Far Away, So Close

Last Tuesday, AICP released the results of a two-year membership survey meant to serve as a benchmark of where the commercial production industry is and which trends bear watching. In the Feb. 2 issue, Adweek focused on one element from the survey —what the film industry views as “runaway production,” a term coined by the unions that positions their members as victims whose jobs have moved out of the country. But the statistics in AICP’s study aren’t about victims. They aren’t about running away. What they are about is getting a handle on the realities of an industry. They are about global competition—a trend that is certainly not restricted to production, and one that requires understanding, not moaning.

True, the survey found that roughly one in four shoot days took place outside the U.S.—mostly in Vancouver and Toronto but also in faraway locations that seem to offer bargain rates. And saving money is a major motivator in all businesses. It was interesting to see that British coverage of the survey talked about non-U.S. production being “only” 22 percent. Perspective is everything.

The study, conducted by Goodwin Simon Strategic Research, offers a comprehensive look at our industry, including where filming takes place (Southern California—36 percent; New York—16 percent); the importance of community attitudes on location choices (50 percent said it is “important” or “very important”); and location (70 percent) versus studio (30 percent) shoot days. But chiefly, it quantifies the economic impact of commercial production, taking the $3.5 billion that AICP members laid out in direct production expenditures and factoring in additional expenses, such as talent payments and post-production costs, for a total figure of $5.5 billion.

If there is one startling statistic in the survey, it is this: 57 percent of respondents said final payments from agencies were late, breaching their contract—one-quarter of them more than 31 days late—and 44 percent said they saw an increase in payment delays over the study period. While that came as no surprise to us, many members of the ANA’s Production Management Committee found it disconcerting, and wondered why agencies were floating the money they were supposed to pass through as agent for the client.

The industry is globalizing—a more realistic description than “runaway production,” which is a relative term anyway. Americans aren’t the only ones worried. As infrastructure matures, it gets more expensive to maintain. Prague, for example, is no longer the bargain basement it once was. The bargain hunters have moved on.

Globalization has its upsides and downsides. It changes the dynamic of the infrastructure. If you take money away from U.S. production centers, you can’t expect them to maintain their level of excellence. Innovation, technology, experience —they require investment and upkeep to thrive.

When production firms leave for parts less known, there’s a tradeoff. Things may be cheaper, but they’re not always a better value. There’s less control. Quality becomes an issue. They can’t rely on familiar relationships, known suppliers or crews that understand what they’re looking for.

They have more upfront and out-of-pocket expenses. Some production companies have to take out loans to bridge the gap between shoot and payment. This raises an interesting question: If the cost of interest becomes a factor, and slow payments by agencies continue, how does the production company recover the money it lays out to bankroll the job? It’s likely to find its way back into the production budget. So we have to ask: When is a bargain not a bargain anymore?

It’s too late to turn back the clock. But American production centers can make sure they don’t give away any more than what’s already gone. How? Competition. Compete with government-sponsored incentive programs. Compete with film-friendly communities. Compete with labor concessions. Understand the competition, and make sure you’re a better buy than Azerbaijan.