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Thursday, Mar 28, 2024

2008 INDUSTRY REPORTS

ENTERTAINMENT By MARK R. MADLER Staff Reporter Hollywood ends the year just the way it started — with labor problems. In January, members of the Writers Guild of America entered their third month of a walkout against the major studios after negotiations failed to produce a new contract. The strike ended in February, just weeks before pickets would have disrupted the Academy Awards. Now it is the Screen Actors Guild turn to threaten a work stoppage as it asks its members for a strike authorization and once again puts the annual awards season into jeopardy. Even without the labor situation, 2008 has been a challenging year for the entertainment industry as it has been for other industries. NBC Universal, for instance, has made staffing cuts and continued to move away from scripted programming by giving a prime time hour to Jay Leno after he ends his run as host of The Tonight Show in the spring. The question remains whether NBC sticks with the move even after the economy improves. After talks between SAG and the studios represented by the Alliance of Motion Picture and Television Producers failed to produce a new contract, the industry entered into a period of a de facto strike that in particular slowed down film production and that in turn took away business from vendors and suppliers already struggling from the loss of business from the screenwriters strike. What filming that did continue had to be well thought out and able to respond in the event that the actors did walk out. “The studios were very careful of what films went into production,” said Marty Shindler, a consultant from Encino with clients in the entertainment industry. While big blockbusters ruled the summer movie season, especially the superhero franchise of “The Dark Knight” and “Iron Man,” box office revenues were up only a half-percent year-over-year and the number of tickets sold had dropped for the second year in a row. The industry, however, did see a growing interest in 3D as more films in that format were released and pulled in audiences. All the major studios will release 3D films in 2009. ACCOUNTING By THOM SENZEE, Contributing Reporter The year 2008 will be remembered as the end of many an era. Locally, this year may turn out to have been the end of an era during which droves of independent accounting firms dotted the region. Consolidation overtook longstanding independents such as Grobstein Horwath and Co., and Good, Swartz, Brown & Berns in ’08. But this year’s first noteworthy accounting merger happened when, at the threshold of an all-out rebranding campaign, Singer, Lewak, Greenbaum and Goldstein (now simply SingerLewak) announced its acquisition of information-systems auditor, INSYNC. While not exactly a merger of two accountancies, the move was a precursor of further industry consolidations, which would echo throughout the region over the course of the next few months. At the time, SingerLewak’s marketing director, Ronit Koren said the move was unprecedented, and would give her firm a clear leg up in the practice of enterprise risk management services (ERMS). “You look at what we’ve done in the last month and you’ll see; it’s groundbreaking,” Koren told the Business Journal in June. “In all my research, I have not come across another accounting firm that has been building out an ERMS practice as we have done.” INSYNC made an industry-wide name for itself with boutique-style approachability and respected prowess in digital forensics. Before the advent of companies such as INSYNC, there were few options beside the largest accounting firms for small and mid-sized companies wanting tech-based ERMS. Watch for moves next year from the region’s other top accounting names signaling a greater push into the world of technology-driven ERMS. Meanwhile, during the second half of 2008, Good, Swartz Brown and Burns was gobbled up by one of the country’s largest independent accounting firms. Motivated by a desire to expand along the West Coast, and attracted by Good, Swartz’s industry specialties, which include high-technology, real estate, and entertainment, New Jersey-based J.H. Cohn LLP acquired GSBB at the beginning of summer. For now, the firm’s merged-branding moniker reads “Good Swartz Brown & Berns, A Division of J.H. Cohn LLP.” The merger followed J.H. Cohn’s combining with three other firms during the preceding 13 months. With its acquisition of Good, Swartz, Brown & Berns, Cohn is now the ninth largest company in the accounting industry, nationally. As we learned in the Business Journal’s annual Accounting Report (SFVBJ Special Report, Sept. 15, 2008) this is an industry that generally does well in bad economic times, proving to even outperform (in terms of sustaining growth during the recession) the gaming industry. But for accounting firms, mergers seem to be a good complement to a bad economy. In fact, J.H. Cohn’s revenues grew by 28 percent in Fiscal 2008. That is after its more than yearlong merger-fest. Nevertheless, accounting firms are watching