Services Allied to Motion Picture Production

SIC 7819

Companies in this industry

Industry report:

This category includes establishments primarily engaged in performing services independent of motion picture production, but associated with them. These include motion picture film processing, editing and titling, casting, wardrobe and studio property rental, motion picture and video tape reproduction, and stock footage film libraries.

Industry Snapshot

This highly fragmented industry covers a range of services and products geared toward the production of motion pictures. Usually, firms engaged in this sector focus mainly or exclusively on a specialized operation and generally contract their services to motion picture producers or distributors. These small, relatively unleveraged firms often are forced to compete with each other on pricing in order to attract major Hollywood studios as well as independent filmmakers, who typically work with a tight budget. According to D & B Marketing Solutions, in 2009 approximately 8,175 establishments operated in this industry, earning a combined $2.6 billion in annual revenue. The two largest and highest earning segments were video tape or disk reproduction and sound effects or music production.

Major studios, such as Disney and 20th Century Fox, invested in large facilities to house equipment for post-production activities, including editing and sound mixing, that could be accomplished onsite. Some, like 20th Century Fox, boasted complete ground-up digital integration, bypassing the need for analog sound conversion. Others included wardrobe and scenery stocks and tape reproduction facilities. Therefore, the firms engaged in services allied to motion picture production were scrambling to maintain their viability in this increasingly consolidated marketplace, often positioning themselves as an attractive purchase for major studios.

One of the hottest sectors of the industry in the late twentieth and early twenty-first centuries was the production of special effects and digital animation. The astounding success and proliferation of films and movies featuring computer-generated special effects led to a rapid expansion and enhancement of these technologies. Film studios were competing to dazzle audiences with the most amazing visual images. At the end of the 1990s, 16 of the 20 largest all-time box-office hits had sold themselves primarily on special effects. The trend continued during the middle of the first decade of the 2000s, with Spider-Man, the Lord of the Rings trilogy, Star Wars: Episode II, Finding Nemo, Shrek 2, Harry Potter and the Prisoner of Azkaban, and Pirates of the Caribbean: Dead Man's Chest dominating the top rankings for box office earnings. By the end of the first decade of the 2000s, high-tech special effects were incorporated in a majority of big releases, including Transformers, Will Smith's I Am Legend, and, in 2009, James Cameron's Avatar. Studios also continued to release regular animations, such as the 2008 releases of Horton Hears a Who, Kung Fu Panda,and WALL-E.

Organization and Structure

The overall structure of the services allied to motion picture industry is distinguished by a heavy reliance on subcontracting and freelance talent. Firms rarely enjoy movie-gross percentages and remain fixed on jumping from one short-term contract to another. As a result, these companies are usually in a poor bargaining position with studios, which is exacerbated by the highly fragmented nature of the industry. They are continually forced to monitor the contracts of competitors in an effort to out-price them and attract studios.

The key players in the industry are the directors and producers who develop strong networks based on previous successes and reputations. The production team, which is composed of primary and allied production services, brings together a diverse group of professionals, services, and capital equipment. These relationships are temporary as they are created for the single purpose of producing a particular film. However, such temporary organizations are reassembled with the production of each new film. A service provider's reputation is a paramount factor in the ability to facilitate inclusion in the new network.

Motion picture production is a highly complex business that involves commercial and creative interaction. There are a number of interrelated activities that may be separated into four phases of development, preproduction, production, and post-production.

Development.
The development stage involves acquiring literary rights, writing and developing a screenplay, and hiring key creative personnel, such as the director and the cast. Key allied services during the development stage include those offered by literary agents and talent and casting services.

Literary agents represent writers and directors. Agents negotiate for their clients and review scripts. They make determinations regarding what projects constitute good film property and then convince producers and actors to take on these projects. Most literary agents are involved in the development of potential deals, concept development, and the provision of creative and practical advice on translating a script into a motion picture.

