The long-anticipated fire sale among Soho post-producers finally took hold this year as several big-name facilities went to the wall. Worryingly, many of these failures occurred before September's credit freeze and the recession is likely to cull more throughout 2009.
It's not all gloom and doom, though, with several firms taking the chancellor's message to heart and planning to spend their way through the tough times ahead.
List of fallen
The casualties began with Resolution, a year ago, followed by M2, The Sanctuary, Videosonics, Noise London (reformed as United Audio Project), Pepper (regrouped as Pepper Post) and TV Set/Beach 74.
Programme budgets are certainly much tighter and producers are not paying their bills any quicker but the immediate cause of collapse for many of these businesses was a failure to elicit further loans as banks closed their books during the credit crunch.
Facilities which had made use of the equity rises in their properties as a source of cash have been hit hard by the property slump. Meanwhile, companies that rent faced sharp increases.
In the cases of Pepper and Videosonics, changes to UK film tax laws were blamed. Some of the films Pepper had banked on were delayed as a result of changes to UK tax breaks.
While not quite a decimation of the sector, many believe that an industry that supports around 100 post-producers in Soho alone is in need of some form of rationalisation.
For one thing, oversupply doesn't aid falling rates and facilities, regardless of size or reputation, continue to undercut each other. Add to that the pressure of more production companies setting up their own in-house facilities and you have a recipe for an oversupplied market. Broadly, the field has split between boutiques catering for a niche and warehouse one-stop shops. Both are able to exploit economies of scale while those in the middle ground lose out.
“Everyone [who aims to go big] has to pass through the middle,” says John Rogerson, managing director of Halo Post, which employs 26 staff. “If you look at why companies have failed it's because they have debt they can't service and very heavy overheads. From day one we've been very canny, spending money wisely.”
Halo operates from a£1.5m Soho facility which opened in January, and an offshoot it launched in Chancery Lane last summer is on track to double its size every 12 months. “Offering quality at competitive prices is not necessarily a contradiction,” says Rogerson.
Evolutions, The Farm and Envy are among the larger houses offering most capacity yet all claim to have had a very decent year underlined by continued investment.
“We need to maximise capacity because as soon as a suite is idle you are losing money,” says Evolutions managing director Simon Kanjee. “You need to invest in the sales department and refresh your range of services.”
“Facilities that will struggle will be ones with huge debts or leases that make it difficult to deal with rocky months for investment,” says Kanjee. “We generally buy rather than lease kit, which makes hard times slightly easier.”
Envy continues to buck the trend, pursuing an aggressive expansion plan, pumping more than£2.2m into its Rathbone Place HQ and a new 32-suite facility in Foley Street.
“It's certainly not been a depressing year for us,” says managing director Dave Cadle. “In fact, it's very exciting to be expanding by client demand.
Offline seems to have been neglected generally over the years yet our suites look as busy as most people's onlines.”
A decade after launch, The Farm Group has poured£3m into a refurbishment of its Soho Square flagship: “Maybe the credit crunch makes it very tricky for facilities that borrow money in order to upgrade to get their hands on the necessary cash but we've had a fantastic year, especially in post,” says joint managing director Nicky Sargent.
One company which has managed to route its way out of the mid-sized league into the premiership is Clear Cut Pictures where chief executive Horacio Queiro began the year taking full control of the company by buying co-founder John Dinwoodie's shares. “I wouldn't be surprised if a large facility goes bankrupt next year,” he warns. “There are inefficiencies in operating multiple buildings while expansion at a time like this may be foolhardy.”
Clear Cut's philosophy is to continually look for ways of streamlining the post process and then pass on those savings to customers.
“We operate offline at a loss by offering two edit systems per client so a director and editor can review and edit rushes,” explains Queiro. “That sort of service generates loyalty among clients who'll place more online with us - an area where we can make margin. We're trying to identify repetitions in the workflow and push that as a service by alerting clients to ways they can save money and avoid unnecessary charges.”
Streamlining is also the watchword at BBC Post Production which began the year with the “for sale” sign hanging over its head. “We didn't know who would own us or what the future would mean,” says director Lesley McMahon-Hathway.
Earlier this month it was announced that as many as 210 positions could go across BBC Studios and BBC Post Production as part of a restructure of BBC Resources designed to “make the business smaller, more flexible and resilient to changes in demand”, according to BBC Resources chief executive Mark Thomas. Some 98 jobs could go in post-production in London, with facilities in Bristol and Birmingham likely to close. Thomas told staff that without the job cuts the company would have been forced to focus on “surviving rather than thriving”.
Of major interest to facilities outside the capital are BBC proposals to devolve more production to the nations and regions. At Welsh über-facility Barcud Derwen, it's too early to tell if this will bear any fruit.
“It depends if the BBC keeps post in-house or whether work will be retained by producers running their own post operations,” says managing director Bryn Roberts. After an “extremely quiet start to the year”, he says business has picked up, driven in part by investment in production. Barcud deferred£175,000 of post fees in the Green Bay/S4C co-production Rivers and Life until the programme was sold.
“One way a facility can make money, provided your cash flow can sustain it, is to share in the intellectual property and equity of a production,” says Roberts. In Barcud's case it helped that it co-owns the programme distributor Cymru International with Parthenon.
“It's certainly been a turbulent and destabilising year for the facilities sector,” says UK Screen chief executive Gaynor Davenport. “In 2009 the sector will continue to face challenges not only from within the industry but as a result of the global economic downturn.
“On the plus side there are opportunities for those with flexible business models and facilities looking to develop stronger relationships with production or those exploring new media platforms.”
The sector, she stresses, “remains underpinned with unrivalled expertise and creative talent”.
Facilities in 2008: at a glance
Halo opens a£1.5m facility in Great Portland Street.
Mumbai's Pixion, a subsidiary of Indian facility giant Century Communications, acquires VFX house Men From Mars, 75% owned by Barcud Derwen, for£1m.
Machine Effects is acquired by Prime Focus for£2m and rebranded Machine.
M2/Lime shuts it doors. Owner John Tadros launches Rocket a few weeks later with 30 former M2 staff.
Smoke & Mirrors begins a£5m expansion, adding 10 onlines and a second telecine suite.
Splice TV launches a£2m facility in Shoreditch.
The Edit Store spends£500,000 on HD kit.
The Sanctuary folds, blaming falling rates and the credit crunch.
India's Century takes a multimillion pound stake in Molinare which opens a new facility at Pinewood Studios and begins to post the BBC's Little Dorrit.
Audio house Videosonics ceases trading.
Prime Focus London and Blue merge resources, retaining their separate brands.
BBC Post Production learns it is not, after all, to be sold.
Pepper goes into administration and is then resurrected with backing from venture. capitalists Partner Capital.
Ascent Media Group consolidates four of its UK businesses - One Post, St Anne's, Stream and a media management division - under the brand Ascent 142. It invests£2m in digital intermediate suites.
2D Video Facilities Ltd, the company behind TV Set and Beach 74, folds after a dramatic fall in the value of its freehold premises.
Shortform specialist Mainframe spends£1.2m on a new studio in Clerkenwell.
Ascent Media merges its Todd AO and Soho Images facilities, rebranding them as Soho Film Labs.
Grading outfit Narduzzo Too opens on the Pinewood lot.
BBC Post announces 98 jobs in post-production are at risk. Facilities in Bristol and Birmingham are to close.