By Johan Ishak
www.kopihangtuah.blogspot.com
PRODUCTION management is an important function to any creative businesses. Not only it embeds both the right brain and the left brain, it is also a crucial determinant for profitability on par with revenue generation. Many production houses make the mistake of not planning their production activities and have taken the 'cowboy' or 'langgar' (‘Just Do It’ approach) attitude. It is this mind set that often destroys the financial viability of a creative project be it a movie, TV series, theatre production or even animation. Planning is the key mantra for management. Imagine if there was no planning done for the runways at the airports for the planes to land. Imagine if there was no set of programmes applied to the traffic lights on the criss-crosses of roads in a city. Imagine if a baby is born without parents. You do not want your creative business to crumble. Do your planning. Manage your production.
Let us start with the question "Do you have the necessary equipment?" This is a function of many things such as what kind of production, size of your budget, expectations of the intended audience or buyers as well as the state of technology. Broadcasting production for football games for instance, will require outdoor broadcasting vans (‘OB Vans’), satellite feed and possibly a crew of 10 cameramen scattered around a football field. Do you buy or do you rent such equipment? A production that predominantly uses indoor studios may not need such extensive set of equipment. A live event can have a more robust set of production equipment than a mere recorded production. For example, Anugerah Juara Lagu (‘AJL’) requires bird’s eyes view that moves across an indoor stadium. Such shot requires a ‘Jimmy Jeep’ camera extension. Audience at home watching TV may prefer to have some form of Augmented Reality (‘AR’) happening on their screens such as that done with Altimet’s performance in AJL in 2018 where the word Amboi! Amboi! Amboi! was popping up and down on the screen. AR requires equipment such as VISRT. So, whether or not the production is live, scripted, indoor or outdoor; a careful consideration is required to ensure adequate and not excessive money is spent for capital expenditure or rental of equipment.
One important thing to not be missed is that, production cost becomes cheaper overtime as technological advancement progress disruptively. Although investing in new technology can be expensive, but the subsequent periods will benefit cost savings. This includes Computer Generated Images (‘CGI’), sound effects, colourgrading, dubbing or voice overs, subtitling, music overlays and a whole suite of post-production gadgets. Now, TV and Film production is done via High Definition (‘HD’) that is far more superior compared to the Standard Definition (‘SD’). In fact, the hype of 4K has now moved on to 8K and miniaturisation like GoPro. Digitalisation of processes is the talk of the day. Everything is done digitally from recording, editing, file transferring, ingesting, transmitting and what not? Many broadcasters spend millions of funds to convert their library of content from the traditional tapes into digital files. In Media Prima for instance, their 30 years worth of content amounting to almost 100,000 hours had undergone massive digitalisation conversion that costs a bomb. In the end, 50% could be saved and the rest not useable due to physical damages relating to the inferior medium preservation quality of those tapes.
Whilst cost saving is the benefit of new technologies, it does present financial burden. Obviously, those without cash or credit facilities from the financial institutions will not be able to embark on such capital expenditure. Rental may be expensive due to scarcity of the equipment in the market. What is worse is that, even if you have the money, the impact on your Profit and Loss may be detrimental without you realising it. For example, the old broadcasting technology for managing 4 TV stations using a broadcasting equipment set that occupies a 3,000 square feet room had technological and commercial useful life of 10 years. If you spend RM50 million in some broadcasting equipment (those days), that RM50 million will be depreciated over 10 years at the rate of RM5 million a year. A new digitally enhanced broadcasting equipment that only uses a stacker of electronic components occupying 9 square feet of the floor can now cost you RM20 million. However, that technology will be obsolete in no time as evident in many digital products. In the end, you may have to depreciate it across 2 years at an annual rate of RM10 million. Not only will you incur higher depreciation, you will now require to fork out huge amounts of cash to invest in the technology at the inception. Therefore, as a businessman, creative producers need to strike a balance between renting or buying those technology, be calculative in financial benefits such as efficiency that saves staff cost, rental cost, utility cost and storage cost as well as consider the output of applying those technology.
Earlier it was noted that planning is important for production. Good planning during pre-production stage can be a crucial determinant to cost savings during the production stage. Securing the story, Intellectual Properties (‘IP’), scripts, directors, casting and crew for instance may take up quite considerable amount of time. As long as the bill has not yet start ticking, planning for all these will make life easier later on. Some content requires a long gestation of research particularly periodic movies like history adapted stories. Puteri Gunung Ledang for example, had a detailed research on Hang Tuah from both Malaysian and Indonesian sources.
