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THE NEW FILM & VIDEO INDUSTRY: GETTING OUR SHARE
By Kevin Wright
Runaway Film Production
Colorado's deep-rooted film heritage dates back more than a century and includes the Legislature's establishment of the world's first film commission on July 1, 1969. From the first documented films shot in Colorado in 1897 to more recent productions, including Good Machine's "The Laramie Project," and "Things To Do In Denver When You're Dead," the film industry has been lucrative for rural and urban communities throughout the state.
Thanks to the natural beauty of the landscape, a talented workforce and a growing tech industry, Colorado has maintained a competitive advantage in securing film and video production. Yet, a new dilemma faces both Colorado and the U.S. film industry -- runaway production. Fueled by new technology and foreign cash incentives, runaway film production is having a deep impact on America's film industry. With more than $10 billion in lost revenues in 1998 alone, it is an expanding national problem.
Defined as the flight of film and video production to other countries, runaway production is a real concern for organizations like the Colorado Film Commission (CFC). Principal destinations include Canada, the United Kingdom, Ireland and Australia. Aside from being English-speaking, these countries boast a skilled workforce, variety of incentive programs, attractive exchange rates and rapidly growing film industries.
One of the main reasons for this trend is that government-sponsored cash incentives are not available in the U.S. Foreign governments increasingly recognize the numerous benefits of attracting film production, and have taken steps to actively attract U.S. film production through financial incentives.
Foreign Incentives:
Canadian incentives, such as cash rebates (calculated as a percentage of labor costs), range from 20%-46%. Additional cash enticements, up to 3% of total production costs, are based upon the number of Canadians employed. "In some provinces, production houses get a tax credit of as much as 35% for money they spend on labor. In Ontario, the figure can be as high as 50%. Couple that with generally lower costing Canada and a strong U.S. dollar, and the result is the defection of productions to Canada." (The Washington Post, November 5, 2000 )
Incentives are often designed to encourage foreign production in order to foster the development and growth of film and video production service industries. Increased production in Canada, for example, has provided the capital to invest in a film production infrastructure that previously didn't exist. This newly-created infrastructure utilizes new technology, such as state-of-the-art studios which in turn, increases the country's marketability for future film and video production.
Another economic factor contributing to runaway production is the attractive exchange rates U.S. film producers receive in Canada and Mexico. A strong U.S. dollar creates lower labor rates in countries with weaker currency. For example, a grip hired in Los Angeles from the International Alliance of Theatrical Stage Employees (IATSE), Local 80, costs a production company approximately $24.72 per hour. A grip in Vancouver from IATSE, Local 891, costs a production company approximately $21.68 per hour. However, the exchange rate and rebates from the government can reduce that amount to $15.00 per hour.
Here's a sampling of recently-completed U.S projects co-produced in Canada:
Bad As I Wanna Be: The Dennis Rodman Story (Ontario)
The Long Island Incident (Ontario)
Oklahoma City (Alberta)
Hidden in America (Ontario)
Joe Torre: Curveballs Along the Way (Ontario)
Nixon & Kissinger (Toronto)
Texas Rangers (Alberta)
Technology:
Within the last decade, advances in technology have created dramatic changes in the way film entertainment content is produced. The ease of transmitting data over long distances, combined with technical infrastructure and a skilled labor force have enabled film makers to take advantage of lower labor and production costs in other countries. The expansion of global cable channels has increased consumer demand for filmed entertainment. At the same time, foreign countries are capitalizing on technological advancements with a speed and ease never before possible.
The large, costly post-production facilities of yesterday are quickly being replaced by high-powered computers, storage space and specialized software. Creating film content is an inherently collaborative process which historically required directors, producers, directors of photography, sound supervisors, visual effects supervisors and many other specialists to be in the same location to supervise or review post production functions. Today's technology makes it possible for individuals from around the world to participate in the process, no matter where they are. This results in a larger pool of post-production specialists and enables new production markets to build a technical infrastructure without relying solely on local sources.
