Art For Art's Sake or Selling Up

European Journal of
Communication
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Art for Art's Sake or Selling Up?

Simon Faulkner, Adam Leaver, Farida Vis and Karel Williams
European Journal of Communication 2008 23: 295
DOI: 10.1177/0267323108092537
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Art for Arts Sake or Selling Up?

Simon Faulkner, Adam Leaver, Farida Vis and Karel Williams
A B S T R A C T
This article explores the discrepancy between the vision of the broadcast
producer as a creative in pursuit of art for arts sake and current trends
within the broadcasting sector, where large super-indies dominate and
smaller producer-owners become rich by selling up. At a theoretical level,
the article explores how representations of the producer as artist frame the
historic and current policy debates, so that liberating the creative has
become the key policy object. At an empirical level the article shows how,
in response to regulatory changes, a slow-growing market and the influence
of external financial backers, the sector has become dominated by acquisitive super-indies, who buy small and medium-sized firms from willing sellers who treat their firm as a real option to be cashed in the future, because
selling up can make them a millionaire.
Key Words cultural entrepreneurs, selling up, super-indies, wealth,
independent television production
Adam Leaver is a researcher at the Centre for Research on Socio-Cultural Change

(CRESC) and a senior lecturer in financial and digital innovation at the
Manchester Business School (MBS), Innovation Management and Policy Division,
Manchester Business School, University of Manchester, M15 6PB, UK [email:
adam.leaver@mbs.ac.uk]. Simon Faulkner is a senior lecturer in the history of art
and design, Manchester Metropolitan University. Farida Vis is a researcher at the
Centre for Research on Socio-Cultural Change (CRESC), Open University, Milton
Keynes. Karel Williams is co-director of the Centre for Research on SocioCultural Change (CRESC), and professor of financial and digital innovation at the
Manchester Business School (MBS), University of Manchester.
European Journal of Communication Copyright 2008 SAGE Publications
(Los Angeles, London, New Delhi and Singapore) www.sagepublications.com,
Vol 23(3): 295317. [10.1177/0267323108092537]
295
E U R O P E A N J O U R N A L O F C O M M U N I C AT I O N 2 3 ( 3 )
Producers occupy a special place in broadcasting. In a sense they are its

artistes, they create the programmes, and their acts determine what reaches
our ears. (Beveridge Committee, 1949: 128)
Kirsty Wark last night became a million pounds richer after IWC, the TV
production company part owned by the BBC presenter and her husband,
Alan Clements, was sold in a deal that could fetch up to 14 million. The
Glasgow based independent company has been bought by RDF, a major
independent TV maker whose shows include Wife Swap, Faking It and
Ladette to Lady. (The Scotsman, 2005a)
This article explores the discrepancy between the representation of the television producer as an artist in pursuit of art for arts sake and the recent
actions of independent television producer-owners who sell up their production companies for significant sums of money to large super-indies.1
Recent examples, such as the sale of IWC to RDF, which made multimillionaires of owners Alan Clements and Kirsty Wark, illustrate the
pecuniary interests of producer-owners and question the representation of
the sector as a creative space that liberates the artist from the financial
and administrative pressures at the BBC or ITV. Our key argument is that
the representation of the television producer that dominates public discourse and informs government policy is influenced by Romantic notions
of art and the artist, but is now out of step with the current behaviour of
individual television producer-owners, and so broadcasting policy must be
reassessed. This argument is developed over four sections.
The first section presents a background discussion on the Romantic
binary division between art and commerce, which provides a frame through
which the position, role and motivations of the television producer are now
interpreted. We show how producers themselves, academics and policy formers have all, in different ways, used this frame to construct a binarism
whereby the motives and competences of producers are not those of administrators or managers. The second section builds on the work of Bourdieu
and Velthuis to offer an alternative account of the television producer, which
highlights the fractured and complex motivations of creative workers. The
observations of these two authors provide us with some latitude to explore
the financial motivations of producer-owners in the cultural industries. The
third section empirically demonstrates the expansion of the acquisitive
super-indies and explains how the convergence of production market and
financial market developments facilitated this process. Finally, the fourth section argues that for every eager buyer of small independent television companies there is a willing seller aiming to cash in on a one-off business
opportunity for financial enrichment by selling up. For independent
296
FAULKNER ET AL.: ART FOR ARTS SAKE OR SELLING UP?
producer-owners, the temptation to sell is nearly irresistible because income

