UK film and TV content creators in the sights of foreign buyers

Over recent years, the UK film and TV industry has experienced rapid growth, much of this driven by the influx of streaming services and the capital they have helped bring to the sector. This boost helped to propel the industry on, even amid the disruption of the COVID-19 pandemic – which forced the majority of production to a months-long standstill.

There is even an argument that the pandemic may have aided this growth, with time spent at home leading to a surge in streaming subscriptions. According to a report from BDO, streaming subscriptions in the UK surged by 50 per cent in 2020, with 31 million homes paying for services.

The strength of the UK film and TV industry has helped to attract inward M&A activity and investment, both from industry incumbents and market entrants. Netflix and Amazon are among the US content giants to have bought and commissioned UK content and set up their own studios here, while BDO has reported UK companies “are of increasing interest to US investment banks and private investors” as a result of their more predictable finances in the wake of the “streaming revolution”. The sector’s upturn also led to the emergence of genuinely competitive British streaming services, such as Britbox.

According to BDO, $1.87 billion (£1.5 billion) was spent on UK films during 2020, with 91 per cent of this being generated by inward investment. That year, UK studio-backed films had a 7 per cent share of the global box office.

The pandemic and the surge in streaming services have underscored a significant shift in consumer preferences within the film and television industry. This transformation is marked by a growing appetite for a diverse array of content, encompassing TV dramas, niche documentaries, general and specialist sports, and films of all genres.

This helped to drive frenzied dealmaking in the sector during 2021 (spurred on also, no doubt, by the overall upturn in M&A following the pandemic) as businesses in the industry sought to adapt and expand the kinds of content they could offer to viewers.

However, especially during 2022 and 2023, the sector has also faced a raft of emerging challenges, posing the question of whether the industry’s post-COVID growth trajectory and strong M&A marketplace will persist.

COVID boom fuels M&A

M&A across the media and entertainment sector boomed in the wake of the COVID-19 pandemic, at a time when many industries saw pent-up dealmaking demand culminate in heightened activity. However, the sector was one of the few to have experienced a genuine boost during the pandemic (alongside the likes of e-commerce), due to the growth of areas such as streaming during lockdown.

This resulted in a 72 per cent increase in M&A deal volume in 2021 (which saw 158 deals compared to 92 the year prior), according to PwC, who cited “flexible content consumption” (such as video streaming) and “investment in locally produced new film and TV content, as well as large scale international productions”, as being key growth drivers.

In 2022, Moore, Kingston & Smith cited TV and film as the most active area for dealmaking in the UK’s entertainment industry, contributing 38 per cent of the industry’s total deal volume during 2022 – the highest of any sub-sector.

While this contribution has slowed so far this year – with subsequent Moore, Kingston & Smith reports putting its share of entertainment dealmaking at 18 per cent in Q1 2023 and 27 per cent in Q2 – the TV and film industry clearly continues to play a major role in UK media and entertainment M&A activity.

Diversification

One of the key trends to emerge over recent years has a diversification of both consumer tastes and means of consuming media content. Amid a seemingly constantly growing array of streaming services and devices on which to watch (coupled with greater amounts of time spent at home during lockdown and since the post-COVID increase in flexible working), viewer tastes have evolved to encompass a wider range of media than ever.

The ubiquity of streaming sites and digital TV means that consumers now have instant access to everything from feature films and TV drama to documentaries, while the huge success of shows such as Squid Game has driven interest in international film and TV to new heights.

As BDO say: “Demand has increased massively, which has in turn impacted on the ways companies are creating content and the willingness of investors to buy into that content. The industry is more diversified than ever, with people consuming content in all manner of different ways on an ever-growing variety of platforms and devices.”

Driven by this, companies have increasingly used M&A activity to move into new areas of content production, diversify the range of content they produce and capitalise on the growing demand for a broad array of film and TV. During 2022, 23 per cent of M&A deals in the UK media sector were in broadcasting and content, according to BDO, who said that this was significantly driven by “media companies seeking to increase their catalogue of original content, sports and specialist programming.”

Central to this has been an uptick in deals targeting unscripted and factual content businesses, with streaming services having made documentaries increasingly popular. As a result, production companies specialising in factual content have attracted strong valuations.

In August 2022, production group Zinc Media raised £5 million in investment to acquire The Edge Picture Company in a deal valuing the company at close to a 9.5x profit multiple. The Edge, which has operations in London, Paris, Vancouver and Doha is renowned for its brand film making, having won more than 700 awards over its 15 years of operation.