Casting for a motion picture is usually the result of interaction between the casting director and casting consultants or services. The casting director is responsible for casting roles and maintaining an ongoing relationship with talent and casting consultants. Casting consultants are hired on an individual project basis. They function as an actor clearinghouse for the director. Casting consultants seek and hire actors, negotiate salary and billing issues with the actors' agents, prepare contracts for all actors, and make "first work" calls. In the late 1990s, the key player in the casting service business was the Casting Society of America. Most other major casting service firms were located in and around the Los Angeles/Hollywood area.

Preproduction.
During preproduction, the remaining creative personnel are hired, a budget is developed, shooting schedules and locations are planned, and other necessary steps are taken to prepare the motion picture for primary photography. Key allied services during the preproduction stage include studio and production facility rental services.

The most prominent studio facilities are the mainstream producers of large-scale release motion pictures. These include Sony/Columbia, Warner Brothers, 20th Century Fox, Walt Disney, and Universal. However, the industry is really a continuum ranging from mainstream studies to true independent producers. The mainstream studios control nearly 90 percent of the revenue in theatrical rentals but are responsible for only 42 percent of production starts. Many small productions utilize small, independent production facilities, especially for productions filmed outside the Los Angeles/Hollywood area.

Production.
This phase of motion picture development includes the actual filming. Key allied services include animation, camera-equipment rental and operation, costume design and rental, lighting equipment rental and operation, and property and scenery design, rental, and maintenance.

The division between equipment rental/provision and operation is manifested during the production stage. Equipment provision services are conducted by a number of independent firms. Equipment operation, on the other hand, is conducted by union employees. The most prominent entertainment unions in this segment are the International Alliance of Theatrical Stage Employees (IATSE) and Moving Picture Machine Operators of the United States and Canada.

Traditionally, animation was the process of exposing film by individual frames while introducing a slight change in the photographed object or drawing following each exposure. By linking hundreds or thousands of frames, the materials become animated, moving in accordance with the intention of the individual creating the film. Other animated files were created by single frame exposures of models or objects. Film special effects were dominated increasingly by digital animation. Technological advances allowed lower production costs in animation, prompting increased use of animation in motion picture openings, commercials, and special effect simulations. Animation and special effects were dominated by a small number of firms, unlike most sectors of this industry. This sector generated estimated revenues of $600 million annually, a figure that more than doubled between 1993 and 2003 as more movies incorporated or featured animation and special effects. Prominent companies included George Lucas' Industrial Light & Magic, Pixar Animation Studios, DreamWorks Animation SKG, James Cameron's Digital Domain, Sony Corp.'s Imageworks, Hanna Barbera, Rankin/Bass Productions, and Walt Disney Studios.

Camera equipment and personnel are an important aspect of motion picture production support. These elements include the actual photographic device for shooting film; camera-hauling vehicles; the director of cinematography and associated camera crew; and individuals responsible for lighting, setting up, and composing shots. Although camera supply houses do not provide operators, they usually offer ancillary services, such as equipment repair.

Costume design is a vital part of the film production process. Costume rental firms exist in virtually every major city due to demand not only from motion picture production, but also from local theater and private costume rentals.

Lighting equipment rental and operation is another important service. Although setting the position of lights on the set is the responsibility of the director of photography, who is called the cinematographer, the cumbersome nature of film lighting equipment makes actual implementation both difficult and time consuming. There are more than 100 lighting equipment firms in Southern California and New York. Lighting technicians, repairmen, and lighting operators all are included in this category.

Property and scenery design, rental, and maintenance are important production elements as well. Property, or "props," includes any moveable item seen or used on a motion picture set. Scenery includes any background or backdrop used in a studio. There are several key professionals engaged in prop design and maintenance. A "prop maker" is frequently a member of the construction department, and is usually a carpenter, who is responsible for making the necessary props. A "prop master" is responsible for maintenance, availability, and placement of props on the actual set. Scenic artists are responsible for production of all illustrations, scenery and set designs, scale models, and props and other set dressings. More than 90 percent of property and scenery rental firms are based in and around Los Angeles and New York.

