Changes in Studio Structures Led to Herc’s Exploration of Strategic Alternative for Studio Rental Business, Silber Says

Herc Rentals is seeking strategic alternatives for its studio equipment rental business, president and CEO Larry Silber told a conference call with investors this week. The decision to explore strategic alternatives, which might end up in a sale of that segment of its rental business, was based on factors beyond the current work stoppage of actors that has ground film and television production to a halt, even after members of the writers’ guild has come to an agreement with the studios.

Herc’s studio management and lighting and grip offering, branded in the TV and film industry as Cinelease, was acquired by Herc as a growing specialty rental market in 2012, Silber explained. Cinelease is one of the largest lighting and grip rental companies in the United States. However, over the past few years, the industry for renting lighting and grip equipment to studios has evolved as investment firms began purchasing sound stages and physical studios as attractive ways to diversify their real estate portfolios.

“These new owners want to offer a single point of contact for studios, studio management, and lighting and grip equipment, thereby making it less of a rental model and more a permanent part of their in-house business,” Silber said. “As a result, in order for us to continue to grow the Cinelease studio management and lighting and grip business, Herc would need to add fixed-cost studio real estate to our portfolio offering. And that capital requirement would be a departure from our core rental business model. So, at the beginning of the year, we began discussing strategic options for Cinelease that will enable it to continue to maximize its potential, either with Herc or on its own. We determined that exploring external opportunities was prudent, and so that process has begun.”

In the meantime, Silber added, the Herc Entertainment Services business will continue to rent its rolling stock equipment to both on-location studios, off-location productions for television and film, and live entertainment venues. Silber added that Cinelease has been a great business for Herc.

“It’s a high-margin, seasonally steady growing platform business with a loyal team of product and service experts, and it opened doors for Herc Entertainment Services to continue to flourish in this robust and exciting end market,” Silber said.

Despite the third quarter slowdown in the studio rental business, Herc Rentals posted 21.9 percent uptick in total revenue for the quarter. For a more complete look at Herc’s third quarter results, visit: https://www.rermag.com/news-analysis/headline-news/article/21276188/herc-rentals-total-revenue-jumps-219-percent-in-third-quarter.