Even in bankruptcy, the creative energy has not stalled at Henninger Media Services Inc. Inside the company's Arlington headquarters one recent morning, jeans-clad workers hunkered over computers to tweak sound effects and video graphics for documentaries and films.
But more is at hand than just the day's work at Henninger, one of the region's largest post-production houses. The 150-employee company is consolidating its operations, moving workers and equipment from its Georgetown office to Arlington and another location in the District. After working out a deal with its creditors, it will emerge from Chapter 11 this spring after submitting its reorganization plan next month -- if all goes according to plan.
Henninger's production work has been seen on such TV channels as PBS and Animal Planet and it has done on-site voiceover work with celebrities, including Sandra Bullock. This summer, though, it became a prominent example of how firms that feed off the advertising business have struggled.
Many factors led to the company's Chapter 11 filing on July 15. Clients cut back on their marketing spending, slowing down the production of 30-second commercials in the company's Richmond office, which specializes in advertising, Henninger officials said. Increasingly cheaper prices for technology, such as the popular Avid editing system, has led some of Henninger's clients, including Silver Spring-based Discovery Communications, to take some post-production work in-house.
But Henninger officials said the biggest blow came from the Sept. 11, 2001, attacks. Henninger's New York division, Henninger Tools, sat six blocks from the World Trade Center and lost business as New York floundered. Henninger founder Rob Henninger, 55, and actor Robert DeNiro formed the division in 1992 to provide equipment, such as a technology called nonlinear, random-access editing, that was used to produce such films as "A Beautiful Mind," "Casino" and "Independence Day." The company shuttered the New York office in August and four staffers were laid off.
"That was the last straw" that led Henninger to bankruptcy, said Steven J. Schupak, 44, Henninger's vice president of strategic marketing and business development. The company had assets of $15.6 million and liabilities of $14.5 million as of Nov. 30 and sales of $850,000 in the month ended Nov. 30, according to bankruptcy court documents.
Henninger is rebuilding itself internally and externally. The firm will move about 30 workers and facilities, including three graphic design suites, to its 75-employee Arlington office, and editing and audio suites will be transferred to Henninger's 17th Street subsidiary in the District, Schupak said. Most of the transition will be finished by February, and no employees will remain in the Georgetown site, whose lease will terminated, he said.
Amid the construction to expand space there, the Arlington headquarters still looks like a production creator's playland with individually decorated editing, music recording and audio suites with such accents as incarnadine-painted walls, halogen lamps and a glossy ebony Weinbach piano. During work breaks, employees can entertain themselves with a foosball table, a snack bar and a jukebox.
The sanguine atmosphere aside, the firm's overall projects have fallen about 20 percent in recent years. In Henninger's fourth quarter ended Oct. 31, the company earned $861,000 on $6.04 million in revenue, company officials said. The company's fiscal 2002 revenue was $20.4 million.
The company has targeted new government clients and hired a government contracting veteran as a sales executive.
Other post-production firms have looked at Henninger as a litmus test for the still-embattled industry. The past few years have brought closures, downsizings and business strategy changes for other companies. In 2000, Richmond-based Park Production closed its District office, laying off the entire staff. On its Web site, Waveworks Digital Media of Arlington is advertising a fire sale of its furniture, electronics and other assets to prepare for its move next month to a smaller office in McLean, after losing more than a quarter of its staff.
Jim Harmon, Waveworks' chief executive, said as part of the move, the company is updating its equipment and has expanded its business beyond post-production work. The firm now also offers communications services to companies, such as producing videos for business sales meetings and creating content for Web sites and CD-ROMs. The company has marketed to banking, telecommunications, defense firms and other industries, he said
"The traditional post-production model isn't what it used to be," Harmon said. "An hour of time in a room is less attractive than being able to sell a solution or a complete project. We have expanded beyond post-production into full production."
In the past few years, the company's staff has shrunk 40 percent to 15 employees as a result of layoffs, a necessary move for the company's financial health, Harmon said. Sales have also dropped, but Harmon is optimistic that the company will benefit from its new communications work.
"Most of the post-production houses have been hit by the economy," Harmon said. "The flip side is that in times of change, people need to communicate. What has become our specialty is corporate communications."
David Perry, director of broadcast production at Saatchi & Saatchi in New York, said even broadcast production houses in larger markets have gone through a turnstile of closings and mergers after the '90s boom diminished.
"They're all crying," Perry said. "In the real salad years, when business was hot in the '90s, there was a real proliferation of companies. When things slowed down, a lot of them got caught."
A downturn in business hit capital-intensive post-production firms particularly hard, Perry said. Unlike production companies, which handle the filming of products such commercials and can be run at a lower cost, post-production firms often spend hundreds of thousands of dollars on expensive equipment to handle editing and other work.
"Production is basically cell phones and office space whereas post-production is million-dollar machinery," Perry said. "Every month you have big bills to pay off with these machines. It's harder to weather a downturn when you have big capital investment."
Todd Mason, president of Atlantic Video, a District production house with 70 full-time employees, said post-production houses face a double squeeze: less business and new, technology-driven competition.
"Post-production is not a standalone business on any large scale at this time," Mason said. "Now you can go to Circuit City and buy equipment that allows you to do editing on a computer."
Tom Angell, president of Interface Media Group in the District, where Rob Henninger once worked, held a Darwinian view of the production industry's changes. To adjust to the economy, he recently outsourced most of his company's accounting staff and implemented new technology to streamline Interface's scheduling, payments and other processes. And, he says, his firm carefully chooses its employees and has targeted new sources of revenue, such as the federal government, which makes up about 20 percent of his business. He used the analogy of flies hovering above fruit to describe the reallocation of money sources in the industry.
"I want to be where the flies are," Angell said. "People are having a hard time, and that is reality. Those who make it through will be stronger because of it."
Ads and Ends
Silver Spring ad firm Nasuti & Hinkle was hired to do a print, transit and radio campaign for Tour de Friends, a nonprofit group sponsoring a 330-mile AIDS charity bike ride between Raleigh, N.C., and the District. The ride will benefit District-based Food & Friends, which brings meals to people who are HIV-positive or have AIDS, The Alliance of AIDS Services in North Carolina and the FAN Free Clinic in Richmond. Nasuti also won nine awards in the Hospitality Sales and Marketing Association International Adrian Advertising Awards, including the firm's work for the Harbor Court Hotel in Baltimore and Westfields Marriott in Chantilly. . . . Arnold Worldwide Washington of McLean promoted Wendy O'Neil to vice president. She was the company's corporate worklife director for six years.
Sabrina Jones writes about the local advertising industry every other Monday in Washington Business. Her e-mail address is email@example.com.