Securing funds to finance any particular production can also be painful. In Hollywood, many production houses would not start their production unless 70% of the budget has been backed by confirmed sources of funds. Some may even get the distributors to finance the remaining 30%. In such cases, the producers must be willing to dilute its equity share in the production to allow attractive Return on Investment (‘ROI’) to the financiers. Source of funds may also incur finance cost if they are in debt instrument formats. In such cases, time is of essence. From the day you start borrowing to the day you complete the production, the clock ticks non-stop accumulating interest expense daily. In fact, it continues to tick even if you have completed the production because then, you will need the throughput time of releasing the content to the cinemas, TV and on-line platforms and wait for collection to come in. So, another mantra worth remembering apart from ‘Planning’ is "Delays in production loses your money".
One obvious determinant of production cost is the location. Earlier we had touched on the subject matter of live versus studio and indoor versus outdoor. Now, the geographical location also makes a lot of difference. Shooting at home (Malaysia) versus shooting overseas will obviously have significant differences in the cost structure. Anna and the King was not shot in Thailand. It was shot in Malaysia. Star Wars Episode 1 was shot in Australia. Lord of the Rings was shot in New Zealand. When that happens, the entire production crew will have to be transported to the different countries. This may also include transportation of the equipment. In the case of The Lord of the Rings, the production that had taken years to complete, was required to also incur costs of living for the casting and their families that joined them in foreign countries. Careful planning of the production is necessary because, as mentioned earlier, "Delays in production loses your money".
Agility and nimbleness is the attitude any producer should have. They need to be fast, efficient, in and out smoothly. They need to capitalise on all opportunities and not do things too many times. Creative process is not absent in this mindset because in the end, it is the creativity of the content that will sell. This means flexibility in amending story lines or scripts to suit current requirement. In the United States (the ‘US’), TV series productions are known to make ad hoc decisions based on the popularity of the characters. They will kill any particular character when such character has no traction. For example, Star Wars was quite fast in limiting the character Jar Jar Binks. Synergising multiple shots per location saves a lot of money. The Lord of the Rings has many shots taken during the first movie that had been used later on in the second and third sequels. Another similar cunningness would be the use of the same props over multiple productions. Puteri Gunung Ledang theatre musical adaptation uses the same props over many rounds of shows across 10 years. This is obviously cost efficient rather than a single shot of an exploding car – or many takes that involves many explosions, and many cars too. Cinematography of a particular production needs to balance between shots and costs, because, again, "Delays in production loses your money".
Different formats of production requires different styles and what is more important is that, regardless of those styles of productions, all crew members must work together. The skills set, equipment, budgets, length of time and depth of creative processes vary depending on whether you are shooting films, telemovies, TV series, live shows or documentaries. Films are more expensive than Telemovies. Documentaries are more expensive than TV series. Animation can be expensive than any of the above at times. When there are physical production constraints as well as financial constraints, a production house may want to negotiate delivery terms. In the TV business, it is known that production house deliver partial series, like episodes 1 to 7, first, in order to get half of the payment from the broadcasters. The delivery of the remaining episodes 8 to 14 concludes the deal with a final payment. This helps ease the burden of working capital constraint and hence, producers are able to pay their crew, casting members, directors, writers as well as financiers on a more timely and favourable manner.
Titles that are closely associated to certain events may have its own unique time requirement. For example, the movie Santa Claus presumably has to be ready for the cinemas just before the Christmas festive season. In Malaysia, many entertainment programmesare shot and completed in time for its airing on TV during Hari Raya Aidilfitri. When time is of an essence, everything else is affected. Editing requires careful creative touch. Imagine that you have shot 3 hours worth of recordings and you will now have to edit and slice and dice it into a 2 hour programme - editing with such position has the risk of producing a disconnected series of scenes in a story line. What is worse is that, the resources utilisedin producing the unused portions has now gone to waste. Such wastes must be reduced to an optimal level, if not eliminated. In a live show, we do not have that luxury. Everything must be at a zero error rate. A couple of years back, AJL had fire issues during a commercial break. Being a live show on TV, the crew worked at a miraculous speed to extinguish the fire and repair the stage in time for the new set to be installed for live session to resume its direct telecast on the TV screen. This is a bit too thin for a live show but shit happens. Of course, such errors are costly as it causes delays. Again, "Delays in production loses your money".
Props management is an element worth dissecting for the purposes of cost optimisation. In a TV broadcasting environment, there are various frequencies to the different programmes. Some are dailies like talk shows (eg. Malaysia Hari Ini (‘MHI’) and news and current affair programmes (eg. Buletin Utama). Some are weekly programmes like documentaries (eg. Majalah 3 and 999) and entertainment programmes (eg. Muzik Muzik and Mentor). In any case, careful consideration is required in determining the types of prop. A daily programme runs for 365 days a year making it worthwhile to invest in permanent and slightly more expensive props. The less frequent ones may need props that are accommodating such as transformable props that can be converted from one look to another or the use of various electronic displays that can easily change its images. Some studios are known to have different settings for different walls in the same studio.
