Creating a Sustainable Rep Plot – Mitigating the risk of Early Adoption
Last week I got a chance to meet in person with Justin. He was in NYC and sitting over some Five Guys burgers we talked about what we’d been seeing in the entertainment lighting industry. As we talked about some trends particularly regarding the rapid adoption of LEDs, traded stories about ancient gear we’d both seen walking into theaters around the country. That spurred a conversation into how the industry might change that. That conversation inspired this post.
First, some background – I went to college at Pace University. It was there that I was taught lighting design by the late Chris Thomas. Chris taught me that you can make a lighting design successful with any equipment, having the newest gear doesn’t make the best designer.
He was right of course, but even when I was a student (which wasn’t that long ago) the movement toward sustainability was little more than a whisper. Today if a lighting designer wishes to use less energy, the newest gear is often vital to the pursuit. Using LED technology represents a quantum leap in our ability to conserve energy, while maintaining the quality of design audiences have come to expect.
After I finished my studies, I went on to work as lighting coordinator for the university’s 700-seat theater the Michael Schimmel Center for the Arts. Like many university theaters, the Schimmel Center struggled to be not only a thriving venue for the performing arts, but also a profit center for the university. As such, it was consistently asked to do more with less, including a distinct lack of updated equipment. At the time, the best we could do was replace the oldest instruments first, usually in four and five instrument batches as supplemental funds became available.
We wanted to be more cutting edge, we wanted to be more sustainable. However, reality was we couldn’t pitch the university on capital level improvements without demonstrating long-term profitabilty. It’s tough enough to argue that having the latest gear will increase revenue over the long term. There was something else holding me back from making the pitch effectively.
I wanted to change out upstage washes and cyc lighting to RGB LED sources. I wanted to add moving light sources to save on man power moving and focusing “specials” for conferences. But there was a problem…what should I recommend? While the moving light market in general is more established, the LED market then, as now was rapidly changing. There were certainly products I favored. Yet, I couldnt guarantee (or even plausibly assert) that the fixtures purchased this year would still be the best available on the market next year. This hesitation made it difficult for me to convince myself, let alone the university, that a major equipment investment would be worth it.
The point of my little story isn’t nostalgia, but rather to demonstrate an opportunity. LED techonlogy today is anaolgous to computer technology in the early 1990s. In the early nineties, the rapid improvment of personal computers made them both thrilling and dangerous. Thrilling because finally, the match of operating system and software improvement combined with the affordable availability of hardware capable of running these new programs held amazing possibilites for companies large and small. But investment was also dangerous. If you bought today, you knew in 6 months your computer would be obsolete. This wasn’t a matter of “keeping up with the joneses” often computers a little as a year old were rendered useless as new software was released requiring ever more powerful hardware. The PC comparison seems to be apt as it came up unprompted in an email I received from the folks at Cree Lighting. Michelle Murray, spokeswoman for Cree had this to say,
…compare this to another semiconductor technology—computer processors. Sure, the next level of processing power is right around the corner—but you can’t keep running a DOS-machine waiting for innovation to stop. The benefits of moving to LED lighting far offset any concerns about immediate obsolescence…
Wes Bailey of 4wall had this to say on the pace of LED innovation and adoption…
We are definitely seeing new LED products at a rapid pace, and more importantly, we are seeing the demand for these products from a rental standpoint increase faster than ever. Previously, when an LED product was launched it took a good deal of time for designers to begin requesting these products…in turn it gave us a larger window of time to investigate them before we started carrying them. In the last two years that has changed quite a bit, now it seems that new LED products are being spec’d on shows as soon as they are released to the public.
It’s hard to compare the market available to a university theater over 5 years ago to the state of LED technology today. But in an important way the situation is the same, the market for new, better lighting instruments is always evolving. How do you know when to jump in? How can we mitigate the risks of adoption?
In the computing industry, a response was developed to this consumer ill. Computer leasing programs became widely adopted across most large corporations as a way to stay current in a rapidly changing computing environment. To this day, most large corporations have some form of renewing lease with their computer vendors. This incentivizes long term investment, without the fear of obsolensence.
