Tough Times

For editors, things really are as bad as they seem. What can wedo to survive this difficult economic downturn?

The days of charging exorbitant fees at big, plush facilities may beending. Many businesses are surviving hard times by offering clientsnew and different services.

No. It's not just you. Things in postproduction really are very bad!Facilities are laying off staff and, in some cases, closing their doorsand auctioning off remaining assets. Big names have disappeared. Oneregional facility owner I contacted asked, “Why do you think I amdoing well?” My response was, “If Joseph Finn Co.Auctioneers is not promoting your facility, then you are doingwell.” “Isn't that the truth!” was his response.

The bottom line is that the post industry as we know it is dying.Why? I believe the economic model upon which TV programming,advertising, and corporate communications are based — whether inthe NY/LA markets or in the smallest post-market segments — is nolonger valid. “Facility” is now considered a taboo word,and the plethora of edit suites have oversaturated the market.

The advertising community has discovered that the value oftelevision advertising, when priced at traditional rates, may no longerbe as attractive. As a result, advertising agencies will be far morecost-conscious with ad creation expenses. When less advertising revenueis generated, the networks and TV stations must cut budgets for programcreation. Therefore, the production and postproduction communities mustfind new ways to cut costs.

Meanwhile, with the advent of the DV format and desktop videotechnology, corporate communicators have discovered that cost-effectiveprogramming of acceptable quality is available from lower-costboutiques or inhouse facilities. These boutiques include thoseestablished by RIF'ed corporate communicators who have closerelationships with the company and understand specific corporatecommunication needs.

Thus, the traditional bread-and-butter of the post industry isreduced to the point that the financial model is no longer valid. Thedays of exorbitant rates at large, plush facilities with huge overheadmay be ending — with the exception of a few production centerswith brand-name talent.

“Historically, post houses have had to re-invent themselvesevery four to five years anyway, and offer what others cannot,”says Mark Horton, Quantel's market development manager. “In orderfor a post house to be successful, they need to offer two things:First, offer services that the clients can't or don't want to do, andsecond, the services you offer must be what your competitors down thestreet can't or don't want to do. If you can do this, you will have asuccessful business.”

The way edit suites will survive is to offer new services. High-endfacilities will successfully compete by offering digital intermediates,film restoration, trailers, and digital dailies services. Today,film-to-tape/disk with color grading continues to do well, buttape/disk-to-film is also a service that is solidly booked at tophouses.

Smaller boutiques and regional post facilities are also offering newservices, such as DVD pre-mastering, authoring and associated work,tape-to-tape color correction/grading, web programming, and interactiveprogram/game creation services. Some are purchasing systems that willallow easy output of multiple formats and resolutions — a featurehighly desirable to clients who see their profits associated withrepurposed programming and the ability to distribute to differentvenues.

Across the country, traditional post facilities large and small arelaying off staff members and forming cooperative relationships withfreelancers, many of whom are former staff editors. Most workers wouldrather be staffers than freelancers, however, the new freelancers arerealizing tax benefits from this relationship and enjoying control oftheir lives and careers. Post houses find that these freelancers arebringing in new business to mutual advantage.

Low-cost video platforms, such as Boxx Technologies HDBoxx, can nowcompete with more expensive technologies, even for high-definitionprojects.

Many experts once believed that HDTV broadcasting would give a majoreconomic boost to larger traditional postproduction facilities.Unfortunately, for a variety of reasons, HDTV has not taken off. Today,lower-cost HD boardsets from Pinnacle Systems, Aja Systems, DigitalVoodoo, and DVS will allow even the smallest boutiques to serve thissegment on desktop computer platforms, if and when HDTV does takeoff.

The biggest growth has been in the explosion at the low end of theindustry. This is where it may be hardest to succeed because marginsare very low, competition is intense, and there is a morass of inferiorofferings for clients to sift through. Those who are doing best in thisarena are selling talent and experience.

With experienced editors leaving staff positions and investing lessthan $25,000 for a “facility” in the garage — or aportable rig they can move to a client's offices — theseprofessionals are offering the low-cost solutions clients are lookingfor. Such editor/owners benefit from previously establishedrelationships. Also, by supplementing basic editing capabilities withrental equipment, there is very little these personal project studioscannot do.

With the quality of today's compressed formats, with the moresophisticated desktop tools available for those formats (colorcorrection, FX/compositing, graphics and animation, plug-ins, audiosweetening, etc.), and with the continual drop in the price of storage,the time-consuming off-lining/batch re-ingesting step is disappearingfrom small boutiques. This was once a major differentiator betweenboutiques and the bigger post facilities.

Less-experienced editors (with fewer client-relationships thanformer facility editors) are fighting present economic conditions bybecoming full-service “one-man bands”(writer/director/camera operator/editor). They're also gathering ascollectives — each with an area of expertise, but working as asingle communal entity and sharing expenses.

These youngsters are often more comfortable with low-priced tools,and have developed a “bag of tricks” through high schooland college experiences. Lacking experience with higher fees, they donot complain about the new lower fee structures. They are hungry andwant the jobs. If there are no jobs, they will start projects on theirown and try to sell them. Last month's column about CustomFlix servicesis an excellent example of how a smaller boutique or editor cangenerate income from such projects with few upfront costs.

I am assured by knowledgeable sources that there actually is thesame amount of post work now as there was two years ago, before thestart of the downturn. The problem is that the work is migrating todifferent post-production providers, and the fees charged are much lessthan before the downturn. On the one hand, this offers greateropportunities for those entering the industry workforce, and on theother, it will take greater effort to compete.

Editors looking for work will find few staff positions, but there isa significant demand for freelance editing talent in many parts of thecountry — even if the rates being offered are lower.

With each passing paradigm shift and economic downturn, talentedpeople have made room for the up-and-comers. It really is the way ofour business. Many who leave turn to teaching. Some become corporatecommunicators. Others leave editing and do something outside theindustry. But if you are not ready to throw in the towel during thisdifficult time, there are ways to succeed.

What is needed is a business plan where you can survive on lowerfees. Find out what new services are most compatible with your talents.Maybe you can use your skills and equipment for ancillary uses likeFlash animations for the Web, CD-ROM/DVD services, interactiveprogramming, or secondary compression for distribution. Doesrepurposing your owned content have commercial value?

Emphasize talent over technology. Devote more time to sales. Createa stronger marketing strategy. Persuade potential clients that you havesomething better to offer — something desirable that is availablenowhere else. Change is not necessarily a problem if you successfullyadapt.

To comment on this article, email the Video Systems editorialstaff at vsfeedback@primediabusiness.com.