Replacing a Stolen Red Cam

[Sean]

I hesitate to ask publicly because it can open a can of worms...but I gotta.

We were considering traveling out-of-country with a well-insured Red Camera...and then we started to have serious second thoughts when we realized that we could be in serious trouble if the camera was stolen. It wouldn't be the money lost--the insurance deductible is reasonable. But would a Red owner go to the back of the line and have to wait a year for a camera replacement? Or would there be a few cameras set aside (canceled reservations?) for replacing the camera in a legitimate case of theft or total destruction. Surely some poor soul is gonna have a camera mishap in the first 12 months. Losing our camera for a year would be devastating. I'm not sure how other companies would generally handle such claims when there's a backlog of camera orders to fill. How would Red handle this scenario?

[Stephen Williams]

Hi,

I don't think you will have to wait 12 months from when yours is delivered. You could insure your camera for its market value & replace on the open market.

Stephen

[laguun]

Stephen put it correctly.

There are insurances which will replace the gear at their own cost.
We have such one on several mission critical devices.

[Sean]

Do you think there will be any cameras on the open market? I know eventually (6-12months there will be). And I suppose someone out there would probably sell their $17,500 camera for $60,000 if an insurance policy was paying for it. I didn't think of that. Will have to check our policy.

[Stephen Williams]

Do you think there will be any cameras on the open market? I know eventually (6-12months there will be). And I suppose someone out there would probably sell their $17,500 camera for $60,000 if an insurance policy was paying for it. I didn't think of that. Will have to check our policy.

Hi Sean,

With 2000 cameras reserved, I would expect 200 - 500 to change hands in the first year.

Stephen

[laguun]

Hi Sean,
With 2000 cameras reserved, I would expect 200 - 500 to change hands in the first year.
Stephen

possible.
however i suppose the percentage will be much lower.

a) tax write-off is several years for new products.
b) for the first 6 months, reservation holders will take delivery. in the 12-18 months before delivery, many of them made quite a business/production plan for putting their cameras to use.
c) a good chunk of the orders go to rental houses and won´t be for sale for many years to come
d) another good chunk are sold to highly acclaimed directors/very wealthy customers. these will probably not show up on the market anytime soon as well.
e) DoPs, if they own their camera, usually keep their camera for a long time.
f) with which camera would a red customer replace or upgrade the red one? One of the main reasons for sales is getting better gear, and as it seems, red has no real competition in its niche.

therefore i would be surprised if 10-25% of the units will be in the open market within 12 months, as you suppose.

however, if red really ramps up production to a rate of >700 units a month, then there certainly will be many cameras on the open market.

in any case, the 35mm camera market will be pretty interesting to observe in the next years. i am especially curious if arri will re-invent itself early enough.

[PaulClements]

If somone wanted to give me $60,000 for a piece of equipment that cost $17,500 I'd happily join the back of the queue, go on vacation for a few months and pick up another camera at a later date with a smile, a tan and a bad Hawaiian shirt.

[Sean]

Well the guy whose camera falls into the Grand Canyon may take you up on that Paul. We'll have to see what the landscape looks like. I still don't know that I feel comfortable risking a theft while traveling and crossing borders until I know I can replace it in the event of disaster.

[Stephen Williams]

possible.
however i suppose the percentage will be much lower.

a) tax write-off is several years for new products.


Hi,

If you sell a fairly new item the profit / loss will be accounted for, no need for tax write off.

Many people will buy a camera, shoot a film sell the camera then replace it next time when they have a new film to shoot. The new camera will probably cost less than they sold the old one for.

FWIW I don't actually know any people who are just DOP's who have a reservation, I do however personally know 20 + reservation holders.

Stephen

[laguun]

Hi,
If you sell a fairly new item the profit / loss will be accounted for, no need for tax write off.

That depends a -lot- on your tax system, registration, subsidary etc. We usually have to keep gear on full tax reduction a minimum 36 or 48 months, depending on classification and value.



Many people will buy a camera, shoot a film sell the camera then replace it next time when they have a new film to shoot.

i agree, this business model is getting more common.



The new camera will probably cost less than they sold the old one for.

In the Beginning when demand>supply: yes, later on when supply>demand rather no.
Furthermore, i wouldn´t be surprised to see a Red Two, Three etc within the next years, which can be a risk for buy/resale production models, as new product announcements typically devalue existing gear.



FWIW I don't actually know any people who are just DOP's who have a Reservation, I do however personally know 20 + reservation holders.
Stephen
Among the 5 orders in berlin, 2 come from DoPs.
In Switzerland, i only know one DoP who has a red on order.

[Stephen Williams]

That depends a -lot- on your tax system, registration, subsidary etc. We usually have to keep gear on full tax reduction a minimum 36 or 48 months, depending on classification and value.



