Terry Rainey, president of the Association of Imaging Technology and Sound (ITS), testified before a key U.S. House of Representatives’ Telecommunications Subcommittee last week (7/25), stating the postproduction industry’s case for an investment tax credit and/or other relief to help make the transition to DTV, including HDTV, more economically feasible. The Telecommunications Subcommittee oversees the Federal Communications Commission (FCC).
As earlier reported (SHOOT, 7/21/00), the ITS has lined up initial congressional co-sponsors for an R&D tax credit bill. The tax credit would be computed at 20 percent of a domestic post company’s current capital expenses incurred for digital post machinery and equipment, less a dollar amount equal to the facility’s average annual gross receipts from DTV post services during the prior four years. The intent is to encourage the domestic construction of an advanced digital post infrastructure when the current demand for such services may not justify the required expense.
Rainey contended that the FCC-mandated transition has placed post facilities, which largely are privately held small businesses, at a financial crossroads. While there’s an undeniable need to gear up for DTV, the return on that investment is clearly not immediate.
Indeed, the timetable for profitability has arguably been pushed back further than originally expected as advertisers have generally not yet jumped aboard the HDTV bandwagon, and television networks appear to be wavering in their immediate commitment to HDTV programming. In his testimony, Rainey noted that for the last television season, CBS was "the only network to broadcast a high-definition primetime television schedule [partially underwritten by Mitsubishi] … The other networks had select high-definition programming [ABC’s Monday Night Football underwritten by Panasonic, and NBC’s airing of The Tonight Show].
"For the coming television season," continued Rainey, "the only major broadcaster that has expressed any interest to broadcast primetime high-definition programming is CBS. However, even as recently as last week, CBS appears to be unwilling to pay increased licensing fees to non-CBS owned production companies for delivery of high-definition programming. As a result, members of the postproduction industry are reporting to me that production companies are canceling their orders for producing their television shows intended to be broadcast in high definition for the 2000-2001 television season."
Rainey said that "many postproduction companies will not survive or would suffer severe financial hardship if their substantial investments in digital postproduction equipment were to lay fallow while no new high-definition programming becomes available to the American people." He concluded his spoken testimony by observing that "America has historically benefited from a strong technological framework supporting its dominance in the creation of entertainment content for the world. The lack of commitment to digital and high-definition programming is contributing to the financial decline of the U.S. postproduction industry that has been the foundation of the television industry for many, many years."
The rest of Rainey’s testimony was submitted in written form and entered into the congressional record. This text included results of an ITS online survey of facilities regarding the anticipated costs of DTV implementation, which are significant over the coming years.
For example, a facility would on average incur some $615,000 in expenses for replacement equipment during the next 12 months; nearly $2 million the next 36 months. Meanwhile, expansion equipment would generate an average per facility bill of $765,000 over the next year, and more than $2.2 million the next three years.
Rainey pointed out that these figures are "imposing" in light of the fact that the average annual revenue of an ITS member is about $7 million.
The Telecommunications Subcommittee is chaired by Rep. W.J. "Billy" Tauzin (R-La.), with whom the ITS has established an ongoing dialogue (SHOOT, 4/7/00). Tauzin has expressed an interest in helping the ITS explore various options for financial relief, including the R&D tax credit.
The ITS hopes to introduce the tax credit bill in the House of Representatives this month. The goal is to have the measure considered for passage in September.
