New York, New York," as the song goes, "… if I can make it there, I’ll make it anywhere." But a tough city has become even tougher for those involved in the business of making commercials. Many in the industry say that a combination of factors, including the terrorist attacks on Sept. 11, has left production and postproduction reeling.
Although many offer optimistic assessments of their own business outlook, few deny that the city and state are facing hard times. "The state of the industry?" asks Rick Wagonheim, a partner/executive producer at Rhinoceros Visual Effects and Design, New York, which is part of the Multi-Video family of companies. "In a word, it sucks. As it relates to Rhinoceros, we have been very fortunate. Overall, anxiety is looming very large throughout the industry."
"In five years in business as hungry man, this is the slowest I’ve ever seen it," agrees Stephen Orent, partner/executive producer at the bicoastal/international shop. "We have been very, very fortunate that we have been able to push through. But we are simply not seeing the volume we’re used to seeing, and the competition is tougher."
The numbers bear that out. According to the New York Mayor’s Office of Film, Theatre & Broadcasting, there was a 28 percent drop-off in location shooting days for commercials in New York City between 2000 and ’01. Location shooting accounts for less than 50 percent of spots shot in New York City; the rest are filmed in studios, or done via CGI. The figure is still "disturbing," says Patricia Reed Scott, the city’s film commissioner, "because commercials are always an important part of the film work. [Although] what with the unusual incidents of the past year, that came as no surprise." The film business—which includes commercials, features, episodic television, and music videos—typically provides 78,000 New York entertainment professionals with employment, and generates $5 billion in direct expenditures annually.
Commercial industry insiders report that problems began before the events of Sept. 11. The SAG/AFTRA strike against advertisers two years ago had agencies taking their production work elsewhere. At that time, spots went to Canada, South America, and Europe, among other locations, where agency producers found agreeable—and often less expensive—working conditions. After the strike ended, many production companies and their clients did not return to the home front.
"It was like the companies that build factories overseas to make tennis shoes," observes Wagonheim. "The production companies discovered they could shoot overseas less expensively. They would fly in the American directors, shoot with a foreign crew and foreign talent who did not receive residuals. Clients got used to this, and learned they didn’t have to pay residuals anymore. There’s a lot of good talent overseas that can hold up a glass of juice and say, ‘Tastes great.’ There’s a lot of talent overseas that does not have to speak in the commercial, and they look great. So in the end SAG actually hurt themselves by striking, because people learned to adjust to working overseas and now it’s a way of life. If SAG reconsidered residual payment, a lot of work would return to the States, giving their membership more opportunity rather than less."
"Runaway production is a problem," agrees Orent, who cites uncompromising unions and union work rules—which, he says, make it more difficult to shoot in New York. "We’ve got to be able to work with each other a little more. If we could be a little looser, there would probably be more people working here. If you don’t need a boom man, for instance, the union refuses to let you slide. We still have to go into our pocket to pay for a boom man. There has to be some bending."
Increasing globalization of production companies—and their clients—has led to increased competition, as well, which also puts the pressure on New York-based firms. "There are now more alternatives available to clients and their agencies," Orent notes. "If you can’t make the money work [for the proposed job], they’ll use that talented director [in another country] who works for less. There are a lot of choices worldwide. We always try to stay as competitive as we can on the financials, offering as much as we can for the money given. No one likes to hear, ‘I can’t.’ "
"There is more competition with global companies," concurs Tom Mooney, partner/executive producer at bicoastal Headquarters.
Nationally, the scenario is the same: Because there are fewer jobs, more directors are on the prowl for assignments in the Big Apple. "There are fewer jobs, more competition, and just too many directors and too many production companies," Mooney relates. "What seems to end up happening is that ten percent of the production companies get ninety-five percent of the work, and everyone else scrambles for the rest."
"There has been a lot of competition," echoes Joanne Ferraro, managing director at bicoastal Coppos Films. "There is less work and more directors are available. Some who used to be booked up far in advance are now available." Frequently, she adds, a client will take advantage of the situation by having six directors bid on a project rather than the typical three.
The increased competition has also led to low-balling on bids to get work—which has meant taking jobs even though they provide for a small or nonexistent profit margin. Wagonheim recalls bidding against a visual effects company based outside the U.S. After he reduced his price dramatically, another firm—this one based stateside—entered the picture. It underbid him, and he decided to walk away from the job. "People are stepping all over themselves to get business, just to survive," he explains. "In this case, I couldn’t afford it. Sometimes you can’t compete, so it’s better to walk away from a project. There is work out there, but the industry can’t support all the people in this business. Every day, there’s another rumor about another company not being able to make its payroll."
Such bidding tactics, he adds, are bad for long-term business. If an unreasonably low, and sometimes unprofitable, bid is accepted, the client will take it as a precedent. "The client knows that next time he will be able to get the job at a reduced rate," explains Wagonheim. "That’s setting precedents we can’t afford if we are going to be viable and grow our businesses."
Agencies are facing hard times, too. With costs rising and profitability diminishing, advertising firms are cutting staff, budgets, and—some say—creativity.