from operations may support a moderately affluent lifestyle, but selling up
could realize a very great deal of money indeed. As such, this article questions the conventional representation of independent production companies
as small, creative spaces that liberate the producer from the administrative
and financial responsibilities found in large bureaucratic organizations like
the BBC and instead suggests that production firms are often treated instrumentally as a real option to be cashed in the future.
Art for arts sake and liberating the television producer
According to sociological studies, it was during the Romantic era that the
principle of art for arts sake and the binarism of art vs commerce took
hold (Williams, 1961, 1965). The principle asserted that an artists creative identity and psychological disposition excluded him or her from an
interest in commercial or administrative matters, forming a binary distinction between Aesthetic Man and Economic Man (Williams, 1965:
54). This distinction later became the principle of legitimacy that asserted
the primacy of aesthetic values above all others and exalted a bohemian
lifestyle that committed artists to itinerancy, indiscipline, libertarianism
and unconventionality (Batschmann, 1997; Hewison, 1981; Wilson,
2000). The result was a rhetorical opposition between the venerable artist,
on the one hand, and pernicious institutional and commercial forces, on
the other, whose values were perceived to be anathema to artistic freedom.
The principle of art for arts sake, then, has a dual character: it
claims to define the instincts, motives and desires of artists and other creatives, but also states that creatives only prosper when left to their own
devices, in a world where the defence of artistic freedom is a permanent
struggle against outside forces that seek to colonize and subvert the aesthetic. Thus, in the 1850s, the principle of art for arts sake was mobilized to criticize the values and practices of dominant institutions, such as
the Academy in the world of fine arts, which sought to impose its will and
taste on other artists (Batschmann, 1997; Mainardi, 1987; Williams,
1981: 6681).
These Romantic visions of the artist in pursuit of art for arts sake
recur in a range of commentaries on television producers, and serve to reinforce a policy environment that seeks to liberate the producer from financial and institutional constraints. The television producer is often
represented as an artist or original author characterized by a reluctance to
compromise artistic values and an ambivalence towards the forces of commerce and administration. This vision is developed through two different
297
types of study. The first comes from academic historical accounts of the
BBC, which shed light on the self-images of television producers and,
through a series of empirical examples, depict their position within the
BBC as truculent, unruly auteurs railing against the constraints of administration. The second set of literatures examined are produced by cultural
studies academics and other commentators who locate the discussion of
producers within a broader context of theorizing the cultural industries,
where the principle of original author dominates understanding.
It is clear from numerous studies of the BBC that producers themselves have played a key role in perpetuating the idea that they are principally creatives. Thus, Goulds (1983: 101) account of writer and producer
Colin MacInness advice to a colleague illustrates the way in which producers treated the BBC as a resource to be exploited out of financial necessity, and that work for it should not be confused with real art. Similarly,
Robert Hewisons (1981: 40) book notes the obstructive practices and
bohemianism of producers inside the BBC as they attempted to defend
artistic integrity and independence by stay(ing) out of the office as much
as possible. For others, like Burns (1977), these behaviours reflect a creative mindset that precluded producers from organizing even basic administrative tasks. This resulted in chaotic peak loading every Friday as all
producers rushed to record their show before they went on holiday. Similar
points are made by Jeremy Tunstalls history of television producers within
the BBC, who during the 1960s and 1970s, concentrated mainly on making programmes, with much less thought given to where and when programmes would be scheduled (Tunstall, 1993: 187).
These accounts of television producers as artists with little interest or
competences in administrative tasks are reinforced by cultural studies literature that seeks to understand broadcasting as an example of author-led
cultural industries. Thus, Marc (1989) and Marc and Thompson (1992)
assert that producers are televisions auteur, while for Caves (2000: 40),
they are cultural producers incapable of even thinking about committing
the character of [their] future work, let alone setting forth a plan in quantitative detail. For Caves (2000), the cultural producer is a unique creative
individual, fundamentally different from the motley crew who constitute
the rest of the industry.
Similar themes are articulated in recent non-academic studies, which
adopt the spirit, if not the letter, of these observations. Leadbeater
and Oakleys (1999: 15) television producers are cultural entrepreneurs
displaying anti-establishment, anti-traditionalist and individualistic
personalities, which predispose them to pursue self-employment. This
personality does not mean producers eschew financial enrichment, but
298
whatever riches they do earn should be understood as deserved reward for

sole-authored artistic endeavour (Leadbeater and Oakley, 1999: 15). At the
same time, the authors engage in a kind of anthropomorphism as the independent firm takes on the characteristics of the cultural entrepreneur
the good, nimble, creative indie which is often counterposed against the
bad, large, slow-moving, bureaucratic broadcaster. This binarism now
dominates in the discourse of many current policy documents.
The idea of the producer as an artist pursuing art for arts sake dominated both the Beveridge Committee (1949) and Annan Committee (1977)
reports. For Beveridge, producers were artistes whose chief impulses were
perceived to be creative and whose artistic output suffered when overburdened with administrative chores (Beveridge Committee, 1949: para. 433).
For Annan (1977: 140, 145) producers were creative officials as well as creative professionals whose artistic sensibilities limited their ability to perform basic administrative tasks or manage finances. The Annan Reports
solution was to develop a new commission-based channel that might liberate producers from the bureaucratic demands of the BBC, and resulted in the
creation of Channel 4 in 1982. The liberation of the artist was also one of
the concerns of the Peacock Report (1986), which recast the independent
producer as creative entrepreneur and resulted in the 1990 Broadcasting
Act ruling that all public service broadcasters must outsource a minimum of
25 percent of broadcast hours to independent companies. This ruling goes
much further than European legislation, which requires broadcasters to
reserve a minimum of just 10 percent of their transmission time or budget
for European works created by independent producers (Television Without
Frontiers Directive, 1989: Article 5).
The result is a changing UK broadcasting policy that seeks to hand
greater power and control to independent producers, who are represented as
a marketplace of ideas and motor of creative change (House of Lords, 2005:
paras 255, 259). The Department of Culture, Media and Sports 2001 paper
Culture and Creativity: The Next 10 Years thus proposes a policy of releasing
core cultural institutions from bureaucratic control (which) can stifle creativity (Department of Culture, Media and Sport, 2001: 36). This policy
includes a range of interventions, such as the establishment of venture capital funds and flexible rents to liberate and support cultural entrepreneurs
(Department of Culture, Media and Sport, 2001: 334). More recently, the
2003 Communications Act established a new code of conduct that gives
independents much greater control over secondary rights, boosting opportunities for new revenues from foreign sales, repeat showings and sales in
ancillary markets (Financial Times, 2004). The BBC was also pressured by
regulators to open up a Window of Creative Competition (WOCC), which
299
not only guarantees 25 percent of its qualifying hours for independent

