlets few far between and the BBC feeling the squeeze, is it boom or bust for the UK kids business? Stewart Clarke gets a producers-eye view.
Oli Hyatt, founder of indie Blue Zoo and industry group Animation UK, played a key role in getting the animation tax break through in 2012. He says its take-up has been “remarkable” and its introduction has played out as the group told the government and tax authorities it would.
It has led to, Hyatt says, to “a swift return to production in the UK of UK originated shows. Broadly speaking the industry has doubled in scale”. He highlights other benefits, including work-for-hire work coming to the UK, and an increase in the perceived value of investing of animation. “There has also been one slightly unexpected consequence, an uplift in the number of animated films being lined up to be produced in the UK, again probably due to a shift in perception,” he says.
Other producers are also positive about the impact. “It is harder than ever to get original shows off the ground from the UK, but the tax breaks have definitely helped,” says veteran kids producer Tony Collingwood, whose CBeebies series Ruff-Ruff, Tweet and Dave (left) used the animation tax break and went into production on the first day of its introduction.
Collingwood notes that in the first year of the new scheme it was natural that a lot of shows took advantage as they had been largely ready to go and just needed the last piece of the funding jigsaw. A more settled pattern will now emerge, he says, noting the same is likely to happen with the new live-action tax break.
There were tax incentives in other countries and that was a competitive advantage we didn’t have in the UK; it has levelled the playing field
Mikael Shields, Acamar Film
With the film tax credit in place as a template, producers are universal in praising the tax credit’s structure and accessibility. “You have to be meticulous in your paperwork and it has to be genuine spend, but as long as you use a good accountancy firm you are in safe hands,” says Collingwood.
The funding and commissioning environment has, however, made it harder for new shows to break through and become British, and then international, hits. Peppa Pig is the biggest breakout preschool hit of recent times and, unusually, came to life out of the UK with the support of Nickelodeon and Channel 5.
The likes of Octonauts and Timmy Time have also fared well over on the BBC’s kids channels and Acamar’s Bing Bunny (right, below) is another UK-originated success story, performing well on CBeebies and registering over 36 million views on catch-up service iPlayer.
Mikael Shields and his Acamar team had started producing Bing when the animation tax break was introduced and then accessed it later in the cycle. “It was enormously helpful for us,” Shields says. “There were tax incentives in other countries and that was a competitive advantage we didn’t have in the UK; it has levelled the playing field.”
Amid the debate about supporting UK kids production, some questions whether, in animation at least, it even matters whether programming comes from the UK.
Ex-Nickelodeon UK boss Howard Litton, who also worked on Bing Bunny, says it is important, in preschool at least. “Does it matter where Adventure Time comes from? No, it wouldn’t matter if it came from the US, the UK or Mongolia. But in preschool it is different; as parents you want to feel programming is in your local language and is using terminology you recognise.”
As well as allowing existing indies to get projects over the line financially, the new tax regime has paved the way for new businesses to open, even animation studios, doing work often previously outsourced to Asia.
Genevieve Dexter co-founded Cake Entertainment before leaving and setting up indie Serious Lunch. “The tax breaks have had a huge impact on programming that is usually only part-funded by the broadcaster in that it enables us to produce in the UK,” she says. “As a result of this happening I have opened up animation studio Eye Present, as a joint venture with Squint Opera. That would not have happened before.”
“The tax breaks have had a huge impact on programming that is usually only part-funded by the broadcaster in that it enables us to produce in the UK
Genevieve Dexter, Serious Lunch
The animation tax credit is administered by the British Film Institute, which also handles the live-action equivalent that was passed last year. “The BFI has come through and provided clarity and is open for business with the live-action tax credit, and producers are preparing submissions now; now we have both it is tremendous,” says Mike Watts, founder of Novel Entertainment, which works in live-action and animation, making live-action movie and ITV animated series Horrid Henry and CBBC’s Michael Sheen-fronted film series Cinemaniacs among others.
Watts, also chair of PACT’s Children’s and Animation Policy Group, adds: “It gives us the fiscal instruments to allow the deficit funding gap to be closed, but that can’t bring new commissioning budget to the table; only the broadcasters can do that.”
While running Viacom-owned Nick, Litton made a point of investing in local fare including Peppa and Ben and Holly’s Little Kingdom. In a challenged landscape in which producers rightly cite a lack of commissioning options, there are also smaller linear channels worth keeping an eye on, such as the Pop and Tiny Pop channels that Sony acquired last year, he notes.
“It’s very interesting that these channels have almost ITV levels of coverage through Freeview,” Litton says. “Both could make a significant impact on the kids eco-system in UK if they decided to start commissioning. I’m not sure they will, but they are picking up some acquired gems like Peg + Cat and SuperWhy and could be ones to watch.”
