The total gross ’98 revenue of companies in the U.S. television commercial production equipment and stage rental business is estimated to be some $194 million, according to a survey conducted by independent research firm Dennis and Company, Minneapolis. Done on behalf of the Association of Independent Commercial Producers (AICP) and the Production Equipment Rental Association (PERA), the study was funded by Children’s Broadcasting Corporation (CBC), a Minneapolis-headquartered, publicly held company that is parent to several spot production houses.
The research was confined to equipment and stage rental usage domestically for national and high-end regional spots with budgets in excess of $100,000. The study did not include broadcast video or high definition rentals. However, video assist packages were largely accounted for in the context of film camera rental activity. Lighting pack-
ages and grip trucks were the most frequently rented equipment, representing 55% of total revenue. Camera rentals were next at 21%.
The survey was sent out to 132 rental companies throughout the U.S. Thirty-nine percent of those shops-a total of 51-responded. Collectively, these respondents reported $81.5 million in gross revenue last year. Projecting that figure over a field of 132 resulted in the $194 million estimate. Each survey respondent served as the primary supplier for camera, lighting and/or stage rental on an average of 187 spot jobs in ’98. The field was largely comprised of smaller scale shops; 61 percent of respondents had gross equipment and/or stage rental revenues of less than $1 million last year while only two percent attained revenues at the high-end range of between $6 million and $10 million.
The highest dollar volume came from clients located in the Los Angeles area (43% of gross revenue), which was also where the most equipment was used (32%). The second greatest dollar volume was generated by clients in New York (16% of gross revenue) which tied with the Southeast region as the second largest area for equipment/services usage (an average of 11%). PERA president and executive director Ed Clare noted that while L.A. and New York clientele accounted for nearly 60% of the dollar volume in ’98, equipment/services usage in both cities represented but 43% of total business. "This means that nearly a third of dollar volume migrated to other parts of the country," concluded Clare.
AICP president Matt Miller said that the survey was important on several levels. "For one, it serves as a business study for an important segment of our associate membership," he related. "They’re the suppliers who invest in equipment to support production and have to plan their businesses from year to year and gauge the best way to invest their resources. To get a handle on the flow of production, where money is being spent and what regions of the country are doing well should prove valuable to them."
The flow of production and a breakout of "who has what equipment where" is also of value to AICP production house members, continued Miller, adding that there are implications for the runaway production issue as well. "One of the biggest concerns related to runaway production is the collapse of American infrastructure and the growth of foreign infrastructure. Equipment obviously is a big part of the production infrastructure and to establish a barometer in that area with this study could evolve into a useful tracking device."
Miller is hopeful that the study will become at least an annual proposition and if need be, perhaps even quarterly or semi-annual. "It depends on how regularly the needle moves but it might make sense for us to track this business given concern over runaway production and other issues … It’s a benchmark that will gain in significance as we see increases or decreases in subsequent surveys." He added that the research could lead to another formula to track overall billings in the industry, particularly since it’s "very hard to get financial numbers out of privately held production companies."
CBC executive VP of marketing Mike Delgado noted that the company wanted to get a better handle on the financial standing of the spotmaking business. A good first step, he reasoned, was to examine equipment rental houses that "generally keep detailed, consistent records of who’s renting what from whom and for how long." He then brought in Dennis and Company, a firm that CBC used in the past for radio station research. (As earlier reported, CBC recently shifted its core business from radio stations and programming to spot and long-form production.)
Delgado noted that one could even break out the findings of this initial survey and come up with a figure for the overall commercial production business in the U.S. He conjectured that by taking the field of 132 rental houses, each with 187 ad jobs in ’98, and applying an average national spot budget of $210,000 per commercial (the 4A’s latest figure for average total production company net cost for a single national spot), the resulting math would peg the U.S. spot biz at some $5.2 billion in annual revenue. Delgado said that bottom-line figure is within range of the $4.5 billion which is cited by AICP.
CBC president/CEO Christopher T. Dahl said that his company is committed to helping to generate research that will help an overall industry that traditionally has not had definitive financial data. He explained that such research is vital to CBC as it looks to provide full marketing resources for its family of commercial production companies. That family includes bicoastal/ international The End and bicoastal Curious Pictures which are subsidiaries of the publicly held Harmony Holdings Inc. (CBC is the largest shareholder in Harmony Holdings with a 49.7% ownership stake). Additionally, independent of Harmony Holdings, CBC has stakes in bicoastal Chelsea Pictures (SHOOT, 3/19, p. 1) and New York-based Populuxe Pictures.
The equipment and stage rental study might also prove of benefit to CBC once it wraps building a select core group of commercial production house holdings. Dahl acknowledged that the next step for CBC to then consider would be to possibly get into the equipment rental business, perhaps through a start-up venture or by buying or striking up a strategic alliance with an established equipment and/or stage rental company. "It’s something we’d explore once our production companies represented a certain volume of business that could be facilitated by such an operation," he said.
Delgado noted that CBC, the AICP and PERA were not privy to any respondent information or raw data in the equipment rental survey. Dennis and Company only shared the bottom-line findings with AICP, PERA and CBC.
But that bottom-line info will be of immediate help to PERA’s 200-plus members, 85% of which are in the U.S. "Our companies now have a backdrop for their own financing activities," said Clare. "If a company is looking to borrow money to grow its business, it can now show bankers a well-documented industry study about the size of the commercial rental business. Also, a member company can compare its activity to the average profile of other companies and see where it falls in the big picture."
