I feel that last two years of financial volatility have abated enough to get some clarity on what filmmakers should be looking for in 2011.
Obviously, life has yet to return to normal, but that’s not going to happen in 2011, nor 2012. Our national debt and deficit are going to continue to take their toll on every facet of our lives.
Foreboding as that sounds, there is comfort to be found in the certainty of the onerous things to come: 1) you can manage your expectations appropriately, which is good for your emotional well being; and 2) you can plan your finance and production life accordingly, and possibly avert some unnecessary debacles.
The national debt’n'deficit crisis is a financial maelstrom of unimaginable size and severity that has caused (and will continue to cause) the value of the dollar to slide against most major currencies and the dollar index; the dollar index measures the value of the dollar against a basket of major currencies that includes the Euro, the British pound, the Canadian dollar, the Japanese yen, the Swiss franc, and the Swedish krona. But this is not all bad news.
It’s better to know you’re going to be in a storm for a few years and act accordingly, than to hold off each day until the sun comes out tomorrow.
For producers, this can be a valuable guide for deciding where to shoot your films. In short, stay local in 2011 and 2012. The diminishing buying power of the US dollar means that if you leave the country, then you’re going to pay more for less. But within the USA, a dollar is still mostly a dollar. I say mostly because you may not get as much for your dollar in major urban production centers like Los Angeles and New York City as you might in places like Michigan.
These variations can add up quickly for things like travel and living expenses in your budget, as well as rentals and food costs. Star salaries, above-the-line costs, and post-production/CGI won’t be effected because they cost what they cost.
These currency fluctuations can certainly be contained by locking-in your currency rates (i.e. buying all your currency ahead of time) or by using various hedging instruments. These currency products can be purchased on margin ahead of time for as little as 10% of your currency requirement; nonetheless, that’s still a lot of money to have to come up with before the film’s financing closes.
This is why many filmmakers don’t truly lock-in their budgeted exchange rates until near the end of their financial closing. This is a very risky strategy because closings can take 6 to 12 weeks, and anything can happen to the value of your budgeted exchange rate during that time. The Euro is certainly having its own problems and has its own decline, but the dollar is declining faster and therefore shooting in Europe is a very costly proposition.
Volatile currencies like the South African rand are very hard to pin down and can vary wildly from your budgeted exchange rate.
