Little lather for soapies

While the creators of feature films receive incentives from government, the local television production industry is out in the cold.

Though SA's commercials industry has long been a success - it has grown consistently, wins accolades and punches above its weight globally - television production is under severe pressure, mainly because of the financial woes of the public broadcaster, SA's largest commissioner of local content.

SABC spokesman Kaizer Kganyago says in 2011, the broadcaster commissioned 142 productions. In November, it released 42 requests for proposals from which it expects 50 productions to be commissioned.

He says the SABC spent R649m on local content in 2010 and R684m in 2011. The latest proposals for new local content are reportedly worth R200m.

The broadcaster's spend has been cut from the more than R1bn it spent before it was plunged into a leadership crisis in 2009. Kganyago says investment in local content is based on schedule needs and available funds.

In response to the SABC crisis, the Independent Producers Organisation (IPO) conducted research to assess the value of the production industry and the amount that broadcasters spent on content. The study found that in 2008 the SABC alone spent R1,1bn on content commissioned from independent production companies. Pay-TV provider MultiChoice spent R200m and free-to-air channel e.tv spent R150m while foreign producers spent R200m.

Cutbacks cause serious decline in the industry

The SABC's cutbacks have brought about a serious decline in the industry.

In early 2012, producers submitted proposals for new series to the SABC, but so far, not one has received a response.

The CEO of production facilities provider Sasani Africa, Eileen Sandrock, says the broadcaster's woes continue to cause strain in the production industry. "Several companies have gone insolvent as a direct result of problems at the SABC," she says. "A number of programmes fell away altogether and the SABC continues to squeeze rates."

One of the most recent closures was that of TOM Pictures, headed by filmmakers Akin Omotoso, Robbie Thorpe and Kgomotso Matsunyane. The company, founded in 2003, produced several large shows including Soul City, Soul Buddyz, A Place Called Home and Nomzamo. However, the lack of new productions meant it could not continue operating and closed earlier this year.

Globally, the television industry is expected to enjoy robust growth.

According to the PwC Global Entertainment & Media Outlook 2012-2016 report, the global television and licence fee market will increase to US$290,6bn in 2016 at a compound growth rate of 6,2%. The global television advertising market will grow steadily at a rate of 6,6% to US$254,7bn, yielding a total value of US$545,3bn by 2016.

SA's television market is also on the rise, with both the SABC and MultiChoice reporting double-digit revenue growth in their latest financial results.

SABC suffers losses

In the 2010/2011 financial year, the SABC reported revenue of R5,3bn, 10% up from the previous year. However, it incurred a loss of R214m, an improvement from the R486m loss in the previous year.

In the year ended March 2012 Naspers reported that its subsidiary MultiChoice had increased revenue 11% to R7,27bn.

The remaining competitors in broadcasting, e.tv and subscription-based Top TV, are much smaller, making the production industry largely dependent on the SABC and MultiChoice.

Producers complain that the higher revenues earned by the broadcasters are not filtering down to them.

Plum Productions director and IPO executive committee member Richard Nosworthy says the number of people employed in the industry has fallen since 2009. "The SABC crisis hasn't disappeared; it's actually become worse," he says. "In 2009 there were 42 000 people employed directly in the production industry. A large number of these were experienced freelancers who were working around 100 days a year.

"Today these people are working 70 days or less, and a lot of them are working half as many days. In 2009 we had over 200 production companies but this number has also dropped," he says.

Nosworthy says the availability of cheaper, high-quality equipment is allowing less experienced people to enter the industry and also undercuts established producers who have already invested in expensive equipment.

"Five years ago you would have to spend R1m on a broadcast-quality camera," he says. "Now a film school graduate will spend R50 000 on a camera with a much higher picture quality and make the money back in a few months while charging a fraction of what experienced producers do.

Lower incomes, shrinking budgets

"People who used to earn R40 000 a month five years ago are now settling for work that pays them R10 000," he says.

Burnt Onion Productions MD and SA Screen Federation executive member Katleho Ramaphakela says shrinking budgets are one of the biggest challenges for production houses.

He says: "A production company can't really survive off one project anymore unless it's a recurring daily show like Generations or one of the seven soap operas in the country.

"A 13-part drama series may receive a R1m budget. The 10% production fee of R100 000 isn't really much for a year's work. In contrast a soap opera works on an average budget of around R40m/year," Ramaphakela says.

The long-running soap format is by far the biggest contributor to the country's production industry.

According to the IPO, R100m was spent in this segment in 2008.

Long-running drama series contributed R70m while short series and documentaries contributed R35m.

Only a handful profit

The problem, according to Ramaphakela, is that only a handful of large production houses receive the lucrative soap opera work. Most have to seek other revenue sources such as poorly paid corporate work and television commercials.

Despite having produced a show rated in the top 10, My Perfect Family, Ramaphakela says Burnt Onion is seeking additional sources of revenue. "The show did very well this year and the SABC commissioned a second season, which we are busy with," he says. "But you can't rely on one project to run a business and we're always looking to go into other avenues such as corporate productions and advertising."

The state of the television commercials sector is somewhat healthier than content production.

According to the Commercials Producers Association, 640 commercials were produced in the 2010/2011 period, which was 3,28% more than the previous year (growth was in double digits in previous periods). A total of R854m was spent on commercials in the period and that is growing each year.

Advertising remains relatively resilient as firms with big brands will always spend, especially in tough economic times, but Ramaphakela says producers with limited track records find it hard to crack this lucrative market.

"Commercials are a bit harder to get into because the advertising agencies have their preferred suppliers and the industry is not that highly regulated in terms of participation," he says.

Both Nosworthy and Ramaphakela agree that one of the biggest challenges faced by the local industry is the lack of monitoring of local content quotas by the Independent Communications Authority of SA (Icasa).

"There's a big issue around how well Icasa regulates," Ramaphakela says.

Poor monitoring

Poor monitoring allows broadcasters to screen the same content several times over and count it as part of their quota, he says. This means programmes aired for the first time make up only a fraction of local content.

This is detrimental to local producers who are not regularly commissioned for fresh content.

MultiChoice SA CEO Collins Khumalo admits it is cheaper to purchase content internationally than to produce it locally.

"Local content will always be more expensive because of production costs," he says. "When a US broadcaster commissions a programme for its platforms, it has to recover the full investment in that particular market.

"The additional revenue it gets from selling the content in markets outside the traditional markets, such as SA, is secondary or incremental revenue (hence cheaper)," he says.

Regulations stipulate that a public television broadcasting licensee must ensure a minimum weekly average of 55% local content over a period of one year. A pay-TV broadcaster must screen a minimum weekly average of 10% local content.

"Nobody knows if the broadcasters are adhering to quotas," Nosworthy says. "I think there is a lack of will by Icasa to monitor and a lack of will by the broadcasters to produce local content."

Icasa spokesman Paseka Maleka, however, is adamant that the regulator is fulfilling its mandate to monitor local content quotas. "It is generally found that broadcasters do meet the requirements," Maleka says. "The regulations were published in 2006 and definitely there is a need to review the local content quotas. However, the authority has not taken a decision yet."

Source: Financial Mail via I-Net Bridge