Three of the U.K.’s busiest production companies, the Palace Group, Working Title and Mentorn Films, are hoping to use an independent television franchise as a springboard for international co-productions and for worldwide distribution of their product.

The three companies have joined forces with record industry giant Polygram to bid for a Channel 3 franchise when these are put up for auction later this year.

The consortium has yet to decide about which franchise area to bid for but has indicated that it is likely to be one of the big five. In addition to a nationwide breakfast television channel, there are 15 regional television franchises in the U.K., of which the biggest are held by London Weekend and Thames (both based in London), Central (based in Birmingham), Granada (based in Manchester) and Yorkshire (based in Leeds).

It would be in keeping with proven interests of two of the member companies in the new consortium, Palace and Working Title, for them to favor a London franchise. Thames is thought to be vulnerable to challenge. On the other hand, Mentorn originated in the provinces and has a significant presence in Central TV’s area via its subsid Mentorn Midlands.

The new consortium does not include a company or leading figure with broadcasting experience, and the three independents have stated that they will at all cost remain primarily producers rather than broadcasters. This sits ill with the fact that, were they to be successful in their bid, the running of a major ITV franchise would likely dwarf their current operations.

Per Palace’s Nik Powell, the consortium will open the door to other indies wanting to make it big in tv. Britain boasts more than 1,000 production companies, most of them tiny and none of them big enough to rise to the challenge presented by the growth of broadcasting around the world.

There will be a strict demarcation, per Powell, between the partners’ roles as producers supplying the station and as broadcasters running it. How that works in practice probably will depend on the strength and independence of the yet-to-be-appointed chief exec.

Common belief in the industry is that Palace and Working Title already are stretched, financially and managerially, in their core biz of making films and tv. However, Mentorn Films, which has stressed its interest in regional programming, is the Johnny-come-lately to the group.

Focus of attention must therefore shift to Polygram, which certainly has the muscle to challenge incumbents of such stature as Thames and Central. Taking a leading role in running a television franchise would, however, be a major departure for the company, which has hitherto prospered by providing backroom services for frontline subsids in records, films and television. Polygram has a minority stake in Working Title.

Per Michael Kuhn, senior vice president of Polygram and chief of its media division, the consortium is complete as far as its creative membership is concerned. A financing partner, or partners, could be added in due course. Kuhn indicated, however, that a large part of the funding will come from bank debt. This raises the possibility that equity will be furnished by the partners (and their respective shareholders) themselves.

Funding will fall into three parts: the costs of making the bid, the bid itself and the startup costs of running the station. The first of these is likely to soak up as much as £2 million ($3.8 million).

The partners will have equal shares, with some equity being held in reserve for distribution among talent should the occasion arise.

Should the consortium fail, the individual partners would likely enter into program-supply deals with franchise-holders anyway. Yet to be discussed by the group is whether and in what measure this could be done collectively.

On the board of the new venture are Kuhn, Powell, Tim Bevan of Working Title and Tom Gutteridge of Mentorn. Project consultant is Andy Birchall, formerly head of British Satellite Broadcasting’s Movie Channel. Accountants Arthur Andersen are handling the books.

The consortium is expected to agree on a business plan within the next few weeks. Its application, including a detailed account of its program policies and business practices, has to be filed by the end of April. Franchises will be awarded in the fall.

Tricky question is whether the consortium’s member companies, none of which will own more than 20% of the venture, will still be deemed independent program suppliers by the Independent Television Commission.

This is a crucial point, for Palace, Working Title and Mentorn rely upon their independent status to make them eligible contributors to the 25% of all British broadcasting that will have to be supplied by independent companies, rather than broadcasters, beginning in 1993. Should that status be in jeopardy, it would, per Powell, Bevan and Gutteridge, make them think twice about the bid.

The new consortium joins the MAI group, Virgin, Carlton Communications and Associated Press in the select club of those who have already declared themselves bidders. Other companies, including Broadcast Communications, Chrysalis, Trilion and Diverse Prods., are thought likely soon to follow suit.

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