the economy closely and adapting their practices’ emphasis to match the changing business climate. Finding cost-saving opportunities for their clients is tops on the things-to-do lists of local accounting firms. Receivables management is the other high-priority task in accounting these days. And, what’s good for their clients is also good for the accountants. One partner at a local firm told the Business Journal that she and her colleagues were making sure clients’ cash-flow troubles don’t reverberate into their firm’s revenue stream. Large national, and international firms with local offices, such as Chicago-based Grant Thornton, New York-based Ernst & Young, or Swiss cooperative KPMG, were not subjects of industry consolidation during 2008. Mergers in recent years have already brought what once constituted the Big Eight down to the Big Four. Almost no one expects any more big accounting marriages in the near future. However, when Crowe Horwath of Oak Brook, Ill. announced it was assuming control of “certain assets” of L.A.-based Grobstein Horwath and Company, many were caught by surprise. Both firms are members of Horwath International, a global professional-services cooperative. The union of Grobstein Horwath with its larger sibling was, in part, a product of the former’s enviable triangulation of well established clienteles in the Silicon Valley, Los Angeles, and China. In fact, Grobstein’s penetration into the Pacific Rim and Silicon Valley proved irresistible to Crowe Horwath. The merger was finalized early this month. The Valleys’ business mix is dominated by mid-sized firms, so it’s no surprise the accounting industry here is dominated by firms with large numbers of mid-sized companies as clients. In fact, the attraction of firms such as J.H. Cohn to the Valleys’ accounting industry is local familiarity with the middle market. Even now, that market for is expanding for accountants in the U.S. The news from Big Four firms with Valley offices was nominal in 2008, and included the opening of a new Westlake Village office for Ernst & Young, as well as that company’s growing practice in the field of clean-tech advisory services. Two major issues underscoring (or perhaps “hovering over” would be a better term) the local accounting industry are Fin 48, and IFRS. Fin 48 is a new IRS rule that requires accountants to put a value on assets that could previously be left designated as uncertain tax positions. At least one local accountant said he would be protesting the new rule with the blessing of his clients by entering “decline to state” in the Fin 48 line of tax filings. IFRS stands for International Financial Reporting Standards, and for accounting firms, it represents a major investment of time and resources aimed at converting the industry from traditional Amero-centric reporting to a standard already adopted by many countries around the globe. As business continues to cross national boundaries, the SEC has begun aggressive “encouragement” of an industry-wide conversion. After years of delay on IFRS and Fin 48, it appears the curtain that began closing on old ways of doing business in accounting in 2008 will draw even tighter in 2009. TECHNOLOGY By MARK R. MADLER Staff Reporter As other industries struggled in Southern California during the year, the technology industry found itself in a safe harbor of sorts. Those companies offering professional services were in much demand as has happened in past economic downturns. Consolidation and co-location of servers, using hosted applications rather than buying software and network management can cut costs and companies providing those services brought in new clients or expanded business from existing clients. While still trailing the Silicon Valley in terms of big name companies and attracting venture capital, the tech industry in Southern California still has a high proportion of tech firms. In the San Fernando Valley region some of those firms are on the paths to provide the newest in tech that keeps people connected. Row 44 in Westlake Village, for instance, has created a satellite-based system to provide broadband connections aboard aircraft. The company was chosen by Southwest and Alaska Airlines to perform commercial trials during the summer months. Xirrus Inc. and Strix Systems offer Wi-Fi equipment used by municipalities, transit agencies, universities and sprawling convention centers. Cloudworks offers hosted-computing services that allow clients to connect to their work desktop from any computer anywhere in the world. Internet services and products provider United Online took a big leap during the year with its acquisition of florist company FTD Group Inc. as a means to diversify its revenue sources and opens up new marketing opportunities. The industry, however, wasn’t completely immune to the layoffs that hit other companies. Yahoo!, for instance, saw a loss in its market share in search and advertising that led to two rounds of eliminating positions, including at the Burbank campus of Yahoo! Search Marketing.

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