03.10 2009

The Crisis


Update March 2014.

Jonathan Stuart-Brown for Save The British Film Industry.

Many people – even many famous people who work in films – just do not understand what Pinewood and Shepperton Studios are AND what they are not. It is confusing if you do not do detail nor do history.

Pinewood Studios and Shepperton Studios USED to be separate companies. Both companies  employed film making staff and equipment as well as sound stages and sets. They used to finance films and even once had a cinema chain distribution outlet. They used to finance, manufacture and retail films without any reference to others. They used to be owned by film makers. They used to compete with each other and police each other’s claims.

1. Now they have no cinema outlet for their own films.

2. Now they do not finance nor make films (this will be qualified later as to grab Lottery Money they technically restarted this in a very minor way in 2012 after a gap of over 35 years).

3. Now they do not employ film making staff nor film making equipment.

4. Now they just own sound stages (essential for big budget films) which they rent out to film makers.

5. They do not own sets, nor essential film making staff or equipment (costumes, cameras, etc). They rent space to freelancers who do have these skills and equipment. These will relocate in a heartbeat if the big productions stop renting Pinewood and Shepperton sound stages. This would leave Pinewood with just empty offices and sound proof warehouses and a greenscreen which can be sold/moved overnight.

6. Many new competitors who rent sound stages are entering the game including China, India, Malaysia, Canada, Paris, Hamburg, Frankfurt.  The UK could and should have been using Lottery Money as originally intended to build capital infrastructure i.e. sound stages, sets, giant green screens around the UK. This would have stimulated private investment and new money. It would have given access across the UK for people to enter the industry. As it is this is only open to those with reasonable daily travelling distance of North and West London.

7. The Pinewood and Shepperton companies were merged in 2002 without investigation of this monopoly. It was floated as a plc in 2004 and fell into the hands of property developer shareholders. Their legal and valid interest was the land values. These are much higher for houses, distribution centres, supermarkets, car parks in West London than for film making sound stages. Sooner or later this commercial reality will lead to the land being used for these-purposes. The revenue from renting film making sound stages out is a joke compared to West London house prices. A company which facilitates films being made on its premises does not per se get any revenue other than fixed rent even if these films generate £10 billion a year in revenue. If you are getting £5 million profit a year from rent, the fast route to £2 billion in a one-off hit for selling the sites for other commercial use (than film making) must really nag at you all the time.

8. The Board of Pinewood Shepperton has the BBC and Government believing is still batting for British based film making as a kind of charity but is in fact expressly batting for China, Malaysia, Atlanta in Georgia USA, Germany, Canada and Dominican Republic. It will soon be batting for India and Brazil if negotiations go well. It is quite lawfully taking a fee to persuade the Hollywood producers and financiers to go there rather than to the UK based Pinewood and Shepperton. Over 90% of film production employment is local to the studio facilities used. So The Government’s chief advisors are steering the film jobs outside of Britain, albeit that a very few established British stars and very very few crew will still be in work. The next generation will not get on the ladder and will not get to the top (at least not unless competitors to Pinewood Shepperton sound stages emerge in the UK).

9. Many people at Pinewood and Shepperton were concerned at this and no longer work there because they voiced their concerns.

10. The present owner may in best case scenario move much production to the North-West of England on 33 000 acres he owns. But he may lawfully just sell off the established Pinewood and Shepperton for land values.

11. The epic victory in January 2012 preventing an additional 105 acres next to Pinewood becoming houses has delayed all plans about Pinewood being sold off / relocated but sooner or later this will be back on the table. We await the outcome of the second planning application and full Public Inquiry.

12. Pinewood and Shepperton are being de facto merged with Media City:UK the new home of the BBC in The North. However, this new private company (delisted from The Stock Exchange) can operate in secrecy (perfectly legal) with minimum information available. The next property move will be a shock with no pre-warning. Media City in Salford and Pinewood Shepperton were amazingly cleared by the OFT to officially merge whenever they want.

13. The Government could take a share in the company and ensure the global brand name is used for British based reasons. The EU could ensure it only operates in the EU and only expands in the EU.

14. This brand can be brand lifted and in China, Malaysia, anywhere overnight. Money talks. The Government should expand the brand across the UK now. How ? Lottery Money ring fenced for the film industry and loans secured against this money. Throw in EU regional grants and local authority regeneration and within five years the UK can have a Pinewood Studios and Shepperton Studios in state of the art film sets within twenty-five miles of every home.

This is one vision.

Another is that Pinewood and Shepperton are sold off to a foreign buyer and relocated outside the EU before the next General Election….or just after.

The other points are historic.

