The Association of Independent Commercial Producers (AICP) has released its 13th Annual Survey of The Commercial Production Industry with results showing positive trends in activity, most notably an increase of 14 percent in production expenditures in 2014 as compared to the prior year.
Independently conducted by Los Angeles-based market research consultancy Bovitz, the study–based on feedback from participating AICP member companies–measures trends and activity in the $6 billion-plus commercial and branded content production industry. The 14 percent hike continues a three-year surge as expenditures exceeded $4 billion for the first time in the survey’s history.
At the same time, the number of projects has decreased on average for production companies, perhaps due in part to the rise of in-house ad agency production. Yet despite the increased prominence of the in-house dynamic, production company expenditures and billings are still up, underscoring the importance of high-end premium production, according to Matt Miller, AICP president and CEO.
“I’m bullish on the overall findings in that they reflect a high demand for video content across the board,” said Miller. “And while we’ve seen the emergence of agency in-house groups, they are doing a lot of low-end work specifically for certain outlets. Our members as well as the in-house entities are doing this work. But our members clearly play in the premium content space–not necessarily just the biggest budgets but projects that need true directorial and production talent in mid-level and smaller budget areas. Production companies provide a level of needed talent that many agencies cannot supply.”
The upturn for production companies, noted Miller, shows “that our industry is thriving in a competitive advertising environment.” Also boosting activity has been a general economic recovery. “As the economy continues to improve, and media channels proliferate–more filmed content is needed–and AICP member companies continue to see the positive opportunities in the economy of a growing industry.”
Production companies engaged in projects combining live action and digital production saw large increases in their average production expenditures in 2014 as compared to 2013. “As the mix of media distribution continues to widen, member companies have increased their average expenditures by 173 percent in the areas of interactive media and projects combining both live action and in-house digital production techniques,” said Miller. “Given the rapid evolution and changes across the media landscape, the AICP membership continues to evolve their businesses to produce both live action and digital content to reflect the demands of brands, ad agencies and the consumer.”
Still, there’s some question as to profitability for production companies as the AICP survey shows only an 11 percent increase in billings compared to a 14 percent hike in direct production expenditures. “The billing is not in line with the amount being spent, showing that profitability is down. In that respect, it’s a tough business environment,” said Miller.
Mobility
Another survey result cited by Miller had to do with the mobility of production in terms of locale. “We’re seeing that tax incentives for commercial filming are working. We’re seeing movement of advertising production to states that are among the most aggressive with tax incentives.”
In 2014, about 21 percent of all shoot days took place away from the major production centers of New York, Illinois and Southern California. The Southwest (Louisiana, Texas and New Mexico) with five percent and Southeast (Florida, Georgia, North and South Carolina) with seven percent have shown the most growth in activity in recent years, mostly due to incentives offered to commercial production in those states.
Shoot days in Europe and the U.K. increased significantly to lead activity overseas with 31 percent of foreign shoot days. Film activity in South America remains steady as the second most filmed foreign location at 21 percent. Filming in Canada continued its decline, at 20 percent of foreign shoot days, as the U.S. dollar performed well internationally and several provinces failed to renew their incentive programs. A bright spot for Canada is Vancouver which experienced a five percentage point increase to 16 percent of foreign shoots in 2014.
Regionally, the industry invested 51 percent of all production expenditures in California, exceeding $2 billion in direct expenditures for the first time. New York/New England comprised 16 percent of all expenditures with all other domestic regions at 23 percent for 2015.
In the big picture, 76 percent of live-action shoot days took place on location in 2014, continuing a four-year trend. In line with expenditures, 49 percent of all shoot days in 2014 took place in California. New York received 11 percent of all shoot days. Illinois continued to experience steady growth in recent years with seven percent of all shoot days, a regional high mark. Other domestic regions received 19 percent. Overall, foreign shoot days are up slightly, accounting for 15 percent of all shoot days.
Valuable info
“The data collected and analyzed by Bovitz provides both our members and the industry at large valuable insights into trends in the commercial production business,” said Miller. “These findings provide an in-depth analysis of where the billions of dollars in commercial production activity are expended, along with key business issues our members face as they manage and grow their companies.”
The survey quantifies the economic impact of commercial production, including identifying geographic trends in production activity by AICP member companies, both domestically and internationally, as well as industry responses to a number of key factors that impact the financial health of the industry.
A second part of the survey of AICP member companies has not been made public. It provides a benchmark of internal working practices and procedures that can be of help to production houses as they shape and adapt their businesses.
Miller noted that this survey portion–a component of the AICP survey for the better part of a decade–deals with how companies structure their rep deals and other business affairs practices. This valuable info is only made available to those member companies who elected to participate in this part of the survey. It serves as an incentive for execs to share info about their companies’ internal workings.