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Weathering the US storm

The television and film business has been far from sheltered from the impacts of the falling us dollar. Take nhnz, a Dunedin-based prodco with Beijing and Washington, dc offices that produces over 60 hours of factual each year. John Crawford, nhnz's general manager, says in the company's last financial year (which ended in June), the bottom line impact of the declining us dollar was nz$1.25 million (us$960,000). 'So it's pretty serious stuff,' says Crawford. In September alone, the shift in the us dollar against the New Zealand dollar resulted in a nz$200,000 ($153,000) reduction in income for nhnz. Although the fluctuating us dollar is a problem the prodco has dealt with for at least three years, 'the severe impact really has been in the last six to nine months,' says Crawford.
December 1, 2007

The television and film business has been far from sheltered from the impacts of the falling us dollar. Take NHNZ, a Dunedin-based prodco with Beijing and Washington, DC offices that produces over 60 hours of factual each year. John Crawford, NHNZ’s general manager, says in the company’s last financial year (which ended in June), the bottom line impact of the declining us dollar was NZ$1.25 million (US$960,000). ‘So it’s pretty serious stuff,’ says Crawford. In September alone, the shift in the us dollar against the New Zealand dollar resulted in a NZ$200,000 ($153,000) reduction in income for NHNZ. Although the fluctuating us dollar is a problem the prodco has dealt with for at least three years, ‘the severe impact really has been in the last six to nine months,’ says Crawford.

While NHNZ does a lot of offshore filming – ‘so at least we’re sort of spending us dollars offshore,’ says Crawford – the benefits are lost at home. ‘When you try to bring the money back onshore to pay the salary bill, you find you’ve got less money than you thought you had,’ he says. NHNZ does some trading in Euros and other currencies, such as pound sterling, ‘but probably 98% of our income is in us dollars,’ says Crawford. ‘So when you’re dependent on another currency, the impact is enormous.’

Michael Prupas, president and CEO of Muse Entertainment Enterprises, a Montreal-based indie film and TV prodco with additional production operations in Toronto and Vancouver, can relate to the hits that can come from doing deals in a struggling currency. He says the us economy’s downturn has affected Muse ‘directly and concretely over the last year’ because Muse has done several productions where its costs were in Canadian dollars, and it had presold films to us buyers back in January. ‘We did four Lifetime movies that way,’ says Prupas, adding he’s sure many Canadian producers are in the same boat. ‘With 15% or 20% loss on the dollar in that period of time, our complete profit margin on those pictures was wiped out,’ he says. ‘That was a very painful process. It’s been a real struggle to do those pictures; we stuck to our commitment, but it became a labor of love.’

Cross the pond to Singapore, and Caldecott Productions International managing director Hee Yah Ong recalls the days when prodcos welcomed being paid in us dollars. ‘In 1997, when the Asian financial crash hit us, I paid an Indonesian production house in US dollars and they were very happy, but not anymore,’ says Ong, who works with a lot of independent Asian directors and producers.

A recent incident taught the company a lesson, she says. A producer submitted her budget in Indian rupees, while Caldecott had calculated everything on its end in us dollars from the beginning. When it came time to pay the producer, she refused to do her project because the difference was about US$2,000. ‘The difference was quite substantial,’ says Ong. ‘It’s a lot of money if you look at it from her perspective, so we said ‘Okay, we’ll cancel out the whole us dollar thing’ and we just paid her the original budget of rupees without the conversion because it’s not fair to her.’

Another company keeping currencies consistent is Off the Fence. The Amsterdam-based prodco and distributor has ‘been luckier than most’ when it comes to the impact of the us economy, says Darrel James, the company’s general manager. He attributes this in large part to the fact that Off the Fence has a dollar account. ‘So it’s critical to us to, where possible, get payment in dollars and we pay out in dollars as well.’

Over at Muse, Prupas has tried to eliminate the surprise element of the unpredictable us dollar by locking exchange rates on deals as early in the process as possible. The company is also protecting itself against the freefall of the greenback with its recently confirmed plans to open an la office.

But setting up shop south of the border is not an option for all Canadian film companies. Wallace Studios, a Toronto-based services company, is staying firmly planted on Canadian soil. And although Wallace founder Lillyann Goldstein says the company hasn’t felt too much heat from the struggling us dollar, she says the Canadian government has urged businesses like hers to bring down their prices now that the loonie has been boosted. ‘But everything we rely on – employees, hydro and property tax – is all Canadian. There’s nothing for us that’s changed, and we’ve never had a lot of fat in our pricing to chop, so there’s nowhere to go with it,’ says Goldstein.

NHNZ’s Crawford addresses the other side of the coin from his New Zealander standpoint: ‘We’ve taken a hell of a pounding with the us dollar – to remain competitive, you can’t hike your prices up, so what we have to do is work smarter.’ For NHNZ, this meant a major restructuring to lower the company’s overall overhead. Crawford says NHNZ re-evaluated its production processes to find ways to streamline them to help guard against the drop of the us dollar. It analyzed workflows, and ended up introducing some new technologies, including upgrading the sound suites and adding extra storage (which came with a roughly NZ$50,000 price tag).

Another restructuring measure led to the downsizing of 10 NHNZ positions, including some full-time positions in the post department being shifted to freelance. The company now employs about 55 full-time staff.

Each region working in non-fiction has faced woes related to the us economy – or at least acknowledges they will in the near future. Goldstein says Wallace Studios may not have felt the brunt of its neighboring country’s economic issues yet, but she sees it coming. Despite that, Muse’s Prupas remains opportunistic. If a project from the States or elsewhere that he thinks will do well comes along, he says the company will try to make it work, and that means adjusting for the value of the dollar. ‘I think this industry as a whole is characterized by people who, especially here in Canada, have had to roll with the punches and the changes from year to year,’ says Prupas. ‘Nothing is ever stable, nothing is ever simple, and this rise in the Canadian dollar is just another one of those blows that we have to deal with.’

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