Post-production.
In post-production, the picture is edited into its final form as music, dialogue, and sound effects are synchronized with the picture and special effects are completed, resulting in the negative from which "release prints" are produced for distribution. Key allied services include computer colorization, cutting rooms, editing equipment and services, film processing and preservation, music libraries, cutting services, sound and recording services, special effect services, subtitle services, and trailers.

Editing equipment and services are essential to the post-production process. Editing involves joining the various pieces of film shot by the cinematographer into a single cohesive and dramatic whole. The autonomy experienced by the editor depends on the director. For some films, the editor and director will work closely in selecting each shot and determining where to cut, splice, and edit. Accordingly, some directors shoot a large quantity of footage, allowing the editor a great deal of choice, while others shoot less footage, providing the editor with less autonomy.

It is common in this fragmented industry for editing equipment, editing services, and editing personnel to be provided by three different groups of organizations. There are more than 50 editing equipment firms, the majority of which are located in Los Angeles and New York. More than 100 firms, represented equally between New York and Los Angeles, provide film editing services.

Other major post-production services include cutting rooms, film processing and preservation, music and sound, special effects, and subtitles. Cutting rooms, which are specially designed facilities equipped with editing equipment where the editor and assistants can put the final film together. During film processing and preservation, the film is actually developed into a negative and subsequently processed, copied, and preserved, particularly Technicolor, which was an industry leader for this service. Music libraries and cutting services and sound and recording services include the process of recording sound during production and subsequent editing and adding sound to the final product. Some producers use stock music by anonymous composers to develop a sound track, while others utilize commissioned musicians. This segment of the industry also is highly fragmented, with more than 100 firms engaged in music cutting and music libraries and more than 100 firms providing sound and recording services. Sound technicians include production mixers who are responsible for sound equipment and recording on set; boom operators who operate the microphones to pick up actor's dialogue; re-recording mixers engaged in combining sound in the studio; and sound effects mixers, responsible for sound effects both on the set and in the studio. Special effect services include a wide variety of creative photographic and sound effects. There are more than 50 special effects firms, operating primarily in Los Angeles and New York, as well as in other locations like Las Vegas, San Francisco, and Orlando. Prominent firms include Buena Vista Visual Effects Group in Burbank, California; Lucasfilm, Ltd., in San Francisco; and Walt Disney/MGM Studios in Orlando. Subtitle services provide translated dialogue that appear at the bottom of the screen of foreign language films or to narrative titles in silent films.

As major studios attempted to streamline their production operations and limit costs, they increasingly integrated operations from this industry into their organizations. Firms specializing in the various sectors of services allied to motion picture production were purchased by large film and telecommunication firms. Such moves were indicative of the overall trend to integrate high-level technological platforms for use in entertainment and communications.

In the late 1990s, the film industry became concerned about the loss of jobs to runaway production, in which film producers take production to Canada and other foreign countries, largely to capitalize on the favorable exchange rates that make production in those countries significantly cheaper. In 1998 U.S. film and TV production out of the country cost the U.S. economy $10 billion, an increase of 500 percent since 1990, according to the Screen Actors Guild and Directors Guild. Legislation creating tax breaks for film production in the United States was showing results by 2005, with several states providing incentives. Production increased in New York and New York City after tax credits were created, and California, with the support of Governor Arnold Schwarzenegger, was expected to soon follow their example.

Firms engaged in services allied to motion picture production are intimately tied to the success of the film industry as a whole and, as such, keep a close eye on box office receipts. Domestic sales grew from $7.7 billion in 2000 to $9.49 billion in 2006. This near-record high total represented ticket sales of 1.45 billion. However, international box office revenues and DVD sales vaulted past these numbers in 2006, with 45,000 DVD titles available and global ticket sales jumping 11 percent to $25.82 billion, a record high. In 2008 worldwide box office receipts hit an historic high of $28.1 billion. International ticket sales accounted for $18.3 billion, and U.S. sales totaled $9.8 billion.

