Now that the six-month-long strike by the Screen Actors Guild (SAG) and the American Federation of Television and Radio Artists (AFTRA) against the advertising industry has ended, post houses caught in the crossfire of the labor dispute are wondering what the lasting impact will be on the U.S. spot market. Managers at post facilities are sighing with relief at the settlement, and are happy to see business starting to pick up—but they still have some concerns.
For one, they are afraid that a sizeable piece of the strike-fueled runaway spot production will never return stateside. Add a possible double whammy delivered by potential strikes by SAG/ AFTRA against television and feature film studios, and a similar action by the Writers Guild of America (WGA) next year, and it’s easy to see why many post house executives are wearing furrowed brows.
There is no question that the SAG/AFTRA spot strike, the longest in Hollywood entertainment history, delivered a blow to the bottom line of many post houses throughout the country. The Association of Imaging Technology and Sound (ITS) released a survey in July that found some 33 percent of its member companies derive a significant portion of their business from the advertising industry. Each post facility in that one-third slice of the ITS membership pie lost an average of 19 percent of its gross revenue during the early days of the strike (SHOOT, 7/21, p. 1).
"Initially, the problem seemed to be pretty widespread," says ITS chairman David Case, who is also president/CEO of Production Masters Inc. (PMI), Pittsburgh. "By initially, I mean the first two to three months of the strike. Then, my sense is that we started seeing individuals and our customers out there beginning to find innovative ways around the strike issues."
How much the strike has hurt individual post houses depends on their size and on the client mix that the facilities had going into the work stoppage. Case says larger companies, with a more diversified client base of advertisers, longform and episodic programs, and corporate clients, weathered the storm better than small boutique editorial houses or larger post facilities concentrating on servicing the ad industry.
"The problem with diversifying revenues is the lead-time to bring that type of business to fruition is longer than commercial work," explains Case. "Commercial work is more immediate. I think companies that were more diversified into those other business sectors were not nearly as impacted by the strike as long as the ones who were just focused on the commercial work. It’s my understanding that a lot of smaller editorial companies—the creative boutique editorial shops—were really suffering."
SHOOT spoke with several post facilities throughout the U.S., and almost all tended to confirm Case’s take on the fallout from the strike. Generally, post facilities outside the advertising centers of Los Angeles, Chicago and New York apparently weathered the strike better than houses in those respective cities, because their revenue mix tends to be less concentrated in spot work. "Our bread-and-butter is cable, with the major clients being Discovery Channel, National Geographic and New Urban Entertainment," says Robert Henninger, president/CEO of Henninger Media Services, which has offices in Washington, D.C., and Arlington, Va. "We also do work for government agencies and trade associations, and corporate-type work. The advertising part has never been a strong part of the D.C. market."
"Before the strike, we were doing very well," reports Steve McCoy, president of editorial house FilmCore, which has offices in Santa Monica and San Francisco. "During the strike we were able to hold our own. But I think the general sense is that L.A. as a community saw a general loss of around twenty percent."
Through his personal experience as a facility owner, Case confirms that spotwork fell off during the dispute. "About forty percent [of PMI’s] business comes from spot work," Case states. "We saw a thirty percent drop in gross revenues in that sector. If you look at that in the aggregate, that’s twelve percent. We noticed a ten- to fifteen-percent decrease in gross revenues when the strike initially started. Most companies like PMI don’t have that fat of a margin to begin with, and when you lose fifteen percent of your gross revenues, it has a significant impact on your bottom line."
Post Perfect, New York, laid off staffers during the strike. It has since hired most of those workers back and now has a larger staff than when the strike began, says VP/general manager Patrick Howley. Many companies reassigned staffers to busier areas, and relied on attrition to cut overhead, if they did anything at all.
The methods employed to combat spot revenue losses by bringing in new business were mixed. Post Perfect, for example, in the midst of forming a new media venture called Liquid Laboratories (which will officially launch in the new year), concentrated on growing that enterprise’s services and client base.
An exception to the spot strike rule was Santa Monica-based post/ effects house R!OT, for which commercials are a large part of the business mix. R!OT reported no noticeable business drop-off during the strike. "If I compare this year with the previous year, when there was no strike, in a nutshell the strike didn’t affect us at all, or was diminished by our successes this year," says Richard Cormier, managing director of R!OT. "I feel bad about it because our sales were up fifty percent when everyone else’s were off. We might have done even better if there hadn’t been a strike, but I have no way of knowing."
Runaway?
Agencies that went outside of the U.S. to shoot, for the most part, brought the footage stateside for posting, though that was not the case with every job. "Since we weren’t involved in production, we were fortunate that work done out of the country did tend to come back here for finishing," observes FilmCore’s McCoy. Although he does admit, "We did lose a certain amount of business."
One point all the post houses agree on is that because the SAG/ AFTRA strike caused ad agencies to work outside the U.S., the agency creatives discovered that other countries have talented filmmakers, crews and infrastructure. The execs expect some of that business will stick overseas. "My brain tells me that work will come back. My brain also tells me that a percentage will be people saying, ‘Hey, we can go to Prague, New Zealand or wherever.’ A lot of it, I hope, will stay in our country," says Dan Rosen, president of Manhattan Transfer, New York. "But to some degree, people have learned they have other options now. I think that will have some effect long-range. How much will it be? Who knows?"
Attitudes in the post community are mixed towards SAG/AFTRA since the strike created the opportunity for ad agencies and clients to discover other shooting and finishing options outside the U.S. Some shrug and think of the strike as another natural disaster. Others take the unions to task for striking at all. Still others point to the timing of the strike.
"I think the [strike happened at a] bad time of the year [for] the commercial industry," says Case. "Going north of the border in the summer months is certainly attractive. Now that some of that has been discovered, whether it’s Canada or New Zealand or Australia or wherever, I think the industry as a whole will have some trouble pulling some of that work back to the U.S."
While post facilities say that business has been steadily improving over the fall, some are still worried. After watching the devastation caused by the spot actors’ strike, Cormier worries that the industry is only in the lull before an even bigger hurricane hits if the SAG/AFTRA and the WGA strikes against television and feature films come to fruition. "It’s my personal belief that [more striking] will affect more than longform. What’s going to happen is that everybody is going to seriously run after all kinds of work. I could say that it will be OK for the next strike, because we’re a commercial house and we’ve already been through it. I don’t think that’s true. There are going to be a million other post houses in L.A. that are mainly involved in longform stuff who will be running after my clients.
"When you’re in short form, you need more than to say, ‘I’ve got a Flame or a Henry or an Inferno, and I’ll go after Saatchi & Saatchi.’ But if [the longform houses] are very hungry and laying off dozens of people every week, or whatever, it’s going to affect the entire industry big time," he continues. "And if it goes down the drain and there are no shows, then advertisers will advertise less. I don’t think it will be good at all. I think it’s going to be much bigger than the SAG strike [against the ad industry]."y