Hi,

If you sell at a profit or loss in year 1, I would expect you will be taxed on that via your profit & loss account for that year.
I would not expect the equipment to be shown as an asset at the year end as you no longer own it! it was acquired & disposed of in the normal course of your business, so normal depreciation / write- offs would not apply.

Stephen

[laguun]

Hi,
I would not expect the equipment to be shown as an asset at the year end as you no longer own it! it was acquired & disposed of in the normal course of your business, so normal depreciation / write- offs would not apply.
Stephen

there are several assets which only can be reduced by 25%, 33% a year. So if you sell it earlier, you can only write off a small share of the total cost.

[Stephen Williams]

there are several assets which only can be reduced by 25%, 33% a year. So if you sell it earlier, you can only write off a small share of the total cost.

Hi.

Are you saying you expect depreciation exceeding 33% in the first year!

If you sell the camera, it's not an asset so I am sure normal depreciation rates don't apply, It's a profit or loss on a sale. I am sure such profits / losses have to be accounted for in any case regardless of depreciation to date in your accounts at the eventual date of sale.

Stephen

[laguun]

Hi.

Are you saying you expect depreciation exceeding 33% in the first year!

If you sell the camera, it's not an asset so I am sure normal depreciation rates don't apply, It's a profit or loss on a sale. I am sure such profits / losses have to be accounted for in any case regardless of depreciation to date in your accounts at the eventual date of sale.

Stephen

Stephen, depending on the legal form of the particular business, be it AG, KG, GmbH, GbR and so forth in Germany, the legal nation of the corporation (e.g. applied for EU-structurezone, German, Swiss etc), declared/accepted taxquote (as BFA-Grants with or without Berlin-quote), involvement in public supported filmproduction etc - a corporation often cannot calculate and declare the full buying price within one year.

Some aspects (as VAT) can be fully cleared in a month, others, as investment grants, have to be declared for several years (if above a certain sum) and are only fully refunded if in use and possession for that period.

Furthermore, we are a state-approved qualifiying and educating employer. (in German: staatlich anerkannter Ausbildungsbetrieb).

To teach, you don´t only have to pass the tests yourself, but you also have to have an determined equipment, and in germany in-corporation education takes 24-36 months. When someone begins the qualification, you have to lock down the gear/tools, as they have to be approved by the council. That can be altered, but you have to replace the missing devices required for state-approved education at once - and that involves risking state quotes on the payment for the employee, much paperwork or in the worst case it might even stall the diploma/title of the pupil.

Then, in germany, there is amongst others, the so called bfa - similar structures exist in almost any EU-country.

If i buy a camera like the red, i as entrepreneur ask the bfa, how much taxreduction/public loan etc i will get. Depending on the amount of new jobs i create when investing, this varies from below 7 up to 33%. However, usually i have to use the gear for minimum 36 months, some investions even for 7 years. If i sell the investment earlier, i loose the bfa-bonus (or worse, get a penalty)

there is much more, but its not annual profit / loss for everyone.
its somewhat easier if you are self-employed or freelancer, however.
Also, i don´t know if there are better tax-models in Switzerland, fully possible. In France and Germany FWIW its a little bit more complicated.

[Stephen Williams]

Hi,

If your getting extra subsidies from the government, as a school that may well be very different. I always thought you were a normal rental company.

Now I partially understand why taxes are so high in Germany! I only know UK tax & VAT rules, people there would be very happy if their kit were subsidized.

Stephen


Stephen, depending on the legal form of the particular business, be it AG, KG, GmbH, GbR and so forth in Germany, the legal nation of the corporation (e.g. applied for EU-structurezone, German, Swiss etc), declared/accepted taxquote (as BFA-Grants with or without Berlin-quote), involvement in public supported filmproduction etc - a corporation often cannot calculate and declare the full buying price within one year.

Some aspects (as VAT) can be fully cleared in a month, others, as investment grants, have to be declared for several years (if above a certain sum) and are only fully refunded if in use and possession for that period.

Furthermore, we are a state-approved qualifiying and educating employer. (in German: staatlich anerkannter Ausbildungsbetrieb).

To teach, you don´t only have to pass the tests yourself, but you also have to have an determined equipment, and in germany in-corporation education takes 24-36 months. When someone begins the qualification, you have to lock down the gear/tools, as they have to be approved by the council. That can be altered, but you have to replace the missing devices required for state-approved education at once - and that involves risking state quotes on the payment for the employee, much paperwork or in the worst case it might even stall the diploma/title of the pupil.

Then, in germany, there is amongst others, the so called bfa - similar structures exist in almost any EU-country.

