Business is going strong these days for production service companies that provide support for U.S. shoots in foreign locales. Those shops surveyed by SHOOT attribute much of the increase to last year’s six-month-long strike by actors against the American advertising industry, but more for its long-term impact than for immediate lensing dividends realized in 2000. In large part, many service firms see the strike as having opened the minds of agency folks to the appeal of lensing overseas.
Baby Lemonade, based in Sydney, Australia, says that its production service business was healthy during the strike. Generally, though, observes Baby Lemonade executive producer Jason Schepisi, advertisers and agencies "just did the productions they had to do. When the strike was finished, suddenly the whole market picked up. [Agencies and advertisers] had had a taste of filming outside of Canada and the U.S., and [they liked it]."
Schepisi says Baby Lemonade has provided quotes on $35 million in commercial jobs in the first five months of 2001. "Although not all have ended up filming here, the interest is stronger than it has ever been," he reports. He counts a number of additional factors as boosting commercial shooting in Australia: a favorable exchange rate, the publicity of the 2000 Summer Olympics, production of feature films and TV movies there, and the completion of the Fox Studios complex in Sydney, where Baby Lemonade is based. Like Prague, Sydney has become a center for overseas soundstage work. Business is divided about equally between location and studio work, according to Schepisi.
Earlier this year, Baby Lemonade worked with director Jean-Pierre Roux, who is represented in the U.S. by bicoastal Original Film, on a multi-spot campaign for Jell-O, via FCB, New York, that required three weeks of set construction on the largest soundstage at Fox Studios. "We bid London, we bid Vancouver, we looked into South Africa, but because of the enormity of the set and what was required for it, which was a lot of greenery, Australia at that time of the year made the most sense," says Bruce Mellon, founder/executive producer at Original Film. "We needed the kind of production expertise you just don’t find anywhere, because we had a lot of specific props that had to be made … From a price standpoint, it was very competitive."
Business and the outlook are so bright, relates Schepisi, that Baby Lemonade has walked away from local Australian production to devote itself to service work for U.S. production companies and will open a Los Angeles office in July to better serve its U.S. clients.
Matthew Stillman, co-owner/managing director/executive producer of Stillking Films, which is based in Prague; and Howard Woffinden, CEO/executive producer at Milk & Honey Films, which is headquartered in Hollywood, and has offices in Prague, Mexico City, Montreal and Moscow, say the Czech Republic got no boost during the strike, primarily because it lacks a large talent pool speaking Americanized English. (Milk & Honey also has affiliations with companies in London, Italy and Spain, while Stillking has additional offices in the Polish cities of Warsaw and Krakow; London; and Los Angeles.)
What the strike did, Stillman says, "is encourage companies of all sizes and shapes to consider and look abroad for shooting options. That development may have ingrained itself in part of the production culture in Los Angeles, and people are more open and ready to look at a variety of places when they consider the boards they have to shoot."
It’s cost more than location that is driving business now. "My impression is that there is a greater awareness on the agency level of the possibilities that overseas shooting can offer," says Woffinden. "In the last year people have been forced to take a look at it and what can be achieved. They’ve found it’s not as scary as they thought it was, or as impossible as it was five years ago."
While activity is picking up for production service firms, a question was raised by a cost consultant at the recent Producers Conference in San Francisco. Conference session panelist Russell Conrad, a production cost consultant with his own firm, Russell Conrad & Company, Ann Arbor, Mich., suggested that production companies not add markup to production services. Since then, he has also floated the notion that markup on production services should be split between the production company and the production services firm.
So far, neither notion doesn’t seem to have much traction on the agency/advertiser side of the business and is being dismissed on the production side. Conrad says simply that the double markup is something that needs to be discussed with the production company when an agency is contemplating overseas production.
Conrad cites a typical job in which a production company aggregates the costs of doing the job and makes a profit by marking that up by 25 percent. The company doesn’t provide the services itself, but uses a service company, which marks up its costs 15 percent. "If you add those together," Conrad says, "the client would be paying a forty percent markup on the cost of the job."
Frank Scherma, co-proprietor at bicoastal/international @radical. media, was on the San Francisco panel when Conrad first questioned the practice, and he calls Conrad’s logic mind-boggling. "The big question is, Are we supposed to pay everybody’s profits so that we don’t make any money?" Scherma says. "Does it mean when I’m renting a camera from a camera house they should mark out separately what their profit is and I should pay that out of my profit? It’s illogical to me." Scherma notes that @radical.media, with its own overseas offices, is an infrequent user of international service companies.
Maddi Carlton, executive producer at bicoastal HSI Productions, calls Conrad’s proposal unrealistic. "A production service company is a necessity when you work in certain foreign environments," she explains. "We should be able to mark up that cost. We’re not doing a co-production with that local production service. They’re not assuming any of the risk of the job."
Executives at service companies say that Conrad’s suggestion ignores the realities of their business and threatens their future. "If suddenly the production companies are being forced to take our markup out of their markup, the first thing they’re going to do is say, ‘Our markup’s been sliced in half; therefore, yours has to be too,’ " relates Woffinden, who insists that no one is getting rich providing production services. "We try to keep our fees as low as we can because we operate in a competitive market."
He characterizes service providers as vendors, even though they perform some of the same functions the production company would provide in a different setting. "We don’t carry the ultimate risk that the production company carries," he says. "We don’t partake in the massive cost of attracting directors and maintaining relationships and growing the careers of those directors that benefits everyone in the industry."
Tim Clawson, president of Gun for Hire Productions, New York, hopes that agencies focus on the value of the advertising, not on each line item. "I would hope we get to the place that there’s a fair price to do a job and we’re not arguing about how much the tires or the paint cost," he says. "When you buy a car, you buy a car. There’s a price to it, and if you think it’s a good value then you pay the price and drive off the lot. If you don’t think it’s a good value, you move on. I would hope that clients are taking a look at their whole advertising and asking, was it effective, was it well executed, did we get value for our money?"
Like others in the service business, Clawson thinks part of the problem is the cost-plus nature of the service company’s invoice. "People forget there is the cost of overhead and the convenience of being available so that when people call and show up, the company is actually there. When we rent a camera, there’s a profit element built into that. It seems crazy to sort of pick one item. What the commercial production company is getting its markup for is its overall management of the job and its financial risk on the job. Ultimately they’re responsible."
