Soho: bridge to the West

There’s a saying in the Soho post-production community: if you want a million quid, start with £10m. But despite the high costs and low margins associated with post, there seems to be no shortage of investors willing to plough their money into a Soho facility.

The demise of Pepper Post in June and the launch of Rain Post the following month demonstrated the staying power of the sector, but also served to illustrate a wider trend: India based companies are increasingly choosing to do business in the UK.

When I ask Karan Arora, chief executive of Mumbai-based High Ground, the main backer of Rain, why he wants to invest in the UK post sector, he smiles.

“It’s a common question: ‘Post-production? Are you mad?’ While it’s true that it’s not been that rosy a picture over here for a couple of years, it’s good to enter when a market is low,” he says.

“The UK is the epicentre for any Asian company looking for an international presence. It provides a bridge to the Western markets; you can connect with LA and the rest of the world from here.”

Through local partners, High Ground already has a presence in the Middle East. From London, it intends to move north to Manchester, and then across the Atlantic to Los Angeles and Canada.

It is a route that Prime Focus, the first India-based company to invest in the UK facilities sector, has already taken. For Prime Focus global chief operating officer Anshul Doshi, one of the attractions of the UK is its proximity to India, both culturally and geographically.

“If you are a global post company, you need to have the UK as a hub - there is no way around it,” he says. “Clients want a global service, and that means they want work done in the UK, New York and India. It’s particularly true for commercials, where top brands want to work with a global organisation.”

Another key factor is the talent available. Reliance MediaWorks ventured into the UK in early 2010 when it bought film processing firm iLab. In July this year, the company announced a deal with US-based VFX firm Digital Domain to launch VFX and stereo 3D post facilities in London and Mumbai.

Reliance says the deal will lead to an “aggressive” expansion in the UK, with “signifi cant” investment in the form of expanded premises and new hires. Naresh Malik, chief operating officer at Reliance MediaWorks Creative Services, says there is a lot of talent in India, but partnerships of this sort are important because they provide know-how.

“We want our staff to train with, and learn from, their experience. In return, we can provide access to India-based talent and complete work at a reasonable cost.” Doshi adds: “UK expertise is undoubtedly superior in creative and technical skill sets. But I’m not so sure about the skill set of managers; I would say that is on a par with India.”

He argues that UK firms have struggled to fi nd suitable leaders. “Lots of those at the top level retired and they didn’t have successors who could carry their business forward. Otherwise, UK companies would have acquired Indian companies and entered India a long time back, but they didn’t.”

Prime Focus entered the UK in 2006, when it acquired VTR for £4.7m. Later that year, it bought Clear Post Production, and in 2007, it moved into the US with the $43m (£27m) purchase of Post Logic Studios and Frantic Films. Then it bought UK company Machine and Clarke Associates for £4.5m.

“It made good business sense,” says Doshi. “The price was not that big, considering prices that I have seen recently, and for that we got a majority stake in an established industry-leading post house. It needed some reorganisation, recapitalisation and re-energising, and that was where we came in.”

Mike Luckwell is the former chairman of UK Post (now UK Screen). An investor in production and post-production since the 1970s, he says foreign investment in the post sector is a recent phenomenon. He cites John Malone’s Liberty Media as “the first of the big foreign investors”, followed by Irish, French and latterly Indian companies.

“I think it mirrors other sectors,” he says. “We have seen work subcontracted by UK and US companies to India, and there were certain companies in India run by very bright guys who made money out of it; and when they did, they realised it would be a good idea to be a principle here in the UK and have their own London office.”

He says that a London base only really needs to break even, as its value can feed the Indian operation. “A foreign proprietor specialising in VFX with hundreds of cheap employees can have a front office in New York or London, perhaps with top American or English talent, but all of the grunt work that needs a lot of employees can be done in India, where it is cost-effective. Companies relying on UK or US employees at local rates can’t compete. It’s very effective, and you have to ask, why not? That’s competition.”

Arora says that when Rain takes on archive and 3D conversion work, it will use its facilities in India and the Middle East.

“If we can’t leverage and complement across the group, what is the point?” he asks. “Of course, we will take advantage of that. But at the same time, Rain is a self-contained structure and all the talent is local. The best talent you can get is in the UK but being cost-effective has always been possible in India. Access to the manpower is where you can get the upper hand and have a little advantage.”

By no means is it simply a case of funnelling work out of the UK. Doshi says Indian commercials want their content fi nished in the UK. What’s in it for India-based clients? Arora concludes: the UK brings “talent that will give them an edge”.