production but also opens up a further 25 percent for competition.
The financial interests of the producer
New policy interventions in the television sector are driven by arguments
about the need to liberate the innovative producer from the constraints of
administrative and financial tasks, which supposedly obstruct the creative
process. However, the representation of the artist and artistic output that
underlies this vision has been challenged by the work of Bourdieu, on the
cultural field, and Velthuis, on pricing in art markets.
For Bourdieu (1993), all cultural objects have both a symbolic and
commercial character. The dual personality of the cultural object suggests artists often harbour very real financial desires and motivations
despite appearing to submit to an aesthetic of artistic purity and commercial insouciance. Bourdieu asserts that artists are mainly deeply selfinterested, calculating, obsessed with money and ready to do anything to
succeed (Bourdieu, 1993: 79), and that the rhetoric of art for arts sake
should be seen as an attempt by cultural producers to build their symbolic capital through their disavowal of commercial interest (Bourdieu,
1993: 79), which can be converted into economic value at a later date.
Consequently, for Bourdieu, the denegation of commercial interest is
often a sound, long-term commercial strategy for the artist in the field
of cultural production because their long-term reward will critically
hinge on, pretending not to be doing what they are doing (Bourdieu,
1993: 75).
What lies beneath representation is also the theme of Velthuiss
(2005) book Talking Prices, which attempts to understand the pricing
strategies of art dealers. Continuing the Bourdieusian theme, Velthuis
highlights the way in which avant-garde art dealers gain symbolic or reputational value by suppressing the commodity character of the works of art
that they sell. Velthuis argues that the consideration of commercial activity as something profane structures the geography of the avant-garde
gallery, with white cube style exhibition space at the front of the gallery
and an enclosed back room space where commercial transactions take place
(Velthuis, 2005: 2937). Thus, Velthuis argues that while society is compartmentalized into separate worlds of art and commerce, the opposition
of the sacred and the profane does not inhibit the marketing of art, but is
incorporated within the very marketing apparatus (Velthuis, 2005: 52).
The artistic and the commercial exist in the same world, but the latter is
hidden to keep the former sacrosanct.
300
The idea that cultural producers are often money- rather than artisticallyoriented has circulated in the media since the early 1990s, when independent
television producers were the object of criticism. The Economist lampooned
independent television producers as Groucho Club members talking earnestly
about the price of designer clothes and second homes in Shropshire and
labelled them, Thatcherites of the small screen . . . beneficiaries of and storm
troopers for, her attacks on the BBC and ITV (The Economist, 1990). More
recently, Cox (2004: 61) announced an epochal shift in the sector:
The fundamental problem is that the centre of gravity in Britains programme-making community has shifted significantly. The definition of
personal success in television is now as much financial as creative. The
heroes of todays programme-making culture are admired for making
money as well as making programmes [. . . ] One of the most powerful
role models is the independent producer who builds a company to the
point where it can be sold for millions of pounds to a broadcaster or major
international media company, or whose formats are bought by the big
American networks. This is a relatively new model and one with a truly
subversive character.
Our aim is to continue this line of enquiry into the disconnect

between representation and outcome and look at two unexpected outcomes
in the sector: the growth of super-indies and the life-changing enrichment of a small number of producer-owners.
Unexpected outcomes
The growth of super-indies
The apprehensions mentioned in the preceding sections are sustained by a

steady stream of media stories about independent producers and presenters
who have become very rich by selling small and medium-sized companies
to larger competitors. In December 2005, an acquisitive independent television production company, RDF Media, bought out IWC Media for 8.4
million, making co-owners Alan Clements, a television producer, Kirsty
Wark, presenter of BBC2s Newsnight, and ex-television presenter Muriel
Gray instant millionaires (The Independent, 2005). Similarly, David Frank
netted 15 million when he sold 60 percent of his holdings in RDF itself
(The Times, 2005). Bob Geldof made a 6 million personal gain from the
sale of Planet 24 to Carlton Communications in 1999 (Broadcast, 2004)
and Chris Evans made a 75 million individual gain from the sale of his
Ginger Media Group to the Scottish Media Group the year after (The
Guardian, 2000). More fabulously, at the height of the dotcom boom,
301
Table 1 Independent market 1993 and 2004

Share of sectoral turnover
1993
2004
No. of companies
Top 15
Middle group
Tail
1000
800
19%
61%
20%
30%
61%
9%
Note: Revenue = income from commissions and excludes programme format and merchandising sales.
Source: Mediatique (2005: 8).
when Telefonica Iberia bought the Dutch independent producer Endemol

