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Hollywood Leads the Way

Brought to you by Staffing Industry Analysts, Inc.

June 2006
It’s an industry where everyone is a contingent employee
By Bill Bucy
Bill Bucy is senior editor of Contingent Workforce Strategies magazine.

What do Denzel Washington, Jody Foster, Al Pacino and Merle McClendon have in common?

Washington, Foster and Pacino are, of course, Oscar-winning actors. McClendon is a former corporate CFO who advises Silicon Valley startups on financial issues. The link is they all depend on contingent work to make a living.

The motion picture and television industries — Hollywood, for short — rely more heavily on temporary employees than almost any other industry. Dominated until the late 1950s by studios that had even the biggest stars on their payrolls, controlling their careers, Hollywood has evolved into a business of hundreds of production companies that hire “temps” to create their products.

Who those temporary employees are, how companies find them — and how much they are paid — offer insights of use to managers in other industries.

With so many different companies making films, television programs and videos, there can be no universal business model. But all of them use contingent producers, directors, cinematographers, actors and crews for the same reasons other industries use temporary industrial, administrative and even professionals.

“The cost of making movies is so extraordinarily high that in everything we do, and when looking at different models, we always think of how we can make it more cost-effective,” says Marjorie Randolph, SVP of human resources administration for The Walt Disney Studios.

The average cost of making a live-action motion picture intended for theatrical release in 2005 was $60 million, according to the Motion Picture Association of America, the trade group that rates films and lobbies on behalf of the industry. Add in post-production and marketing costs, and the total soars to almost $100 million.

The Business Models
A number of companies in a wide range of industries are moving toward a business model in which regular employees focus on the core business processes and contingent workers smooth out the ebbs and flows created by spikes in product demand or unusual occurrences. The use of contingent employees varies from company to company, but averages about 9 percent among larger employers, according to a report by Staffing Industry Analysts, Inc., the publisher of this magazine.

The entertainment industry, though, organizes its product creation into projects — a movie or a TV series. In some cases, that means an umbrella company, such as Carsey-Werner Productions, will create and sell to networks and cable channels TV shows that are then produced by individual production teams.

“I’m freelance, our casting director is freelance, everybody who works on stage — director down to the grip — is freelance,” says Melanie Patterson, producer and unit production manager for That ’70s Show. She says that even the corporate staffs of production companies she has worked for are often contractors who work for a month or a year. The reasoning is simple: They keep it flexible so that as projects change and get canceled or new ones develop, they can keep just the employees they need.

Disney’s Randolph said large studios also use multiple structures and which one is deployed for which product depends on a number of factors. Some might already be in place within Disney. Often, outside companies, such as Jerry Bruckheimer (Con Air, Remember the Titans), will handle all the production elements, including hiring, while Disney takes over marketing and distribution. The efficiency gained makes it worthwhile. Live-action motion pictures are generally 8- to 12-month projects once launched, so basic business economics demand they be treated as projects.

In some ways, this system is similar to the use of project managers in other industries. Those specialists offer instant access to skills that might not exist in-house or that would take too long to develop. For instance, R&D organizations are increasingly handing over projects to scientists and engineers with specialized expertise. That frees up regular employees to focus on the management of projects, sometimes several at a time.

The model is somewhat different for animated feature films such as those made by Pixar Animation Studios (Toy Story) and DreamWorks Animation SKG (Shrek). For one thing, modern technology requires a larger capital investment in high-end computers, software and other technical gear that, unlike cameras, lights and microphones, usually can’t be rented. In addition, the maintenance of the systems requires special knowledge that can’t always be handled by temporary employees. And the permanent staff must include people who can match creativity with technical knowledge.

Even though animated motion pictures lean on technology, cost efficiency still reigns supreme. Randolph notes that the Disney animation unit at its Burbank studio relies heavily on full-time staff, most of whom are unionized. While employees might flow from one project to another, they are on the payroll even during down times. That has caused Disney to move toward what she calls a “rent a project” deal with some artists, contracting with them for a single feature. They might move to another if one is available later, but the agreement is always for a single project.

Animated film production staffs will likely become more contingent as companies seek greater profits from their films. For instance, Shrek 2, which reportedly cost about $40 million to make, grossed $436 million worldwide. That made it the third highest-grossing film of all time behind Titanic (1997) at $601 million and Star Wars Episode IV: A New Hope (1977) at $461 million.

Unusual Temps
While most in Hollywood might be contingent employees, they aren’t quite the kind of people a typical company would seek from a staffing firm.

Take contingent employee Denzel Washington. His agreeing to star in a motion picture can prompt a studio or production company to approve the project because they believe his presence will ensure good box office results. According to Forbes magazine, Washington’s bottom line is $20 million per project, plus a percentage of the gross receipts, merchandising income and more.

Washington reportedly earned only half that much for starring in Inside Man (2006), but that could have been because director Spike Lee was a personal friend and the project was scheduled to last less than three months. Industry publications also report Washington gets paid whether or not a movie is made. That happened when he was signed to star in American Gangster, a project created to reunite him with Antoine Fuqua, the director of Training Day (2001), for which Washington won a best actor Oscar.