Editing between long formats and short formats can uncover opportunities especially in this digitally disrupted era. Many broadcasters have now opted to also produce short content that has better traction on-line. A research done by an international consultant on the subject ‘TV audience versus On-line audience’ revealed that the attention span of the millennials are worse than that of a gold fish in the glass bowl. If we are to put that gold fish in the bowl in front of a TV set, that gold fish will probably watch TV at a longer duration than a 12 year old kid. Some short formats are the derivatives of the long formats. For example, a half and hour entertainment programmelike Melody can have its own short format like Mbuzz. Short formats can also be produced on its own bearing the function of testing the waters on-line. When good traction appears, a long format becomes the derivative of the short format.
Formats are not just about duration. It is also about the mode of the content. In 2009, TV3 produced a series called Nurkasih that became very popular. The producers were in dilemma on whether they should produce the second series on TV or a movie. After much consideration, they had decided to produce a movie sequel to the series a few years subsequently. Fast forward to 2019, TV3 had commissioned Radius One to do a sequel TV series, Nur 2, to continue the saga of the successful first season, Nur. In fact, they may also toy with the idea of producing a movie as its third sequel. On another title, Pujaan Hati Kanda, also a successful TV series, instead of doing a sequel series or movie, TV3 had decided to do a Hari Raya special telemovie. All these opportunities must be identified swiftly and actions taken nimbly. The producers of Hantu Kak Limah did not take long to realise that that IP has potential and wallah! They now have a portfolio of what they call the Banana Village movies (Kampung Pisang) that consists of Zombie Kampung Pisang, Hantu Kak Limah Balik Kampung and Hantu Kak Limah. Hantu Kak Limah happens to be in top 5 of the Malaysian record for box office collection of around RM30 milion plus in 2018.
Co-production with other companies are beneficial as it allows the pooling of funds into a bigger sum that allows better production. This also limits the risk of financial loss as the participating production houses share both revenues as well as costs. In 2019, Media Prima, Astro, MM2 and Infinitus joined force to produce the movie Sangkar. On the TV side, MediaCorp and Media Prima had also joined force to produce various Chinese dramas that are aired in both Singapore and Malaysia. The beauty of such partnership is that all participating partners have their own strengths that can now be synergised and combined to create a favourable outcome. Astro, Media Prima and MediaCorp, of which all three are TV broadcasters, offer valuable media inventory for the promotion of those movies. This helps save approximately 30% of a typical production budget. What is more compelling is that those broadcasters do not even have to incur cash outflow for the media inventory as they can easily use unutilised commercial airtime that would have been perished anyways had it not been used. For this, it is always optimal to partner with others who have strengths that you do not have. The mindset of ’Indie’ production that embrace some form of arrogance sugar coated as independence will not enjoy this.
Illustrating a hypothetical example, a RM6 million movie production should typically incur about 30% of that production cost, i.e. RM2 million, as its Advertising and Promotion (‘A and P’). This is a huge amount of money. Many production houses rather spend that money in enhancing the quality of the programme. By doing this, they have failed to embed the commercial aspect of the production. Commercial viability of any particular programme does not solely rely on the quality of the programme. It must also take into account the awareness of its existence in the eyes of the audience. Of course this presumes that the programme has been created for its intended audience, if not, your production will be a white elephant. Producers must have in mind the tastes of its intended audience. They cannot be stuck in a self indulgence mode (‘Syiok Sendiri’) of satisfying their own creativity need only.
Back to the A and P, RM2 million is a big sum of money. Why do you need to incur cash for that when you can get broadcasters to spare unutilised airtime that does not even require cash outlays. What it means is that, you will have to dilute your equity share in the movie to the broadcasters. Although financially, on the surface, you may feel that it is a loss, but you may not even get the revenue in the first place had you not do the A and P in a mass manner. In the end, the success of the movie, financially, may give you a positive net position after deducting the lost of revenues carved out as a result of the dilution of the equity stake. This is all sensible economics. In a small market like Malaysia, partnerships produce the best outcome. If not, why would two giant nemesis, such as Media Prima and Astro, go to bed together? The answer is, maximising their economic benefits. Maximising economic benefits is of course, driven primarily from revenue generation, but, one must not forget that cost optimisation is equally critical in determining economic benefits for what is the point of generating revenues when the bottom line is a small margin, or worse, negative margins.
In the context of production cost optimisation, the presence of the synergy between the right brain and left brain is very relevant. Whilst you strive to ensure the best of creative content, you must not lose focus on the objective of it all, that is, to make money. Creative content should never be myopically viewed as arts and culture only. It must be reimagined into an industry - An economy - A ’Creative Economy’.
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