(Financial Times, 2000), John De Mol as co-owner netted US$1.4 billion,
which made him the second richest man in Holland and among the 500
richest individuals in the world (Forbes.com, n.d.).
The sale of these companies suggests that the independent television sector is rapidly consolidating. Table 1 presents basic data on share
of turnover by type of firm in 1993 and 2004 and shows that over this
period the small production firms share of total sectoral revenues collapsed from 61 percent in 1993 to just 9 percent in 2004. By way of contrast, the share of the 15 largest independent companies has grown from
just 19 percent of the market to 61 percent over the same period. An
industry where the top 15 firms capture just over half of turnover may
still not be highly concentrated by the standards of capitalist oligopoly
in other industries where the top three to five firms often take a 50 percent
market share, but it is worth noting that 30 percent of the expected
820 million sectoral revenue in 2005 will be captured by just two giant
independent companies: Endemol UK and All3Media (Mediatique,
2005: 3). The task of our alternative business analysis is to explain the
motives and consequences underlying this process of consolidation,
which raises questions about the vision of small, creative production
companies interested in art not commerce.
Consolidation is the logical sectoral outcome when the overall market for independent television production has not increased hugely in real
terms since the early 1990s. As Figure 1 shows, despite compulsory outsourcing quotas, multi-channel television and a better deal for independents on secondary rights, total sectoral revenues increased by less than 25
percent from 631 million to 780 million in real terms over 11 years.
The top 15 firms revenues have increased largely at the expense of small
firms (or the tail) whose total real revenue fell by some 70 percent. As
such, we can conclude that large independent production companies are
taking an increasing proportion of a slow-growing market.
302
m real (2004 prices)
1000
800
70
600
234
400
385
200
126
120
476
1993
2004
Year
Top 15
Middle group
Tail
Figure 1 The independent television production market in 1993 and 2004

Note: Middle group and tail are Mediatiques definitions.
Source: Derived from Mediatique (2005: 8).
Multi-channel digital television has not been a huge opportunity for