It’s a bit different for most actors.
For example, the Screen Actors Guild contract with the WB and UPN TV networks calls for an actor with five lines or less to be paid $1,002.34 a day, which includes salary and a payment for one rerun. Many temporary employees in other industries would be happy to earn that much in a week. However, most SAG members earn less than $7,000 a year and the union strongly warns potential members that they probably will have to work other kinds of jobs to make a living.

The majority of actors, however, don’t belong to the Guild and are scattered throughout the United States. That means there might be more opportunities to work — perhaps in local TV and radio advertising — but, for the most part, they are paid far less. The Bureau of Labor Statistics says the average hourly wage for those artists is $22.68 an hour.

At the same time, the factors that draw people to contingent work are often the same for actors, musicians, directors and producers as they are for the growing number of people who have adopted the temporary employee lifestyle: freedom, variety, and the opportunity to learn.

Carl Bressler is a Hollywood veteran who has worked as an actor (The Usual Suspects 1995), producer, talent agent, company president and investor. He says the same factors are in play among entertainment contingent workers as in any other occupation. For instance, when a contingent worker settles down and has a family, he or she might seek a corporate job for the steady paycheck and the benefits. After the family is grown, it might be time to take a shot at being an entrepreneur or working for a social cause.

But, he notes, it still takes a certain personality to rely on skills and drive for a living. “If you are looking for stability, long-term work, loyalty to a company for a long, long period, the entertainment business or these productions or short-term assignments are not for you,” Bressler said during a panel discussion at the Staffing Industry Executive Forum held in March.

Finding Them
There are many ways to find good contingent talent in Hollywood. But it’s a more subtle process than in other industries, where an order can be placed with a staffing company for someone with a specific skill set and level of experience. There are too many hard-to-measure qualities in the jobs. “You are picking from a group of enormously qualified people so it comes down to things like do I like them? Can I work with them?” Bressler says. “It’s not like they are going to bring some extra skill or something to the table.”

Talent agents actively seek work for their clients, who are “above the line,” such as better-known actors and directors. They also negotiate the deals. Some, like Bressler when he owned his agency, also represent what he calls the high end of the “below the line” people, such as cinematographers, production designers and film editors.

Unions — and everyone seeking work with the major studios and production companies belongs to one — keep lists and directories of members who are available for work and their rates. They also provide their members a number of services, such as health insurance and negotiating minimum payments with studios for categories of employees. But they don’t advocate on behalf of individual members. “For those people you don’t know, that you don’t hear about, who are happy to go to work at any rate, that’s what the union’s doing,” says Bressler, a critic of entertainment industry labor unions.

Carsey Werner’ Patterson illustrates the complex web of Hollywood contingent hiring. In her job she negotiates with agents for the creative services she needs. She also belongs to the Directors Guild and has an agent. And that means she has to play many different roles at various times. “I might know the writers of a show, or some executives who might want me,” she says. “But when I work, I have to serve both the show we’re making as well as the company so I have to make sure everyone is comfortable with me.” That suggests managers in other industries might want to consider using someone in different roles at different times – manager for one project, team member for another.

In general, though, how much someone works and how they are paid in Hollywood hinges on relationships. That includes “taking” meetings and “doing” lunch — just like in the movies about the movies. And that can extend to other industries.

Steve Pfrenzinger, president of the Carrera Agency, which finds IT consultants for companies, had worked in HR and staffing firms before setting out on his own. He says one of his goals was to avoid the drawbacks he confronted in his previous jobs. “We made a great effort to specialize and do things really better. And [still] our clients would say, ‘It’s all margin; get in line.’”

Pfrenzinger adopted portions of the Hollywood talent model to his business, which emphasizes developing long-term relationships with both clients and the talent pool. For the consultants, that includes informational newsletters, skills training seminars and marketing of individuals — “anything beyond calling them with a job order from time to time.” He tries to emphasize that by calling Carrera a talent management agency. Corporate clients are assigned a talent agent who gets to know the company’s needs and searches for the best fit from the inside. In the movie business, that’s called packaging.

The Opportunities
Most companies would find it difficult to emulate the Hollywood model for acquiring and using temporary workers. While a material handler needs to understand instructions and safety rules, an actor whose sole job is to sit at a café table reading a book has probably spent thousands of dollars learning his craft. Neither is essential to the overall success of the company or project, but their skill levels vary widely.

Corporate purchasing managers and HR people are accustomed to working within a formal system to find contingent workers. They might contract with multiple suppliers that deliver people with specialized skills, but they probably would not care to pay attention to such things as bonus pay when a temporary employee misses a meal break or personal perquisites negotiated individually.

Decision makers should look closely at the general business model, which stresses extreme flexibility of operation at all levels, project-based hiring and product manufacturing, and the need to constantly focus on cost-effectiveness in all aspects of their operations. If they learn the lessons of Hollywood, they might get a star on their office door.

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