And for Blighty’s next TV trick

Indies parlay o'seas sales into big bucks

LONDON — From Hat Trick’s “Whose Line Is It Anyway?” to Celador’s “Who Wants to Be a Millionaire?,” from 19 Group’s “American Idol” to Hartswood’s “Coupling,” the British invasion of U.S. airwaves has been led by the U.K.’s feisty band of indie producers.

But back home, in the shadow of Blighty’s mighty broadcasters, these pioneers have struggled to move from the creative cutting edge to the kind of business that attracts big-money backers.

That might be about to change. When Kleinwort Capital bought a 45% stake in Hat Trick last month, it signaled renewed interest among investors in the potential of the U.K.’s production sector.

Several more deals reportedly are in the works. These will finally give some of Britain’s most innovative program-makers the financial muscle to match their entrepreneurial spirit and launch even more aggressive efforts to export their ideas around the world.

A similar wave of optimism surged through the sector three years ago when indies Talkback, Planet 24, Ginger and multinational Endemol were sold in quick succession to major media groups. But the stock market crash brought deals screeching to a halt — until now.

“This time it’s different,” promises Patrick McKenna of Ingenious Media, which brokered the Hat Trick and Talkback sales. “The larger media groups have come to terms with reality, and now they are starting to look ahead and pick out content companies that offer potential value going forward. You will see a number of deals before the end of the year.”

Simon Fuller’s 19 Group is putting together a sale prospectus in response to investor approaches. “Faking It” and “Robot Wars” producer RDF admits it’s raising finance for corporate acquisitions.

Meanwhile, Hat Trick and Kleinwort have said their pact is just the first step in a strategy to create a much larger creative group, with the aim of selling the expanded company within three to five years, possibly to a British broadcaster or a U.S. media group.

Those could be the same thing, following the recent change in British law allowing U.S. takeovers of U.K. webs.

“Broadcasters might consider bulking up to make themselves attractive to an American acquirer, or an American company might see a producer as a first point of entry into the U.K.,” McKenna suggests. “With some high-profile British shows doing well in America, the Americans naturally see the U.K. as a good center for creativity, and as a bridgehead into Europe.”

But indie producers shouldn’t start sending off for yacht catalogs quite yet. Endemol (bought by Spanish telco Telefonica for $5.5 billion) and, to a lesser extent, Talkback (sold to Pearson for $100 million) have yet to prove they were worth the purchase price. Scottish Media Group ended up in court with Ginger founder Chris Evans, highlighting the dangers of investing in the kind of mercurial individuals who populate the indie sector.

No wonder those investors who are now returning to the indie sector strike a cautious note. Sebastian McKinlay, Kleinwort’s head of media investment, notes that only a handful of Blighty’s 1,100 indie producers possess the business acumen to turn their creative outlets into commercially sound companies.

Hat Trick, with revenues of $32 million in 2002 and an operating profit of $6.4 million, is the exception, not the rule. And with British webs notorious for favoring their own inhouse production departments and squeezing the margins of indie producers, much of that is due to Hat Trick’s success in breaking into the U.S. market, where the rewards for a hit are much greater.

With “Whose Line…?” now into syndication after many years on ABC, Hat Trick is co-producing the ethnic chatshow/sitcom hybrid “The Ortegas” for Fox, based on its own BBC show “The Kumars at Number 42.” It’s also working on a pilot American version of its Channel 4 sitcom “Father Ted” and is in talks with Conan O’Brien to host a remake of its satirical quizshow “Have I Got News for You.”

Not all indies want to go the corporate route, though. Many are still run as “lifestyle” businesses by program makers who are more comfortable working outside the big broadcasters. Such personality-led businesses find it difficult to capitalize on any additional commercial opportunities available to them.

Most firms tend to be based around two or three talented individuals whose motivation may not be the same once they’ve banked their millions by selling out to a bigger player.

At least Hat Trick co-founders Jimmy Mulville and Denise O’Donoghue still own 55% of their company, giving them every incentive to work even harder toward a final sale.

In the meantime, they are evolving a new corporate model, with Hat Trick as a central company surrounded by satellite joint ventures with program-making talent, which will make the company’s ultimate value less dependent on their presence.