Behind the Orange Curtain

This week’s post deals with an extremely current and poignant topic – the economy.  But more specifically, the economy and how our businesses are being affected in the film, TV and advertising communities.  I don’t know of any business in our industry that has not been affected, many significantly, by the current, unprecedented crisis.  In the current economic environment, the phrase “runaway production” has become an understatement.   The production is gone and we will now have to battle to get it back.

Production in the Los Angeles area dropped to an all time low in 2008 as companies looked out of California for cheaper solutions.  It is, in fact, off fifty percent from the high in 1996.  I attended the National Association of Television Production Executives show in Las Vegas last week.  One of the sessions that I attended dealt with the challenge of shrinking budgets and skyrocketing production costs.  During the panel discussion Emiliano Calemzuk, president of Fox Television Studios, declared that they had solved the production cost problem – they are now saving almost 50% on their budgets by sending their productions to Europe!  I about fell out of my chair.

In order for production to start returning to California, those fine folks in Sacramento need to not only complete a realistic budget, but one that has substantial incentives to bring production back to the state.  Many other states have such incentives and they are significant.  For instance, by filming a feature in Connecticut instead of Los Angeles, producers could save $21 million dollars out of a 110 million dollar budget – a 19% savings.  What would you do if you were a producer?  While California’s government contemplates things like a 10% sales tax, I would be packing my bags.

For just one example of a state that cares about production and getting as much of it as as it can, look no further that the fine state of Michigan.  I have a friend who works in our industry out of Detroit.  He said the business there is booming.  Take a look at the following link about a motion picture production facility in Pontiac, Michigan.  Many other states are looking to get production work as well. 

What will we in California do to get it back?

While the causes of runaway production are many (unfriendly production environment, out of control union costs, difficult and costly permitting process, etc.), we will all have to work together to solve this problem.  It will be much, much harder to get the work back in the face of the new competition from other states and even other countries.  

On top of this, we are all dealing with the current madness brought on by the economic meltdown.  This is the most challenging time I have seen in my more than twenty years in business.  There is plenty of work out there, it is just a matter of reminding companies that they still need to market their products if they are going to survive and getting them to commit to spend.  We can do it, but we will have to work together and work a lot smarter to get our share of the work than ever before.

Let’s find a way to get it done.

I am sure that this week’s post title will elicit some disagreement among at least a few people.  Now for all of you who have recently purchased Blu-ray players, don’t send me hate mail.  This is after all just my opinion.

While Blu-ray may not be dead at this moment, I would submit that its days are likely numbered.  The truth is that as technology and bandwidth improve, all of this type of content will be delivered over the Internet.  As of today, we already have many technologies that allow for instant access to HD programming.  Here are some examples:

Apple TV (which I use at home) allows for the rental and purchase of HD movies through iTunes.

Blockbuster’s Instant Access program allows for the instant download of movies to its MediaPoint player and other devices.

LG has developed a new High-Def set that will function as a streaming device and receive feeds from Netflix.

Netflix can also stream to Roku devices and XBOX 360’s.

LG also has a Blu-ray player that will receive and play streamed HD video.  They are calling it a “Networked Blu-ray player”.  

See a trend here?

Beyond the use of Blu-ray for the distribution of feature films by studios, it has proven to be a very challenging technology for the production community.  At Post Factory, we have had so many compatibility issues with Blu-ray that we finally gave up and moved on to other technologies like modified AppleTVs that we can push content to for client approvals and even kiosk-like display of programs.   Then you have the cost prohibitive nature of Blu-ray licensing fees that make it very unattractive for short run replication and content that must be updated frequently.

Some of you will now say, “What about the behind the scenes and featurette content on DVDs?  I like that stuff.”  Well to that I would say, me too.  However, I am currently in Las Vegas attending the National Association of Television Production Executives conference where just today the industry studios and conent creators were talking about moving that content to the web so they can get better engagement with their audience and enhance the “behind the scenes” experience by adding things like blogs and chats with characters and more.

If there is one thing that I have learned from the show this week, it is that the Internet becoming a significant if not primary distribution vehicle for films and TV programming is an inevitability.

Tuesday will bring us a new president and if his campaign promises hold up – change.  Regardless of your political affiliation or opinions (which is not the subject of this blog), things are changing, both in the world and in our business.

2009 will continue to bring changes to the film, television and advertising industries.  The single largest change afoot is the rapidly increasing use of the Internet as a blended distribution vehicle for television programming and video advertising.  At this point, no television property is complete without a web site and the web is increasingly being used as a vehicle for distribution.  I offer some recent and poignant examples:

1.  FOX streamed the recent BCS championship game live for the first time in the history of the game. The feed did not include FOX’s TV feed — a tactic that has become the norm for broadcasters trying to make live online coverage complement, not replace, what’s on TV.  Online angles included an overhead cable-cam, a shot isolated on quarterbacks and shots (and audio) of each school’s band.

Tuesday also brings the unprecedented partnership between CNN and Facebook covering the inauguration ceremony.  There is a reason that Barrack Obama won the “Marketer of the Year” award from Ad Age.

2.  The almost epidemic use of the Internet based video ad campaigns.  Shootonline now profiles an increasing number spots that never hit the broadcast airwaves.  Check out these examples:

            JCPenney’s | Beware of the Doghouse spot. 

            Dodge’s RAM Challenge  

            Honda’s Cinematic “Dream the impossible” Documentary Series Campaign 

The fact that advertisers are spending significant dollars on online or hybrid campaign like the RAM Challenge is a strong signal that the Internet has become a viable outlet for mainstream video advertising as bandwidth available to consumers has been exponentially increasing.  Online video viewing rose 34 percent over the past year.  The latest data also shows that 77 percent of U.S. web surfers watched online clips in 2008 and one analyst predicts a 45 percent growth in the coming year.

Here’s to change in 2009 . . . .