From Deadline|London editor Tim Adler: Observers I’ve spoken to say that the decision to wind down the London office of 19 Entertainment could be the first sign of owner CKX preparing to sell. Staff at 19’s London office have been put under threat of redundancy. It’s not known yet how many London staff could be laid off. Employment law here in Britain is a protracted legal process that can take months. The company behind American Idol and So You Think You Can Dance employs around 60 people in London. CKX has decided to wind down 19’s London office given that 95% of its profits come from US-based TV production. Sister offices in Los Angeles and New York recently both took on staff. The company employs around 160 people worldwide. CKX currently spends $30 million a year on overhead. One New York analyst told me this cost-cutting could pave the way for 19 Entertainment’s assets to be sold on – either to new buyers or back to founder Simon Fuller.
CKX chairman and CEO Robert Sillerman told me that CKX will be examining every aspect of his business “to see the best way to grow shareholder value”. CKX’s share price is currently $4 compared with $14 in June 2007. Sillerman recently told analysts that he was open to selling American Idol or 19. American Idol is supposed to be worth $25 billion as a brand on its own. At the end of the last financial year, 19 delivered $92 million in profit, dwarfing the nominal amounts generated by CKX’s other properties such as Elvis and Muhammad Ali. “Our responsibility is to build shareholder value,” Sillerman said. “So if something is more valuable to somebody else, we also have to be willing to part with it immediately.”
“I hope they do sell it,” this analyst told me. “Now they’ve got Simon Fuller’s services anyway, why bother paying for all that overhead?”
The light at the end of the tunnel is that a number of staff could transfer to Simon Fuller’s new company, XIX, which could, confusingly, work out of the same south London offices as what’s left of 19. Fuller is on an exclusive consulting contract with 19, the company he founded 24 years ago. Even more confusingly, CKX has an option to buy one third of Fuller’s new venture. That option to buy expires on March 15th.
But 19 is much more than just a couple of TV shows. Once past its Willie Wonka-style black iron gates, it’s a creative factory looking after the careers of David and Victoria Beckham, tennis star Andy Murray and managing pop acts including Annie Lennox and local crooner Will Young. It owns Storm, the model agency responsible for Kate Moss, Lily Cole and Emma Watson (Harry Potter). US pop stars it manages include Carrie Underwood and Adam Lambert. Between them, the pop acts have sold 80 million units for record companies such as Sony and Universal. There’s a book publishing arm and another office which deals with tie-in brands such as Coca-Cola (American Idol) and Adidas (Andy Murray).
If, like me, you assumed that Posh Spice’s fashion label consisted of slapping her logo on the backside of a few pairs of jeans, it’s a surprise to find 19 operating a full-blown fashion house. Barneys, Saks and Bergdorf Goodman all stock her clothes. Seamstresses scurry here and there. The smell of dry cleaning fluid was overpowering when I visited there.
Fuller launched website Fashionair, a kind of online Vogue, early last year.
Fuller’s latest show for 19 has just gone live. He’s spent three years developing If I Can Dream. The show follows five aspiring stars pursuing their careers in Hollywood, monitored at all time by closed-circuit cameras, Twitter feeds, MySpace blogs and Facebook updates. There’s no competition involved in this Truman Show-style entertainment. Pepsi, Ford and ad company Clear Channel are also backing the concept. Fuller hopes it will become the first reality show hit of the social networking era. Interestingly, he’s bypassed the US networks completely. Hulu is showing weekly episodes, not Fox or NBC. If Fuller’s right and the show takes off, then other TV producers could also start bypassing regular broadcasters.