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June 2019

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  • Televisual Bulldog Awards - the winners
    The votes have been counted and the results are in. See the winners of this year's Televisual Bulldog Awards
  • The Art of Noise
    Special 15 page report on audio post for movies, TV & commercials
  • Making the Cut
    Top editors behind Spectre, Inception, A Very English Scandal and Bros: After The Screaming Stops on sculpting the story
  • Live Action
    From concerts to cup finals: how broadcasters are using live events to stand out from the streamers
  • Machine Learning
    Televisual’s Technology Survey uncovers the industry’s favourite kit
  • Breathing Space
    Studios dash to make room for an influx of movies and drama
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Facilities 50 2018 Back to Reports & survey Listing

Budgets and Brexit are still causing post houses concerns, but the rise of the FAANGs and their demand for high end deliverables is proving to be a shot in the arm for the facilities market 

It’s now 31 years since Televisual published its first ever Facilities 50 survey.

That 1988 survey, filled with post houses boasting of their Paintbox graphics systems and Harry editing suites, seems like a different world now. But then a few of the top-rated post houses in this year’s survey made the grade in that first one too – MPC, The Mill, Molinare, Framestore (then called The Frame Store).

And, 29 years on, many of the same issues still remain for the post sector. Post houses have always felt the sting of budgetary pressure as the last link in the production chain. As one respondent to the survey puts it, although off the record, there’s still the problem of “large international broadcast companies, naming no names, cutting their expenditure and squeezing suppliers to do business on their terms. It’s like how supermarkets operate with suppliers and farmers.”

It’s a pressure mentioned by many respondents to the survey as their clients are squeezed. “Budgets remain a key issue with clients needing more for less, often in terms of multi-platform delivery,” says Dock10. And that pushes some operators into desperate measures. “As always,” says Smoke & Mirrors, there are “people undercutting just to win work at any cost.” Arteus too mentions “small operations undercutting prices” that harm everyone. Cinelab picks out those “companies continuing to operate at a loss that prove to be disruptive to the industry.” Glassworks complains of a “race to the bottom in undercutting” which leads to contracts being awarded purely on the price with productions “using sub-standard teams for vfx to hit budget,” as Nineteentwenty puts it.

The B word
Some issues for the post world are more of the moment though. Although one in particular feels as if it’s been with us forever now. Brexit, and the feeling of general uncertainty it fosters “has placed mounting pressure on marketing budgets and subsequently the production industry,” says MPC. Axis is another company that mentions “the uncertainty and apparent disarray around Brexit that continues to affect the future.” Bravo also points to “uncertainty regarding Brexit for work in the corporate and advertising market.” Though Lola reckons that the wider implications haven’t been grasped as yet, saying that “the Brexit turd hasn’t really landed yet. There’s a certain amount of blind optimism while everyone is busy.”  Brexit uncertainty is in large part responsible for the current weakness of the pound which, at least in the short term “increases USA spend in the UK,” says TVC Soho.

But that’s just the silver lining on a darker cloud. There are very particular worries about the eventual Brexit outcome for the post production market. For everyone, but particularly those in the vfx sector, it’s the possible curbs on Freedom of Movement that are top of mind. “Brexit could prohibit talent from coming to London,” says Coffee & TV. Framestore also picks out “Brexit and any potential impact on recruitment of talent into the UK” as a point of concern. Freefolk similarly says that post Brexit, the worry is that “there will be a noticeable talent drain from the UK.”

Capital costs
There are also specific local difficulties for post houses with bases in London and particularly Soho. Bluebolt points to “rent and rate hikes in central London”. Halo also picks out the “pretty unforgiving” rents for a central London business. Fifty Fifty speaks of “the continually rising cost of running a Soho based business” as a concern. Run VT points out that while “rates and rent are now sky high, what we are able to charge our clients remains the same.”

But for many, this cost is a necessity. Directors Cut, among others,  argues that “despite the rent rises, being central is a key to our facility’s success and it is incredibly important to our clients and staff.”

There are also big changes happening in the broadcast production market which are seen as either a threat or an opportunity to post houses depending on whether they’re mainly London-based or in another UK city. UK broadcasters are placing greater emphasis on sourcing from production companies in the nations and regions now. Bristol’s Doghouse says that it has already seen “a big increase in indie production setting up which has made 2018 more varied and exciting than other years.” Fellow Bristol facility Films at 59 also says it has “seen a rise in interest from London-based companies looking to establish a regional base.” Timeline, with its Mediacity presence, feels that “more productions relocating to the regions should have a positive impact.”

