Three friends got together one evening over white wine spritzers. Let’s call them Manny, Moe and Jack. “So I own a camcorder, a tripod and a portable monitor” said one. “I own a portable DAT recorder, a microphone with a cable, portable sound mixer, and a pair of headphones” said the other, The other friend owns an Arri 4-light kit, four stingers and two C-stands.

“None of us is using the equipment on a daily basis so why not rent it out and make some extra money?” said the third.

On the surface, it may seem like a great idea. Extra money from stuff you already own. All you need to do is get the word out, figure how much per day for each of the items and let the cash roll in. Easy street, next exit.

Oh, but if it were that simple.

When I opened up back in 1993, Bill Clinton was just elected President, gas ran about ninety-nine cents per gallon and everyone billed a four day week. There were only about eight or so well-known visible rental companies in the Los Angeles / Hollywood area and a few monsters like Panavision and Bexel. They generally stayed inside of their specialty areas;  BetaCam SP camcorders, decks and monitors, Lighting & Grip, Sound, Film Cameras, etc.

Those were great days. Hi-8 and Super VHS dominated the lower markets, standard definition, composite video & Y/C were the only thing really moving signals around. Sound went on Nagra’s or the new DAT recorders, lighting companies moved product out by the truck load and a movie was being shot on every corner. Oh how I miss them days.

I was on Cahuenga Blvd. back then, working out of a 250 square foot office right across from Universal Studios. No parking anywhere and the bathroom didn’t work. Many of my current customers remember those times with a bit of nostalgia.

Despite the limitations, I made it a point during that time to expand rental inventories evenly and to grow the inventory so that I could reasonably equip an entire production with equipment in all of the various production categories. Perhaps I was the first “multi-category” specialist, carrying Video, Sound, Lighting, Grip, Communication and logistical support like Director’s chairs, pop-up tents and Banquet Tables.  A one-stop shop. And since more volume was going out to a particular customer, I could apply more liberal discounting. I still do, but the center and focus of my inventory has shifted. It had to.

Times then were a bit different from today. Between real brick-and-mortar rental companies, and those who exist in the vapor without a location generally advertised through a Craig’s List ad, the number of equipment outlets in th Los Angeles area now number about forty-seven. Friend-to-friend rentals and gear made available through colleges, universities and film schools add to that number. Even the major studios are letting non-studio prductions access to their on-lot inventories for use off-lot.

RENTALS IN A LIMITED MARKET

While Los Angeles is perhaps the largest market for the rental consumer of motion picture and television broadcast equipment in the world, and LA firms still ship product everywhere in the world, the number of rental customers is declining. This is do to several reasons. Primary amongst those reasons is the fact that you can simply purchase very high quality equipment at very reasonable prices. Once you buy it, you’ll never have to rent it again. The old Sales vs. Rentals senario.

Need to buy a high definition camera and you’re on a tight budget? In my quicky review of the local market, I found a Kodak Zi6 true High Definition camcorder that shoots 720P to SD/SDHC cards selling for $145.99. While it’s not a CineAlta, but it is HD and has had some favorable reviews, all for under a hundred and fifty bucks. As Dr. Smith used to say:  Oh, the pain.

With several manufacturers touting the ever lower purchase prices of their wares, a person intending to shoot a project must look at the purchase option instead of rental. A rental of sufficient length may be the same as the purchase price of the item they were intending to rent. And after use, sell the items to pay for post.

No great secret here, the other obvious reason for market constriction being the amount of production outside of the Los Angeles (Southern California) area. As Louisiana, Texas, New York and other Cities and States provide exceptional support both logistically and financially, and as productions continue to migrate there, those regions are seeing the creation of new local rental companies to cover most or all of the equipment needs of the production.

Who wants to rent gear in LA and truck it to Wyoming? Sometime you must, if quantities are gross, or the product unique. If shooting out-of-town and in the event of a device failure – you’re screwed, even if only for a day or so. Shoot LA, please.

