You won’t see their names on movie marquees or listen to their witty acceptance speeches at the Academy Awards, but without the veritable army of entrepreneurs who serve the entertainment industry, your favorite blockbuster would probably be a bust. They’re a special breed—innovators who make zombies look terrifying, install temporary communication systems on remote sandbars, and build software that can read scripts and generate production schedules.
And they do it all for extraordinarily demanding clients who work on tight schedules and have little tolerance for delays. “Production is like combat," says Dave Thomas, CEO of Exchange Communications, a company that installs phone and Internet systems for movie productions and production companies around the world. “Producers spend years putting a production together, then they get funding and it’s like, ‘Boom! Let’s make this project.’ It’s wait, wait, wait, then go. And when it’s go, it’s 24/7.”
But for companies like Thomas’, the rewards can be substantial. According to PricewaterhouseCoopers, the $31.8 billion U.S. filmed entertainment industry is poised for steady growth over the next five years, with worldwide revenue expected to top $100 billion by 2016. And the growing number of U.S. states and foreign countries that offer film tax credits means the industry has expanded beyond traditional production hubs like Los Angeles and New York City. Georgia, Louisiana, Mississippi and New Mexico are increasingly popular production locations, giving local entrepreneurs an opportunity for a piece of the action.
OPEN Forum recently spoke with several entertainment industry entrepreneurs to get a fix on what it takes to break into and remain competitive in the movie business.
Know Your Niche
Howard Berger has been fascinated with monsters for as long as he can remember. “I practiced sculpting, drawing and painting, and I was lucky enough to grow up in Los Angeles, where I stalked my favorite makeup artists,” he says. The co-founder of KNB EFX Group in Chatsworth, California, Berger has been in the makeup effects business for 28 years and specializes in prosthetic makeup, specialty props and mechanical animals. The company won an Emmy for Outstanding Prosthetic Makeup for The Walking Dead TV show and has done work on a wide variety of film and TV productions, including The Chronicles of Narnia movies, Breaking Bad, True Detective, The Amazing Spiderman 2 and many others.
Berger says the secret to longevity in his industry is diversifying but also remaining true to your own special sauce. “Twenty years ago, when the digital revolution began with Jurassic Park, we all thought we were extinct,” he says of his fellow makeup artists. And although many of his competitors invested heavily in digital equipment, Berger stuck to his knitting. “I want to do what I’m really good at,” he explains. “I had no interest in digital.”
Rather than competing with the special effects folks, Berger decided to collaborate with them to "facilitate their needs.” For instance, he worked with the award-winning visual effects firm Rhythm and Hues to create the minotaurs in The Chronicles of Narnia films. “We designed the character together,” he says, “and decided there would be times when their lower torso would be digital, and the upper half would be practical [achieved with prosthetic makeup]. It was a perfect marriage.”
Berger’s company has grown from a tiny shop to a 22,000-square-foot facility with 30 employees who work on approximately 30 projects a year. “Most of our competitors are soloists or smaller companies who go from one film to the next with their kits but aren't attuned to the business aspects,” Berger says. “The time frame is monstrous these days, and the biggest challenge is the limitations forced by production: There’s no money, and no time.“ As a successful entrepreneur, Berger speaks the language of budgets and schedules, and that, as much as his creative skills, is what has earned him his Hollywood pedigree.
Be Agile and Flexible
Back in 1977, Dave Thomas was living in New Mexico and running a business that involved renting cell phones to tourists, which turned out to be a terrible idea. “I was in business for eight months and had two sales,” Thomas recalls. Then a production for the film The Hi-Lo Country came to Santa Fe, and the production coordinator called Thomas out of the blue. “She said, ‘We need 20 phones, and we need them now,’” he recalls. “They rented my inventory for six months, and I made a lot of money.”
But the windfall was short-lived: Thomas realized that he had Los Angeles-based competitors who were big players with economies of scale. “I thought, there must be something else I can do for productions,” he says. It struck him that when films shoot on location, they often rent empty buildings with little or no infrastructure, so he decided to market himself as an installer of temporary telephone systems, despite having no industry knowledge.
Initially, he hired professional installers, watched them, read manuals and eventually learned how to do the installations himself. “The first system I installed was in 2000 for Planet of the Apes in Lake Powell, Arizona,” he notes.
As technology changed, so did Thomas’ business. “When I started, fax was huge," he says. "Then it was the Internet, and we installed DSL and T1 lines and began building rudimentary data networks.” Now, with film being shot digitally, data sharing, Thomas says, "[has] gone from a trickle to a tsunami. They’re not just moving content—there are also teams of visual effects artists all over the world working with live action crews, and there’s constant back and forth of data. Security is huge.”
Case in point: the recent hacker attack on Sony. In the highly secretive film industry, trust is paramount, and his customers, Thomas says, 'know we understand what their needs are, that we'll pretty much do anything we possibly can to achieve the results they’re looking for.”
Like Berger, Thomas stresses that anyone who works in the industry must be willing and able to go from zero to breakneck speed at a moment's notice. For instance, a major upcoming film was green-lighted but then delayed for two weeks while a commercial building lease was being negotiated. “It was an elaborate production, and they were behind,” Thomas recalls. “The lease was signed on a Friday, we worked 36 hours straight to get the office up and running, and they started shooting on Monday.”
