Today I had a conversation with a couple of rental company folks who shared the same opinion I have concerning most of the new gear coming out.
Manufacturers have stopped making what people need, what companies require in order for their companies to be profitable. Instead, manufacturers are making gear they want to make. Ego gear I call it. Lights with bigger lamps, more gadgets or LED rings around the bezel. While this is all cool, the problem is this. The math no longer works.
10 years ago, practically an eternity in the lighting biz, you had the studio color, mac600, cyberlight, etc. These lights were generally bringing a company somewhere in the area of 5-7% rental rates. This means, each time it was rented, the company would see 5-7% of their purchase price as a rental rate – weekly. Cybers were costing $4500 and renting for $275-300 per week. Macs or Studio Colors, $3000 with a rental rate of $200. You get it.
Now, VL and Martin both have lights they’re asking over $10,000 for. And the rental rates have dropped to maybe $175-250 on these lights.
Rental companies are being asked to spend more for much less. A $10k moving light with a $200 weekly rate and 75% utilization is going to take a year and a half just to break even not including labor, overhead, etc.
It’s not a shock that we are seeing companies changing hands. I really respect these rental companies for trying but I think it’s coming to a point where the manufacturers need to smarten up and start building more fiscally responsible products.
If US buyers could only buy $100,000 automobiles where would we be right now? Same goes for gear. We are coming to a break point in my opinion and manufacturers are going to feel it.
Marcel
GearHeads 
March 12, 2009 at 3:41 pm
I agree, the math doesn’t add up. However, wouldn’t this pattern be a good thing for your business? I figured that the more expensive gear would drive more customers in your direction.
If automobiles were $100,000, the used car dealers would be king.
March 12, 2009 at 3:46 pm
Correct – and I didn’t say this trend hasn’t helped our business. Sure, the more that it costs to acquire NEW gear, the more sense it makes for a company to at least entertain buying used. At the same time, the overall health of the rental and production industry is imperative to our success.
Marcel
March 14, 2009 at 6:48 am
We at Martin have moving lights in a number of price brackets, pretty much like a car manufacturer has compacts, midsize, large etc. We’re not just building “luxury lights” and the success of the MAC700 is proof of that. That said, our flagship, the MAC III is doing pretty too.
But there is no denying that the average rental rates have not kept up with the price evolution of lights. The average packback time is about 40 weeks. Meanwhile in videoland, they recoup their investment in, on average, 25 weeks.
Look at the value chain – how much of the $100 concert ticket goes towards light/sound/staging/video etc? We did the math a while ago and I can tell you the figure is ridiculously low!
The only way rental companies can get more competitive and get a better return on their investments is to get much more innovative in terms of the products and services they offer. Some companies already do this and they are doing much better than most as a result.
I definitely agree that we, as a manufacturer, should keep a close eye on what we are offering and at what price. Your “need vs want” is spot on in that respect.
March 16, 2009 at 10:28 am
Hey Matts – thanks for the reply. While I value your opinion of EVERYTHING technical, I don’t totally agree with a few of your comments here.
First, your suggestion that a moving light is paid for in 40 weeks vs Video gear in 25 – is not entirely true. Again – lets look at one of your products, a MAC2000. Most dealers buying these new are paying very close to $10,000. So – you’re suggesting these guys are seeing a rental rate of approximately $300 (250 for the fixture, plus approx $50 in prep / lamp / maintenance cost). Check around – and I think you’ll see 2k’s pretty standard at $175. At that rate, you’d be looking at closer to 70 weeks, and I think this is a rather aggressive model… so – back to what I said – 2 years is more likely.
Then – the manufacturer introduces wonderful new technology like the MAC 3, or (lets pick on someone else for once…) the VL3500 Wash FX. This is a great new version of VL’s washlight – but at just under $10k cost, where’s the market? If the going rate for washlights is $125-150 / wk – where’s the math on this? There’s simply no logic. It’s like I’ve always said – if a used VW Beetle is worth $2,000 and you put in a $5,000 stereo, you’re not going to get $7,000… The same is true with gear. Adding more bells and whistles does not increase rental ROI. Trust me – I am a gadget guy. I LOVE a new toy as much as anyone, but now is not the time to be adding features and jacking up the cost. Increase ROI for your customers and you’ll win. Actually LISTEN to what the people buying your products need to positively affect THEIR bottom line – and you’ll see your own sales increase. Continue building ego-lights – and you will likely be in for a few more tough quarters.
I appreciate your comment about the breakdown on concert ticket revenue, but do you REALLY think you’re going to change that? You have what you have… about $125 / week for a wash light, and $175 for a hard edge. Build lights that fit those budgets – and you’ll rule the world!
Marcel
March 18, 2009 at 6:51 pm
Well the numbers may be a bit skewed these days due to the drop in value of the US $ to the Euro. I agree with you in general though – the manufacturer who has the guts to make a true workhorse and cut the out bling could do very well.
But.. design by committee and focus groups seems to be prevailing these days and then R&D wants to put in their latest greatest wiz-bangs stuff. Before you know it you’re well past the $10k sign and too late to hit the breaks!
Less is more…
Mats
May 5, 2013 at 11:21 pm
I couldn’t agree more with your logic. Clients want the latest greatest gadgets, but they want to pay the same price they paid 10 years ago while the cost of doing business has increased. The math does not add up. It is very difficult to afford to keep quality employees, insurance, and spend the money necessary to maintain your rental inventory when the market does not bare it.
i have seen cases where the client paid a vendor more money to lay green turf style carpet in a tent then they paid the sound and lighting vendor that brought in 2 trucks full of gear and personnel with over 100 years of combined experience to set it up and run it. The learning curve to lay temporary carpet for an event is surely less then the curve to learn to run moving light consoles and digital sound consoles, yet some clients don’t seem to value the skill and monetary investment involved in the complicated business of live production!
OK. I’m stepping off my soap box! Thanks for bringing up the topic. Sometimes it helps to vent to the sympathetic!
I think someone keeps rubbing heroine on equipment causing my addiction and keeping me from getting into a sensible business.
Later fellow addicts!