Japan Quake Leaves U.S. Production Community Facing Shortages, Price Hikes

Disaster is impacting supplies of HDCam SR tapes and other supplies widely used in TV production
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The tragic 9.0 earthquake and
subsequent tsunami and nuclear crisis in Japan are beginning to have an impact
on professional products for the TV and production industries, with some
distributors telling clients they may face shortages in tapes widely used in TV
production and other analysts predicting both shortages in electronic
components and price hikes in equipment in upcoming months.

One immediate issue was the damage
to a Sony plant in the Sendai region in the earthquake zone that was a major
producer of tapes and professional products and the shutdown of another Sony
plant because of power outages.

As a result, at least two
distributors - Comtel Pro Media in Burbank California and Tape Resources in
Virginia Beach - were predicting shortages of Sony HDCam SR, and other recording
media widely used in TV production.

Some outlets were also restricting
sales of HDCam SR tapes, which is often used as a master recording media for
primetime TV production because of its high quality.

"Our industry has already been
affected by a halt in media manufacturing operations - professional media supply
shortages are evident, namely HDCam SR," explained a post on the Comtel Pro
Media web site. "Worldwide stock shortages present a realistic threat to our
industry and the immediate needs of the television and motion picture
production."

TV producers use a wide array of
camera systems, many of which have different proprietary formats for recording
video, so there are alternatives to the formats and recording media used by
Sony cameras. Many of the lighter, less expensive HDcameras, including those
made by Sony, use solid state media and inexpensive flash memory cards that
remain widely available.

But the shortages in HDCam SR is
particularly important for big-budget theatrical film and primetime TV dramas
and sitcoms, where high-end Sony cameras play an important role in many
productions and the format had been widely adopted by producers, noted David
Cohen, CEO and owner of Edgewise Media/Comtel Pro Media.

The tapes are of such high quality
that in recent years, a number of productions have moved from film to HDCam SR.


Shortages of the HDCam SR tapes "is
a crisis," Cohen explained in an interview. "A lot of people haven't grasped
its importance yet, but this will have a worldwide impact that people are going
to have to think about and manage."

Amid the devastation, Cohen and
others stressed that problems with TV equipment supplies "were nothing compared
to the loss of lives and devastation in Japan."

Here, there has been some good news.
Most major manufacturers with Japanese operations contacted by Broadcasting
& Cable
- including Sony, Panasonic and Grass Valley - reported that they had
not suffered any deaths or serious injuries among their employees as a result
of the crisis.

They also stressed that a number of
plants had suffered little damage and that some had already resumed
production. 

While consumer electronics
manufacturers in Japan had moved a great deal of production off-shore in the
last 15 years to China and other lower-cost regions, Japan remains a major
producer of semi-conductors and a number of major vendors of professional
products for the TV industry maintain factories in the country.

These include Sony, Panasonic, Grass
Valley, FOR-A, Hitachi, Canon, Fujifilm, which owns lens producer Fujinon and
others, which are important suppliers of cameras, lenses, switchers, and
professional media, such as tapes or solid state media, used to record video.

As a result of the crisis, prices
for memory chips have jumped, with Reuters reporting a 20% jump in spot prices
of NAND flash chips on Monday and another 3% rise on Tuesday.

Market research firm IHS iSuppli
estimates that Japan produces about 60% of the silicon used in semi-conductors
and that production shortfalls could have a significant impact on global output,
producing a "significant shortage of certain electronic equipment, potentially
causes pricing for those device to increase dramatically.... However, the global
supply chain has about two weeks of excess component inventory in the pipeline
for semiconductor parts affected by the quake. Because of this, the shortages
are not likely to appear until the end of March or the start of April. Just the
same, these shortages and their price impact are likely to linger until the
third quarter."

The rapidly rising Japanese yen,
which hit levels this week against the U.S. dollar not seen since the
mid-1990s, will make products produced in Japan more expensive unless the yen
weakens. Power shortages forcing factory slowdowns and the difficulty of
transporting materials over quake- and tsunami-damaged roads could also
production shortfalls, price hikes and possible shortages.

