Report: Post road rocky

The future of post-production is going to be one of serious turmoil, with some companies unable to make a neat transition to all-digital editing or to embrace the increasingly important computers.

That’s the conclusion of a new report called “Creating Multimedia: Hollywood Goes Digital,” published by Volpe, Welty & Co., the San Francisco-based investment bankers. The review of the post-production industry targets equipment makers whose fortunes are going to rise or crash with the switch-over to computer-driven editing.

“I’m pretty convinced that there’s going to be substantial upheaval in the post industry in the next few years,” says Volpe analyst Charles Finnie. Obviously, the most at risk “are post-production firms with large investments in analog equipment.”

In the future, says Finnie, the price of editing equipment will nose-dive, bringing into the biz a flood of users who can afford to do their own high-quality productions.

While the post-production market is expected to increase 16% in dollars to $ 3.5 billion worldwide in three years, the number of customers will explode nearly ten-fold to some 825,000.

“Over the next five years,” says Finnie, “this entire market is likely to convert from old tools — analog, hardware-based, difficult to use, expensive — to new tools, digital, software-based, easy to use, inexpensive.”

Indeed, this trend will rewrite the rules for the entire Hollywood post-production community. The inevitable influx of low-priced, higher-performance editing on computers is going to cause serious price erosion at the dozen or so top-tier post houses.

Already, Silicon Graphics Inc., International Business Machines and Apple Computer Co. are offering a slew of software that permits their computers to perform a number of tasks on just one machine. For example, AVID Systems, maker of the leading off-line non-linear video editing system, will be available on an SGI shortly.

“People aren’t going to be able afford to spend $ 1 million on a single machine,” says Linda Rheinstein, a vice president at the Post Group.

“Shops investing in hardware-based proprietary systems may do well for a while,” says Finnie. “But eventually the end customers are going to say, ‘Wait a minute, I can have this done for half the price and the results are the same.’ ”

The biggest losers, says Finnie, are going to be hardware companies that have equipment dedicated to playing their proprietary software. Companies like Quantel Inc., a unit of Britain’s Carlton Communications PLC, are under pressure from computer makers who will be offering software with many of the same features for a fraction of the price.

For example, Quantel’s latest machine, the Henry, offers high-speed video editing at $ 750,000.

Industrial Light & Magic, says Finnie, did its 3-D effects for pic “Death Becomes Her” on a SGI workstation with a program from Montreal’s Softimage Inc. “ILM can afford a Henry. It chose a system that sells for well under $ 100,000.”

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