digital producers because the main terrestrial channels still account for the
vast majority of the spend on first-run originations. A report by Oliver and
Ohlbaum (2003: 22) found that of the 3.4 billion revenues generated by
pay TV in 2001, just 100 million was spent on new UK programming.
Hence, in 2004, the main terrestrial channels (BBC1, BBC2, ITV1,
Channel 4 and Channel 5) accounted for 90 percent of the total spend on
new programming (OFCOM, 2005a: 4). Consumers are spending on digital television, but most of that subscription income is spent on sports and
movie rights: in 2002, sports and movie rights account for 68.2 percent of
the total programming spend of all digital channels (see Figure 2), and for
the largest, BSkyB, they accounted for 67.4 percent of total programming
costs in 2004 (derived from BSkyB, 2005: 14). Furthermore, outside sport
and film, imports and repeats are preferred because a typical digital channel keeps its costs at between 1500 and 2500 per broadcast hour to generate a profit. Oliver and Ohlbaum (2001: 7) found that roughly 510
percent of broadcasting hours on digital television are original productions, 2040 percent are repeats and 5075 percent are acquisitions from
other channels or imports.
The main revenue source for the independent sector comes from BBC
and ITV commissions, but this market is constrained because the BBC and
ITV keep most production in-house: the BBC has often struggled to meet
its 25 percent independent production quota, while ITV outsources just 30
percent of its production. Some opportunities arose for independent producers seeking commissions from the BBC due to the rise in licence fee income
303
Music
1%
Factual
2%
Leisure
4%
Childrens
4%
Shopping
5%
Adult
1%
Ethnic
0%
Other
0%
Entertainment
7%
Sport
News
8%
Movies
19%
Figure 2 Average programme spend per channel by genre for digital channels
2002 (in percentages)
Note: Based on a survey of 176 digital channels.
Source: OFCOM (2004: 30).
from 2.3 billion in 1998 to 2.8 billion in 2004 in real terms (2004 prices),
but ITV has fared much worse because advertising revenue declined as audiences fragmented in a multi-channel world. As Table 2 shows, net advertising revenues for the entire television sector dropped from a peak of 3591
million in 2000 to 3148 million in 2003. While there is some evidence of
an advertising recovery in 2004 (OFCOM, 2005a), commercial terrestrial
broadcasters have not benefited, and they, like many other broadcasters are
looking towards the acquisition of repeats or imported content where the
average acquisition price is approximately 10,000 for a one-hour broadcast
or a cost per transmission hour of 1000 if the programme is repeated 10
times, which is the industry average (Oliver and Ohlbaum, 2001: 8).
304
Table 2 Total TV revenues by source (2002 real prices) m
Subscription
Net advertising revenue (NAR)
Licence fee
Other
1998
1999
2000
2001
2002
2003
1451
3077
1725
238
1697
3241
1843
337
2186
3591
1883
408
2623
3442
1965
792
2968
3147
2224
648
3202
3148
2233
951
Source: OFCOM (2004: 22).
In such circumstances, with limited product market growth and constraints on organic growth, a business analyst would expect acquisitions
and consolidation. The timing and extent of consolidation is obviously
influenced by transaction-cost and resource-based concerns, such as
whether the consolidated firm can be run from one office or whether the
skills base in the acquired firm could add to the core competences of the
acquiring firm. But, these contingencies aside, the trend towards consolidation is unusually pronounced in the independent sector because all the
super-indies now have a turnover of more than 12 million a year
(OFCOM, 2005b: 12) and the majority are indirectly or directly connected
to the capital market. Shareholders and private equity backers both supply
the funds for acquisition activity and add new demands on firms for programming that generates a return on investment.
Some of the super-indies are indirectly connected to the stock market
via a giant firm corporate parent that sets budgets and targets in line with
stock market expectations. Fremantle is owned by RTL, with revenues in
2004 of 4.9 billion; RTL in turn is now 90 percent owned by Bertelsmann
AG, the leading German media group where the controlling Mohl family
planned an early flotation for Bertelsmann (Financial Times, 2006). Endemol
is owned by Telefonica Iberia, the leading fixed-line telephone utility in
Spain, Portugal and Latin America; Endemol is now individually listed following Telefonicas sale of 22.3 percent of its shares (Financial Times, 2005a)
and is likely to become an independent quoted company in due course. As for
the expanding medium-sized firms in the UK, The Television Corporation
(TTC), Ten Alps, Shed Productions and RDF Media are all stock market
listed in the UK and thus directly exposed to UK stock market expectations
about profit increases. RDF was floated on the AIM market for an estimated
50 million in May 2005 (The Guardian, 2005a), while Shed was listed
for a similar amount two weeks prior to that (The Guardian, 2005b). The
remaining medium-sized firms, including Hat Trick Holdings, Zenith
Entertainment, Shrine and All3Media, have private equity investment where
305
sales and profit growth is required by an owner who expects to sell at a profit
within five years.
After financialization, pressure from the stock market means that all
firms must focus on turning a return on invested capital (Froud et al.,
2006; Lazonick and OSullivan, 2000; Stockhammer, 2004). Listed superindies experience pressure to create programming that delivers a return.
For companies with private equity backing, the imperatives are the same,
when, as Kevin Grassby, director of private equity firm Sagitta Asset
Management revealed, the investment decision is determined by to what
extent the management is involved in the business for lifestyle as opposed
to shareholder reasons (Broadcast, 30 May 2003). Inorganic growth and
the exploitation of rights become the principal objectives of management.
Thus, David Frank, RDFs founder, commented after the companys AIM
floatation that the cash injection was, a currency that will enable us to
grow sustainably and more rapidly than we can as a private company. He
then noted that there were about a dozen companies we are interested in
buying after a float (The Guardian, 2005b). Likewise HIT, which specializes in childrens entertainment and is widely regarded as a takeover target, boasts on its website that it has the strongest portfolio of classic
properties and claims to be the fourth biggest childrens character licensor in the world (HIT Entertainment, company information, n.d.).
The stock market quoted super-indies are particularly interesting
because their public discourse for the capital market explicitly emphasizes
the primacy of shareholder returns through financial control over production, exploitation of rights and a disciplined acquisitions strategy. Here,
for example are two super-indie PLCs, Shed and Ten Alps, explaining
themselves (to investors and the market):
Sheds financial strength owes much to its ability to control costs in the production process and to hold on to and fully exploit all the underlying rights
to the programmes it produces. . . . Shed is mindful of the strategic advantages of acquiring other production companies and is aware of opportunities in the market. However Shed will adhere to the strict criteria it has set
itself of increasing shareholder value, creative fit and talent tied to the target company by ownership. (Shed Productions, 2005: 2)
Our plan is to be one of the key players in Britains growing independent
TV sector in which consolidation has a long way to go. From 2005
onwards, we aim to produce more content, own more rights and be more
active in their exploitation. . . . We will also consider acquisition deals, if
the valuations are right. From an investor relations perspective, we will
work at explaining our strategy to the larger funds. (Ten Alps, 2005)
306
Nearly 30 years after the Annan Committee Report (1977), the outcome within the independent sector is a corporate form of independent production with financial motives that were not anticipated when the liberation
of the creative producer was originally mooted. This is not to suggest there
is any mechanical connection between financial motives and controls and
creative output HBO in the US clearly combines financial control with
creative, quality programming. But we would note that the current generation of British super-indies have focused their efforts on formulaic output
that will not cost the broadcaster/commissioner too much. For example,
Shed focuses specifically on popular drama like Footballers Wives and Bad
Girls, where the business model is essentially to retain control over rights
and produce high-volume mass market drama with inexpensive talent.
Companies like RDF develop reality-based format programmes such as Wife
Swap and Faking It, which are cheap to make, often recommissioned for an
additional series and can be spun off overseas. In the case of HIT entertainment in childrens television, half the revenue comes from programmes like
Bob the Builder or Thomas the Tank Engine and the other half comes from consumer product licensing of dolls, models and other products that feature the
characters (see HIT website, at: www.hitentertainment.biz/hit/).
Such independent production firms where financial motives coexist
with low-cost programme formats are hardly creative spaces that liberate
the producer. In all this, the emphasis on creating and exploiting rights in
formats, programmes and merchandising also fits uneasily with any idea of
creativity involving the non-routine, the novel and the disruptive. As Alex
Connock, chief executive of Ten Alps Communications explained, [this]
business is about making money when youre asleep and you can do that
with rights (Financial Times, 2005b).
Producer-owners selling up
A process of industry consolidation logically requires willing sellers as well

