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Sole Sourcing

Plant shutdown sends small production firms scrambling Add to ...

Until a few weeks ago, film and television producers worldwide were happy to rely on Sony Corp. to supply all the high-end videotape they needed to get their shows out to audiences.

But last month’s earthquake and tsunami destroyed the only factory in the world that makes Sony HDCAM-SR tapes, throwing the industry into panic mode.

“For those in the middle of producing a series, they’re saying ‘Holy cow, there is no HDCAM-SR,’” said Howie Gold, executive vice-president at Creative Post, a Toronto-based post-production company. “The world is now at the mercy of when SR stock comes back in line.”

Sony has an exclusive licence to produce the tapes, and its only manufacturing facility was in Miyagi, Japan. The factory was badly damaged and it will likely be months before production resumes. As a result, worldwide supplies of new HDCAM-SR tapes are nearly depleted.

Those still on the market are either being hoarded or sold for up to three times the usual price – nearly $400 for a one-hour tape. One buyer is said to have purchased a box of 10 on eBay for $10,000.

Mr. Gold, who also oversees film materials supplier Tapeworks – a combined work force of about 50 employees – said he has stopped selling SR tapes and is reserving those he has in stock for existing customers. Some production companies are conserving their stockpiles by using one tape for several productions. Others are erasing and reusing master tapes or second copies of older programs.

Most, however, are scrambling to switch formats, either sacrificing quality by using a slightly lower-end videotape or replacing tape altogether and sending out programs digitally.

Sony’s monopoly over the HDCAM-SR format is rare, and people in the film industry say they never considered that it would be a problem.

“It just didn’t matter because it was always there, and whether or not it was true, everyone always thought Sony had the best quality,” said Christopher Sandy, post-production supervisor for CCI Entertainment, a television production company with 20 employees.

But experts say the current shortage was a predictable result of an entire industry relying on a sole supplier for a key component of their business.

“It reflects a mistake both on Sony’s part and its customers,” said Fred Lazar, an economics professor at York University’s Schulich School of Business.

Relying on a sole supplier can help achieve economies of scale and help minimize inventory, but it can also be a dangerous strategy, making it difficult to recover from an interruption in supply, said Hubert Pun, a supply chain expert at the Richard Ivey School of Business at the University of Western Ontario.

“It’s never a good idea to put all your eggs in one basket, because you invest your entire future in one supplier,” he said.

Sony may also suffer from its decision to operate a single manufacturing facility if its customers switch to another product before the company can restart production.

As it is, the industry has already started changing its practices to try to make up for the shortage of tape.

Mr. Sandy said although he has signed contracts with most of his customers that require providing programs on the SR-style tapes, most have now agreed to use another tape format. Some have also said they will accept programs in a digital format.

Mr. Sandy said the film and television industry was already moving in that direction, but Sony’s disaster has pushed the transformation ahead by as much as five years. After two weeks of discussions, CBC Television recently agreed to accept the animated and live-action series Artzooka in a digital format from CCI Entertainment when taping finishes this summer.

Most major markets around the world have also started switching to digital.

Mr. Sandy said the move could end up saving tens of thousands of dollars for each production because it would eliminate the cost of expensive tapes such as the HDCAM-SR.

Special to The Globe and Mail

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