Advancements in software and hardware have also made it easier for filmmakers to mimic locations on sound stages. This is a major concern for Colorado, whose main selling point has been "location." The advent of high definition (HD) cameras has also impacted the film industry, and is making it easier for foreign countries to compete. HD cameras expedite instantaneous review of shot scenes without waiting for the film to be processed and transferred to tape. This not only skips a time-consuming process, it eliminates the use of specialists with years of training and saves millions of dollars.
Technological advances are not only changing the skill-set of individuals that produce entertainment, but the way these individuals are trained. In the past, production artists often developed their trades in a Union environment. Today, many of the processes have remained the same, but the tools have changed dramatically. Post production markets now emerge with newly trained workers who bypass time-consuming "apprenticeship" programs.
A U.S. government-sponsored initiative that is certain to have dramatic effects on the industry is the Federal Communications Commission's (FCC) plan to transition to digital and high definition TV. Most of U.S. post-production facilities' equipment do not function HD and the replacement or upgrading of this equipment to support it will be a very costly endeavor.
Globalization:
The formation of international production companies and new technology has led to the replacement of U.S. film workers and the migration of high-quality film production to non-traditional locations. Throughout the 1990s, major Hollywood studios and independent production companies faced a period of decreasing profits, as domestic costs for production and distribution rose substantially.
Between 1990 and 1999, average costs related to the acquisition and production of a movie prior to release almost doubled, from $26.8 million to $51.5 million. The same is true for distribution costs for new feature films, which climbed from $11.97 million in 1990 to $24.53 million in 1999. Conversely, operating margins for major studios -- including Disney Studios, Viacom, News Corporation (parent of 20th Century Fox) and Time Warner -- have substantially declined.
In addition, the vast expansion of television channels worldwide through cable has heightened demand for lower-budget production. Foreign film industries have capitalized on this, and with the help of government programs, moved in to claim their share of the action.
Supporting Numbers:
A report released by the Monitor Company, "The Economic Impact of U.S. Film and Television Runaway Film Production," estimated that from 1990 to 1998, U.S.-developed film and television productions abroad almost doubled from 14% to 27%, while U.S. economic losses from runaway production increased fivefold, from $2 billion to $10 billion. The report identified the high-growth "made-for-television" and mini-series productions as the segment hardest hit.
The study also showed that in 1998, out of a total of 308 U.S.-developed made-for-television movies, 139 were produced abroad, a significant increase from the mere 30 produced abroad in 1990. The report identified Canada as the number one host for U.S. film production - with revenues estimated as $2.24 billion in 1998. Canada was followed by the United Kingdom, which reported U.S. production values of approximately $647 million in 1999.
A closer look at figures for U.S film production in Canada reveals production tripled since 1992. From 1997 to 1998, jobs related to film and television production increased by 13%. Foreign location shooting (a majority presumed to be U.S.) increased fivefold from 1992.
Some feel these numbers reflect a "Hollywood problem" versus a "state" problem. Film commissions across the nation, however, concur that runaway production is a significant challenge. The Midwest Office of the Directors Guild of America, which monitors production activity in the Midwest and Southeast, observed a 15% to 20% drop in feature film and television production in 1998-1999 from the previous year. As Representative Jerry Weller (R-IL) notes, "So many people out there wrongly think that this is a Hollywood issue. It's not. It's a Chicago issue. It's a Texas issue. It's a New York issue. It's a national issue."
North Carolina, ranked third in the U.S. for film and television production, reports Movie of the Week (MOW) production was down 86% from 1996 to 1999. Feature film starts in Florida were down 64% from 1996 to 1998, and MOW production was down 40% in Texas from 1992 to 2000. Highlighting this downturn is Chicago-based Show magazine which found that more than 70% of the firms listed in the previous edition of its Annual Production Bible (published 15 months earlier) were no longer in business.
Colorado has been hit as hard as these states, if not worse. A review of Colorado Film Commission numbers reinforces the same downward trend. Reported revenues for out-of-state film and video shooting in Colorado for fiscal year 2000 shows a 75% decrease from the five-year average.