as eager buyers (or at least the exit of some firms from the sector). In this
section of our business analysis, we turn from the super-indie buyers to the
usually smaller sellers. After considering the financial pressures and calculations of super-indie buyers in the last section, here we consider the financial opportunities and calculations of producer-owners in smaller or
medium-sized firms who are selling up. Our argument here is that, for
producer-owner figures like Alan Clements, selling up represents a one-off
opportunity for enrichment, which speeds the process of industry consolidation around the super-indies. Thus, OFCOM (2006: 56) identifies that
relatively small production companies with annual revenues below 12
307
million are much more likely to be takeover targets than to seek to acquire
other companies, while companies with 2050 million turnover are just
as likely to grow through acquisition as get approached for takeover. In our
view, the basic motive for selling up is supplied here by the contrast
between the modest amounts of income or dividends that can be drawn
from operating a small or medium-sized independent production company
and the much larger sum of wealth that can be realized by selling up as
part of the process of industry consolidation.
The most fundamental point is that business analysis shows that
there is a strong relation between firm size and what can be taken out in
the form of income for senior managers and dividends for owner shareholders. We have explored these issues in an analysis of chief executive
(CEO) pay in listed firms in the US and UK where there is separation of
ownership and control (Froud et al., 2006: 5464). The basic point is that
CEO salaries have increased hugely to more than 1 million per annum in
FTSE 100 giant companies with a turnover of 500 million plus; but
CEOs in medium-sized companies outside the FTSE 100 with turnovers
of 100 million or 200 million usually earn no more than 150,000 a
year. How do we explain this disparity? CEOs in giant publicly listed
firms have a structural position that enables them to skim a small percentage of revenue that flows through the company without obviously
damaging other stakeholders. But in medium-sized firms the payment of
seven-figure salaries could only come at the expense of profits, investment
or another stakeholders claim. If a company with 100 million turnover a
year is making a middling 5 percent operating profit return, the shareholders will generally not accept a CEO claiming a salary of 1 million (or
a sum equal to 20 percent of the profit).
Financial information for small and medium-sized privately owned
television production companies is very difficult to find due to limited
obligations for disclosure. However, it is possible to understand the limits
of realizing large financial fortunes through ongoing operations by looking at the accounts of the super-indies. Here we note two basic obstacles
to enrichment through operations: first, remuneration for top executives
through wages is limited by the relatively small size of the firm and the
modest profitability ratios of the activity; second, while distribution of
earnings through dividends has the potential to generate larger rewards for
those with a sizeable ownership stake, most super-indies do not distribute
much and prefer to retain earnings that allow them to make acquisitions
and insure against product market risk. All of this encourages a strategy of
build and sell up in small and medium-sized companies, which gives producer-owners a large one-off gain.
308
400
350
300
250
200
150
100
50
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
All3Media
Celador
The Television Corporation
Hat Trick
Ten Alps
RDF
Shed
Tiger Aspect
Figure 3 Pay for highest paid director in eight large super-indies

Source: FAME Database.
Note: Endemol is excluded in the interests of clarity, because they pay significantly
more than the other eight because of their larger parent and hence distort the graph.
If we exclude the two independent giants (Endemol and All3Media),

