Production cuts surface as Hollywood responds to rising inflation – The Hollywood Reporter

Entertainment industry is collapsing under the weight of inflation exacerbated by ongoing supply chain turmoil, physical production executives and studio operators say The Hollywood Reporter† Amid a record year for production levels following the pandemic recovery, studios are struggling to build sets on budget and on time.

“The accessibility of steel and wood due to supply chain issues has pushed up material costs by at least 25 to 30 percent,” said Herb Gaines, executive vp physical manufacturing at Legendary. On a recent film, he notes that the same set with the same plans was double what it cost four years ago.

Hardly any material or part needed to build sets has been freed from rising prices. Inflation has affected everything from fuel to electrical equipment to adhesive tape. “Across the board, we’re facing increased costs,” said Brian Cooper, a partner at soundstage company S2CO, which is building a 1 million square foot production complex in Georgia. “Where I could build a $3 million podium five years ago, it’s $8 million now.”

Last year, most production executives and set design stores said they were mostly dealing with delays and hadn’t reached the point where they couldn’t purchase certain set fixtures. Some are now saying that the impossible nationwide demand for the same materials, equipment and parts amid record demand for content is affecting set-building. “If a scene calls for a bathroom, but nothing happens there, we won’t have it to cut costs,” says the top production manager of a major studio. In California, where gas costs now average $6.34 cents per gallon, this director notes, “For the first time, we’re asking how we can reduce fuel spending.”

Mark Binke, executive vp production at NBCUniversal Supervision gas burner, The girl from Plainville and Queer as Folk, among other titles, notes that one of his most daunting challenges this year has been mitigating the impact of rising costs. “Inflation has impacted every area of ​​production,” he says, explaining that the studio has moved to “have all the scripts pre-written [to] cross-board multiple episodes,” clustering filming locations and seizing “volume discounts at key suppliers.”

Julia Roberts in Starz’s ‘Gaslit’.
Starz / Courtesy Everett Collection

Several actors who build sets from scratch say the cost of raw materials, including wood, metal and certain fabrics, is at least 30 percent higher than at the beginning of the year. Some materials have more than doubled in price. Where a sheet of plywood sold for about $40 a year ago, it’s now just under $80, a source says.

Manufactured parts and equipment have not been spared inflation either. A sound equipment rental company owner notes that he was paid $85,000 to install a modest power line — a steep increase from the $42,000 he paid just two years ago. Another electrical appliance, transformers, has risen from $2,800 at the beginning of last year to $5,800 now.

Many stage owners say they would be willing to pay the premium if not for the huge turnaround times. “We recently placed a lighting order, which would normally be completed within two to four weeks,” said Luis Guizar, co-founder and foreman of stage rental company A Very Good Space. “We are told it is now 16 weeks.”

One of the most difficult parts to protect is switchgear – an essential part used to power electrical systems that are in high demand in every industry – which can take up to a year depending on quantity. Cooper says he was told he could get his order in 30 weeks if he pays an additional $100,000 for $300,000 worth of components.

Studios tackle inflation in different ways. Some are better positioned to absorb costs. A representative for Trilith Studios, an Atlanta-based operation that is home to Disney+’s Mrs. Marvel and She-Hulk: Lawyer as well as features such as: Black Panther: Wakanda Forever, says it currently costs about 15 percent more to build stages than it did last year. In addition, the studio faces lead times of eight to ten months for critical parts and supplies such as electrical boxes and stage doors.

Lazy Loaded Image

An artistic rendering of a virtual production stage at Trilith Studios, allowing VFX work to be done on set in real time.
Courtesy of Prysm Stages at Trilith Studios

“We still have a series of stages online that we need,” said the rep. “We’ve got the team there, and we’ve got bulldozers out there, but we don’t have all the electrical boxes we need and we don’t have all the doors.”

Still, Trilith describes inflation and supply chain disruptions as an eyesore, albeit an expensive one, rather than a crisis forcing major business changes. The studio is building no less or less elaborate sets to offset rising prices, especially amid record content demand — filming in Los Angeles is up 40 percent in the first quarter from 2021 — and more competition than ever for growth. of subscribers. The rep explained: “I don’t know anyone in this industry that is shrinking their construction. The demand for content is at an all-time high; we can’t keep up with the demand, and as we continue to increase the amount of content we produce and the amount of content consumers consume “I can’t imagine anyone slowing down or downsizing the process to meet that demand. Now it’s all about getting around all these challenges.”

But for other studios, the higher cost of inflation coupled with already bloated budgets from COVID-19, which could add up to five to 20 percent in spending on the likes of PPE, testing and safety personnel, has forced cutbacks. A physical production manager for a major studio says that some productions, for example, had to combine two scenes written for different locations in a single area. “We ask, ‘This scene is seven-eighths of a page. Do we need the set, which costs $500,000?’” he explains. .”

Tax incentives have become an even more important part of the calculus, insiders note. Studios have lasered in jurisdictions with the most generous credits — such as Georgia, New Mexico and Ireland — that can cut production costs in the range of 15 to 40 percent depending on where they shoot, ignoring certain risks and potential infrastructure problems if they can save enough money. Amid inflationary pressures, a production director says studios were more willing to film in high-incentive areas like Vancouver, though it’s seen as a liability to fire in after the Directors Guild branch of Canada’s British Columbia affiliate in April issued a formal strike notice. (The Director’s Guild division officially made peace with the producers on June 23.) After all, movie magic can only go so far.

In a move that can contribute to shortages, execs from studios and production facilities are buying materials and parts in bulk for later use whenever possible. In a market where they’re jockeying with dozens of bidders across industries to get to the front of the line, they say their supplier relationships matter now more than ever.

“We have a great general contractor that we work with on a weekly basis to make plans, and we just got in line early for advanced orders for everything from concrete and steel to electrical boxes,” says a Trilith representative. “Advanced planning is the broad answer, but it’s really about relationships. We have a lot of relationships that are critical to us, and when you need crazy stuff like concrete, that’s really important.”

A stage foreman remembers cleaning up an office building that was slated to be demolished. The price? About $200,000 worth of insulation on top of thousands of light fixtures and other spare parts, all for the labor cost of gutting the building. “Not a week goes by without a competitor asking us to part with some of that stuff,” he says. “It wasn’t just the cost, but the length of time to secure those materials that scared us.”

For some major studios, bulk buying is a logistical nightmare, as they have to build sets for movies thousands of miles apart. There’s no point in getting a large consignment of wood to Atlanta even if it’s available, say turn it around and try to ship it to Africa or Australia where it’s needed. Not only does it yield a lot, it costs too much money.

Despite inflation hitting the US economy in general, the race to build sets for studios trying to produce content amid a shortage of stage space has become even more competitive. Studio conglomerates have allocated huge content budgets for programming this year as Disney plans to spend $33 billion, Warner Bros. Discovery $23 billion and Netflix about $17 billion to $18 billion.

Private equity continues to surround the soundstage operators, but questions are beginning to arise as to whether there is money to be made building them now due to rising prices. “It can get expensive to build stages in certain areas,” Cooper says.

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