While revenues are rising on the back of TV tax credits and a weakened pound, fears are growing that EU exit could lead to a loss of skilled workers
p20 https://www.broadcastnow.co.uk/digital-editions/8-december-2017/5124800.article
UK post production is enjoying record levels of business yet the same forces driving the boom are at risk of derailing it. Brexit looms large in the minds of many in the sector.
The Office of National Statistics records turnover increasing in postproduction from £1.38 billion in 2015 to £1.85bn in 2016 – up 34% on the back of film and TV tax credits and, in the latter half of 2016, a weakened pound.
Most of this growth is in VFX: the top 15 VFX companies between them generating around £360m in 2016. What’s more, VFX is still expanding with evidence of an increasing number of projects bringing VFX-only work into the UK because of the reduced threshold for tax relief qualification.
Yet facilities and post houses are the part of the industry most likely to be hit by Brexit's ending of the free movement of labour.
“Any high charges for visas or restrictive quotas for migrant workers from either the EEA or non-EEA countries, will be highly detrimental to the sector,” warns Neil Hatton, chief executive at UK Alliance which submitted a strongly worded report to the government’s migration advisory committee in October.
It stated that a third of the 6000 workers at UK VFX houses were from the EU or EEA (excluding UK and Ireland) and 13% from the rest of the world.
Government proposals to double the Immigration Skills Charge and extend it to EEA workers were attacked as “a punitive tax that impacts our competitiveness and diverts money away from internal training.”
VFX chiefs sounded the alarm. “Currently 25% of our team are here under the EU freedom of movement of workers policy,” said Union VFX co-founder, Adam Gascoyne. “If they were to become subject to similar rules [as the non-EU migrants] our business would be severely impacted.”
“Any visa regime must be affordable for employers in order not to squeeze the growth of the UK VFX industry,” advised Will Cohen, CEO, Milk VFX. “Making it more difficult to hire specialist non-EU employees when there is a domestic skillset shortage creates a short-term dichotomy.”
Double Negative MD Alex Hope stressed that foreign talent had “a critical role” to play in UK skills development and voiced concern that “any changes to visa costs and its scope will impact this.”
Dneg is one of the world’s five largest VFX shops, all of which are based in London but all of which have outposts overseas in places like Vancouver. If the cost of employment increases they are threatening to uproot from Soho.
“There is a very real prospect that projects could be quickly moved to other parts of the world if the UK’s VFX and animation industries cannot get the access to the talent they need,” warned the UK Screen Alliance report.
Despite the best efforts of the education system “the skills gap won’t be filled by domestic workers for the best part of a decade,” according to Hatton, “by which time the sector could have suffered irreparable damage.”
For its part, the UK Screen Alliance coordinated Access:VFX in 2017, an outreach programme to engage with students across London. “We miss out on a lot of latent talent in some socio-economic groups because they are never given a chance to develop,” Hatton explained.
However, he remained upbeat about long term prospects: “The underlying current is that we are on a roll. The message [to government] is we are generating value for the economy - let’s make sure we don’t muck it up.”
Despite the shadow on the horizon, UK facilities are reaping benefits from the drama boom. By the end of 2017 Goldcrest Post will have built four new picture suites as it welcomes superstar colorist Jet Omoshebi to Lexington Street in January. Facility MD Patrick Malone described the expansion as forming a “TV drama village” complete with new audio suites and client area.
Warner Bros expressed confidence in a post-Brexit Britain by announcing plans for a 25,000 sq ft facility in Soho opening in 2021. Warner Bros De Lane Lea will feature grading suites and four audio post stages – one of which will be ‘on a scale to rival those in Hollywood” according to Warner executive Kim Waugh. Existing picture and audio house Halo upgraded its flagship dubbing theatre with Dolby Atmos, a pre-requisite for the growing volume of feature work passing through town.
The Brexit fallout is not just being felt among those catering largely to drama and VFX. “We do have concerns firstly with staff and secondly, with our advertising hat on, it does seem that the UK will lose out on certain brands moving their business away from the UK,” says Dave Cadle, Envy MD. “The full impact of Brexit isn’t yet clear and we think a lot of businesses are waiting to see what will happen or what they can do.”
The current holder of Broadcast’s Post House of the year award opened eight cutting rooms at Mortimer Street in July bringing the firm’s total offline roster to 145.
“We noticed that a few companies, big and small, haven’t shown very good numbers this year,” reports Cadle. “Not sure if this has anything to do with Brexit or it’s just one of those ‘post cycles’ but when the successful companies make a loss it does make you think a bit harder going forward.”
Often viewed as a loss leader by facilities hoping to route higher margin online and audio elements of a project in house, offline mushroomed in 2017. January saw Run VT open the doors on a second facility on Newman Street spanning five floors and including seven offlines and a Baselight for grading. Halo took the chance to open a new £250k 12-seat Avid facility in Brewer Street in July. Also in July, Fifty Fifty added five edit rooms which, said operations director Alex Meade “should stop us having to outsource any more work.”
Jellyfish Pictures had one eye on circumnavigating Brexit when it launched two new studios in South London to operate on a virtual basis without local hardware. Linked to a central technology hub at the firm’s Brixton HQ, the addition of the sites will allow Jellyfish to increase its workforce for shows that include the animated series The Floogals.
“Part of the reason we are doing this is that it gives people the chance to live outside London but still work in this industry,” CEO Phil Dobree told Broadcast. “This will enable us to bring in artists to work remotely from anywhere in the world.”
Sadly, there were casualties too. Long serving kit dealer ProKit shuttered its doors at the beginning of the year and equally durable duplication and content preparation services firm TC Soho was forced out of business in August blaming an “astronomical” rent increase.
Deluxe closed its London film restoration division in February but Cinelab was the recipient of a £2.25m injection in the summer proving that there is still demand and money to be made in film scanning, restoration and archive services. “With demand for HDR and 4K, film is seeing a revival since it already has the resolution and dynamic range,” said Adrian Bull, Cinelab MD.
The medium’s resurgence was cemented by Kodak’s opening of a film processing lab at Pinewood Studios in October.
There was a change of hands at Crow TV in October as Rapid Pictures took over the West London and Birmingham post house, renaming it Radiant Post with Rapid joint-MDs Ben Plumb and Elouise Carden assuming responsibility of both houses.
More recently, DCD Media closed promo specialist Sequence Post and the axe appeared to have fallen on veteran Soho brand Rushes. Part of Deluxe’s Creative Services division, the 40-year old commercials specialist was considered to be no longer financially viable.
Industry reaches the end of tape
Over the last couple of months, UK broadcasters officially stopped receiving tapes for late delivery, opting for new solutions to delivering close to transmission programmes. One of these will be a new version of the Interoperable Master Format (IMF), written specifically for broadcast and online by the DPP and SMPTE and due for publication next spring.
Major online distributors such as Netflix already require the delivery of IMF packages for their commissions. The goal is to make the process of handling acquired content for compliance and outgoing programming for sales a lot more straightforward.
“Many facilities will have reviewed their infrastructure if they supply to the major OTT providers, and so it should be relatively straightforward for them to incorporate the DPP/SMPTE spec,” explains Mark Harrison, DPP MD. “If a facility doesn't currently have the ability to master in IMF, and they want to work on commissions that have an IMF deliverable, then they can either build that capability in-house or work with third party companies that offer a mastering service for finished programmes.”
Facilities will be required to upgrade their mastering tools from the likes of Marquise Technologies, Telestream and Rohde & Schwarz.
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