The central tension in Pinewood Studios and Shepperton Studios economic model is that no-one ever builds a profitable film factory-for-hire facility on supremely expensive land. The six original Hollywood Studios were built in a desert no-one wanted because it was free land. The cheapest land in the USA at the time. To make it economic, you always build factories (especially film manufacturing factories) on the cheapest sensible option available.

The Board of Pinewood, egged on by property developer shareholders and non-film maker shareholders, unsuccessfully sought planning permission for houses on greenbelt land and the profits from these would have been eye watering. The attraction to  profit seekers is obvious to anyone except the most naive film luvvies who believe everyone shares their all consuming  passion for movie making.

The lands and the planning permission are  in the hands of a man who may choose – perfectly lawfully – to just cash in on the lands for the billions on offer from other property developers.

The South of England ought to see this South Bucks greenbelt as a vital defensive firewall to stop London’s urban sprawl stretching to concrete over every untouchable greenbelt  including The New Forest and to the beaches of Sandbanks in Poole and the Royal Dorset Yacht Club.

In fact every greenbelt in the South-East and Oxfordshire is now in urgent threat from new legislation. The first legal precedent that the granting of planning permission on greenbelt land will concrete over the south-east of England.


Pinewood Studios Board only other alternative policy seems to be to quit The UK altogether and set up shop using cheap labour in Malaysia and China.

see:  http://www.telegraph.co.uk/finance/newsbysector/mediatechnologyandtelecoms/6210282/Bond-studio-targets-Far-East.html

No consideration has been given to relocating the expansion across The UK to create jobs and regeneration here. Or rather none was officially announced until the Cardiff announcement in February 2014.

The $200 million TOTAL RECALL movie was put in Toronto with Pinewood Shepperton taking a commission fee, but the whole production could have been put in their UK studio sound stages. The jobs on the production naturally went to actors and crew local to Toronto.

This will rapidly become the normal rule.

They have plans to build tremendous sets in Toronto.  These include a series of London sets. These could be built in the Midlands, South-West, East Anglia, The North, Scotland, Wales or at least in an EU country. Instead the jobs will go to Canada, China, Malaysia, places 3000,  5000 and 6500 miles away from The UK.

Even if the present owners are the most noble of men but they have a big dilemma if their wider business empire hits trouble during the recession. They may have to sell Pinewood and Shepperton as lucrative West London car parks to stay afloat.

On October 2 in  2009 the Stock Market valuation of Pinewood Shepperton plc as a film factory for hire facility business was only £59 million. It has been even lower and almost always lower than its 2004 floatation valuation. On its present supremely expensive land, the non-film making valuation of Pinewood Shepperton land  is worth minimum twenty times this.

At the last two AGMs the Board again kicked the quality financial press out of the room. No plc does this if things are going well. It is a real tell tale sign that people should examine the accounts with tremendous vigour.

In 2010 the second biggest shareholder asked The Chairman Michael Grade for a definition of “return on capital”, which Crystal Amber said had fallen from 14.2 per cent in 2004, to 6.6 per cent in 2009 BUT Mr Grade failed to answer the question and some think he did not even understand it. Mr Bernstein of Crystal Amber said he had tried to work “for over a year” with Pinewood, to enhance the value of the business, with proposals including greater transparency on the performance of its various divisions, and a revaluation of Pinewood’s property assets. However, these suggestions were rebuffed by the board.

“This is a good brand, this is a business with terrific potential, and our view is that in terms of corporate governance, Mr Grade has been there for more than 10 years,” said Mr Bernstein.

You may well think that his assessment is based on the feeble profits achieved in the industry’s recent exceptionally fat profit years when Pinewood Studios had a far greater competitive edge over European and Far East rivals. Major new competitor film factory facilities for hire are being built in France, South Africa, Germany, Eastern Europe, and China and ….of course This Board selling the right to use the Pinewood Brand Name to get Hollywood $2000 million annual contracts to  a Chinese, US, Canadian, Malaysian and two German factories does not help British based film making.

Although Pinewood Studios and Shepperton Studios magnetise well over $2000 million of Hollywood investment into The UK each year, these monies mostly go to sub-contractors such as actors, crew, lifters, shifters, painters, carpenters, electricians, drivers,caterers, clerical, etc. The Board’s refusal to co-invest in films made on their premises is a massive mistake. No investment, no reward in the staggering profits the movies -made at Pinewood Studios but not by Pinewood Studios – make. No regional expansion means no chance of theme park and merchandising revenues.

Pinewood Studios present business model does not share in the outcome of the products manufactured on its premises.  WE ARE 99% sure that 99% of the journalists writing about the film industry, at least those reviewing films, just do not get this nor communicate it to viewers and readers.

