Hollywood aims to cut production costs amid rising inflation and supply chain problems

The entertainment industry is shrinking under the weight of inflation exacerbated by continuing supply chain turmoil, say physical production executives and studio operators. hollywood reporter. In the context of a record year of production levels after escaping the pandemic, studios are struggling to figure out how to build kits on budget and on time.

“The availability of steel and wood due to supply chain issues has resulted in materials costing at least 25 to 30 percent,” said Herb Gaines, CEO of Legendary Physical Production. In the last film he mentions that the same set with the same shots was worth twice what it was four years ago.

Almost none of the materials or parts needed to build the kits were protected from rising prices. Inflation has hit everything from fuel to appliances and duct tape. “We’re dealing with a completely higher cost,” said Brian Cooper, a partner at sound studio company S2CO, which is building a 1,000,000-square-foot industrial complex in Georgia. “Where I could have built a $3 million scene five years ago is now $8 million.”

Last year, most manufacturing executives and construction companies said they were experiencing delays and had not reached a level where they could not afford a certain set of equipment. Some now say that impossible demand across the country for the same materials, equipment and parts versus record demand for content is hampering team building. “If the set asks for a bathroom, but nothing happens there, we won’t have to cut corners,” said the studio’s production director. In California, where gasoline now costs an average of $6.34 cents a gallon, the executive notes, “For the first time, we’re learning to reduce fuel costs.”

Mark Binke, Executive Vice President of Production Reporting at NBCUniversal distort, A girl from Plainville s strange how people, among other headlines, notes that one of its most daunting challenges this year has been reducing the impact of rising costs. “Inflation affected all areas of production,” he said, adding that the studio applied “all scenarios in advance.” [to] “Multi-episode crossover”, grouping of filming locations and “volume discounts with major suppliers”.

Several scene operators who build kits from scratch say the cost of raw materials, including wood, metal and certain fabrics, is at least 30% higher than at the start of the year. Some materials doubled the price. While a sheet of plywood sold for around $40 a year ago, it now costs less than $80, the source said.

Inflation left no manufactured parts or equipment. The owner of a soundstage rental company says he was paid $85,000 to install a modest lighting network, a sharp increase from the $42,000 he paid just two years ago. Other electrical equipment, transformers, rose from $2,800 at the beginning of last year to $5,800 now.

Many scene owners say they would be willing to pay the premium if it weren’t for a big time. “We just placed an order for lighting, which is usually two to four weeks away,” said Luis Gizar, co-founder and co-founder of A Very Good Space, a stage rental company. “They tell us it’s now 16 weeks.”

One of the most difficult parts of security was the switches, a vital component used to control high-demand electrical systems across all industries, which can take up to a year to supply, depending on quantity. Cooper says he was told he could place an order within 30 weeks if he paid another $100,000 for $300,000 in components.

Studies fight inflation in different ways. Some are in a better position to absorb the costs. A representative of Trilith Studios, an Atlanta-based operation that houses Disney+ lady wonder s She-Hulk: Lawyer In addition to features like Black Panther: Vakanda ForeverHe says that building the stages now costs about 15% more than it did last year. Additionally, the studio faces eight to 10 month lead times for critical parts and supplies such as electrical boxes and stage doors.

“We have another Internet milestone that we need,” he said. “We have a team there and we have tractors, but we don’t have all the necessary electrical boxes and we don’t have all the doors.”

However, Trilith describes inflation and supply chain disruptions as thorns in the eye, albeit costly, rather than a crisis that forces major changes in operations. The studio isn’t building more or less sophisticated sets to keep up with rising prices, especially in the context of record demand for content (filming in Los Angeles increased by 40% in Q1 2021) and more competition than ever to drive growth. client. . The representative explains: “I don’t know anyone in the industry who cuts down on their construction. Demand for content is high all the time; We can’t keep up with the demand, and as we continue to increase the content we produce and the amount of content users consume, we can’t imagine anyone decreasing or reducing that demand to meet that demand. . Now it’s about working on all those challenges.”

But for other studies, the higher costs of inflation due to COVID-19 with an already inflated budget, which could lead to an additional 5-20% of the costs of PPE, testing and security personnel, among other things, forced a reduction. The main studio’s physical production executive says that some of the performances, for example, had to combine two scenes written for different locations in a single space. “We asked, ‘This scene is seven-eighths of a page.’ Do we need a set worth $500,000?” he explains. “It is in the fields that we can reduce rather than the wholesale cut list.”

Experts note that tax breaks have become an even bigger part of the calculation. Studios have used the most generous credit jurisdictions, such as Georgia, New Mexico and Ireland, which can save products 15-40% on costs depending on where they shoot, while ignoring certain risks and potential infrastructure issues. You can save enough money. Against the backdrop of inflationary pressures, Production’s CEO says studios were more interested in having fun filming in places like Vancouver, although filming has been under consideration since the British Columbia branch of the Directors Guild announced a strike. official in April. (The Directors Guild branch officially made peace with the producers on June 23.) After all, cinema can only go so far.

In a move that may have contributed to the shortage, executives at studios and production facilities are buying materials and parts in bulk so they can be used later. In a market where dozens of competitors from diverse industries are joking to get ahead, they say their relationship with merchants is now more important than ever.

“We have a wonderful general contractor that we work with weekly to plan, and we are in an early stage of advanced orders for everything from concrete and steel to electrical boxes,” a Trilith representative said. “Ahead planning is a broad answer, but it’s really about relationships. “We have a lot of relationships that are crucial to us, and when you need nonsense like that, it’s very important.”

One of the teachers remembers cleaning the office building, which was due to be demolished. ᲞRiz? Approximately $200,000 worth of insulation, plus thousands of light fixtures and other parts, at the expense of exposing the building. “There isn’t a week that a competitor doesn’t ask us to discard these items,” he said. “It wasn’t just the costs, but the time it took to provide these materials that scared us.”

For some major studios, buying in bulk is a logistical nightmare as they have to create series for movies shot thousands of miles away. It makes no sense to ship much of the wood to Atlanta even if it is available, for example, to go back and try to ship it to Africa or Australia where it is needed. Not only does it speed up delivery, but it also costs a lot of money.

As inflation hit the US economy, the race to set up studios to try to generate content when there was a lack of stage space became even more competitive. Studio conglomerates have set aside a huge content budget for this year’s lineup, with Disney planning to spend $33 billion, according to Warner Bros. Discovery $23 billion and Netflix between $17 and $18 billion.

Private equity remains a ring of soundstage operators, but questions are being raised about whether they are making money if they are currently building due to rising prices. “The construction phases in some places can be expensive,” Cooper said.