During the early years of the first decade of the 2000s, films using animation and special effects were extremely successful at the box office. A record year for visual effects came in 2002, when the second Lord of the Rings installment, Star Wars: Episode II, and Spider-Man averaged $347 million at the box office. Animated films earned new recognition from the industry's Academy Awards, which introduced the new category of best animated feature film. The 2004 nominees in that category, The Incredibles, Shrek 2, and Shark Tale, had combined earnings of $851 million. In 2006, 4 of the top 10 grossing movies were animated features: Cars, Ice Age: The Meltdown, Happy Feet, and Over the Hedge.

The much anticipated animated feature Polar Express, however, proved that expensive and innovative films sometimes disappoint. With Tom Hanks voicing five parts and his facial and body movements replicated using a relatively new technique called performance capture, the film cost $170 million but could not compete with other animated films at the box office. Los Angeles Times writer Patrick Goldstein remarked, "the technology takes the star out of the movie. He may play five parts, but there's no Tom Hanks in the film. Not only is his face gone, but the performance capture somehow leaches his trademark charm and everyday humanity off the screen as well."

By 2006 U.S. firms Lucas Digital's Industrial Light and Magic, Digital Domain, and Rhythm & Hues Studios continued to lead the industry, but the demand for digital effects was feeding the growth of overseas competition. In an article for Daily Variety, David S. Cohen acknowledged that India, China, and especially England offered tax breaks and were home to talented effects artists. At the same time, George Lucas and James Cameron were speaking out to encourage a speedier transition to digital cinema projection in theaters. In a story for the Daily News in Los Angeles, Cameron commented, "I think this can be as profound a change in the movie-making experience as color and sound."

The Casting Society of America (CSA), which represents some 400 members, gained new support in its attempt to unionize. As perhaps the only specialized group not represented by a guild or union, the CSA gained the backing of the International Brotherhood of Teamsters, which had some 4,100 members working in the motion picture industry. Casting directors and their associates were also seeking health and pension benefits in negotiations with the Alliance of Motion Picture and Television Producers, which represents the major studios.

Digital animation's market share continued to grow throughout the second half of the first decade of the 2000s. For the last five years of the 1990s, movies relying on digital animation, such as Toy Story and A Bug's Life, accounted for an average 2.5 percent market share. For the period between 2000 and 2005, digitally animated features, such as Shrek, Shrek 2, and Monsters, Inc., averaged 6.1 percent of ticket sales. From 2006 to 2009, digital animations, including Happy Feet, WALL-E, Ratatouille, and Up, held more than 11.1 percent of the market. The increase in market share is partly due to increased acceptance of the animated format as well as an increasing number of digitally animated releases. Eleven digital animations were released between 1995 and 2000, 27 between 2001 and 2005, and 59 between 2006 and 2009.

The highest grossing (adjusted for inflation) digitally animated film during this period was Shrek 2, released by Dreamworks in 2004. Shrek, also distributed by Dreamworks in 2001, and Shrek the Third, distributed by Paramount Pictures in 2007, ranked fourth and fifth. Buena Vista held the remainder of the top 12 spots with Finding Nemo (2003) and Toy Story 2 (1999) ranking second and third, respectively, and spots 6 through 12 held by Monsters, Inc. (2001), Toy Story (1995), The Incredibles (2004), Up (2009), Cars (2006), A Bug's Life (1998), and WALL-E (2008).