So in 2008 film products manufactured in The UK made £2.5 billion pounds at cinemas around the world but Pinewood Studios and Shepperton Studios received no more income as a result. Add in DVD, merchandising, gaming, TV and this pot for 2008 was £10 billion but this plc got only around £40 million turnover of which the profits were well under £10 million.  Clearly a better business strategy could and should do much much much better.

Cinema ticket sales for products manufactured at Pinewood and Shepperton Studios was 15% of the total global cinema market in 2008. With Pinewood’s 20 set  expansion plan implemented properly, this could easily be over 30%. If a more ambitious expansion plan was implemented in Wiltshire, The West Midlands, East Midlands, Wales, East Anglia, Dorset, Scotland, etc this could be well over 50% of all global cinema production and all international TV drama production in every language.

This would put Britain at the very top in a global industry which grew EVEN during the recession and credit crunch.

Pinewood Shepperton has almost been run as a not-for-profit business by providing its factory for hire manufacturing facilities for the benefit of the nation BUT not really getting much benefit for shareholders other than their patient hope of an overnight £1000 million property deal at the end of a planning application rainbow. They spent £15 million on legal costs, PR and wining and dining most MPs and Ministers and Civil Servants in Westminster. They still failed to get planning permission for their housing scheme. But now planning laws are being changed, they will succeed next time.

Pinewood Shepperton plc Board has invested over 20% of its company assets on chasing a planning permission for a greenbelt housing expansion.

If only they had invested 20% of their assets in financing films.

Pinewood Studios  spent treble its annual profits seeking not film success but a housing deal. During this bid, Pinewood Shepperton PLC share price market capitalisation was nearly below annual turnover. In a healthy company market capitalisation is taken to be 10 to 15 times profits.

In fact every shareholder bar a few minnows had been waiting for a property developer to offer £2 a share to get hold of the lands, which finallyhappened in 2011. They get a 35% return on the shares they bought and sold. Not one cared about film making.

It is amazing the UK luvvies  and/or Government had not bought the shares.

The commercial need for the Pinewood Studio expansion was not  the £200 million spend on twenty magnificent film sets recreating (Venice, Paris, New York, Amsterdam, Chicago, Lake Como, etc) to blow away the new competitors building new studio facilities being built in France  etc. It was also the £2 billion  immediate cash injection from being able to sell 1400 houses on greenbelt land with the prospect of getting to build many more houses in future years.

Without this immediate £2 billion cash injection (from people who HOPE to watch James Bond and Star Wars movies being made, bump into film stars everyday, live next to Paris and Venice, be thirty minutes from The West End of London), Pinewood Shepperton PLC may have no commercial future as a film manufacturing facility in South Buckinghamshire and is mooting abandoning The UK altogether.

Of course if they stop making films there, they would not buy back the houses from the purchasers who HOPED to live near where 007 is made.

As Pinewood has now made deals to be sales agent for the rivals in China, Canada, Malaysia, USA, Germany, Dominican Republic (and get ready to hear China), and they have sold the use of the Pinewood brandname to them THEN the brand is diluted and the quitting the UK scenario is strong.

Pinewood Studios and Shepperton Studios taking its 75 year British heritage and its James Bond, Bourne Identity, Star Wars, Superman, Batman, Mama Mia, Slumdog Millionaire, Mission Impossible, and several thousand major movie film catalogue with it.

It is axiomatic in hard nosed business terms that Pinewood Studios can be rebuilt much cheaper, much better, with far lower labour costs in Malaysia and China. They are off to Malaysia, transfering work and employment to Canada now, and Germany as well…USA and China from next year..but after that….It is also axiomatic that this will leave 98% of British based actors, creative, crew and blue collar film workers unemployed.

The reason American actors and crew do not work much at Pinewood Studios, and British nationals get lots of work, is that they can not get work permits even for Hollywood financed products. British based workers without visas and work permits will similarly be kept out of working in China, other than the super-elite global acting stars and super-super-super-elite crew such as Vic Armstrong.

Only crew members of this supreme standard can be guaranteed work if Pinewood Studios and Shepperton Studios quit The UK.

For most British based workers already in the film and TV industry, it will be like the passengers on the Titanic who could not get in the lifeboats. The film career is over.

SAVE THE BRITISH FILM INDUSTRY.com urge the British Government to intervene. This is not one that can be left to lament after the event. Sound stages must be built around the UK. Without football stadiums around the UK, there would be no national football industry.  Physical infrastructure is the key.

The Government MUST  see that they can be employing 250 000 people and have an annual revenue of over £25 billion across The UK if the  brand is expanded across The UK. But it can also quickly be an industry employing fewer than  2000 people with an annual turnover well under £50 million if Pinewood and Shepperton lands are sold off for shops and houses. The Government if nippy and quick can get the former and its tax revenue…not the latter.

Jonathan Stuart-Brown


Screen shot 2010-08-25 at 19_23_50

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