Camera maker sharpens its focus

By Richard Verrier

Dec. 3, 2006 12 AM PT

Times Staff Writer

Four years ago the picture was bleak for Panavision Inc.

Massive debt, bad management decisions and rapidly changing technologies threatened its stature as Hollywood’s gold standard for cameras and lenses used in shooting television shows, movies and commercials.

Now Panavision, whose logo on film credits has been familiar to moviegoers for decades, is regaining its focus. The company is rebounding on the strength of an innovative, state-of-the-art digital camera, a global reorganization and a strategy that lessens its dependence on traditional film.

“I’m thrilled with the changes,” said billionaire Ronald O. Perelman, who eight years ago gambled more than $600 million to gain control of Panavision and now owns the whole thing.

The overhaul by management he installed in 2003, the New York investor said, “reinvigorated and reengineered the company so that it is much more vibrant, more customer-friendly and equipment-friendly.”

Last year’s $233 million in sales were up 22% from 2003. More importantly, the company is generating a healthy amount of cash to give it breathing room from its still considerable debt, which a Securities and Exchange Commission filing this year listed at $370 million. Although interest payments still leave red ink on the bottom line, Panavision’s net cash from operations nearly doubled in two years, to $25 million in 2005.

With its increased financial muscle, Panavision is expanding rather than laying off workers as it did before. One reason is that film shoots are booming around the world. In the last year Panavision opened offices in India, Romania and New Orleans. The company also recently acquired Plus 8 Digital, a North American digital camera rental company, and AFM Group, a British lighting and camera equipment company.

“We’ve come a long way from where we were,” said Chief Executive Bob Beitcher, who joined Panavision in 2003.

Still, the company remains relatively small. It has about 1,300 employees worldwide, including 300 at its 150,000-square-foot headquarters in Woodland Hills.

Nonetheless, it’s still by far the biggest name in its field in Hollywood, supplying about two-thirds of the industry’s cameras and lenses while winning a slew of Academy Awards and other honors along the way.

Over the years Panavision cameras have been used to film scores of movies, including “Lawrence of Arabia,” “Saving Private Ryan” and “Memoirs of a Geisha.”

Founded in 1954 by camera technicians Robert Gottschalk and Richard Moore, the company began designing and making lenses for Cinemascope, an innovation that allowed theaters to display films on much wider screens. At the time, Hollywood was threatened by the advent of television and was looking for splashy ways to keep people going to the movies.

Another Panavision innovation was the Panaflex, a lightweight, flexible camera introduced in 1972. Two years ago, Panavision introduced Genesis, a highly-acclaimed digital camera with film-like quality used in “Superman Returns” and Mel Gibson’s upcoming “Apocalypto.”

Panavision today manufactures its cameras, lenses and accessories, but it doesn’t sell them. Instead, it leases them to major studios and film and TV production companies as needed through a global network of company-owned offices and distributors. Rental rates for cameras and accessories vary from $5,000 to $55,000 a week.

The company is owned by MacAndrews & Forbes Holdings Inc., Perelman’s main investment vehicle. The financier, who Forbes magazine estimates is worth $7 billion, has a reputation for savvy investments, the best-known of which is his controlling stake in cosmetics giant Revlon Inc.

Perelman has dabbled frequently over the years in Hollywood, reaping handsome profits by buying and selling producer New World Communications Group Inc. and venerable film processor Technicolor Inc. His holdings also include Efilm, a provider of post-digital production services.

But the Panavision investment has been one of his rockiest. Perelman took control of the company in 1998 in a complex deal that saddled Panavision with nearly $500 million in debt.

Three years later, the financier attempted to have another company he controlled, M&F; Worldwide Corp., buy his 83% stake. But dissident M&F; stockholders opposed the move, fearing that it would dilute the value of their shares.

Panavision had been slow to roll out new products, as well as adapt to the changing digital market. Employee morale sank and the company’s vaunted service began to slacken.

Panavision’s then-Chief Executive John Farrand, resigned in 2003 amid the turmoil. Enter Beitcher, a former executive at Technicolor and Paramount Pictures, who brought in his own team to turn things around.

To show he was focused on customer service, Beitcher in his first week allocated the best parking spaces, which had been reserved for executives, to customers instead. He also shut down an executive dining room.

One Beitcher discovery was that Panavision’s method for servicing equipment varied around the world. Some locations would service cameras immediately after they were returned, while others waited until an order was placed, causing unnecessary delays in a business where time is money.

So Beitcher established a set of business practices, dubbed the Panavision Way, for the entire company.

To better tap overseas markets, which account for nearly half of Panavision’s revenue, the company shifted equipment to areas such as India and China.

Beitcher realized the company also needed to jump-start the kind of innovation Panavision was known for. He prodded technicians to leave their desks to visit cinematographers on sets to find out what they wanted.

The company relaunched an upgraded version of its flagship film camera, the Millennium XL, in June 2004. More significantly, it introduced the digital Genesis that has proved a hit with filmmakers.

Developed in partnership with Sony Electronics Inc., Genesis has become Panavision’s most successful camera system since the advent of the Panaflex, which became the industry standard.

Panavision had previously developed a digital camera system with Sony but it had more limited capabilities and was used mostly in television production. Since its debut in 2004, Genesis has been used to shoot several features.

Digital cameras save time and money because they eliminate film processing and scenes can be viewed immediately after they have been shot. But many filmmakers have viewed the video-like picture quality as inferior to film.

Genesis was designed to solve that problem, combining the look and feel of a traditional 35-millimeter movie camera with digital technology. A key feature is that it can be fitted with any of Panavision’s film lenses.

“Genesis has finally made digital filming an aesthetic practicality as well as a technical practicality,” said director Tony Bill, who used the camera to shoot “Flyboys.”

Cinematographer Dean Semler, who used the Genesis to shoot jungle scenes in Mexico for “Apocalypto,” said, “The Genesis to me is the bee’s knees. It’s a true film camera.”

Responding to increased demand, Panavision has built 70 Genesis cameras and plans to make as many as 20 more in the coming year.

In addition to leasing its own cameras, Panavision has broadened its customer base by offering digital cameras from rival manufacturers Thomson and Panasonic.

Although there is much debate about how quickly Hollywood will shift to digital production, Beitcher expects digital cameras to account for close to half of his company’s camera rentals in five years, up from about 20% today.

To further diversify, Panavision also has launched a business that sells lenses and optical systems to the federal government for use in homeland-security equipment.

“We’re looking to expand our footprint in areas where you might not have thought of Panavision before,” Beitcher said.

Needless to say, the changes have done wonders for morale.

“It’s a much happier place to walk into,” said Steven Poster, president of the International Cinematographers Guild. “The spirit of the company changed in a way that was almost palpable.”

Still, as big a market share as Panavision has, Beitcher knows he can’t dismiss competitors that aim to win over a customer base that is inherently demanding and finicky. Rivals include Germany’s Arri Inc. and Dalsa Corp. of Canada, both of which have introduced digital cameras with film-like quality that compete with Panavision’s Genesis.

But it helps to have Perelman’s deep pockets. His company has pumped more than $100 million into the business.

“I have no plans to sell it,” Perelman said. “I love it.”

richard.verrier@latimes.com

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Panavision’s stars and their big movies

The 65mm camera

Introduced: 1959

Used on: “Westside Story,” “Lawrence of Arabia,” “My Fair Lady,” “Ryan’s Daughter”

The Panaflex

Introduced: 1972

Used on: “The Towering Inferno,” “Gandhi,” “JFK,” “Dances With Wolves,” “A River Runs Through It,” “Saving Private Ryan”

The Millennium XL