Zinc Media CEO Mark Browning commented: “The Edge is a truly impressive business – highly-respected, sustainably profitable with a world-class reputation, and we are thrilled that it is joining the Group. The Edge will sit alongside Zinc Communicate, our branded entertainment, corporate film, publishing and audio business, and our award-winning TV businesses.”

“This adds further scale to our Group enhancing our creative, commercial and cultural ambition. It will enable us to increase our branded content offering in the marketplace, both on a domestic and international level, and move into new content markets including animation, e-learning and education.”

Emergence of regions

Crucial to the UK’s recent strength in film and TV has been the emergence of areas beyond London as production hubs. Over recent years, other nations of the UK, as well as cities such as Manchester (which is now home to the BBC’s headquarters) and Cardiff, have established themselves as major parts of the UK industry.

This has helped to drive an influx of investment and M&A activity from a growing pool of buyers that might previously have been focused on the major London-based studios that dominated the UK industry for decades.

As well as seeing firms based in the UK or with a UK presence seek acquisitions of domestic production companies based further afield, there have also been a growing number of acquisitions of regional companies by international buyers.

Last year, STV Studios, a Glasgow and London-headquartered TV production company, struck a deal to acquire unscripted television production network Greenbird Media. Since it was founded in 2012, Greenbird has developed the largest independent production network in the UK, producing shows including The Misadventures of Romesh Ranganathan for BBC 2 and Lego Masters for Channel 4.

While based in London, Greenbird has an extensive presence across the UK and this was a major factor in STV’s acquisition, with the buyer seeking to become the UK’s leading regions and nations production company. In addition to expanded bases in Glasgow and London, the acquisition also provides STV with bases in Belfast, Manchester, Brighton and Cardiff, which the company said would strengthen its “ability to take advantage of the continuing growth of production in the nations and regions.”

STV CEO Simon Pitts commented: Growing STV Studios into the UK’s number one nations and regions production company is one of our core strategic objectives. This transformative acquisition represents a major step towards that goal, adding significant scale and creative firepower to the group and immediately accelerating STV’s overall diversification in terms of both revenue and profit.”

Inbound investment

The UK’s renewed prominence has led to increasing levels of inbound investment into the sector from international buyers. Even prior to the pandemic, Netflix had created a UK production hub at Pinewood Group’s Shepperton Studios before announcing in 2021 that it would double the size of this base.

The company Vice-President of Physical Production for the UK and EMEA Anna Mallett said: “The new contract with Shepperton highlights our commitment to investing in the UK creative industry and will provide a wealth of opportunities and production jobs, from entry level to heads of department.”

In 2020, 91 per cent of the £1.5 billion spent on UK films was from inward investment, and this growing interest in the UK from overseas firms (whether industry giants or investment firms and banks) has translated to significant M&A activity – much of it helping to drive the development of the industry across the UK’s nations and regions.

In September 2023, Great Point Studios – the New York-based arm of US and UK group Great Point Media - acquired Seren Stiwdios (formerly Pinewood Studio Wales) in Cardiff from the Welsh government in a deal valued at £9.35 million, having previously leased the facility since 2020. The move was hailed as “yet another show of confidence for Wales' flourishing film and TV industry".

Wales’ Deputy minister for arts, sport and tourism, Dawn Bowden, said: "This is a very exciting time for the Creative sector in Wales - and Great Point Studios purchase of the studio and their planned investment is another show of confidence in Wales as a brilliant and established location for film and TV productions.”

Great Point Studios founder and chief executive Robert Halmi said: "Cardiff has a thriving creative community and offers highly skilled industry professionals, not to mention a beautiful setting for any location filming. With the continued strong demand for content, purchasing Seren Stiwdios and expanding our footprint in Wales was a natural next step.”

Popularity of sports continues to drive deals

Another crucial factor in M&A activity in the UK’s tv and film sector has been growing global demand for sport – which includes growing demand in the UK for international sports, international demand for UK sports and the increasing popularity of women’s sports.

UK viewers are taking a greater interest in international sports such as ice hockey, American football and basketball – a natural consequence of the internet and greater TV coverage making these sports more accessible. This has helped to drive dealmaking, such as through Viaplay Group’s acquisition of Premier Sports, which gave it the rights to broadcast the National Hockey League (NHL), as well as European football and rugby in the UK.