Even worse problems would emerge if
the nuclear crisis is not contained and radiation releases further disrupt the
economy, forcing companies to shut down factories and evacuate employees from
areas not already impacted by the quake and tsunami.

Sony is still assessing the impact
of the damages on its factories, note two Sony spokespeople. Sony has reported
"no significant injuries" to its staff in Japan, the company has noted in a
press release.

On Monday, the company reported that
operations at eight facilities had been shut down, but that one resumed
operations on Tuesday.

These facilities include operations
in Sendai that were a number of Sony Professional Media products are produced.

Those closures impact production of
a number of Sony formats for recordable media, including HDCam SR, HDCam,
DVCam, Betacam SP, Digital Betacam, Betacam IMX,Betacam SD, XDCam, SxS, LTO,
Blu-ray, DV and HDV, that could limit supplies and boost prices, noted Bob Daly
and Mike Cullen owners of Tape Resources in a post on their website to their
customers.

"In some cases, a competing
manufacturer such as Maxwell or Fuji may have product that is interchangeable
with an affected Sony item," they wrote. "However, these manufacturers are also
undergoing a huge increase in demand and we are certain to see resultant
shortages occur as they ramp up production."

Comtel Pro Media's Cohen notes that
companies can adapt to the shortage of HDCam SR tapes by going back to older
media or using different camera systems. "The question is how readily available
those cameras might be," and the problems producers might face in their
workflow when they switch to different cameras and formats during production
and post-production, he says.

A more viable solution, he believes,
is to recycle tapes. "It is a very robust format" that can be recorded over
"multiple times," he says. "We already working with our existing customers to
take some existing library tapes [and transfer them to solid state media] so
they can be reused."

Grass Valley has two facilities in
Japan, one in Kobe that wasn't affected and another in Tokyo that suffered
"limited damage," a spokeswoman for the company noted. "All of the employees
and their families are safe."

The two facilities produce such
products as the company's EDIUS HD editing software, ADVC codec, HD Thunder
board, and HD Storm.

Panasonic also reported all its
employees survived the disaster without serious injuries, noted a spokesman.
The company's Osaka headquarters in the northeast part of Japan was not
impacted, but "a few employees working at Panasonic's Fukushima factory and
Sendai factory, the Koriyama factory of Panasonic Electronic Works and the
Sanyo Tokyo Manufacturing Co., Ltd. factory, which is located in Gunma
Prefecture, received minor injuries," he explained.

In the areas impacted by the quake
and the tsunami, "some parts of ceilings and walls [in Panasonic facilities]
were damaged, but there were no fires or building collapses. Panasonic has
suspended operations at the factories in the impacted area. In addition,
continuing aftershocks are preventing the company from entering the Sendai and
Fukushima factories."

FOR-A employees have reported that
they face unscheduled blackouts but remain safe, a spokeswoman noted.

Canon has reported damage to some
facilities, including operations in Utsunomiya where it has an optics factory
and the company's web site says "time will likely be needed before
operations resume" in Utsunomiya.

Pioneer, Mitsubishi Electric, Yamaha,
and others have reported no significant injuries to its employees. Yamaha, a
major producer of professional audio equipment, has factories in Kakegawa and
Toyooka that continue to operate normally.

Dave Walton, assistant vice
president of marketing, JVC Professional Products Company, noted in an email
that "very fortunately, we know of no JVC employees directly affected by the
earthquake or tsunami" and all the U.S.-based JVC employees who were in Japan
for meetings have returned home safely.

"Most of our facilities are in
Kanagawa prefecture, more than 200 miles away from the northeast area where the
most damage occurred," he added. "So far, we have had no reports of significant
damage."

Power shortages have, however,
affected much of Japan and disrupted operations. "It's too early to know if
there will be any NAB shipping delays, or change of travel plans due to the
disaster, which is still unfolding," he explained.


Melissa Grego contributed to this story.

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