WHAT THE U.S. IS DOING TO STOP RUNAWAY PRODUCTION
In July, Sen. Blanche Lambert Lincoln (D-AR) introduced Senate Bill 1278: The Independent Film & Television Production Incentives Act of 2001. Designed to address "runaway film and television production," the legislation grants a wage credit for production of film, television or cable programming, mini-series, episodic television and MOWs produced in the U.S., with total wage costs between $200,000 and $10 million. The amount of the wage tax credit, in most cases, would be 25% of the first $25,000 in qualified wages per worker.
In discussions pertaining to the legislation, Sen. John Breaux (D-LA) stated, "Just last year, Canadian cities were substituted for New Orleans in four different productions. This is a problem not just for the movie industry, but also for the small businesses across our country that provide services to the film industry. I believe the wage credit I have sponsored with Senator Blanche Lincoln of Arkansas will provide an important incentive for the movie industry to go back to making American movies in America."
D-LA)
Other programs to combat runaway production include the Export-Import Bank Loan Guarantee Program and the Small Business Administration's Loan Program for Independent Film Production.
THE COLORADO PICTURE:
Last year, the CFC moved from the Department of Local Affairs to the Governor's Office of Economic Development and International Trade. "The silver lining in all of this," reports Program Director, Stephanie Two Eagles, "is that the new Colorado Film Commission is energetic, lean and mean, and the staff we have is the most focused and forward-thinking group the film commission has seen in a long time. We've been able to start with a clean slate, taking with us the knowledge of past failures and successes to move forward in what we and the community feel is the right direction."
Colorado freelancers were excited this summer when Greg Babcock was hired as the CFC's location specialist. A 20-year veteran, Babcock worked as a Location Manager and DGA first assistant director on numerous motion pictures, television programs and commercials. His experience and relationships throughout Colorado and the national film industry are strong assets. Adam Clark serves as administrative assistant. A Sterling, Colorado native, Clark recently graduated from CU-Boulder with a major in economics and history. Adam was highly recommended by State Rep. Diane Hoppe, for whom he worked during the last legislative session. Kevin Wright is marketing specialist for the CFC and the Colorado Tourism Office. Wright is the first staff person in the history of the CFC whose sole focus is marketing. Rounding out the team is Mary Crawford. Crawford retired from the CFC last year and offers her ten years of experience to serve as part-time special project coordinator. She is overseeing progress of the new website through the end of the year.
Five of eight new advisory commission members were appointed by Gov. Bill Owens in July. They are: Mickey Booz, director of photography at Ice Cream Films of Englewood; Donna Dewey, filmmaker, producer and writer for Dewey-Obenchain Films, who received an "Oscar" in 1997 for her documentary, "A Story of Healing;" Joel Ehrlich of Nederland who is CEO and chairman of New Deal Pictures, Inc., a newly formed company which distributes independent films and encourages Colorado film production; Dan Hugo of Glenwood Springs, an award winning motion picture producer and successful actor in film and television; and Maury Willman, president and CEO of MediaTech, Fort Collins. Along with existing members David Emrich, president of Post Modern Company in Denver; Tom Hoch, a video and film producer from Aurora; and Dan O'Brien of Englewood, an attorney for the film and video industry, they form a dynamic advisory commission which represents a diverse cross-section of the Colorado film and video industry.
WHAT THE COLORADO FILM COMMISSION IS DOING TODAY
Unable to compete with foreign financial incentives and exchange rates, the CFC faces the daunting task of increasing its share of a shrinking pie. Faced with budget and staff cuts, the CFC is trying to accomplish what many in today's economy seek: Do more with less. The CFC is undertaking some new marketing strategies in hopes of ebbing the flow of runaway production.