Let’s go back to the folks that owned those few items with a slight detour. It’s no secret that when I first opened, I didn’t even have that much equipment. I had a boompole I made out of a broom stick I found, my lighting was largely shop lights with blue gels, all of my cables I made myself from scraps and remnants. It’s amazing how far a can of semi-flat black can go. Everything looked nice, albeit in the same color.

With the help of a friend, I brought in a Sony DCR-VX1000, an early MiniDV camcorder when they first came out, and built the first dual XLR-to-Mini-plug stereo plug to interfaces allowing professional balanced sound devices.

Now a days, rental houses don’t really build much, consigned to what they can easily purchase from a variety of sales vendors. Which leads me to the next point. Only a few have any form of service background. Bring back a defective unit, only to have the rental personnel say “Yep, it don’t work”.

EVERYONE CARRIES THE SAME STUFF

If you were to take the time to write down all the equipment shown on all the rental rate cards from all the area rental folks, and deleted those items that are the same and commonly listed between them, many rate cards would have but a small few items on them. Several would cease to exist all together. This commonality reflects the buyers (read: owners) belief that those fundamental items will be most popular. That is not always the case. It is true, however, that camcorders (et al.) are gateway products to the world of accessories where the profit lives, and where the true girth of the rental firm is displayed. Go wide, don’t go deep.

Like a 7-11 or Starbucks on every single corner.

How does one decide on where to rent? The “Proximity Effect” as I call it, is an important element. If you live in Long Beach, a Hollywood dealer is closer than the Glendale dealer, a Palmdale renter will go to Glendale instead of driving all the way into Hollywood. If the gear is the same, and the price is the same, most customers loyalty lay within the confine of their wallets. Who can blame them? Money talks and b……. .

Unbeknownst to Manny, Moe and Jack, the items they anticipate carrying are already carried in great quantities by twenty-five other rental firms. The only way to compete is to have a lower rental rate, better condition of equipment and a more complete group of provided accessories.

Mathematically, it doesn’t seen to work out that well, and to make it a go, many accessories must be purchased by MM&J prior to the first rental so that a complete package is able to be offered to the rental customer. An example of accessories add-on and its impact on unit item budgeting is illustrated below:

“The Sony PMW-EX1 example”:

The camcorder sells for about $6800.00 and includes a small battery and an 8 GB card, neither of which are particularly useful in a professional rental environment, so they are set aside.

To complete the package properly (HSR-style) the following items must be purchased:

PELICAN 1600 CASE WITH PADDED LINER     $235.00
SENNHEISER K6ME66 W/SHORT XLR                 $450.00
3X BP-U60 @ $250.00 EACH                                  $750.00
2X SBP-16 16GB CARD @ $530.00 EACH        $1060.00
HOYA PRODIGITAL 77MM LENS PROTECT        $45.00

TOTAL ACCESSORIES                                              $2540.00 plus tax.

Now we’re up to $9340.00. We send the package out for $275.00 per day with two 16GB cards which is somewhat regionally lower than most, who rent at $350.00 plus cards, no mic. To be competitive, you would want to be below, or match, the commonly available lowest regional rate of $275.00.

If you rent the package thirty-four times you will break even. Not profit, mind you, just even. This assumes no un-billable damage or failure. In reality, batteries wear out, mic clips get broken and cables fail. Your EX1 better go out every weekend, because if it doesn’t, it’ll be a year before the break-even point. The division of profits is easy, though. Nobody gets nothin’, not this year, anyway.

That’s just a single example, most production equipment packages (sound, lighting) also need this level of completeness to be an effective, usable and complete rental item.

What if your new rental firm venture can not afford to buy two packages? You know, if one fails the customer will need a replacement unit. This will mean that you will need to sub-rent it, assuming you can find one. This also means you will be in “negative profit” on the rental. Negative profit equates to loss, which relates to an extension of your break-even point.

Let’s say you can afford two complete like packages. The second package will go out less than the first. Thirty-four rental turns may now take over a year.

