In the third part of Screen International's analysis on the effect on the industry of the Sept 11 attacks on the US, the threat of recession on the production and post-production sectors is assessed.

Abstracted from Screen International

The production sector could be the part of the film life-cycle that is most impacted by any slowdown as production companies are highly geared to the volume of films made. If a studio were to cut the number of pictures it releases from say 25 films per year to 20 it would still have a slate big enough and diverse enough to carry it through the year. For some studio-dependent production companies, however, this could mean a matter of survival or going to the wall.

Given a boost of confident self belief by the studios that may not happen. "We have no intention of cutting back on production. Quite the opposite. We have to find ways of reducing manufacturing and entertainment costs. But the one thing we will not change is producing and marketing movies. That is the business!", says Fox chief Jim Gianopulos. "We have not seen any shift in production [because of talent unwillingness to travel]. And we don't anticipate changing our strategy on making pictures and programming in local markets."

That is good news for the smaller production outfits, which may only make one film a year, the difference between one picture and none is huge. (And any wedded to a particular genre that is now out of fashion could be in trouble). But Jonathan Davis, media economist with the C-Quential division of consultancy giant Arthur D Little points out that the production sector is a lagging indicator of economic health.

Most expenditure decisions (in any in industry, not just film) are made in the growth phase of the cycle. However, with film there is an 18 month to three year gap between the time a film is financed and greenlit and the time it is released. If, after a surprisingly robust summer season, September's tragedies become a turning point in the US and international box office fortunes, the impact on producers may not manifest itself until 2003. Indeed the first part of the down-phase may see the release of many weak films which were okayed when there was plenty of froth and money sloshing around.

This is less the case in the TV sector, where the interval between investment decision, delivery and measurable performance may be a matter of months or even weeks. Given broadcasters' already weaker advertising performances, TV producers are likely to suffer more immediately than film-makers. And those film companies used to relying on a TV division for cash flow may soon discover how mercurial that business can be.

And the TV sector, in turn, also has an impact on film sales and ultimately on production. "When distributors can't get a TV sale they become more picky and risk averse. So prices fall. Then the banks stop lending against estimates. Which pushes prices still lower," says Miramax's Rick Sands. "Right now TV is suffering in Spain, Italy and Germany. France is never easy. The UK is starting out on the down slope. There is no 'wonder' territory right now, but the UK is probably the strongest in terms of TV. Theatrically it is hit or miss.

"Production is already slowing. It has already in the US. But when we look at Europe, we don't see StudioCanal, Europe's biggest producer, putting too much into production right now. And where are the big multi-national co-productions like Walter Salles' Behind The Sun'"

Post companies were already suffering well before Sept 11 due to over-capacity. Lack of film business, however, is not at the heart of their problems, advertising is. According to some analyses post-companies may have suffered 20%-30% drops in advertising business.

Wolfgang Borgfeld, company spokesman at Germany's Das Werk, says that September was a busy month, up on July and August, but that the advertising market, which is highly reactive to confidence levels, is already down. Although the outfit has diversified geographically and from advertising services into film, the overall business is down. "We will still make a profit this year, but one less than we were forecasting at the beginning of the period." Merrill Lynch's Tubeileh points to heavy capital investment and the need to be equipped with the latest kit as millstones around the necks of the smaller post-houses.

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