“Consumer and audience behaviour means it is now impossible to develop a new project without thinking about online, VOD and different windows,” says Acamar’s Shields.
In terms of origination, the SVOD platforms are buyers of UK kids programmes, but rarely commissioners. Netflix has a pipeline of original kids fare, much of it sourced from DreamWorks, and Amazon has made a big play in original kids programming, but most is from the US. However, given the rapid expansion of both services – the UK is Netflix’s largest European market and slated to grow 250% in the next five years – it can only be a matter of time before regular commissions come.
What’s more, these new players may even cover 100% of the budget, something UK producers have not enjoyed for a decade or more. There are also local SVOD services such as Hopster, which is now expanding internationally. It is acquisition-only for the time being, but there is hope that will change.
The advent of new digital services will also provide much-needed competition to the BBC, which although making short form and interactive fare, does not dominate the digital space as it does with linear.
“The Kids YouTube App and other VOD services will challenge the huge popularity of iPlayer with kids,” says Serious Lunch’s Dexter. She is working on digital-to-linear project Xephos & Honeydew, based on a Minecraft-inspired YouTube channel. She adds that in the digital world, producers can go out and source talent and IP in a completely egalitarian way.
“The biggest opportunity [for producers] is to tap into some of the grass roots content that kids have found for themselves and made famous, and to option those properties and bring them up to a higher quality for wider audiences.”
There are more opportunities for success that ever if you can get your content made
Oli Hyatt, Blue Zoo Animation
There is, then, agreement that the kids tax breaks are well structured, workable and have made a tangible difference in terms of getting projects into production that would otherwise have been in funding limbo.
The glass half-full reading of the market? Maybe not a boom, but a long way from bust. “We we need a disruptive change and for me that starts with a conversation around the parity of funding [between kids and grown-up TV],” says Oli Hyatt.
“In the meantime studios need to dig deep and use the tax credit to attract work and investment from around the world and push forwards with new technologies. There are more opportunities for success than ever if you can get your content made.”
Programme spend at the commercial PSB channels has declined drastically in recent years, particularly at Channel 4. The problem was compounded by decision to ban high fat salt and sugar food advertising during kids programmes. Meanwhile, the BBC, which remains the dominant force in UK-originated kids TV, is facing its own issues ahead of the renewal of its Charter. As part of the Delivering Quality First proposals, the money for kids has already declined and the combined CBeebies and CBBC budget decreased 4% to £105 million (US$163 million) for 2014/15.
No-one blames the CBeebies or CBBC, but there is no sense the budget cuts will stop against a background of licence renewal
Unnamed indie boss
“No-one blames the CBeebies or CBBC, but there is no sense the budget cuts will stop against a background of licence renewal,” says one prominent indie boss.
Animation UK founder Oli Hyatt says: “Childrens at the BBC do everything they can for the unreasonable [low] share of licence funding they are given. They stretch every penny, which in turn puts huge pressure on the industry serving them, leading to a loss over sixty-four per cent of original hours for children. They now make less content than before they had two dedicated channels. Add to that the ninety per cent funding decline in the commercial PSB, and the environment is as unstable as I’ve ever known it.”
A PACT and Ragdoll Foundation report issued earlier this year provided more sobering reading. Spending on kids programming by commercial PSBs fell by 95% between 2003 and 2013, from £58 million to £3 million. The BBC, meanwhile, cut first-run hours by 59% across the same period.
The environment is as unstable as I’ve ever known it
Without a vibrant commissioning landscape, many producers argue the positives from the tax breaks are rendered redundant.
Another possible issue with the new tax regime is broadcasters factoring tax benefits into the proportion of budgets to which they will commit. Producers say thus far the broadcasters have played fair, although one reports a case in which the channel was offering less money because the series would qualify for tax relief.
The tax break also does not benefit producers across all genres. “Where programming is fully funded, e.g. factual entertainment, it really just enables the broadcaster to commission more content because they expect you to contribute this to the production finance, but some are offering to cash flow this for you,” says Genevieve Dexter of Serious Lunch.
The crux of the issue is the lack of commissioning options aside from the BBC. Producers who spoke to TBI on an non-attributable basis bemoaned this lack of plurality. One, who has worked for indies and the US-owned channels says: “Fundamentally the ecosystem of kids TV in the UK is broken. The only game in town for significant and meaningful original programming is the BBC and no other PSBs are putting their weight behind kids programming. That is the single biggest failure weighing on the kids sector.”
One of those publicly leading the lobbying efforts is Anne Wood, who as a veteran indie producer and the creator of Teletubbies and In the Night Garden, and more recently Abney & Teal and Twirlywoos (left) for CBeebies, is well placed to comment.