Women’s football has also seen surging popularity over recent years, spurred on massively by the success of the England women’s national team (the Lionesses) and the growing prestige and coverage of the Women’s Super League (WSL).

In 2022, England won the UEFA Women’s Euros. As well as boosting the game’s popularity in the UK, the success of the tournament overall has helped generate greater interest internationally – with the tournament becoming the most watched Women’s UEFA tournament in history. This year’s World Cup (which England reached the final of) also saw huge international coverage (although a significant degree of this related to the fallout surrounding former Spanish Football Federation President Luis Rubiales kissing Spain forward Jenni Hermoso after the final).

This, again, has translated to growing investment and M&A activity – with notable deals including the acquisition of ELEVEN Sports Network by UK sports streaming platform DAZN in July 2022. The deal, for an undisclosed amount, gave DAZN the broadcast rights for women’s football from six confederations, as well as live broadcasts from 90 FIFA associations.

Headwinds could temper growth

Gaming and VR threaten traditional models
While streaming is significantly more resilient in the current market, the ongoing emergence of gaming and virtual reality as dominant forms of entertainment poses a distinct threat to more traditional forms of entertainment.

This is particularly acute for market segments such as traditional television and home video, which – while still seen as dominant market forces as recently as May 2022 (according to corporate finance firm Regent Assay) - have already seen a considerable amount of market share taken away by streaming

As the growth of streaming continues, and consumer habits in entertainment increasingly shift towards gaming and virtual reality, businesses like traditional TV studios, TV broadcasting houses, home video based businesses and retailers could find that they are losing out.

As Bain & Co. said: “interactivity is redefining media and entertainment—with the rising popularity of video games and the advent of social media, consumers have grown accustomed to being part of the content. Consumers shape content as amateur creators, they forge their own paths through virtual worlds, and they increasingly view online worlds as key life touchpoints.”

Industrial action takes its toll and could spread
While the actor and writer strikes are limited to Hollywood - with the writers’ strikes having since been resolved - and consequently largely impact the US industry, they could still have a significant impact on the UK industry.

Primarily, the two industries are deeply interlinked and, as a result, the disruption caused by US actors and writers having been unable to work for more than five months now will have had a considerable impact on production at UK film and TV companies, the talent pool that these firms can draw on for their productions and, as a result, the ability of broadcasters and streaming sites alike to offer viewers new shows and films.


The impact of US strikes on the UK industry has already been cited as a factor in the decision of long-running UK independent TV production house Hartswood Films to put itself up for sale. The studio, which has been operating since 1979, said it was seeking a buyer or investor in order to help capitalise on its rapid growth (which has been aided by streaming) and “strong production pipeline”.

A more secondary concern, but one that will no doubt have been in the minds of bosses at production studios, broadcasters and streaming services in the UK, is that industrial action in the US industry could lead to growing discontent among UK writers and actors and recognition of the gains they could make by potentially taking their own industrial action (this will become more acute given the favourable deal that the Writers Guild of America won in their dispute).

There have already been considerable shows of transatlantic solidarity between actors and writers in the UK and US, with the Writers Guild of Great Britain showing support for their American counterparts with a “Global Day of Solidarity” demonstration in London in June 2023 and subsequently welcoming the deal that unions won. Given this, and the gains made in the US, concerns must be acute in the UK industry that the scope for industrial action and resultant disruption to production is high.

Cost of living hits household spending
While streaming services saw huge growth in the UK during and after COVID-19 (accelerating an already existing trend), these gains have been significantly tempered by the cost of living crisis and its impact on discretionary household spending.

Tighter household budgets have seen millions of UK homes cancel their subscriptions to paid services such as Netflix and Amazon Prime and this has arguably been exacerbated by subsequent moves taken by streamers, such as raising prices and Netflix’s recent efforts to eliminate “password sharing” and limit certain popular subscription models to one household.

According to Kantar figures, the number of subscriptions to streaming services in Britain fell by more than two million during 2022, with 30.54 million subscriptions reported during Q4 2021, a number that fell to 28.46 million a year later.

A more recent report from Deloitte found that, while the number of subscriptions per person was still rising (2.46 in 2022 up to 2.62 in 2023 – 6.5 per cent increase), this was sharply down from the relative pace seen between 2018 and 2021, when subscriptions per person increased 60 per cent from 1.45 to 2.33.