If i buy a camera like the red, i as entrepreneur ask the bfa, how much taxreduction/public loan etc i will get. Depending on the amount of new jobs i create when investing, this varies from below 7 up to 33%. However, usually i have to use the gear for minimum 36 months, some investions even for 7 years. If i sell the investment earlier, i loose the bfa-bonus (or worse, get a penalty)

there is much more, but its not annual profit / loss for everyone.
its somewhat easier if you are self-employed or freelancer, however.
Also, i don´t know if there are better tax-models in Switzerland, fully possible. In France and Germany FWIW its a little bit more complicated.

[laguun]

Hi,

If your getting extra subsidies from the government, as a school that may well be very different. I always thought you were a normal rental company.

We haven´t had a cent subsidies in the last 8 years, and well below 3% over the recent 15 years. I simply wrote the informations to illustrate that the selling of a camera within a year can pose problems for corporate body.

You are right, we are rental & production, not a -school-.

In Germay, instead of going to college/university/highschool you can learn the job on the job. This however requires a state-approved employer - and thats what we are. As is Airbus, BMW, Siemens.

Every 8 weeks the employee goes to university/college/highschool, which is run by the state for a month, where he passes most of his exams and gets theroretical classes. He is paid by the employer all the time, including social/health insurance etc, even when in college.

So, if you want to learn camera or editing, i as employer have to guarantee that you will have a red camera for your own projects, or a flame/avid etc for animation/editing if you want the state-approved qualification as camera/editor.

A good 20% of the German industry offers this additional benefit to their employees. Especially the younger ones (twens) like it quite a bit, as they can earn, work and get a state-approved qualification.

This education model is highly successful since decades, especially in the car, aerospace, medical and legal/law area.



Now I partially understand why taxes are so high in Germany! I only know UK tax & VAT rules, people there would be very happy if their kit were subsidized.

The kit is indeed often highly subsidized in the UK. The UK spends -massive- state support for entertainment and gear. Recently the conversion of >200 screens to DCI digital projection, just to name one example.

A good starting point to learn about it:
http://www.ukfilmcouncil.org.uk/filmmaking/filmingUK/taxreliefbritfilms/


PS. The last time we applied was in 1999 for an D.I. system which wasn´t granted - as the BFA qualified DI back then as "computer" not "film". The paperwork is nightmarish, so we skip that almost all the time.

[Mark L. Pederson]

I HATE to say this ... but I strongly suspect that there are more than a few reservation holders who do not know exactly what they are getting into in terms of cost - accessories, etc. AND I have read ONE TWO MANY posts about reservation holders building whole business models around renting their cameras, and based on many of these posts - it is clear to me that some folks don't understand the realities of renting pro gear.

So ... I think there will be some folks looking to sell their cameras - especially once the rental houses (those that manage to stay in business) have multiple units and the rental rate plummets to the floor in mid 2008 -

But, I also think the demand is going to be so great for a while - you'd be CRAZY to sell it - ROI it fast - and than use it to pursue your dreams - or al least shoot pretty pictures ...

All we can do is guess at what is going to happen - but one thing is for sure - RED is going to seriously DISRUPT the film/HD/cinema camera market - lots of folks are going to go out of business - I think it was BRILLIANT that Plus8 sold out to Panavision - and the man who sold Plus8 spent pllenty of time in the RED booth in NAB2006 ... actually reserved some cameras ...

Exciting huh?

[PaulClements]

You're probably right offhollywood.

My worse case scenario is that I have high end equipment I can go travelling with and film some awesome shots or get together with Indie filmmakers and shoot for free! It is a lot of money I agree but it's not much more than buying a decent brand new car.

Personally, I don't look at the camera as an investment monetary wise, rather career wise. In that sense you can't really lose money :)

I've been in business long enough to know not to expect too much, just work hard at it and hopefully the money or opportunities will sort themselves out. I agree that hedging your bets that you will earn vast amounts than what you pay for the equipment might work for some, but not for all.

And yeah it is exciting!

[Stephen Williams]

The kit is indeed often highly subsidized in the UK. The UK spends -massive- state support for entertainment and gear. Recently the conversion of >200 screens to DCI digital projection, just to name one example.

A good starting point to learn about it:
http://www.ukfilmcouncil.org.uk/filmmaking/filmingUK/taxreliefbritfilms/


Hi,

How absurd to subsidize DCI Digital projection.

I don't see any mention of grants in your link, Tax relief is given if you flush your money down the toilet in a business venture, but that is true with most businesses.

Stephen

[Stephen Williams]

Hi Mark,

But if somebody offered you $60,000 for your reservation, you are unlikely to make that in profit by mid 2008. I must be missing something.

