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Currency conundrums

TV producers constantly have their eye on the bottom line, always looking for ways to cut costs in order to save - and eventually make - money. However, for many people in the industry there is one area they hardly ever tread and rarely challenge - that of foreign exchange. Currency fluctuations can be a deal-breaker in this world. Frequently, a production will be meticulously costed, tendered-for, negotiated and executed, only for anticipated profits to be subsequently wiped out by fluctuations in currency markets.
June 1, 2006

TV producers constantly have their eye on the bottom line, always looking for ways to cut costs in order to save – and eventually make – money. However, for many people in the industry there is one area they hardly ever tread and rarely challenge – that of foreign exchange. Currency fluctuations can be a deal-breaker in this world. Frequently, a production will be meticulously costed, tendered-for, negotiated and executed, only for anticipated profits to be subsequently wiped out by fluctuations in currency markets.

Documentary production is, by its very nature, an international business with lots of money changing hands across international borders. But what few people realize is that every time you change currencies to pay salaries and bills or to help maximize profit, the only people who really benefit are the banks. Traditionally, production companies use standard banking arrangements for their foreign currency budgets, but without market knowledge and protection, producers set arbitrary foreign exchange pricing for future market trends, resulting in budgetary risk.

The industry is generally run on a dollar currency standard, so even if you are talking to your distributor or directly to Japan or Canada about your program license or your next coproduction deal, it is usually conducted and paid in US dollars. All producers, of course, receive some, or often a very large proportion, of their income in dollars, and we also all have to agree to exchange rates for contractual purposes and physically manage regular exchanges into Euros, American, Canadian and/or Australian dollars. However, the banks can take advantage of the fact that producers are generally unaware of the details of international currency fluctuation, and – hungry for cash flow – are too afraid to ask any questions of their bank. It’s a bit like seeing the headmaster. Of course, the banks don’t and won’t advise you fully on your future currency planning and risk management as it’s not in their interest to do so. Bank exchange rates for many tv producers and distributors are often not much better than tourist rates, so be aware.

I believe there are real savings to be made for all TV and film production companies if they are better able to manage their foreign exchange. There are several solutions available online, but these can be risky. If you are a small company, you’ll generally have to make spot trades to seize the trigger point cash immediately as it comes into your bank. What prodcos need is a dependable alternative source of foreign exchange that offers the best spot trades and the best risk management for our industry.

I have been investigating this area for some time and recently became involved with Pinewood Media, a financial service to the film and TV industry through its brokerage with HIFX PLC. HIFX is a regulated company that was recently voted ‘Best Forecaster’ by Reuters. It handled £200 million (US$375 million) in foreign exchange last year and has offices in America, Australia and Eastern Europe.

I’m not someone who naturally plugs the benefits of working with this or that company, but as a producer travelling the globe over the past 15 years or so and paying cameramen, drivers and indeed the odd backhander everywhere from the rainforests of Papua New Guinea to the highlands of Ethiopia, a trusted partner to advise on currency fluctuations and help you manage risks is to be valued. Production can be a precarious profession at the best of times and I’ve always enjoyed taking a few risks. In fact, the majority of my Tribal Odyssey films would not have been made without some risk. But I only really enjoy those risks that get the adrenalin pumping, not ones that put my margins in jeopardy.

We owe it to ourselves to play the system, along with the financial institutions, and ensure we get maximum value from our own investments as well as those of our business partners. At the end of the day, it’s our money and our margins, so we’ve got to keep on top of this issue.

About The Author
Meagan Kashty is an associate editor of realscreen, an international print and online magazine that covers the non-fiction film and television industries. Meagan is an award-winning business journalist. Prior to joining the realscreen team, Meagan was online editor of Canadian Grocer, named Magazine of the Year at the 2015 Canadian Business Media Awards. She can be reached at mkashty@brunico.com, and you can follow her on Twitter @MegKashty

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