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TV’s terrorism tax

Apr 8, 2002  •  Post A Comment

After the September terrorist attacks on the United States, insurance rates increased sharply in all industries, television included. The costs of producing programming-from commercials to news to series to awards specials-have been affected.
“In general, rates have gone up 25 to 50 percent,” said Yvonne Cordova, president and chief underwriting officer at Studio City, Calif.-based Encore Entertainment, which underwrites insurance for TV shoots such as NBC’s “Fear Factor.” “The rates go another 50 percent higher out of the country,” she said.
Insurance companies themselves get insurance from reinsurance companies, which helps offset the risks they take. Reinsurance policies, for example, could pay 20 percent to 30 percent or more of an insurance company’s losses on a claim. But many reinsurance companies increased their rates after Sept. 11 and also restricted the capacity they made available to policyholders.
Between the cost of reinsurance, the cost of insurance in general and an ailing economy, many corporations aren’t getting the profits they used to get, Ms. Cordova said. She added that entertainment studios are more inclined not to go around the globe to shoot and instead are opting to film locally.
“I think productions have gone down a little bit,” Ms. Cordova said. “Because the economy has gone down and because of last year’s threat of an actors’ strike, a lot of people pushed their productions forward” to stockpile programming.
A `hard market’
Analysts agree the insurance industry is now in a hard market, meaning higher rates and more difficulty getting coverage. “We have to raise the rates. We have to do what insurance companies need to do to make a profit,” Ms. Cordova said. “I don’t see it changing any time soon. It’s definitely a hard market. We haven’t been a hard market for 20 years.”
Andy McDonough, a principal at a smaller company, Arts and Entertainment Insurance in Massachusetts, which handles PBS shows such as the “American Scientific Frontiers” series, said insurance rates have gone up a minimum of 20 percent, and it has affected television commercial production.
“It’s the reinsurance market that dictates it,” Mr. McDonough said. “The biggest problem now is they’ve lost so much money. In insurance, if you lose money one year you raise rates next year. The only thing that is slowing down now is the people who do television commercials, because advertising agencies have slowed. They’re going with the low-budget ones instead of doing massive Super Bowl-type commercials. They shoot in the studio instead of sending a crew out to the desert. We’re seeing that and hearing from different clients that they’re not that busy.”
The country’s largest entertainment insurance firm, Fireman’s Fund Insurance, has raised rates between 20 percent and 50 percent. The Novato, Calif.-based company, which has been around since the silent screen days, underwrote this year’s Screen Actors Guild Awards and also insures the major studios, including Warner Bros. movies and television projects (such as “Friends”) and 20th Century Fox (“Ally McBeal”).
“In September the world changed for the reinsurance community substantially. Reinsurance withdrew from the marketplace-not completely, but it did become much, much more selective,” said John Kozero, spokesman for Fireman’s Fund. “Consequently our costs have gone up because reinsurers would not cover as much as they once did. We’re finding that our costs have gone up because reinsurance costs have gone up.”
Fireman’s Fund Executive Underwriter Wendy Dias, who underwrote insurance for the SAG Awards, said the award organizers were not required by insurers to provide extra security. For awards shows, insurance companies insure property (the props, sets, cameras, lights and equipment) and provide liability coverage (which covers injury if, for example, someone slips and falls). “When I’m thinking about security on an account, I’m thinking of security on equipment, because that’s where the loss will be a lot,” Ms. Dias said.
“You can’t protect everything,” Mr. Kozero said. “You have to decide what type of protection you want to buy. You’d go broke if you insured everything that happens in life all the time.”
Jim Chabin, former president of the Academy of Television Arts & Sciences, was in charge of last fall’s Emmy Awards, which were postponed twice due to America’s war against terrorism. It finally aired the third time out, albeit from a smaller venue, the Shubert Theatre in Century City, Calif.
Security was tripled, with sharpshooters and FBI agents on hand in addition to officers from the Los Angeles Police Department.
Security is job No. 1
It was similar to the last month’s Academy Awards presentation, for which even spectators in the bleachers were given background checks. “It’s fair to say that federal and local agencies are now working together for high-profile events like the Emmys and Oscars in a way they never had before because the world changed on Sept. 11,” Mr. Chabin said. “I am sure that security will forever be upgraded for all these events because of what happened.”
