Are we shooting ourselves in the the foot?

[Guest lightnix]

January's copy of Lighting & Sound International just hit the doormat this morning (after all it is nearly February). There is a very interesting article on pages 61-63, entitled Discounting - how low can you go ?

 

It's a report on one of two seminars held at last year's PLASA Show and makes for some very interesting reading. Here are some quotes...

 

The whole industry is on the verge of coming down like a pack of cards because of this.

 

We've arrived at a situation where the client is dictating the price... and the reason they continue to do so, is because we continue to let them.

 

...no mechanism exists for establishing a realistic industry-wide rental rate.

 

We have seen companies in our industry make suicidal decisions - totally uncommercial decisions - based on trying to buy market share.

 

...classic cases of over-supply, leading to fierce competition between suppliers, and a downward price spiral

 

I'll leave you all to read the rest, although the article does end on a slightly optimistic note

 

There will be another report in next month's L&SI on the other PLASA seminar about freelance rates, for which I sat on the panel with Chris Hannam, on behalf of the PSA.

 

It's a shame that this thread seems to have petered out a little. It's a subject which will decide what happens to the business in the long term and I think part of the problem is the apathy on the part of many people whom it will affect the most.

 

So come on, let's hear it: what do you all think ?

[nick_field]

Diversify!

 

The general lighting/sound/etc. rental market, as you've pointed out, is rather crowded, so find another market to serve. Specialise in a specific area that isn't covered by the big hire companies. Price is a function of supply over demand, as long as there's so much over capacity in the industry then prices will stay low.

 

Bigger certainly seems to be better, so maybe some of the smaller lighting hire companies would be best off selling out to the giants? Of course that will mean higher prices for all of us, but it may also mean suppliers that are still there next time you call them and hire stock that has been properly maintained.

 

Just some thoughts.........

[Paul J Need]

So come on, let's hear it: what do you all think ?

Well, as the subject founder in here I think its only right to reply to you Lightnix.

 

As one of the smaller players in the business of supply of lighting and sound equipment we took a stance a few years ago of changing how we priced equipment hire.

 

We used to have a 2 tear rate for lighting equipment a weekly and daily rate. The daily rate was based on 1/3rd of the weekly price. It finally dawned (DOH!!!) on us that the prep and running costs of a hire going out the door was the same if for 1 day or for 6 months - and as we put together all systems before they leave so ensure all is working, all the right "bits" are there - all in date for PAT testing etc. Hence we scrapped the daily rate. Guess what happened? ABSOLUTELY NOTHING!! Not a whimper from any or our existing customers. So if you want a 650w fresnel you pay £7.00 whether for one day or a week ( A week to us actually means what is referred to a 'theatre' week" i.e. Collect on a Friday return it on Monday Week. Just due to us being closed over the weekend so the hire cannot return it, or they have a peformance on Saturday evening.

 

Therefore, our short tern hire rates went up 66%

 

Nick says Diversify...... well we actually started that way. Offering 10 services (Hence the name) . if you start off offering just lighting hire, how can you really compete with White Light EXCEPT for the following:

 

The bigger firms seem to have lost touch with some of the clients who put them where there are in the first place, the smaller people: Schools, Am.Drams, smaller theatre venue etc. Concentrating on the larger shows or events. I guess when you have 30, 40, 50+ staff to pay each month you MUST get kit out the door, so dealing with a local school after a £70 order seem perhaps useless in terms of the grand scheme of things. Someone like White Light or SLXs' wage bill alone would probably be the same as the turnover of my firm, Gradav, PSLX and Kave combined.

 

So Perhaps small is beautiful? I don't know.... Do the small firms try harder? Perhaps.

 

Regulation is not the answer.... and probably illegal if firms try to fix prices. You only have to look at the situation with BT ( Ok a different scale) but the regulators OFTEL actually forbid BT to reduce prices and are trying to get them to lose 30%+ of market share. If BT were allowed to charge what they want , and reduce charges, probably ALL the competition would go bust inside 6 months. So why has our industry not been reduced to a handful of the big players? There are an awful lot of firms out there (hire and sales) - more than when I first got involved with lighting 21 years ago, SLX has grown 10 fold in the past 15 years, AC has a huge market share, White Light moving from Filmer Road to a vast building in SW19 but no shift in prices......... well I say that ..... you can buy a replacement lamp for less than you could 10 years ago, hire a parcan for the same price and hire a production electrician at the 1995 rate. So where is all the extra money coming from????

 

I have asked more questions than answered, waffled on like a coffee filled bloke who should have been off line and tucked up an hour ago. But to finish....... There is no fix, no solution except perhaps for capacity of suppliers to be reduced. You can bet your bottom dollar however, if a firm is in trouble, fighting for survival, the first thing they will change are their prices.......... downward.