Major studio theatrical product does not just dominate the UK market, it owns it. Fully 86% of the 2018 U.K. box office went to 103 major studio films, just 15% of the 684 films released. Unsurprisingly, films from the U.S. majors monopolize screen time in the multiplexes which account for the majority of the UK’s theatrical screens.
Independent films that do get theatrical releases are under tremendous pressure to perform. It’s “be good” or “be gone” after the first week of release, causing independent films to often struggle to stay in theatres long enough to make significant revenue. Add to this the fact that the UK has very high release costs and a very low distributor / exhibitor box office split and it is little wonder that it is incredibly challenging for local U.K. distributors to make money and to maintain the traditional 16-week theatrical window. As a result, widows are collapsing as local buyers move product through the downstream windows as quickly as they can to maximize revenues.
Most of this money will come from the various on-line windows (EST, TVOD, SVOD) and 1st and 2nd Pay TV windows. The physical video market is in steep decline and the Free TV channels buy very few independent films.
According to the European Audiovisual Observatory, the revenues in the UK physical home video market have dropped by 52.2% over the last five years, from $2.911 billion in 2013 to $1.135 billion in 2017. While sales on DVD and Blu-ray have steadily declined year-to-year, there are still significant sales that can be achieved for family-based titles, award nominated titles, franchise titles, and anniversary titles.
Instead of licensing independent films the Free TV Channels (BBC, ITV, Channel 4, Channel 5) fill their schedules with game shows, reality programming, in-house and commissioned TV series, and major studio films. However, sales of commercially viable independent films can happen in particular to Channel 4 and Film 4 which still have movie slots. While the BBC rarely buys independent films, they will acquire titles that fit their criteria of being “British,” have a popular theme, or are festival worthy. Selling catalog titles to Free TV to be played in conjunction with a relevant current event can also be a winning strategy for some distributors.
The UK continues to embrace VOD streaming services as evidenced by wider audience use year over year, predominately by young adults whose viewing habits include numerous devices across multiple platforms. Revenue from services like Netflix, Amazon, Sky Store, Google and Apple make up 70.9% of the market.
Netflix is the most popular SVOD service in the UK with 8.15 million subscribers at year-end 2017 followed by Amazon Prime (4.3 million) and NowTV (1.5 million). These three services make up 40% of households in the UK and represented $1.14 billion in revenue for 2017.
UK consumer use of online transactional video has enjoyed robust growth over the last five years. Figures from the BASE show that from 2014 to 2018 consumer spending rose 108%, coming at $336.7 million in 2018. Over 16.4 million people bought or rented home entertainment content in 2018, over 25% of the U.K.’s 65.1 million population.
For companies trying to license independent films to the UK, there are three types of buyers: First-tier independent distributors; Second-tier independent distributors; and sales agents. However, only the latter two categories hold much real promise.
First-tier independent distributors include Entertainment Film Distributors and Studio Canal along with the London offices of eOne, Lionsgate UK, and STX International. By-and-large, eOne, Studio Canal, and Lionsgate predominantly handle product that their parent companies have produced or acquired for North American or, in the case of select major studio films, for international release.
Second-Tier distributors (examples: Altitude Film Sales, Dogwoof, Kaleidoscope) are more likely to license an independent film for the U.K. While sellers may ask for a full theatrical window, the Second-tier distributor will give an estimate of what the windows are going to be in order to maximize revenue.
If a seller can't make sale to a First-Tier or Second-Tier distributor, then the next option may be a U.K. sales agent. Going with a sales agent may mean a film has been judged to not have the potential for a U.K. theatrical release. However, this is not always the case.
The very real difficulties encountered by U.K. companies that release independent films have caused many to scale back on the number films they handle. Some, such as Icon and Metrodome, have left the business. Others have reportedly decided not to do theatrical releases anymore because of the expense. All, it seems, are re-evaluating their business model as the UK audience moves to access more entertainment product through online services.