With plummeting rates and offline suites increasingly moving in-house, Michael Burns examines the changing business models for facilities operating in a tough commercial climate and uncovers the new growth areas.

The post sector is undergoing an intensive period of diversification and investment. According to a recent post-production survey carried out by Broadcast, more than two-thirds of the 100 companies which responded say they have diversified into new areas.

Our survey found that high definition is still seen as the largest single growth area for post-production, with 59% of respondents considering it number one. Evolutions managing director Simon Kanjee is optimistic about HD. “High def is taking off,” he says. “The BBC and Channel 4 are launching HD channels. There is an increased volume of HD work going through the facility and we'll be investing in more high-def kit.”

Due to its roots in music production and promos, the Sanctuary became an HD post facility some time ago. Of its current business, 80% is high def, according to joint managing director Daniel Stracey. “I feel sorry for companies which have to invest from scratch now because rates are starting to come down on the HD side,” he says. “Also, you don't want to be going through a learning process with HD given the amount of [HD] programming that's coming through now.”

Tapeless production is another key theme for facilities - 27% voted it the second major growth area. The tapeless camera scene has seen increased use of cameras such as Sony's XDCAM, but this year the Red camera is sure to become a talking point.

Like HD, tapeless formats can be a minefield for the unwary, so facilities need to be ahead of the game and able to provide technical assistance well before the footage comes down the pipe to their suites.

“We see tapeless and HD as definite growth areas for us,” says Katy Child, head of commercial development at BBC Post Production. “While the speed of the transition is still not clear, helping and guiding programme-makers through the new technologies and the processes, workflows and formats which accompany them is crucial.”

Audio was also highlighted as a major growth area by 17% of survey respondents, with facilities reporting considerable investment in audio suites, particularly with the provision of 5.1 sound finishing.

DI is another hot topic, with many facilities reporting growth in this area. “DI has reached maturity; we have three suites in operation,” says Kevin Phelan, head of post-production at LipSync Post, adding that the facility will be looking at a fourth suite in the near future.

Money talks
The survey's findings in relation to kit purchase support the picture of a sector investing in the future. Our survey revealed the average spend for a facility in 2007 was£690,000, about£40,000 more than in 2006. However, the general intention for 2008 is to spend less on kit, with respondents planning to spend£660,000 this year.

The largest investment, perhaps unsurprisingly, has been in editing (57% of respondents bought new kit last year), followed by storage (49%), presumably to handle the far greater file sizes involved in HD and tapeless post. Investment in audio kit is next (43%), with 23% of survey respondents buying full audio-mixing consoles and 30% investing in audio software.

Unit managing director David Peto puts his kit spend at£500,000 over the past year, costs incurred mainly in setting up his Final Cut Pro-based facility. “We invested a lot in storage capacity because it's needed for HD,” he says. “In terms of CGI, we've bought six Mac Pro desktops with 30-inch displays, along with Shake, After Effects and Maya. We've invested quite heavily in Cinema 4D seats. We've also invested in grading kit such as control panels. The rest of it has been more Final Cut Pro editing licences.”

Breaking new ground
With rates from production companies plummeting and in-house offline suites increasingly becoming the norm, the survey found many editing houses were diversifying into other areas.

Evolutions is extending its services to offer multi-format delivery online and to mobile, and has opened a branch in New York servicing British production companies doing work in the US. However, according to Kanjee, the big step has been into 5.1 audio finishing. “It's massive for us,” he says. “Audio is absolutely chock-a-block and it has been for the past four or five months. We've got eight audio suites and we're outsourcing on top of that. That's partly because we're good at it, but also because 5.1 eats up audio suite time.”

Kanjee adds that the facility will build more audio suites, all Pro tools-based.

Editing houses moving into high-end audio may not sit well with audio facilities, but there seems to be plenty of work available for everyone. That's the case for Sumners, which has diversified by opening a new sound stage complex in Manchester called the Pie Factory. The three-studio facility has produced more than 20 hours of TV drama and comedy, all post-produced at Sumners.

In 2007, Pepper moved from Covent Garden to two Soho premises. “We have chosen to diversify into data DI with two projection grading theatres in Greek Street and also into VFX and audio for features at Noel Street,” says joint managing director Shane Warden. “Greek Street and Noel Street are the largest investment in high-end facilities in Soho for a long time. The bulk of it is in HD and 2k/4k data capable equipment and a vast storage system. This allows us to work on many HD/data broadcast dramas as well as features at once.”

