Rise in diesel costs impacts sports industry
By Carl Lindemann
The shockwave of fuel price surges has begun to ripple through the economy. Anything closely connected with trucking is bearing the brunt of it as diesel prices sail past $5 a gallon. For the sports industry, that puts the mobile production business at the epicenter. “This is a long-term issue. Fuel prices aren’t going down anytime soon,” says NEP CEO Lou Borrelli. “Most of our business is contracted and there are some provisions that address fuel costs. But they are not enough to address the issue we face today.”
That fuels costs figure into the game is not something new to the mobile production business. For Mobile Television Group’s General Manager Phil Garvin, this has been key in virtually every aspect of the operation.
“Diesel mileage is a factor when you shop for a tractor and also with the weight we load into trailers,” says Garvin. “We’ve lightened the load by about 10,000 pounds going to midsized trailers, and maybe now get 5-6 miles per gallon. We’re always looking for ways to squeeze out another half mile per gallon.”
Logistics, too, are crucial as scheduling trips efficiently can add up to significant savings.
“Sometimes it’s what drives a decision as to whether we do an event ourselves or sub it out,” says Garvin. “Right now, I’m spending a lot more time with our staff member who coordinates movement.”
In the past, the goal of achieving such efficiencies was to create bottom line savings. Now, the drastic rise in fuel has put this in a different light. What are the added costs given the rise in prices? Garvin calculates the cost per mile of travel goes up 10 cents for every 50-cent increase in the price of a gallon of diesel fuel. That means that each 50-cent rise adds $300 for a cross-country trip. Overall, he sees this as adding up to a 50% increase in fuel costs over last year. There are additional expenses, too. “Airline tickets are up 20% for flying our engineers to events,” Garvin says.
Pat Sullivan, Game Creek Video’s President, wonders where the rise in diesel prices will stop.
“The most conservative projections say we’ll see $6 by the end of the summer,” he says. “I’ve heard one prediction that it will hit $15 by the end of the year. If that happens, we’re going to need to sit down with our customers with mileage components built into their contracts and face this as just a fact of life. It is in our customer’s interest to have a healthy industry.”
What about those without a mileage component written in?
“We’ll be adding a fuel surcharge. That’s what we see with almost every freight company we deal with – Fed Ex, UPS are all adding a surcharge,” says Sullivan.
New Habits for a New Era
Already, some habits have changed to meet the new realities. According to Garvin, one of the traditions of trucking is now gone forever. Once upon a time, trucks would idle for an hour to warm up, or would continue running at rest stops. No more. Part of this is due to innovations in diesel engine design making this practical. This fits in well with the need to save on fuel costs.
Sullivan sees one traditional arrangement with clients that will likely change over time. Current contracts are often written to have specific trucks travel cross-country to follow specific clients, creating many long-haul trips. But keeping trucks regional would make for significant savings. That, however, would mean that production crews would need to feel comfortable working in different trucks.
“As a practical matter, all HD trucks are virtually identical anyway,” says Sullivan. “But Directors and producers get attached to specific trucks.”
Contract or Business Breaker?
The core question is what can be done as long term contracts with fixed terms for mileage costs become unworkable? How much give and take will there be with broadcasters now that it is clear that old assumptions about fuel costs have evaporated?
“We are talking to all our partners about ways to share or relieve this burden,” says Borrelli. “It is a real burden, regardless of company size, and I remain optimistic that our partners will continue to work with us. Fortunately, all parties involved here view it as a mutual problem requiring a mutual solution.”
Despite the added costs for mobile production, Garvin sees hope here for the industry overall as high gas prices create changes across the society.
“If diesel goes to $9 and gas to $8, I don’t know what happens,” he says. “It seems like it should be a game changer of some kind. For those of us in the TV business, that could be a bonanza – no one goes anywhere. They just stay home and watch TV. The arenas will be empty with everyone watching the game on TV.”