If an agency loses a big client, for example, those assigned to the account may not be reassigned, but simply let go. Ferraro says that the anxious climate has resulted in less-interesting commercials, with clients opting for safer, more conservative work. Such an atmosphere complicates the business scenario. "Now," Mooney says, "when they tell you they’ve got six-hundred, fifty thousand for the budget, they mean it. It’s not six seventy-five or seven fifty. It’s not negotiable. You do it for six fifty, or someone else will. … Some jobs you have to give away to get. My feeling is that it’s better to work and make less profit than not work at all. Last year, I did the same billings as 2001, as in 2000, but I made less profit."
Smart Spending
Budgets are getting tighter, even as production and post costs are rising. "People are more cost conscious, and a lot of times you have to compromise with clients to see what it costs and what they have to spend," explains Frank Devlin, executive producer at Liquid Light, a New York post facility. "A lot of time you are repackaging projects to accommodate the budget constraints on their end. That’s not necessarily new, but more often done these days, requesting the same amount of work for less money."
"The business is different now," Orent adds. "You have to be very smart about the budgets and struggle to get everyone on board, including unions. You have to ask the unions for favors. It’s a tough climate to build directors."
Another trend that computer animation shops are worrying about is the test reel. Many clients are requesting these reels before assigning the jobs. Those requiring reels are ostensibly doing so in order to see who can produce the best effects. But the reels are produced on spec, often at a loss, before the job is assigned. "Some of these tests look so good, the client could almost run the test as a finished spot," says Wagonheim. "So when you are bidding a job, you have to justify your bid. Clients don’t realize the high cost in doing these tests, and some of these costs are built into the final budget."
And, finally, there is the aftermath of Sept. 11, with many clients becoming reluctant to travel to New York. This has had both good and bad effects on the city. The bad is obvious: Out-of-town clients keep their work closer to home. But in some cases, this mindset has also worked to the area’s advantage. On three Blue Cross spots shot this past January, for instance, the Philadelphia agency Tierney DeGregorio chose New York partly because the firm’s creatives could travel to the Big Apple by train. The commercials—"Watches," "Kick Me" and "Shoe Laces," directed by Brian Aldrich of Coppos Films—utilized unique New York locations.
The one-of-a-kind identity of New York is being utilized by industry and government boosters to draw production to the city and state. The city and state are regularly promoting the many locations, as well as the production services—from sound stages (the Queens-based Kaufman-Astoria Studios, Lifetime Studios, Silvercup Studios, among others) and equipment houses (more than 50 lighting and grip houses, 27 generator rental companies, and some 40 camera rental houses) to the many post facilities (which the city’s ads describe as "the largest concentration of post facilities outside Southern California").
To help the municipal government get out that message, the New York Production Alliance (NYPA) has recently initiated a "marketing fund." The NYPA is a nonprofit, volunteer organization created to maintain, promote, increase, and expedite film, video, audio and new-media production and postproduction in New York City and State. According to Morty Dubin, chairman of the NYPA, and president of Iris Films, New York, the fund comes from $10 contributions, donated by member organization employees.
"We wanted to make it easy to give," explains Dubin. Adds Terry Lawler, executive director of the New York Women in Film and Television (NYWIFT), and a member of NYPA: "We thought, ‘Everyone can give ten bucks without even thinking about it.’ You’ve got seventy thousand people working in the industry, so if everyone gives ten dollars, [the fund will generate] seven-hundred thousand dollars."
The word on the fund is just getting out—through company newsletters and other methods—and Dubin reports that money is already trickling in, although Lawler says the NYPA has not yet made a major media push to get attention for it. Once the money arrives, it will be earmarked to help in promotional and legislative lobbying efforts by the city, state and NYPA to help encourage work in New York.
One result of such lobbying is the recently signed legislation that will preserve New York State and local sales and use tax exemptions in relation to personal property and services used in the making of commercials, theatrical features, TV programs and other projects—regardless of what means is used to deliver the final product. The bill goes into effect on Dec. 1. The exemptions have for the most part been in place for some 20-plus years, but the language of the long-standing tax law applies to tangible property—meaning that the finished product has to be a videotape cassette, a reel of film or some other physical medium. There had been some question as to whether the sales tax and use exemptions for property and services would be granted if delivery of the final product were made over the Internet, electronically, digitally, or via satellite. The new legislation changes that.
For all the hard times and complaints, almost everyone thinks New York has a number of plusses working for it. "The bulk of the agencies are here," says Vito DeSario, owner of Version 2 Editing, New York, and its subsidiary, the aforementioned Liquid Light. "[That makes for] the highest concentration of young creatives and creative advertising on the East Coast," he observes. "Sept. 11 had a great impact on travel, but we have the talent here, and I would think people don’t want to live in fear."
"Advertising is not going away," adds Mooney. "We just have to adjust our overheads and our profit margins. But most of the creative comes out of New York. You’ve got to be here. I feel that agencies can save money by not sending their people out of town. The money saved on hotels and rental cars can go into production. But, a big factor is the weather: You can’t shoot a golf commercial here in January."
In fact, all think that, despite the obstacles, the business will survive—and thrive. "This is a phenomenal place," says DeSario. "In the future, New York will just remain the top. I’m a New Yorker, so I figure the city is the center of the world. This is the place. There is no other like it in the western hemisphere."!