London headquartered post outfits including Suite, Evolutions, West Digital and Rapid all point to regionalisation of production as a challenge they will have to deal with. Clear Cut considers it to be an “existential threat” as “post houses have long leases on their buildings, huge investment in infrastructure and a stable employed staff base. This could damage the existing companies and threaten the world class skills base of the industry that attracts work to London as a global hub.”

Many London post houses are dealing with the threat by creating regional offshoots to their London HQs. That’s not in itself a new thing but increased regionalisation of production has accelerated the trend. Evolutions is looking to “UK regional and national expansion” it says. The Farm has this month opened the doors on its shiny new Manchester facility with a new Bristol facility opening early next year. Splice too is expanding its Cardiff offering. There are plenty of others too.

Broadcast based post houses are also worrying about the prevalence of production companies taking some of their post work in house. But it’s in the commercials world that many are seeing the biggest impact of in-house post with ad agencies hoovering up as much bread and butter post and production work as they can. Freefolk, Big Buoy, Glassworks, Absolute, Jam VFX, Leap and Nice Biscuits all point to the increased in-house post offering at agencies as a problem for the sector.

But there’s been push back too with more and more post houses, both big and small, quietly setting up their own production divisions and often working direct to client. MPC, for instance, points to “shifts in the traditional agency /production model” as both a threat and an opportunity. Post houses that have traditionally looked to commercials work are also taking a renewed interest in the high-end TV and film markets. Says Nice Biscuits: “We are seeing a notable reduction in the amount of commercial work from large agencies and are replacing it with direct to client, international and film work.”

Which brings us to another major change in the UK post market, and this time an undoubtedly positive one. The emergence of Netflix, Amazon and other big players in the SVOD world has given a big boost to the UK post market. In this year’s survey, the total turnover has risen to £749m for all respondents, up from £681m last time. The median turnover for a UK post house has gone from £3.5m to £3.8m. The UK has for years had a big international reputation for its high-end post work in the world of movies. Now the double whammy of the tax credits system for film and high-end TV, coupled with increased SVOD and movie studio spend has led to a surge in the UK post market.

The recent BFI ‘Screen Business’ report showed that, taken together, the VFX spend on tax relief incentivised productions generates £773.9 million Gross Value Added (GVA) for the economy.

Every post house with a toe in the high end world is reporting optimism due to the favourable tax relief system for movies and TV coupled with the content push from the FAANG buyers. As Outpost says: “Between Netflix, Amazon, Hulu, Apple and HBO there’s an ever-growing appetite for high end TV, which in turn means VFX providers are expanding in order to service that demand.” Pinewood says that the “film and TV market has continued to evolve with increased VOD content. It’s a positive market to be in currently.” Unit points to the “recent golden era in longform.” WB De Lane Lea says it has seen “the volume of drama and features work increase with the influx of VOD titles.“ Lipsync says that it was “our best year since records began. High end TV drama continues to grow in importance.” Onsight notes the “many more 4K and HDR projects coming through the door. Posting high quality content in 4K and HDR for our VOD clients has increased.”

And the quality demands of those clients has spill-over benefits too. It “has had a positive impact in terms of the emphasis on quality of content, workflow and finish - audience expectations are high in terms of production values and experience,” says West Digital. Silverglade too notes that “productions are more adventurous and looking to emulate high end productions and with an eye to sell to VOD platforms.”

And that push for higher end deliverables plays to post production’s strengths. As Clear Cut points out: “Technical complexity makes in-house editing a less attractive proposition.” Many post houses are reporting much higher demand for 4K and HDR deliverables along with Dolby Atmos work – complex tasks that require serious technical infrastructure and knowledge. As Halo says: “Technology is right back at the forefront of post – that offers great opportunities for facilities that have invested properly in people, training and technology.”

But will clients understand that complex deliverables are more expensive to produce? As Molinare says: “Challenges continue with more SVODs and broadcasters looking to take an expanded list of deliverables, more are now including HDR and Atmos as standard, which is great from a creative perspective but adds to the costs. This isn’t a problem as long as productions understand that.”

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