“If we don’t do something, we will lose all of the value of kids TV in this country,” she says. “When PSBs were allowed to buy-in rather than commission, it struck a death blow. Costs are going up, and prices [paid] are going down.
“Then we get to a situation where the government felt a mistake had been made, and hence we get the tax break. However, that does not address the problem of diminishing [programming] budgets.”
Kids channels in the UK are required ensure that 50% of their programming is of European origin, a requirement PACT says is likely not being met and needs to better policed. Irrespective of compliance in terms of hours, channel insiders privately admit this acquired programming is also often relegated to graveyard slots to clear more attractive parts of the grid for US-originated fare.
Nickelodeon has put some money into UK projects including Sixteen South-produced Lily’s Driftwood Bay and Cartoon Network and Disney also have the odd UK-originated show, but all are mostly reliant on US fare and no producer cited any of them as a serious investor in UK-originated content. PACT says 14% of the pay channels’ output is UK-originated.
The lobbying effort is not, therefore, focused on foreign-owned pay TV channels, but getting the commercial PSBs to do more.
Producers agree Channel 4 is not really at the races; it has almost completely pulled out of programming for younger kids. There was hope that after 2012’s The Snowman and the Snowdog film it would go on to at least make a series of specials, but that never happened as it chose to focus on making shows for older youth demos with series such as Youngers.
The broadcaster now plans to stop ordering any bespoke content for 10-to-14s and has notified Ofcom it will favour ‘general commissions’ that reach this demo, as well as a broader audience. It recently cited three recent commissions that exemplify its strategy, a trio of reality series: The ABC, Educating Cardiff and Naval Cadets.
Channel 4 tiptoed away a while back, they say there is spending on kids and youth, but there is nothing that we can see
Mike Watts, PACT and Novel Entertainment
“Channel 4 tiptoed away a while back,” says Pact and Novel’s Mike Watts. “They say there is spending on kids and youth, but there is nothing that we can see.” Another seasoned kids producer says: “Channel 4 is invisible”.
The jury is out on ITV’s commitment to kids. Having been a major player in a duopoly with the BBC, the commercial broadcaster gradually scaled back, taking with it tens of millions of pounds a year in investment, which was never replaced.
However, it has reintroduced a Saturday morning studio-based show with Scrambled, its first since Ministry of Mayhem in the mid-2000s. Furthermore, its recent success with Mr Bean: the Animated Series (right) and Thunderbirds have UK producers hoping it is back commissioning.
The production community is watching Thunderbirds in particular, with its success or failure seen as a key factor in whether ITV will commit to kids.
“We’re looking to see if it will continue to fund to the same extent going forward,” says Tony Collingwood.
Others are sceptical that Thunderbirds is a positive signal. “What is it other than a reworking of a successful show from the past,” says a producer who has made shows for both ITV and the BBC. “The corporate thinking is ‘that will be a safe bet; let’s do what worked before’. People making original programming don’t think like that.”
The lack of information from ITV on kids is a problem. “We want to know their plans,” says Watts. “They stopped preschool to concentrate on 6-to-11s, which is fine, but what is their policy? There has been silence on where they stand, there is no clarity.”
Another producer says the problem at ITV and Channel 4 is that there no-one championing kids TV within the organisatons. There is also frustration that the broadcasters are missing a trick by not fully backing kids TV. “Why not run a commercial version of CBeebies,” says one channels expert. “ITV, for example, has really been polishing its brand recently, but hasn’t applied that to kids. The advertising value of a true commercial equivalent of CBeebies would be huge.”
Channel 5 has its popular Milkshake strand, but producers are gloomy about the prospect of many commissions after Nickelodeon-owner Viacom bought the channel last year. “Channel 5 is commissioning a lot of programming with zero contribution to the budget and asking for ten per cent of the UK merchandising,” says one indie chief working in the UK.
Others say it will simply become a shop window for Nick fare and it already plays shows including Dora and Friends. One copro between Channel 5 and Viacom has been announced since the Viacoom takeover, Nella the Knight.
Meanwhile, the digital opportunity is limited ,in the short term at least. Watts says: “As much as we’re excited by Netflix and Amazon, they are not commissioning originals from the UK. It’s very exciting to have them in the market, but if we just sit and wait for them [to start commissioning] it isn’t healthy.” The success of digital platforms has also accelerated the decline of DVD and home entertainment.
As much as we’re excited by Netflix and Amazon, they are not commissioning originals from the UK
Ragdoll recently supported a successful UK exhibition tracking the history of kids TV. “We’re living in different times and those days are gone,” Anne Wood says. “But we do need to think about what kind of infrastructure we can build.”
Without some action, many programme-makers agree, the ‘bust’ case is easier to argue than ‘boom’.