Advertising
To keep Colorado visible, MGA Communications of Denver created a new advertising campaign to break through the clutter, differentiate Colorado and promote in-state shooting. While other states have qualities that attract filmmakers, none have Colorado's strong image and emotional connection. The new campaign became an extension of this idea, with stunning images by Boulder photographer, Allen Birnbach presented in an open, panoramic style. Simple headlines were used to promote Colorado's attributes in intriguing ways. An elegant new logo and a discreet call-to-action underscored the powerful series of print ads. This summer, the CFC ran ads in four industry trade publications: Advertising & Marketing Review, Location Update, 'boards and the Hollywood Reporter.
Website
With help from programmer Nelson Goforth, designer Kim Malueg of Tripstream Productions, local location managers and the Economic Development Commission, the CFC plans to unleash a new weapon by year's end. While it won't eradicate the woes of runaway production, it will increase the Commission's efficiency and marketability and provide an invaluable service to location scouts and film industry decision-makers throughout the world. These features will be showcased when the CFC relaunches coloradofilm.org.
The website will sport a new look, better navigation, more readily updated content and significant new features. The latter will include a searchable database of location photographs and a "Screening Room" featuring material produced by Coloradans. The location database will be unique among state film commission sites, enabling producers to find images through a keyword search. The CFC's vast collection of photos will be transferred to a digital database and continually enhanced with new locations and photos.
Other highlights include a "shopping cart" of selected photos and locations. Users will be able to direct production personnel to see locations being considered. By simply e-mailing a single link, location scouts, producers, directors and production designers -- even in different countries -- can view and discuss potential locations without having to e-mail or snail-mail large photo files.
New, Stronger Relationship with CFVA
New leadership in the CFC and the Colorado Film and Video Association (CFVA) has fostered closer ties between the two organizations. The purpose of the CFVA is to serve, promote and develop the film and video industry's private sector through dynamic leadership and responsible representation, a purpose closely allied with the efforts of the CFC. Stephanie Two Eagles complimented the strong leadership of CVFA President, Susan Gurule, and her board by stating, "We've really have a wonderful partnership."
Joint projects include the first-time production of the 2001 Colorado Production Resource Guide (CPRG) on CD-ROM and the expansion of the 2002 CPRG to include more listings and advertising.
Formation of the CFC Marketing Committee
The CFC Marketing Committee met for the first time in September to develop a comprehensive marketing plan. Additional committees has been created to handle research and website projects.
Research
Once funding is secured, the CFC plans to begin work on a groundbreaking research project to identify and profile companies and individuals in the film industry, and to quantify contributions to Colorado's economy. CU-Boulder's Business Research Division will undertake the study, which is slated to provide key information never before collected. The current Standard Industry Codes capture a portion of the revenues brought into Colorado by the film industry, but fail to capture the revenues generated from small businesses and freelancers, who comprise a large portion of the fragmented industry.
The new report will offer economic data on revenues generated within Colorado and underscore the importance of the industry's role. A $15,000 matching grant has been secured from the Economic Development Commission. The CFC Advisory Commission and the CFVA are currently working to raise the additional $15,000 needed to initiate the project.
The CFC's Future Plans
Over the next six months, the CFC will implement a targeted direct-mail program aimed at film producers, ad agencies, production company executives, creative directors and other film production decision makers to drive traffic to the newly-upgraded website.
Plans also spotlight greater involvement with regional film festivals, starting with the CFC's sponsorship of the Denver International Film Festival, October 11-21, 2001.
Finally, the CFC is focused on implementing a public relations program that will provide information to local, regional and national media outlets on a regular basis and cover film production projects throughout Colorado.
Kevin Wright
As Marketing Specialist for the Colorado Film Commission and Colorado Tourism Offices, Kevin Wright manages and coordinates the marketing efforts of both state organizations. Wright's career includes marketing positions with Loveland Ski Area, Eldora Mountain Resort and S.K.I. Ltd., an operator of five Northeastern ski resorts. Wright currently staffs the Colorado Tourism Office Board and the Colorado Film Commission Advisory Commission. He is a 1995 graduate of Plymouth State College, New Hampshire, with a bachelor's degree in Marketing.
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