◆ Glasgow-based company extends its investment in highly-rated production company, writes Scott Reid

STV has taken majority ownership of drama producer Two Cities Television, the company behind the critically acclaimed police series Blue Lights and Patrick Melrose, starring Benedict Cumberbatch, in a fresh boost for its increasingly lucrative studios business.

The Glasgow broadcasting group’s studios arm took a 25 per cent stake in Two Cities in January 2020, with an option to increase that to a majority position upon the business becoming profitable. Following the initial investment, the Belfast-based company is said to have made “significant progress”, producing two series of Blue Lights for BBC One, with the second series due to air in 2024. This follows previous success with Bafta awardwinning show Patrick Melrose for Sky and Showtime.

Currently, Two Cities has additional high-end drama series secured which will deliver forecast revenues of £55 million over the next three years. STV Studios has now increased its stake in the drama production company to a majority holding of 51 per cent for an undisclosed sum.

Founded in 2016, Two Cities is led by Michael Jackson - formerly controller of BBC One and BBC Two, chief executive of Channel 4, president of programming at USA Entertainment and chairman of Universal Television - and creative director Stephen Wright, formerly head of drama for BBC Northern Ireland where he commissioned Line of Duty and The Fall.

Simon Pitts, chief executive of STV Group, said: “Michael and Stephen have delivered significant creative and commercial success on the back of the standout performance of Blue Lights and there is so much more to come. STV’S consolidation of Two Cities is clear evidence of the ongoing success of our Studios strategy of taking minority stakes in high potential production companies. We’re very proud to be in business with Two Cities and look forward to our continued partnership.”

STV Studios has grown into one of the UK’S top producers of scripted and unscripted content and Scotland’s largest production group, with stakes in several production companies. It acquired Greenbird Media’s extensive network of independent production companies in July 2023, significantly increasing the number of creative labels in the STV Studios family to 24 and its portfolio of returning series to nearly 40. STV Studios is responsible for a wide range of series such as prison drama Screw, Bridge of Lies and Celebrity Catchphrase.

David Mortimer, managing director of STV Studios, said: “Two Cities remains a natural partner for STV Studios,

Blue Lights, above was a success. Simon Pitts, chief executive of STV Group, is pictured right with Tod Productions), Bafta and international Emmy award-winning TV film Elizabeth Is Missing (for BBC One) and a number of auction-based series, including the long-running BBC daytime hit Antiques Road Trip.

Roddy Davidson, an analyst at house brokerage Shore Capital, noted: “Today’s release does not disclose the cost of this investment but does highlight the company’s expectation of ‘material’ future earnings enhancement. The timing of the latter will depend on when secured productions are delivered, so we are not changing our estimates. However, from a financial perspective, this deal looks a highly attractive conduit to majority ownership of a growing business with substantial revenue.”

Johnathan Barrett of Panmure

Ialways believe that people generally do things with the best intentions. That policies and ideas arise from a desire to produce positive outcomes with the intention of helping people.

Yet the realist in me understands that for every action there is a reaction and failing to understand and forecast the possible implications of your decisions can often lead to poorer outcomes.

Thus, we have the Cost of Living (Tenant Protection) Scotland Act in 2022 which sought to help tenants at a financially difficult time by introducing rent capping: a system that has never worked anywhere in the world. Everywhere that it has been tried – Ireland, Germany, Sweden, San Francisco – it has produced a worse result for tenants through higher rents, a shortage of supply, and poorer housing. What we have seen since October 2022 is that while the intention may have been to control rents and help tenants financially, the reality is that this policy has resulted in higher rents. It is our old friend unintended consequences.

Rob Norton, a former economics editor of Fortune magazine, said that: “The law of unintended consequences is that actions of people – and especially of government – always have effects that are unanticipated or unintended. Economists and other social scientists have heeded its power for centuries; for just as long, politicians and popular opinion have largely ignored it.”

We can see this in the latest official data from the Office for National Statistics which shows the annual rate of rent rises in Scotland has increased by 50 per cent, rising from 4.2 per cent in October 2022 to