Mr. Chabin said in the case of the Emmys, CBS was responsible for insuring the whole event. He anticipated losses incurred by the twice-canceled Emmys to exceed $1 million. Jack Sussman, senior VP of specials at CBS, said when the Emmys were canceled the second time-on the day U.S. bombing began in Afghanistan-food prepared for the post-awards dinner gala that night was donated to a food bank.
“The world changed on Sept. 11 and continues to evolve, and we have to be able to respond in kind to whatever’s going on,” Mr. Sussman said. An example of the heightened level of awareness is beefed-up security for the “Survivor: Africa” reunion finale at CBS’s Television City.
CBS also had to cancel the Latin Grammy Awards, which was scheduled for Sept. 11. Mr. Sussman was on a flight from New York to Los Angeles, returning from the taping of CBS’s Michael Jackson 30th anniversary special, when the plane made an emergency landing in Kansas City. He had to drive the rest of the way to Los Angeles that day. “I found out we made a decision to cancel the [Latin Grammys] show that night,” he said. “We certainly weren’t going to put on a music event.” The Latin Grammys presentation was not rescheduled.
Fireman’s Fund’s Suzy Wozniak, assistant VP of entertainment production, said terrorism is now in the back of people’s minds in the industry. “At one time it was good to shoot in the U.S. and Canada. Now maybe it’s not,” Ms. Wozniak said. “Nobody anticipated Sept. 11. Now everybody is talking about [if and when] there may be another attack. We never would have [previously] considered that domestic production could have terrorist exposure. We have to insure it, and still we consider it as the better location to shoot, but we have to consider that [terrorism] can happen.”
The higher costs of insurance will not stop production, because insurance premiums are “tiny” in relation to the overall cost structures of major media companies, said Heather Goodchild, managing director of media and entertainment for Standard & Poor’s.
Costs don’t deter news organizations
Higher insurance costs certainly have not stopped news organizations such as Fox News Channel, which in its aggressive coverage of the war against terrorism deployed staffers to Islamabad, Pakistan, within a week of the terrorist attacks. John Stack, Fox News Channel’s VP of news gathering, said the network has sent three to four cycles of news teams overseas, totaling up to 100 staffers, to cover the war. The teams go for four- to six-week rotations, and some wear flak jackets, bulletproof vests and helmets for protection, especially when there is live fire.
“We always take precautions when we know we’re going into a war zone, and the best precaution to take is experience,” Mr. Stack said. Fox News Channel also hired local people to provide security at its news facilities in Islamabad and Kabul, Afghanistan.
“The press is many times competitive, but in situati
ons of security there is a camaraderie that exists, and everybody is looking out for each other’s well-being,” Mr. Stack said. The effect of increased insurance rates on sending staffers never came across Mr. Stack’s desk as a possible issue. He said priorities are “to cover things editorially and get people in a safe position. As always, you watch your costs. In this war, we managed our costs, but it never kept us from covering the story.”
While local stations need not send reporters overseas in times of war, KABC-TV, Los Angeles, hasn’t scaled back coverage. After the war began, the station dispatched reporter David Jackson to Pakistan, Afghanistan and other points in the Middle East to visit Palestinian and Israeli families that once lived in Los Angeles. Anchor Marc Brown also went on a dangerous shoot in the Philippines-his own story idea-after a Los Angeles man vacationing there was killed by a militant Muslim group.
“The cost of insurance has gone up, but it hasn’t deterred us in the quest for the best coverage,” said KABC News Director Cheryl Fair. “It’s part of our continuing coverage on the war on terrorism, and what we have said all along is the war on terrorism is for us a local story, partly because the four planes were headed to California. That means there were a lot of Californians directly affected by the events of Sept. 11.”
Ms. Fair points to ratings success in the February sweeps, in which KABC won the 4 p.m., 5 p.m. and 6 p.m. newscasts in a book opposite the Olympics on KNBC-TV. “The fact we did as well as we did in February has to be a testament to our coverage, because people really had to switch to us to want to watch us,” Ms. Fair said. “We go where the news is, and we haven’t changed what we do.”