no independent television production company is large enough or profitable enough to pay seven-figure salaries to their CEOs and directors. The
smallest super-indies like Shed and Celador turned over only 14.9 million and 15.6 million respectively in 2004. Even large super-indies like
Endemol (97.4 million), All3Media (82.7 million) and The Television
Corporation (67.3 million) generate under 100 million in turnover per
year. As a result, none of the independent production companies pays
much more than 200,000250,000 on average per year to their CEO as
highest paid director, with the exception of Endemol, which paid out
approximately 4.5 million in 2004; and salaries of CEOs are not rising
rapidly, as Figure 3 shows.
Wages for top earners are also constrained by the modest profits generated by even the largest companies within the sector. As Figure 4 shows,
only The Television Corporation generated annual profits over 4 million
for several years in succession and most of the other super-indies are generating profits of 24 million a year with no strong upward trend,
despite acquisition. The stock market and private equity may hope for
profit, but average rates of profitability within the sector are modest. As
Figure 5 shows, the profit margin for a typical super-indie is around 5 percent, and is only considerably more when they deliver a hit product like
Big Brother for Endemol or Who Wants To Be A Millionaire? for Celador.
309
8,000
6,000
4,000
2,000
2,000
4,000
6,000
8,000
10,000
12,000
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
All3Media
Shed
Celador
Endemol UK
Hat Trick
RDF
Ten Alps
Tiger Aspect
Figure 4 Operating profit (,000) for nine large independent television production companies
Source: FAME database.
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
5.0%
10.0%
15.0%
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
All3Media
Shed
Celador
Endemol UK
Hat Trick
RDF
Ten Alps
Tiger Aspect
Figure 5 Operating Profit Margin (in percentages) for nine large independent
television production companies
Source: FAME database.
While margins can be higher when a firm has a smash hit, from an industry point of view the observable result is erratic profitability and modest
remuneration of directors.
Hypothetically, it is possible for individual producer-owners to
become far richer through dividend payouts if most of the modest profits
are distributed as dividends and individuals have a sizeable ownership stake
in the firm. Again, limited disclosure for small and medium-sized firms
means we have to take large super-indies as our proxy and interestingly we
310
find a variety of strategic and structural factors limit dividend payouts. Ten
Alps and Shed have never paid out dividends, Endemol paid out dividends
in just two of the nine years for which we have data (2.5 million in 1998
and 500,000 in 2000), between 2001 and 2004 RDF only paid out dividends once (1.5 million in 2004) and while Tiger Aspect has paid out on
four years out of six, in three of these years the amounts were fairly modest
200,000, 400,000 and 708,000, with 1 million being the largest
payout in 2004. We only have 2004 data for All3Media and Hat Trick
when neither of those companies paid out dividends.
In a speculative way, it is possible to explain this reluctance to distribute earnings; when retained they become a currency that can be used
in acquisition and a reserve against cash flow problems when programme
formats fail. Our data suggest that only The Television Corporation and
Celador have a history of consistently paying yearly dividends and the
recent misfortunes of both companies show the limits of high-distribution
strategies in an uncertain business. Celador realized 22.7 million
turnover and 4.8 million profit by 2001 on the back of their one major
hit, Who Wants To Be A Millionaire?, which generated 80 percent of their
revenues. Celador then paid out between 52 percent and 88 percent of
their profits as dividends between 2000 and 2004, leaving the firm with
little or no funds for diversification or acquisition when the one big hit lost
momentum. The companys revenues fell by 7 million and profits fell by
3 million in real terms between the peak year of 2001 and 2004, and the
company is now mooted as a potential (management) takeover target.
The super-indie examples show why producer-owners find it difficult
to achieve enrichment through ongoing operations in medium-sized firms;
and all this is even more pronounced in smaller firms, where revenues and
profits are lower and the dependence on one-off formats and projects is
more significant. However, it is possible to become rich by selling up.
Smaller independent production companies do not pay the kind of
200,0000 a year salaries drawn by the CEOs/highest paid directors in the
super-indies. Thus, prior to the IWC merger, Alan Clements, producerowner of the production company Wark Clements, paid himself just
75,000 per year, though his wife Kirsty Wark, who was both non-executive board member and co-owner, did pay herself 200,000 and pushed the
company 1 million into the red (The Scotsman, 2005b). However, smaller
independent production companies can make sole or joint owners much
richer if they sell up. Thus, Clements and Warks ownership stake in IWC,
the company formed after Wark Clements merged with Ideal World, gave
them both a share in the profits realized by selling the company. In
December 2005, Alan Clements, Kirsty Wark and two other non-executive
311
directors each got a one-off payment of 1 million when IWC sold to RDF
(The Scotsman, 2005a).
In independent production companies, the value locked up in the company can only be realized by selling up an ownership stake because such companies do not generate enough operating profit to make the producer-owners
millionaires overnight, though selling up can do that very easily. In technical
finance terms, the endeavour of operating the firm gives the producer-owner
the real option of selling the firm at a handsome price at some later point in
time. A real option is the right, but not the obligation, to acquire the gross
present value of expected cash flows by making an irreversible investment/
divestment decision on or before the date the opportunity ceases to be available (Brealey and Myers, 2002). The value of the company can be boosted by
management decisions to acquire programme rights or (as at Wark Clements)
to bulk up the company to obtain a dominant position in regional programming where BBC quotas guarantee a market.
Producer-owners can realize serious wealth by selling up and this
point emerges from the annual broadcast rich list published by Broadcast.
This list demonstrates the point that serious wealth comes not from creative activity per se, but from holding an ownership claim in one or many
firms whether as executive or non-executive, as creative or passive external investor. The rich list is constructed by adding together the total
wealth of UK broadcastings biggest earners, which includes realized gains
by selling out in the form of cash and personal assets, as well as the estimated fortunes of those with ownership stakes or high earnings in ongoing business concerns. Producer-owners are still a prominent presence in
the 2004 Top 100, though the rich list is distorted by individuals with
minor broadcast interests but large asset bases in other activities, such as
the DeHaan brothers in holidays and Viscount Rothermere and Richard
Desmond in newspapers, who take the top three spots. However, producerowners are still well represented and include a mix of relative unknowns
as well as famous on-screen personalities. The former grouping include
behind-the-scenes players like Simon Fuller at number four with an estimated wealth of 220 million, following the success of the Pop Idol and
American Idol format with his production company 19 Entertainment;
Elisabeth Murdoch at number 15 with 50 million from her Shrine
Entertainment indie and Peter Orton at number 18 with 35 million at
HIT Entertainment. The latter group include celebrities like Rowan
Atkinson, whose Tiger Aspect production company nets him an estimated
60 million; Chris Evans, whose sale of Ginger Media and current interest in UMTV realizes 30 million and Bob Geldof at 19 who sold Planet
24 and has a 1.7 million stake in Ten Alps. No fewer than 21 of the top
312
100 on the 2004 rich list were well-known on-screen celebrities with ownership
stakes in production companies, which is perhaps unsurprising given that
companies with links to creative talent have often managed to leverage
better returns from broadcasters (Mediatique, 2005: 9).
Becoming rich through building and selling a broadcasting company
is an outcome that is not as unlikely but just as rewarding as winning the
lottery, when in 2005 those at the bottom end of the broadcast rich list had
fortunes of 5 million. Of course, the timing of the sale is dependent on a
number of factors, such as the terms of the transaction, the tax consequences
of selling up and the producer-owners own perception of the future trajectory of the firm: whether a better price could be achieved at a future date
when more programme rights have been acquired or developed. What is
certain, however, is that to guarantee a payout in the end, it is important to
accumulate a suite of programmes that other people want to exploit and are
willing to pay for. The indie company is thus not necessarily the organizational embodiment of creative people, or a creative space that liberates the
artist, since many producer-owners have an instrumental relation to the
company, which gives them the option of selling out. We doubt whether
shifting the property rights regime in favour of the independent will move
us closer towards the original vision of an emancipated creative producer.
More plausibly, it will encourage a sector that is dominated by a few giant
firms who exploit property rights and outsource almost everything to a
workforce whose pay and conditions may often be poor. There are still some
500 plus one- or two-person firms (ITC, 2002: Appendix 1: 9) mostly
production-only operations subsisting on one or two commissions per year
and typically paid on a cost-plus basis (Mediatique, 2005: 89). But these
firms have already ceased to have any weight and significance in the sector
as a whole. In constant 2004 prices, the one-person band producers collectively had revenues of 385 million in 1993, which had fallen to just 70
million by 2004; so that such firms saw a 75 percent decline in revenues
over 10 years. The paradox is that the vision of small independent creatives
used by the pressure group Producers Alliance for Cinema and Television
and others to encourage government to extend the rights regime and open
up the broadcast market for independent production companies is likely to
end up with far fewer one-person operations or entrepreneurs mythologized in the rhetoric.
Conclusion
The scholarly arguments are important because they have very strong policy
implications. Since the Annan Committee (1977), independent production
313
has been encouraged on the assumption that breaking up the vertically integrated bureaucratic monoliths and encouraging independent producers will
liberate creativity. Unintentionally and unexpectedly, it has created a new
kind of corporate in the form of the financially motivated super-indie, which
is beholden to the capital market, and a new kind of producer-owner with
opportunities to sell up and become rich through an ownership stake. If legislation has proceeded on visionary rhetoric about the liberation of creative
producers, then more comparative ethnographic studies detailing the actual
role of producers could illuminate their quite different roles across genres,
institutions and indeed countries. Research in this area may go some way to
popping the bubble of visionary rhetoric that currently drives UK broadcasting policy.
The independent production company, therefore, does not so much
liberate the creative producer as enmesh the producer-owner in new financial instrumentalities, which, on current programming evidence, generates
as much chintz as it does art. In that case, if Ten Alps and Alan Clements
and Kirsty Wark are emblematic of a new order of financial priorities over
creative concerns, just why are we encouraging more independent production through output quotas and all the rest?
Note
1. Super-indies is a term coined by The Guardian (2004) to describe the emergence of large, powerful independent television production companies in the
UK, and now enters the vocabulary of official publications like OFCOM
(2006).
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Art For Art's Sake or Selling Up