What I propose is rental houses create similiar long term lease offerings for clients providing repertory light plots across the country. They add up to little more than a long term rental, with additional service offerings should equipment fail. Like an auto lease, it would be expected to be returned in good working order, ready to turn around to other clients. This would promote a move toward more sustainable lighting by mitigating the risk of an ever-changing market place. It would also ensure a steady stream of income for rental houses.
That’s not to say there wouldn’t be challenges. To make this a truly sustainable concept, there would need to be an end-of-life cycle for the lighting gear being returned to the vendors. If it’s all simply scrapped in favor of the newest model then the energy saved on stage doesn’t mitigate the lost embodied energy of the gear. At a minimum the gear would need to be sold at a reduced price elsewhere on the market to extend it’s useful life. The best of all possible scenarios is the gear goes back to the manufacturer where as many of the components as possible could be reclaimed and turned into new gear or otherwise put to good use.
I put this idea to the folks at 4wall and I got a thoughtful response. Again Wes Bailey,
Currently 4Wall does not offer any official leasing options. I will try to explain to you the closest scenario we have to that. We do have a number of venues (especially back east) that we do long term rentals with, and these venues are of course free to trade out rental gear for new items during the rental period, but that of course incurs differentiating costs. Because we do basically offer our entire rental stock for sale on UsedLighting.com, any of these long term rental clients are able to have the gear they currently have priced out for them from a used sales standpoint. When pricing the equipment for the used sale, we definitely take into account how long they have had the gear, and of course we also take into account the age of the gear… While these type of options are not exactly a leasing plan, it does occur frequently that venues who have been renting long term do decide to purchase from us as a used sale. Another thing to keep in mind on this is that some venues (we run into this with churches, schools, and to some extent, casinos) are forced by management into using specific monthly budgets… In these cases this can lead to a venue simply renting gear over and over that they might actually save on by purchasing….this also prevents them from being stuck with older equipment (so maybe not a bad idea after all?).
Have you designed any repertory light plots recently? Do you work for a venue which owns or rents gear? What are you doing to adopt more sustainable solutions? Have you figured out a way to mitigate risk? The comment section awaits….
2 Comments
Sorry, the comment form is closed at this time.
By: Doug
James,
First of all, well written! I like where you’re coming from & agree that there’s a problem with the inability to get what will eventually be money-saving gear into the hands of the vast majority of the market. Let’s face it, most theatre buildings are built as monuments to their donors, and lots of money is spent to make them beautiful, and state-of-the-art when they open. Unfortunately, they aren’t well-enough endowed to operate at the level at which they’re built. The number of PACs in small midwestern cities where I’ve seen gleaming front of house space & equipment that’s been obsolete for 25 years is a travesty. I live in a city where the new, big budget performing arts center has already had to restructure debt & claims a budget shortfall on the order of $8 per year, per citizen. That may not sound like much (and I’d argue that it should be covered by a small tax increase for the city), but with the current state of governmental budgets, it’s more than can be afforded in a lot of places. My friends who work in homeless advocacy & a hundred other worthy causes would all tell you that if the city spends that $8 per person in that way, they’re ignoring other needs to do it.
So, now that I’ve agreed that this problem exists & is worth solving, let me explain where I differ with you. I work for a dealer/rental house. We’re a large, established house with nice rental inventory, but we handle mostly theatrical gear, not corporate & rock & roll gigs. As a result, we’re heavy on dimming & conventional fixtures & lighter on LEDs & automated. We’d love to have more big-ticket, flashy gear in our inventory (who wouldn’t?), but it’s not our bread & butter, so it’s not always financially viable. Neither would financing the sort of long term leases you’re discussing.
Please note that all of the pricing discussed below is entirely hypothetical. The margins aren’t real, nor is the product, but I think it will illustrate the problem I see with the funding model you suggest.
Let’s say there’s a cyc that a PAC would like to relight with LEDs. The cost of new fixtures might be $10K to the dealer. The manufacturer recommends a list price of $14K. Maybe the dealer would sell it for $12500 to the customer by the time it’s been shopped around to death.