UNDER THE RADAR

To be a real-and-true rental firm, you will need to file a bit of paperwork with the government. If you choose to operate under the radar to preserve profits, know that the District Attorney in every City and County has investigators whose sole job it is to ascertain and locate individuals or groups that are operating as a company but have chosen to do so illegally and in an un-licensed manner. If caught, many, many bad things may occur including confiscation and the preferring of criminal charges. After all, it is illegal.

So the thought of incarceration has convinced you to play by the rules. An excellent choice, but comes with a price. If you don’t wish to have your customers come to your house or apartment to transact business, you will need a location. You can work out of your house legally (with the required paperwork), but trust me, it’s not really a viable alternative to a real business location.

The small of feet, the dog poking its nose into customers crotches. While some may like this, most will not. What if they need to use the bathroom? Heavens to Mergatroid.

Here is a basic list of some of your start-up expenses and required paperwork:

LOCATION SECURITY DEPOSIT AND RENT
CITY LICENSE
D.B.A. STATEMENT PUBLICATION
OPENING BANK ACCOUNT DEPOSIT
STATE SELLER’S PERMIT
FEDERAL TAXPAYER ID NUMBER
LLC OR PARTNERSHIP FILING
ADVERTISING
CONFORMING THE RENTAL PROPERTY FOR YOUR NEEDS
BUSINESS TELEPHONE NUMBER
COMMERCIAL USER WATER AND POWER ACCOUNT
EMPLOYEE DEVELOPMENT DEPART FILING if you will be having employees
CREDIT CARD PROCESSING ACCOUNT
BUSINESS INSURANCE
ALARM SYSTEM INSTALLATION OR ACTIVATION
PRINTING, ALL FORMS
COMPANY DELIVERY & PICK-UP VEHICLE
INSURANCE FOR COMPANY VEHICLE
WEBSITE CREATION AND MAINTENANCE
DESKS, CHAIRS, FILE CABINETS, ETC.
CREATION OF LEGALLY BINDING FORMS AND DOCUMENTS
BOOKKEEPER/ACCOUNTANT (If you try to do this yourself you’re a fool)
BUSINESS FACSIMILE NUMBER
MORE EQUIPMENT
MORE ACCESSORIES
MORE CARRY CASES
MORE EVERYTHING

And many more too depressing to list here. The point being, it’s not hard to acquire equipment, indeed, that’s easy. What is hard is working within the confine of laws which are often contrary to logic and the multiple layers
of municipal policies and jurisdictions.

HAS ANYONE EVER HEARD OF MERGERS?

You take a few rental companies and put them together. Assuming you can work out the split, this process, according to Fortune Magazine, may increase the odds of survival (and growth) many-fold. I’ve been keeping my eyes open for may years, but the right mix has never happened. I am still looking as that’s just smart business.

Historically, mergers increase market capitalization, reduce employee payroll burdens by removing over-lapping employee functions, would allow a centralized operation in a larger location, often at a better per-foot lease rate than the smaller firms per-square-foot rate. In most cases, duplicate inventory can be sold allowing for the reduction or elimination of company debt, a stronger industry position and better access to banking financial products like loans and lines of credit as well as being able to re-enforce current product mixes or expansion and exploration into similar and tangental areas.

Maybe, instead of trying to open a new firm, approach an existing firm with what you can collectively offer them such as experience, rentable product and any customer base you already carry. If you got the goods, they should listen. Plus, they would (generally) have the legal and business infrastructure already well established, saving you a great deal of time and money.

AND IN CONCLUSION

Don’t let me discourage you from opening a new rental company. Our industry can always use a forty-eighth local company to address an ever getting-cheaper shrinking market cluttered with a never ending assortment of possibly necessary equipment that nobody knows how to use correctly that will most likely be replaced by a new model at a lower price with more and greater features in three months anyway.

I could have been an Optometrist. What was I thinking?

More to come…