The studios may be pushing into post, but some investors are betting that in the long run they’re not going to stay there — or at least that there will be plenty of business to go around.
One private equity group, Celerity Partners, recently purchased Pacific Title, while another, H.I.G., bought Wexler Video and Coffey Sound — this in the wake of several private groups putting funds behind visual effects shop Digital Domain a year ago.
“One of the themes of our investment is outsourcing things that large companies don’t want to do because it’s not their core competency,” says Celerity managing partner Steve Adamson.
“Though all the studios have the ability to do what we do themselves, it’s just more expensive to do it inhouse for them.”
H.I.G. managing director Eliot Maluth sounds a similar note when talking about his firm’s acquisitions. His company, too, invests in outsourcing services and sees an opportunity in movies and television.
“You’ve got this ongoing migration toward digital, this inevitable move to high-def, and not everybody knows how to deal with that.”
Post tends to be a low-margin business, but even flops have to pay for their post services, so return-on-investment tends to be consistent, if not huge.
“Our take on the industry,” says Adamson, “is that it will continue to consolidate, driven primarily by the fact that not every competitor is going to be able to make the transition to digital media. So therefore this could be a profitable business for us for some time.”