Following a year that saw Hollywood productions more than double from pandemic levels, the film and T.V. industry begins 2022 much better equipped to manage their COVID exposures. However, given the rapid spread of the Omicron variant, production delays and rising inflation, filming will come at a much greater cost.
Production on the Rise
Over two years into the pandemic, millions are still working remotely, cutting down commutes and giving potential viewers more time to sit back and binge their favorite shows. That's been a major reason why 2021 was such a busy year for filming, particularly in the television and made-for-streaming sectors.
FilmLA, which tracks productions shot in Los Angeles, found that studios spent a combined 18,560 days shooting T.V. and streaming content — topping a 2016 record by 18 percent. To further put it in perspective, 2020 saw film and T.V. together shoot for just 18,933 days.
So, while box office numbers are still down 61 percent from 2019 levels, we certainly haven't run out of things to watch.
Increased Cost of Admission
Widespread vaccines and regular testing bolstered the comeback. COVID now more frequently delays projects than it does stop them all together. But, production lulls remain a problem because they raise film costs and associated film insurance premiums.
At the most basic level, COVID delays mean additional time spent filming. If production is pushed back two weeks due to positive tests, that's two extra weeks for a camera to be damaged, a theft to occur or a cast member to break an arm. These are all events regularly covered by film insurance and the premiums are slowly creeping up, not directly due to COVID, but the time lost because of it.
To avoid these slowdowns, studios are taking pricey steps to ensure a safe and healthy environment. Industry insiders told The Hollywood Reporter that the expense of making shows and films grew anywhere from 15 percent to 30 percent last year due to new line items like PPE, frequent testing and additional COVID personnel. Not only that, but other production-related expenses like hotel rates shot up in 2021 as cities got busier again.
2021 also saw the U.S. economy marred by inflation, and it doesn't look to be slowing down. Everything from cameras and boom microphones to plywood and paint grew in expense and became difficult to obtain. If something costs more to buy, it'll certainly cost more to ensure in case it's stolen or damaged — driving up insurance premiums.
COVID Insurance: Now and in the Future
From the insurer's perspective, many are asking why there are so few options for dedicated COVID insurance. The answer lies in how prevalent and frequent positive cases are, particularly since Omicron hit our shores.
Insurance at its core exists to protect against reasonably unpredictable, infrequent events. For example, auto insurance companies expect their insured to get into a car accident once every decade, not once every year. It's the same with film insurance. Equipment damage and workplace injuries definitely occur, but they're not anticipated on every production. If everyone is shutting down for COVID, it cannot be practically insured on a cost-effective level because it's not yet managed effectively.
Even if the virus soon reaches the endemic phase, I still anticipate a 5-10 year period before we see widespread, affordable COVID insurance. After 9/11, as quickly as insurance companies could exclude terrorism in their policies, they did so. A year later, the U.S. government passed the Terrorism Risk Insurance Act to serve as a federal backstop for certain insured losses due to acts of terrorism. It then took another decade for the private insurance market to start aggressively insuring terrorism again. By then, they could more effectively develop coverages while managing risk.
The insurance industry tends to be conservative in reinstating coverages, mainly because they can't afford to pay a full claim to each policyholder. Like film studios, insurance companies do need to turn a profit.
Now more than ever, content is king, and the demand isn't going anywhere. Film productions, and expenses, will continue to soar in 2022.
