The familiar drums of diversification have begun to beat. Familiar, at least from this chair, because in addition to my duties as editor of Playback, I also edit PB spin-off On The Spot, a trade devoted to the business of commercial production.

With a commercial production sector struggling over the past two years, we have been hearing a similar refrain from producers and service providers about the need to diversify.

Following unprecedented growth through the latter part of the 1990s, commercial producers, a group highly dependent on U.S. business, have been struggling to maintain margins and, in some cases, just to stay in business. This is due to a combination of factors including a recession in the U.S., and the ongoing pressures of an unstable ad market following 9/11 and the subsequent escalating conflicts in the Middle East.

Like their counterparts in the ad sector, long-form producers have begun to feel a drag on their bottom lines. The reasons are similar. Roadhouse work was once the fastest growing segment, expanding from $539 million in 1994/95 to $1.8 billion in 2000/01. But for the first time in a decade, we saw growth flatten last year. Add to that cuts to the CTF and a rising Canadian dollar, and it is safe to predict that production in Canada will not return to the growth of the last decade.

The first groups attempting to offset this decline are post-production and service providers. In this issue we look at two such areas. The lead story in our report on Sound, Music and Audio Post looks at audio shops that are moving away from their core businesses into areas such as editing, providing dailies for feature films and the possibility of expanding into the video games market.

As featured in OTS this issue, studios have also begun to expand services to include equipment rentals and editing and are servicing more corporate clients and music videos.

In the name of diversification, it will not be too long until some long-form producers try their hands at commercial production. Already commercial producers have entered the long-form arena including The Players Film Company, which launched 49th Parallel last year, currently in production and preproduction on two new Ginger Snaps sequels.

The problem for struggling shops under this scenario is, inevitably, we will see more and more producers and post houses battling for pieces of what is a shrinking pie. As the stronger players move to solidify their positions, this, in turn, will mean a round of consolidation in the very near future. The post sector is most likely to move on this first. Indeed, we are already hearing rumblings that such moves are underway.

Ultimately, this means the diversification we’re seeing today is the first step in a full-scale shift in Canada’s production sector: fewer shops handling larger amounts of business and straddling various specialties.

Even as Alliance Atlantis, Corus and CanWest move away from such models by jettisoning non-core assets, a new breed will step into the fray.

As Deluxe Post Production Sound director of mixing services Daniel Pellerin says in our report: ‘We’re witnessing the meltdown of the Canadian industry, but out of the ashes of that, what is the phoenix going to be? And who is going to be prepared to deal with the phoenix? That’s the whole name of the game right now.’