ITV Studios was recently described as a “crown jewel” by the CEO of its parent company amid heated speculation around its future. Richard Middleton talks strategy, M&A and next moves with MD, Julian Bellamy.
ITV Studios (ITVS) has provided some much-needed spark for its commercial broadcast parent over recent years, as the allure of linear networks dim and the potential afforded by global production shines ever brighter.
So perhaps it’s no surprise that ITV CEO Carolyn McCall recently described the production and distribution division – which spans some 60 companies in 13 countries – as a “crown jewel” of its operations.
Whether or not ITVS will join the ongoing consolidation trend remains to be seen – more on that later – but for MD Julian Bellamy, it is not the focus. “The thing I worry about above all else is narrowing the odds of coming up with more hit shows and attracting the very best talent,” he tells TBI.
The strategy to do that was largely revealed at the end of 2021 and revolves around three key pillars: expanding scripted; growing formats; and expanding ITVS’s business with streamers.
It is resulting in an evolution of sorts: ITVS revenues have moved from being around 70/30 in favour of unscripted to around 60/40 today, and Bellamy says the aim is to “close that gap” to parity.
He is bullish on the scripted front and says the company is “well on track” to achieve its ambition of quadrupling drama from the 100-hours produced in 2019/20 by 2026.
ITVS might not have been as acquisitive as some of its Europe-based rivals, but it has made some big plays – most notably by securing Nicola Shindler and her Quay Street Productions on the drama front in 2021.
“You can see the fruits of the investments we made coming through now, with Nolly for Quay Street – that is the first of several dramas coming down the line from Nicola.”
Other deals that have seen ITVS provide incubation to talent – as opposed to direct takeovers – include the partnership with former Bad Wolf exec David P. Davis, whose 5 Acts Productions now sits under Patrick Spence’s studio, while Dominic-Treadwell-Collins has set up Happy Prince.
And while that trio might all be UK-based, Bellamy says he remains keen on European additions, with demand for European scripted remaining “pretty strong”. That, in turn, should provide opportunities for labels including Tetra Media in France, Denmark’s Apple Tree Productions and Italy’s Cattleya, which is behind Django for Sky and Canal+.
Bellamy points specifically to France and its moves to regulate local streamer spending as one reason why the current global slowdown of content investment might not bite as deeply as some have predicted. “All of that is driving quite a vibrant market overall,” he says, but admits that being at the “premium end” of the business helps.
That’s not to say per ep spend has to be huge, however. “Brilliant drama is a not a function of budget, just look at Happy Valley – it’s hardly Game Of Thrones,” he adds, highlighting how European drama producers might just find growth amongst the cuts.
“There’s also a bifurcation of the market – the producers that will flourish are going to increasingly come from the premium end of the market,” he says, because they have “the best relationships with talent and the best ideas that can command the best offers and prices. You’re relying on your own creative chops and the ability to operate at that end of the market.”
ITVS’s new factual flank
It takes us neatly onto factual and ITVS’s “new flank”, as Bellamy describes it, largely powered by the $126m acquisition of Plimsoll Productions. Joining fellow ITVS label Oxford Scientific, Bellamy says the Plimsoll deal was the result of ambitions to tap into the “real opportunity around so-called premium factual.”
“We’re only a few months in but we’re absolutely delighted and feel very confident. There’s enduring appetite over the medium term for very special, high quality factual storytelling that feels intrinsically global in its nature – and that’s what natural history does.”
It has also been an area of interest for streamers and the tie-ins with Plimsoll are clear: it produced Tiny World for Apple TV+ and has Giant World in the works, while it delivered Night On Earth for Netflix. Other shows, such as Hostile Planet, are now available on Disney+ having been commissioned by Nat Geo.
Such activity should help ITVS achieve its goal of driving streamer revenue from around 16% in 2021 to 25% by 2026, despite the current cooling of demand, and Bellamy reiterates that the spending cuts that make headlines aren’t as ubiquitous – or as deep – as some might believe.