Stephen


I HATE to say this ... but I strongly suspect that there are more than a few reservation holders who do not know exactly what they are getting into in terms of cost - accessories, etc. AND I have read ONE TWO MANY posts about reservation holders building whole business models around renting their cameras, and based on many of these posts - it is clear to me that some folks don't understand the realities of renting pro gear.

So ... I think there will be some folks looking to sell their cameras - especially once the rental houses (those that manage to stay in business) have multiple units and the rental rate plummets to the floor in mid 2008 -

But, I also think the demand is going to be so great for a while - you'd be CRAZY to sell it - ROI it fast - and than use it to pursue your dreams - or al least shoot pretty pictures ...

All we can do is guess at what is going to happen - but one thing is for sure - RED is going to seriously DISRUPT the film/HD/cinema camera market - lots of folks are going to go out of business - I think it was BRILLIANT that Plus8 sold out to Panavision - and the man who sold Plus8 spent pllenty of time in the RED booth in NAB2006 ... actually reserved some cameras ...

Exciting huh?

[Mark L. Pederson]

Hi Mark,

But if somebody offered you $60,000 for your reservation, you are unlikely to make that in profit by mid 2008. I must be missing something.

Stephen

I don't know if I understand you correctly - but if someone offered Offhollywood $60,000 for one of our reservations - I would laugh and say "THANKS, BUT NO THANKS"

We'll make WAY MORE than $60,000 per camera BEFORE 2008.

And besides, why the HELL would I want to sell a piece of HISTORY?

[Stephen Williams]

I don't know if I understand you correctly - but if someone offered Offhollywood $60,000 for one of our reservations - I would laugh and say "THANKS, BUT NO THANKS"

We'll make WAY MORE than $60,000 per camera BEFORE 2008.

And besides, why the HELL would I want to sell a piece of HISTORY?

Hi Mark,

I am interested to find out this time next year how you got on.

Stephen

[laguun]

I don't know if I understand you correctly - but if someone offered Offhollywood $60,000 for one of our reservations - I would laugh and say "THANKS, BUT NO THANKS"
We'll make WAY MORE than $60,000 per camera BEFORE 2008.

We will not certainly make that much in 2007 (our reservations are quite a bit later than yours), however we will probably have an extremly fast breakeven with the movies already scheduled. heck, i have 130 shooting days until november, now if i would have the reds already now *sigh*... our hdcams are completly booked out, i even won´t have a camera for our own use in september...



And besides, why the HELL would I want to sell a piece of HISTORY?
that, so far, is one of the most fascinating aspects of the whole red story.
- history in the making
- an manufacturer, who listens, influences and is -really- interested in the product, not only in the business - and indeed was able to transform creative input of its customers in real product advantages.

[Mark L. Pederson]

Hi Mark,

I am interested to find out this time next year how you got on.

Stephen

I'll keep you posted, Stephen.

For the record, I'm not a "shooter for hire with camera" or a "rental house" -that's a pretty risky business model -

my company provides production and post production services specializing in emerging technologies - AND we produce for hire and develop and produce our own content - we make money from WHAT WE KNOW and WHO WE KNOW and WHAT WE MAKE - not what gear we own - for us ... it's about staying right on the BLEEDING EDGE of what's here and what's coming ...

[PaulClements]

we make money from WHAT WE KNOW and WHO WE KNOW and WHAT WE MAKE - not what gear we own - for us ...

Surely that means you'll make no money from your RedOne's then lol :)

(Yeah I know I'm being a smart arse!)

[Mark L. Pederson]

Surely that means you'll make no money from your RedOne's then lol :)

(Yeah I know I'm being a smart arse!)

TOUCHÉ!!

Okay, I confess ... I AM getting LOTS of meetings with "significant" potential clients because "our directors want to shoot RED", etc., etc.

So yeah, you're right - the GREAR WE OWN is critical - but I think you get what I was TRYING to say ....

[laguun]

TOUCHÉ!!

Okay, I confess ... I AM getting LOTS of meetings with "significant" potential clients because "our directors want to shoot RED", etc., etc.

So yeah, you're right - the GREAR WE OWN is critical - but I think you get what I was TRYING to say ....

hehe... yes.

i can also confirm, that the rental biz is risky, for many reasons. also, clearly, several reservation holders underestimate the necessary invest in gear as optical, support systems etc, manpower , as 24/7service if necessary, fallback and replacement, maintenance, insurance etc.

also, gear is just one side of the business. you have to have good partnerships with several clients, mutual trust and better knowledge about any aspect of the business than your usual customer.

production and service is the main revenue anyhow, i don´t have the figures for 2007, but as guestimate i would say >60% revenue is from creative service & production here.

btw offhollywood, let me mention 2 things: 1) nice work you are doing! 2) i am -so- jealous about your reservation number :)