Deloitte reported that one in five subscription-video-on-demand (SVOD) customers (21 per cent) had cancelled a subscription over the past year, up from 19 per cent a year earlier. The cost-of-living crisis was key here, with 27 per cent of those who had cancelled doing so due to the rising cost of the subscription itself (23 per cent in 2022) and 24 per cent cancelling due to rising costs in other areas of their lives (21 per cent in 2022).

Deloitte partner and global head of technology, media and telecommunications research Paul Lee said: “Churn is rising and continues to be a significant challenge for SVOD providers at a time when there is growing pressure for services to become profitable, mostly via the lever of increasing subscription prices. This comes at a time when consumers are continuing to be impacted by cost-of-living pressures.”

“In order to reduce levels of churn, we may see more SVOD platforms teaming up with other media, telecoms, or financial providers to offer bundled deals; securing new and existing users in longer-term contracts. Meanwhile, a continued focus on producing a diverse range of high-quality content that is accessible for all consumers will be key.”

It's not just streamers, however, that are being hit by cost of living. The fall in subscriptions is also being felt in digital TV and with satellite TV subscriptions (according to PwC, 20 per cent plan to spend less on satellite TV subscriptions and mobile phone contracts), while the cinema industry (already catastrophically impacted by COVID-19, the rise of streaming services and the growing trend for films to go straight to streaming or have only limited theatrical runs) will also be hit – with 34 per cent of consumers polled by PwC saying they will spend less on going to the cinema as a result of rising costs.

Tailwinds continue in spite of challenges

While the entertainment industry no doubt faces an uncertain future when faced with economic chaos, industrial action within the sector and (for certain major segments of the market) the threats posed by other, emerging forms of media, the sector has, nonetheless, demonstrated considerable resilience in the face of these challenges.

In 2022, as geopolitical and economic upheaval soared as a result of the invasion of Ukraine, BDO says that the deal volume of M&A transactions announced in the UK’s media and entertainment sector fell by 7.3 per cent compared with 2021,

However, despite this drop, the sector showed remarkable strength given the severity of the headwinds that it faced, with deal volume still remaining above the five-year average, while 2022’s deal value surpassed 2021’s total by 67 per cent.

Much activity within the broader sector, as tracked by BDO, occurred within Marketing Services, Advertising & PR (49 per cent) - significantly driven by continuing growth in the advertising sector – but broadcasting and content was the second most active segment, with 23 per cent of deal volume. BDO said: “Strong demand for fresh content is propelling companies to build their content library or pursue new revenue streams or joint ventures to maximise market opportunities.”

This strength means that, even though the challenges are considerable, optimism is high. In a 2022 report by PwC analysing the sector’s prospects over the coming years, it is forecast the the UK media and entertainment industry will see “robust long-term growth forecast over the next four years” and reach a valuation of around £97 billion by 2026, with a compound annual growth rate of 4 per cent.

PwC says that, while investor confidence may have softened amid the emerging headwinds, M&A in the sector is expected to broadly continue along the upward trajectory seen during 2021, when deal volume increased 72 per cent. Despite the impact of the cost of living crisis on streaming sites and digital platforms, PwC still expects these businesses to cement their position as key growth drivers across the wider sector.

PwC Strategy Partner Dan Bunyan commented: “Despite the economic headwinds, the UK’s entertainment and media industry has yet to take cover. That’s because while there’s no denying the short-term uncertainty in the market, there is greater confidence in the long-term direction of the industry.”

“This is reflected in the record numbers of deals that took place last year. While investor confidence has slightly softened in the face of economic headwinds, we still expect high deal volumes in the years ahead.”

Crucially, in the face of challenges posed by the prevailing headwinds, the best thing that many companies in the entertainment industry could do is continue to make acquisitions that help them to diversify, tap into emerging trends and new revenue streams and, as a result build resilience in the face of a changing entertainment landscape.

As Dan Bunyan adds: “It's clear that the global shift in consumer behaviour is pushing companies to accelerate new digital revenue streams, collaborate, or make acquisitions to fuel growth.”

“While the current economic headwinds may cause some businesses to rein in spending in the short term, I believe brands who take a long-term view and keep investing in marketing during this down period will be in a prime position for growth when macroeconomic conditions improve.”

Share this article

Latest Businesses for Sale

---

---

---

View more businesses for sale