Many blockbuster films at the end of the first decade of the 2000s, although not animated, relied heavily on computer-generated images (CGI) to produce vivid special effects. Used extensively in the Lord of the Rings trilogy, CGI was central to action films like Transformers and GI Joe. By 2009 there was some backlash against the overuse of CGI in films and the underreliance on live action that was unassisted by computer enhancement. However, the CGI technology continued to push forward as industry experts work to create a realistic digitally created film, also known as a CG or 3D film. Jean Lafluer noted in Computer Graphics World, "The digital movie is much more than a technical curiosity; it is the birth of a totally new medium. It's not animation. It's not conventional cinema. It's not just slick special effects or weird monsters. It is a whole new ball game...When we learn to create real human beings, the medium will explode." Some attempts have been made to cross the threshold to create a realistic human-based CGI film in such films as Final Fantasy--The Spirits Within (2001), this has not occurred by the end of the first decade of the 2000s.

Current Conditions

With box office revenues reaching $10.2 billion domestically in 2011, services that supported motion picture production were on solid ground. In a report on movie and video production in the United States in 2012, IBISWorld predicted that "innovation will renew consumer interest and expand production" through the 2010s. New technologies like Blu-Ray, online streaming video, and 3-D would continue to impact the film production industry, but IBISWorld reported, "These innovations will create new revenue streams for industry players." On the other hand, firms will be forced to act quickly to keep up with the technological advances and with consumer demand for the latest features. Another challenge for the industry was the cost of personnel. Because employment in the film production industry was mostly unionized, salaries remained high. The average annual wage of an employee in this industry was about $67,000 in 2011--significantly higher than the national employment average of $55,000, according to the U.S. Bureau of Labor Statistics.

Research and Technology

A technological advance in the film industry beginning in the late twentieth century was the colorization of old films. Colorization is the process that transforms black-and-white films to color. The process involves breaking down each frame into 525,000 dots. An art director examines the first and last frame of each scene and programs the colors for each object. There are two primary firms engaged in colorization, American Film Technologies and Color Systems Technology, both in the Los Angeles area.

The most significant technological developments in the film industry occurred in the special effects sector, where computer-generated images quickly became a staple of Hollywood films, thrusting firms like George Lucas's Industrial Light and Magic and James Cameron's Digital Domain into the national spotlight. Increasingly, the level of special effects assumed a primary selling characteristic for blockbuster films, such as Titanic, King Kong, Star Wars, The Lord of the Rings, trilogy, Transformers, and The Chronicles of Narnia.

Although CGI had made tentative forays into films since 1984's Tron, manipulating images this way requires vast amounts of memory due to film's superior picture quality. Since the powerful technology needed for this process was too expensive, few movies made in the 1980s used computer-generated images. By the late 1990s, however, inexpensive, powerful workstations and a wide range of versatile graphics software made computer graphics a viable alternative to the models traditionally used for special effects. The widespread transfer of high-end digital production to computer platforms, which offer tremendous cost benefits, especially in computer animation, allowed major studios to invest more heavily in attracting the top graphic artists and less on expensive equipment. Moreover, small independent filmmakers were able to process high-level special effects in-house. By the end of the first decade of the 2000s, CGI was an industry staple.

The film industry also made aggressive moves toward the use of digital cinema as a replacement for film. In 2005 the major studios agreed on technical standards and began negotiating how to finance the conversion of more than 36,000 screens across the nation to the digital format. During 2008 alone, the United States added 842 digital screens, bringing the total to over 5,400. By 2011, 65 percent of the screens in U.S. movie theaters were digital, and more were converting every day.

In a development not likely to be popular among actors, industry observers noted that digital technology had reached a point where the implementation of virtual actors in major motion pictures, a primary focus of the digital animation industry, was just around the corner. By combining scores of photographs in a data memory bank, graphic artists can shape features and movements tailored to the needs of the director. While the actors do not yet appear to be truly real, analysts note that it is simply a matter of time before that technology is available. Such moves take selective casting of actors to the next level by literally creating actors from the ground up, allowing directors to get the precise features and capabilities they desire. Such actors could pull off physical stunts beyond the capacities of live stunt actors without necessitating elaborate set designs.

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