Postproduction has grown into a global business.
The most obvious examples are companies with deep pockets and large infrastructures-notably Ascent Media Group LLC, a wholly-owned subsidiary of Discovery Holding Company (NASDAQ: DISCA, DISCB) that encompasses such businesses as Company 3, RIOT, Method and POP Sound; and Thomson-owned Technicolor Content Services, which maintains post entities under the Technicolor brand name. Both of these companies maintain postproduction facilities in many locations including throughout North America and in Europe.
Ascent Media Creative Services president Bob Solomon says that at Ascent, the focus is primarily on the three major centers of New York, Los Angeles and London, while regional bases are also maintained in cities such as Atlanta.
Technicolor’s international reach goes across Canada with bases in Montreal, Toronto and Vancouver, as well as in leading European cities including Rome, Barcelona and London.
While both industry leaders have been doing a substantial amount of building outside the United States, they also earned their positions through acquisitions. In late ’04, Thomson famously paid 53 million GBP–$102 million USD–to acquire leading London-based commercial post house Moving Picture Co.. Earlier, Ascent Media’s London base grew substantially through the company’s (then known as Four Media Co.) purchase of the postproduction entities of the Virgin Media Group, which included Rushes and SVC (which was since merged into what is today St. Anne’s Post and One Post).
The topic of acquisition has again surfaced this year. This time, Prime Focus–a publicly traded, Mumbai-headquartered postproduction group that employs roughly 400 and offers post services to feature, TV and commercial clients–began to execute its plan to go international when it bought a 55 percent controlling interest in The VTR Group, which encompasses London-based postproduction house VTR, editorial and post house Blue, visual effects arm Hive and standards conversion and duplication business The Machine Room. And, Prime Focus orchestrated a management buyout of privately owned London-based visual effects boutique Clear. The India-based company also reports that it has next set it sights on the Los Angeles market, which it intends to enter through acquisition and potentially within the next six months. Prime Focus has also identified Dubai as a target market.
Meanwhile, Prime Focus’ London operations have been rebranded under the new Prime Focus U.K. umbrella, and the company is restructuring and building a massive postproduction conglomerate in Soho with strong ties to India. Clients can either do work in London, or have it completed at lower rates at Prime Focus in Mumbai. A network will eventually be installed as the backbone of this effort.
“There are such pressures on the London market; there is still a place for the high end. But we can provide alternatives for clients,” explains Clear managing director Simon Hutala. “This is our lifeline…for the long term survival of the post business in the U.K.” Considering that in the U.K. the technology, talent and rent are expensive and budgets are falling, he concluded, “something’s got to give.”
But there are other beliefs about the recipe for success.
“Our model is to be located ‘at home’ for people who want to be able to work in their own countries,” says Bob Hoffman, VP of marketing, Technicolor Content Services. “[For example] if you have a roster of great world class directors and directors of photography that live in London and want to work in their home and support the British film industry, you need to take your service to them.”
Solomon relates that outside major production centers, it can be a real challenge to identify new target markets, as production is a mobile business that is very much impacted by tax credits.
“[Tax credits are] one of the daunting things about making investments in facilities. Production is mobile, and the economics are a primary driver of where people work. That changes as international or domestic tax credit programs fall in or out of vogue.
“It literally changes by the month,” he continues. “There is not a month that goes by where someone doesn’t come out with a new tax incentive program. It’s an interesting environment because they are all outbidding each other. And there are some very, very aggressive programs out there.”
Larry Bridges, founder/CEO and editor at multi-city Red Car believes that exchange rates are also an important factor. “In Canada, traditionally…the dollar goes further,” he says. “[Recently] the dollar situation has been an advantage for keeping work on our shore.”
To better service their multi-city and multi-country clientele, both Technicolor and Ascent remotely offer services through dedicated high-speed networks designed to improve collaboration and efficiency. Red Car, which maintains bases of operation in Chicago, Dallas, New York, San Antonio, San Francisco, Santa Monica, and Buenos Aires, also uses a network as a link for its operations, but Bridges says that at least for the creative editorial side of the business, this is not a significant factor.
“[Creative] editing is 90 percent local,” Bridges suggests. “So after all the discussion about long-distance collaboration and store and forward, editing tends to be locally focused. People in a city tend to work with people in that city. Yes, people travel…but 90 percent is local.
“I think the challenge for editing boutiques–anywhere but in America and Canada–is the fact,” he relates, “that editorial is a service that is organized with a director/production company-driven model, so it is hard to have a standalone boutique with a service model that will sustain itself. But I think there is an advantage for finishing facilities; the agency becomes their direct customers.”
Technology’s Impact As the subject of acquisition resurfaces, the access to capital afforded by a large parent company might be particularly attractive to post entities in this time of rapid technological change. If you look back on earlier acquisitions, some whose businesses were sold to Four Media Co. had at the time cited the cost of transitioning to HD as an advantage to being owned by a larger entity. Today, technological change remains an issue facing the post business.
“We are moving to a more file-based infrastructure,” says Solomon. “[To take advantage of] file-based opportunities, we need to explore technology. We might be developing proprietary workflows.”
Technicolor’s Hoffman adds, “That gives us the technical firepower that other companies might not be enjoying the benefit of. In terms of investing in new technology, [Thomson] is being very supportive of that.”
Prime Focus U.K. is already benefiting from the infusion of capital. In addition to a massive facility overhaul, it acquired a Grass Valley Spirit 4k scanner and additional technology purchases are anticipated.
Critics of the large postproduction conglomerate model have pointed out that senior execs may contribute business–but not necessarily postproduction–experience.
“I think you need to blend the perspectives, bring in people from different backgrounds and experiences. It’s critical that our artists make strategic and tactical decisions,” Solomon says, pointing out as an example that Ascent’s senior management team includes Company 3 president and renowned colorist Stefan Sonnenfeld.
Technicolor’s Hoffman insists, “When it comes to postproduction, it is the creative people making the decisions.”
As Prime Focus plans its next move to break into the Hollywood, Technicolor meanwhile is eyeing Bollywood. “Everyone is looking at India very closely,” relates Hoffman. “It’s still a little bit early to discuss…but we are actively working on some business relations in India.
“We are also investing fairly heavily in East Asia [with a plan to open new business], Southeast Asia [by expanding existing business] and South Asia [through a joint venture].”
Red Car maintains its place in the international market through a base in Buenos Aires. “The boutique editing company really has to do with the talent in that town,” Bridges says. “In our case with Buenos Aires, [editor] Steve Armstrong wanted to go down there. This is a big base that attracts a lot of production companies…It’s turned into a little version of Hollywood. We want to be there and be the familiar brand presence so that when American agencies arrive, then they see us and feel right at home.
“I think the city [production center] of the future will not be just where you do post work, but also where you can get production [services],” Bridges concludes. “The future will not be where you do one thing, it will be where you have production crews, wardrobe, DPs, sound–so you can go somewhere and have a ‘mini Hollywood.'”