But his biggest challenge, Thomas says, was setting up a communications system for a Pirates of the Caribbean sequel in 2004. “They decided on a location in the Exumas [a district of the Bahamas] that was stunning—a sandbar, a mile offshore, where they had three huge ships as basecamp,” Thomas says. He was given one week to set up phone, fax and Internet service. “Decisions are made very quickly in this industry,” he notes.
But being responsive has paid off. Exchange Communications rang up $3 million in revenue last year and has 14 employees working in Albuquerque, New Mexico; Atlanta; Los Angeles; New Orleans, New York City and Santa Fe. “Between state tax incentives and new entities like Amazon and Netflix needing content," Thomas says, "it’s been a boom in a lot of ways.”
Stand Out From the Pack
In 2001, Louisiana became the first state to offer tax credits to the film industry, but it had little infrastructure in place to accommodate film production. Andre Champagne, a New Orleans native who was working in the industry in Los Angeles at the time, returned home when it became clear that there was opportunity in that scarcity. He started Hollywood Trucks, which provides talent and wardrobe trailers, trucks, vans and just about every other piece of transportation equipment that doesn't appear in front of the camera.
“Louisiana had a fantastic program, and it was catching on like wildfire,” Champagne says. “We were filling an infrastructure need in the state. The company literally grew by purchase order.”
But it wasn’t a cake walk: Champagne fought to survive both the financial crisis of the late aughts and the 2007-2008 Writers Guild of America strike. Currently, Hollywood Trucks has a fleet of 300 vehicles, and Champagne says he’s in the process of “the largest expansion in the history of the company.” In 2015, he’s expecting the company, which now does more than $5 million in annual revenue, to grow by at least 50 percent.
What he’s most excited about is the product he says distinguishes him from his competition: the company’s fleet of Ecoluxe trailers, which A-list celebrities call home when they’re on set. The trailers are TRA-certified (the equivalent of LEED green housing certification but for mobile units) and run on solar and thermal technologies, use LED lighting and feature post-consumer recycled materials. They’re also outfitted with Nest smoke detectors, Apple products and high speed Internet access. “What we’re putting into the marketplace is really vanguard,” Champagne says.
The company has expanded into Georgia and Mississippi, which also have tax credit programs for film productions. Offices in the UK and Los Angeles are also in the works. The strategy, Champagne says, is to diversity into several markets so that if tax credits are discontinued in one state (North Carolina, for instance, recently made drastic cuts to its program), he can redirect assets to more movie-friendly locations. He's not worried about finding new business: As he notes of the industry, “There’s massive growth out there.”
Provide a Tech Advantage
“Hollywood is in the forefront of investing in digital effects, but what happens behind the scenes is much like it was when film was invented 100 years ago,” says Mike Rose, CEO of Ease Entertainment Services, a full-service entertainment payroll, technology and incentives tracking firm. Rose worked as a consultant at business management consulting firm McKinsey & Co. and also ran a small production company. In 2008, he saw a glaring need for software that would automate back office functions, such as payroll, during the production process.
“There’s a high level of complexity in this business,” Rose says. “People come and go on films, so things like the Affordable Care Act throw the whole industry into a tizzy.”
Tax incentives and global expansion have also made human resource functions even more burdensome, Rose says, "[with] boxes of paper being shipped back and forth to Los Angeles.” Rose’s value proposition was to offer production companies the technology to handle all the back office functions so that filmmakers have time to focus on the creative aspects, not the administrative burden. That means automating everything from payroll and budgeting to regulatory compliance.
“Say you have pyrotechnics on a scene,” Rose explains. “You have to be OSHA-compliant and make sure that safety bulletins are distributed." To launch the company, he recalls, “I had software engineers come to my house for a year.”
In February 2013, Rose expanded his operation by acquiring Scenechronize, a cloud-based production information management system. The integration of Ease Entertainment and Scenechronize means that a project can flow from script development to production to payroll to residuals all on the same platform.
“Say a big star has in their contract that they need to have at least the second most number of lines for every scene they’re in,” Rose explains. “Our software can count those lines. It used to be that someone had to do it manually.“ The company’s software can also scan a PDF of a script and automatically generate a production schedule.
“Our tools are so advanced that people can’t believe it until they see it, then they can’t live without us. Every studio and major independent [film company] is using at least one of our products,” Rose notes. He’s got 130 employees, 11 offices in the U.S. and Canada, and says he just landed a “major investment” from VC firm Bison Capital. “This year, revenue will be up a huge amount,” Rose says. “We’re gaining momentum.”
Dramatic growth is a common theme among entrepreneurs who know how to serve the movie business. Part of the secret sauce is to identify and solve a real problem, and to do it at breakneck speed and with an over-the-top service mentality.
But before you get all starry-eyed, consider this: “We deal with the biggest stars in the world every day,” Champagne says. “You get unbelievable demands from people who are able to access anything in the world they might want. And everything is very time sensitive—it’s almost like a strategic military operation.” If you're ready to jump in, just make sure you’re up for the battle.
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