“There’s not a week goes by with yet another story about change and evolution and consolidation, particularly in the US,” he says.
“But take a step back and there is still a very big opportunity here and our plan has always been about growing market share,” he says, highlighting that while Disney is cutting around $3bn from its spend, Netflix is holding steady and Apple TV+ appears to be increasing its spend.
“If you’re in my shoes, and in a world where Netflix is spending $17bn on content, that is still a very big opportunity and growing our share is a very big priority. Three or four years ago that was low single digits, now we are on course within a couple of years for it to account for a quarter of overall business.”
There is also more opportunity for ITVS to retain rights across all genres and Bellamy sees it as a situation that can work for all concerned. “The messages coming out of global streamers suggest there will be more appetite for [coproductions] as companies seek profitability. It’s a win-win if we avoid leaving value on the table.
“I feel optimistic over the next one two three years that we will see more creative deal making and it makes sense for all sides and it’s potentially very interesting for us as producers and distributors.”
Formats & futures
Then there’s formats, with ITVS flagship The Voice – acquired via its £355m (equivalent to $531m in 2015) deal for Talpa Media – now into 73 markets.
“Even though there is so much buzz around scripted, there is still nothing as powerful as an entertainment hit in the content business,” Bellamy says. “There are two parts – protecting and growing and nourishing the big brands, and then doing everything we can to launch new formats.”
The ambition is to increase the number of shows produced in three or more countries from 16 in 2021 to 20 by 2026, with entertainment also being supported by considerable digital pushes.
I don’t feel pessimistic about [consolidation] at all, it is just the natural cycle of creative talent
Whether streamers will increase revenue via format deals as they look to push dollars ever-further remains to be seen, but there have been few deals yet. Bellamy says, however, that the key element of his role is to avoid being “knee jerk” amid the current clamour around spending corrections.
“You have to tune out the noise to some degree and see the long game. Look at all the apocalyptic commentary around the initial Netflix correction on share price a while back [Netflix’s share price fell to $166 in June] and look at them today [$344 at press time].
“And every streamer has different goals. The challenge is more around the turbulence and change – execs will reorganise and there will be changes to budget spend, and then you have delays in budget spending and that can be a challenge for producers.
“But to counter that you have to rely on undeniable ideas and talent, and that in the end will punch through and get decisions made.”
As for further acquisitions, Bellamy says ITVS is being “very discipled and selective” but points to activity over recent years that drove the company’s European footprint. He adds that acquiring talent such as Dominic Treadwell-Collins is an alternative approach, as is the hire of former Shine exec Thierry Lachkar to lead operations in France.
“The size, scale and firepower outside of the UK in our group has definitely grown in the next five years and we expect that to continue,” he says. And it’s certainly something that caught the eye of competitors.
Bellamy is predictably reserved about commenting on speculation over a potential sale – or partial sale – of ITVS, but the allure for both buyer and seller is clear in a world dominated by belief in scale.
ITV CEO Carolyn McCall recently confirmed the company was reviewing its options for ITVS, with the sale of a minority stake seemingly its preferred choice. It is less clear which buyer that might work for and she also talked up the benefit of having a studio arm as “a big advantage.”
“It’s taken a while but [ITVS] is in a really good place. So I think anything we do has got to have real accretive value and has got to be very strategic, because it is a crown jewel and it works really well within ITV. So it’s definitely not for sale,” she added to The Times.
For Bellamy, it’s not a bad compliment to get from your boss, although sitting atop a crown jewel can’t do much for those worries around striking hit after hit.
It helps being in the UK, where the landscape remains healthy with new start-ups, despite the ongoing production consolidation, he says. “I don’t feel pessimistic about [consolidation] at all, it is just the natural cycle of creative talent – some stay, some jump and launch their own things that build and grow and they might be invested in or acquired.”
As for streamers and wider M&A activity, consolidation seems all but assured. “If you were a betting man, and I don’t think this is a crazy bet, not many of us would be surprised to see more consolidation. But who consolidates who and how it plays out is very hard to predict. It’s part of what makes this business so interesting.”