The Sanctuary is one of the facilities involved in the wave of acquisitions in 2007, doubling in size after purchasing Oasis Television. In addition to high-end audio and editing, it now has a new media arm, Arias DVD (acquired in September). It also has three additional subsidiaries: Sanctuary Gaming, which serves the gaming market; design and branding arm Funktion; and its own production company, Sanctuary Productions. While building this end-to-end solution, the Sanctuary's HD infrastructure has also been completely overhauled.

“We've just spent the best part of£2m,” says Stracey. “If I had to justify that on post alone, I couldn't, but because of the other elements we now offer clients, I can.”

The Sanctuary's Funktion subsidiary is part of another sea change in the market where facilities such as Unit and LipSync have been developing in-house teams to offer CGI and motion-graphics services.

“VFX has been our largest growth area,” says LipSync's Phelan. “We've expanded from five people two years ago to 28 workstations with 16 full-time staff and a bunch of freelancers at the ready.”

Unit had a single CGI artist in May, but now boasts eight VFX staff. “Turnover's grown about 300% since we started,” says David Peto, adding that a permanent staff of specialists is required to guarantee the quality and fast turnaround required for broadcast visual effects.

Traditional VFX houses have also been diversifying. Lola, a facility servicing commercials and film, is making inroads into TV. “We find that the organisation required for film work and the immediacy of commercials, combined with the production quality of both, make for a very good basis for quality TV work,” says managing director Grahame Andrew.

Predictions for the future
With kit investment last year exceeding the amount facilities surveyed in 2006 thought they would spend by£80,000, post facilities look set to tighten their belts this year. However, judging by some industry predictions, 2008 still doesn't look cheap. Unit is a typical example of a facility aiming to further invest in storage, data management and routing infrastructure. “The main growth will be in data management and digital distribution,” predicts Pepper's Warden. “The security of intellectual property and the ability to deliver efficiently will become the backbone of every facility.”

Investment Case Study: BBC Post Production
The post market is moving swiftly to high definition and tapeless workflows, according to Broadcast's survey. The outlay BBC Post Production made last year is typical of the heavy investment made by many companies in this area.

“Our investment in HD grading equipment includes a new Nucoda FilmMaster from Digital Vision and upgrading our Autodesk Lustre to the 2008 version,” says head of commercial development Katy Child. “We also recently invested in new non-linear equipment to support customers in BBC Sport as they move towards a tapeless workflow in a fast-turnaround environment.”

Building on experience at the Fifa World Cup in 2006, where the facility pioneered HD tapeless workflows from ingest to playout, BBC Post Production installed new Avid Adrenaline suites and upgraded its EVS network and server, aimed at delivering long-term logistical benefits and potential cost savings to production. The first programme to benefit from the investment was Match of the Day in 2007.

“We also upgraded our Final Cut Pro cutting rooms to Version 6 and moved from Final Touch to Color to meet production's appetite for new HD workflows,” adds Child. “We upgraded an extra finishing room and editing suite to be HD capable. France on a Plate, a new 60-minute BBC HD documentary exploring French politics through food, benefited from the upgrade as it meant that it was possible to work at native DVCPro100 resolution throughout the project and finish in the Final Cut Pro environment.”

Investment Case Study: Multiplatform delivery
The results of Broadcast's post survey indicate that post companies are increasingly interested in multiplatform delivery - 27% of respondents rated new media as the third biggest growth area. One reason for this is that the processes involved in multiplatform delivery complement the technical infrastructure and knowledge already present in any large facility. According to Sanctuary's Daniel Stracey, more production companies should be working with facilities to maximise their investment, particularly with rates from broadcasters being so low.

“Post-production companies can't just be about editing any more,” says Stracey. “When you're sitting down with a client, you're looking at programming and content from a business perspective. You need to consult them about how to make the most money from content.”

As well as the value of other platforms, post companies also need to make producers aware of the costs upfront, one of which is deliverables, the largest and most frequently underbudgeted area of post, says Pepper's Shane Warden. “With multiplatform delivery and approvals, the volume of versions and standards required is staggering,” he says.

Golden Square's Disqo is a digital design division aimed at the multiplatform market, an area which managing director Ewan Macleod sees as demanding more of post houses, but which also opens up new opportunities for facilities to become more creatively involved. “I think in five years or so, post and production will have fused together to provide a one-stop creative shop, capable of providing solutions across all media platforms,” he says.