Let’s set up a lease where the same gear would pay out $15K. The dealer still needs to put out $10K to buy the gear for a 5 year lease that will pay him $250 per month ($15K over the life of the lease). The payback doesn’t happen until midway through the 4th year. The cost to finance this transaction probably pushes it back into the first quarter of the 5th year, because the dealer can’t keep $10K in capital tied up for three and a half years. At that point the dealer is going to see the same $2500 in profit from a 5 year lease that they would have by selling it outright for $12500. On the downside, if the customer defaults on the lease, the dealer is now responsible for the debt. Sure, on the back end they may be able to recoup another $2-4K, but there’s no guarantee that the used gear doesn’t end up sitting on their shelves collecting dust. After all, the customers who are interested in 5 year old LED gear may not have $2-4K in capital funds lying around to buy it. I’d personally much rather sell them the gear outright for $12500 to start with, and keep my capital (and/or borrowing power) available for other projects.
I think the model needs to look more like it does for auto dealerships (who also can’t afford to finance leases on expensive inventory). The manufacturer sets up, markets & finances a program, the dealer sells it and takes a percentage of the profit on the lease. When the gear is returned, the dealer can either resell it (in which case there’s a larger profit to be had), or work with the manufacturer to dispose of it (your recycling idea may have merit here), in which case the dealer sees no additional benefit from the end of transaction phase. Now, because the profit has to be split, the dealer & manufacturer each make $2500. Now, however, the dealer doesn’t have to worry about finding the financing and carries no risk in case of a default, so they can actually afford to make this transaction work. The manufacturer sees an additional $2500 in profit over their normal sales transaction (remember, they were going to charge the dealer $10K before), so they have some motivation to do this. They maybe put $6K into producing the gear, so they aren’t tying up as much capital to do this as the dealer would. Also, the manufacturers of higher end LED & automated gear are typically larger, better-funded operations than their dealers are. At the end, maybe the dealer pays a small amount to keep the gear. If the dealer can get the title to the gear for $500 the manufacturer now has an extra 30% on the sale, and the dealer has an asset that may be useful to them. Maybe they sell it for $2-4K, maybe they put it in their rental inventory (unlikely), and maybe they just return it to the manufacturer to recycle.
This sounds like a funding model that may be worthwhile for our industry. I’d love to be able to help my customers stretch their dollars this way. They spend less on power, labor & expendables (so maybe they actually spend more on gear, or maybe they keep costs down). They have better gear to do better, more exciting shows, that maybe help them increase their subscriber base. The manufacturers sell more product at higher profit margins, and people can afford their expensive gear. The dealers do the same, per transaction, as they do now, but maybe they can create more transactions. Everybody wins (assuming the manufacturers have the capital to do this).
So, manufacturers, who’s interested?
By: Russell Wooten
I know exactly where your coming from. First off I love the post and the site. I work at a church as there lighting guy.
Where we started was in 05 it was straight static lighting about 150 of them in a 2400 seat sanctuary no movers no LEDs and a high power bill. We would rent when we needed stuff from local rental houses. Many times I would push for a purchase but was shot down because either they did not see the big picture or the funds were not there.
Jump to 09 we made our first purchase it was a big one. 4 Elation 300 pros, 6 adj ph45 LEDs, 4 12′ 12″ box truss, 2 4′ 12″ box truss, 4 bottom plates for said truss and 2 top plates for said truss. It was a big deal to get all of that. And it made me happy but more aware of the lighting world. You see I dont have and formal training I have had on the job training only. My teacher is my TD he learned at USF in tampa. But I was up to the challenge of using the new gear to up our standards.
Jump to now. We run a 12 mover rig. 4 USED Martin 2k pro II’s, 6 Elation 300 pros, 2 Elation 1200cs, 9 Chauvet Colorado 2 tours (3 are used for back lighting on our thrust) and 10 adj ph45s. Over the years my plot has changed dramatlicly to the point where I have a local lighting rental guy notice what I’m doing.
Now to the point of long term rentals. I have spoken to two different rental house in tampa about this. But the way I ask is during you slow season witch is different could it be possible to “store your gear at my church for a small rental fee” it would be used and kept in good shape. As of right now both places don’t have anything in place to do this. But they are thinking of doing this. I will let y’all know how that venture goes.