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Art for Arts Sake or Selling Up?

Adam Leaver is a researcher at the Centre for Research on Socio-Cultural Change

Producers occupy a special place in broadcasting. In a sense they are its

FAULKNER ET AL.: ART FOR ARTS SAKE OR SELLING UP?

producer-owners, the temptation to sell is nearly irresistible because income

FAULKNER ET AL.: ART FOR ARTS SAKE OR SELLING UP?

whatever riches they do earn should be understood as deserved reward for

not only guarantees 25 percent of its qualifying hours for independent

FAULKNER ET AL.: ART FOR ARTS SAKE OR SELLING UP?

Our aim is to continue this line of enquiry into the disconnect

The apprehensions mentioned in the preceding sections are sustained by a

Table 1 Independent market 1993 and 2004

when Telefonica Iberia bought the Dutch independent producer Endemol

m real (2004 prices)

FAULKNER ET AL.: ART FOR ARTS SAKE OR SELLING UP?

Figure 1 The independent television production market in 1993 and 2004

Multi-channel digital television has not been a huge opportunity for

FAULKNER ET AL.: ART FOR ARTS SAKE OR SELLING UP?

Table 2 Total TV revenues by source (2002 real prices) m

Source: OFCOM (2004: 22).

FAULKNER ET AL.: ART FOR ARTS SAKE OR SELLING UP?

A process of industry consolidation logically requires willing sellers as well

FAULKNER ET AL.: ART FOR ARTS SAKE OR SELLING UP?

Figure 3 Pay for highest paid director in eight large super-indies

If we exclude the two independent giants (Endemol and All3Media),

FAULKNER ET AL.: ART FOR ARTS SAKE OR SELLING UP?

FAULKNER ET AL.: ART FOR ARTS SAKE OR SELLING UP?

FAULKNER ET AL.: ART FOR ARTS SAKE OR SELLING UP?

FAULKNER ET AL.: ART FOR ARTS SAKE OR SELLING UP?

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