FILMLAND'S REEL PROBLEM; SMALL-EQUIPMENT SUPPLIERS CAUGHT IN PRICE SQUEEZE.

Byline: Dave McNary Daily News Staff Writer

This should be the best of times for Jesse Hurtado, seven years into owning his own business of supplying lighting equipment to movie sets at a time when entertainment production is booming.

Instead, Hurtado might shut down Prima Equipment.

``Usually, we're in the middle of our busiest time right now, but I'm spending time waiting for the phone to ring,'' he lamented recently. ``I try not to think about it too much because it's only going to rattle my brain.''

Hurtado took in more than $500,000 in his best year but saw sales fall to $250,000 last year with an even dimmer outlook for 1998. He scoffs at the popular belief that the entertainment industry is in the midst of explosive growth. The Motion Picture Association of America, for example, recently reported that California's annual production grew 69 percent in four years to $27.5 billion.

``I don't see much of a rise in production in this neck of the woods for the smaller houses like myself,'' said Hurtado, who has worked nearly two decades in the equipment business. ``I do have options, but I'm probably not going to get paid what I'm worth. I've got a wife, three kids, two dogs, two cats, a house payment and a car payment.''

What went wrong? Hurtado believes much of the problem stems from a glut of smaller players attracted to the glamour of show business and trying to carve out a niche by relentlessly cutting prices.

``We're low-balling each other to death,'' he said. ``You have production companies coming in and doing cutthroat pricing, so you don't have much choice but to give them a better deal.''

Hurtado began in the business by working for other suppliers, then building lights and carrier bags for production companies in his garage in his spare time. His wife then helped him rehabilitate a dilapidated storefront on Lankershim Boulevard.

In a good month, he would sell more than $40,000 worth of powerful lights to studios, independent producers and rental houses. His lights come with a five-year guarantee and are built to withstand the rough handling of a production set.

``I build these so that if you drop them, they still work,'' Hurtado said. ``The problem with places that low-ball is that they're cutting corners on how they put together the lights so you're going to have a problem in a year or so.''

Edmund Pourpassand, owner of Advance Motion Picture Lighting in North Hollywood, said he's lost about $200,000 in potential business this year to suppliers who cut prices to the bone.

``We're barely making it this year because there's so much under-bidding or people won't make a deal unless we agree to not accept payment for 90 or 120 days,'' he said. ``I get calls all the time from people who went with the low-ball bid and then had a big problem with the equipment.''

Advance, which specializes in cables and ``distro'' boxes, took in $400,000 in its best year. Pourpassand figures his three-employee outfit will gross about $300,000 this year. ``I'm not worried,'' he added.

Robert Guzman, owner of Concept Rentals in Sun Valley, said the pricing squeeze is on throughout the equipment rental and supply business.

``What's happened is that the customers got smart,'' he said. ``There's so much competition that the production companies can go from one to another and get products and services for free or almost free by promising, We'll use you from now on, and then moving on to the next company for the next show.''

Guzman, who started Concept in 1987 and specializes in renting ``grip trucks'' stocked with lighting equipment, said the glamour of Hollywood blinds many of its players to the obvious dangers such as fly-by-night operators who put off payments for 120 days and then routinely stiff creditors.

``If they don't want to pay, my vehicles and equipment stay in the yard,'' he explains. ``I never went to business school, but a lot of this is only common sense. We stick to one rate - the fair rate - and that's how we stay in business.''

A few years ago, Guzman notes, a rival decided it would replace burned-out bulbs during production free of charge even though the high-powered bulbs often cost several hundred dollars to replace. ``That was their selling point,'' he said. ``Then another one said we won't charge for burnouts either and then the whole market gets brought down.''

Guzman believes that what should be a fairly straightforward business - supplying reliable equipment to crews - attracts people with unrealistic expectations. That leads to instability as major players vanish, reorganize under a different name or get bought out, he asserts.

``It can cost production companies something like $75,000 a day if they get on a set and the equipment doesn't work properly,'' he said. ``So, eventually, you get companies that are smart enough to realize that it makes more sense to go with us.''

Further squeezing has come from an emerging giant in the rental business: Burbank-based Matthews Studio Equipment Group. With the goal of becoming the ``one-stop, full-service'' leader, Matthews has snapped up midsize operations such as Four Star, Olesen and Duke City, going from 150 employees at three offices in 1995 to 500 employees at 14 locations today. Revenues in its most recent quarter hit $17.1 million, up 50 percent over the year-ago period.

Chief Executive and co-founder Carlos De Mattos said recently that more acquisitions likely will come as Matthews looks for ways to diversify beyond its core of servicing TV and film producers.

``Our intent is to make it possible for a producer to call a 1-800 number and get everything from soup to nuts,'' he said, noting that ESPN recently used Matthews companies to provide most of the equipment for staging the Extreme Games. ``The same dolly, lights, generators and trucks that we use on movie sets can be used for special events.''

Matthews recently agreed to sell co-founder Ed Phillips its manufacturing business, noting the strain created by those operations. ``As we expanded in rentals, we were not making a lot of friends because our manufacturing operations were competing with our own customers,'' De Mattos said. ``You had customers going to producers and saying about us, Why are you feeding the lion?''

The director of an industry trade group notes that producers are under tremendous pressure to economize.

``What I hear is that producers are interested in squeezing every last nickel out of rental houses and they don't fully appreciate the investment into new technology,'' said Ed Clare, president of the Van Nuys-based Production Equipment Rental Association. ``Overall, business is pretty good and everyone I talk to is busy.''

Clare points out that the equipment business exploded in the 1980s and early 1990s due to the rise in off-studio-lot production, requiring smaller, quieter cameras and lights that were both portable and powerful. ``Everything needed to become transportable, so the grip equipment used for support like generators and distro boxes needed to withstand the weather,'' he said. ``You can't just button it up at night any more.''

That led, in turn, to diversification in manufacturing and rental houses operating outside the studios although several, particularly Warner Bros., continued to offer a range of production services.

De Mattos said the smaller companies, often run by technicians who go into business for themselves, are healthy for the industry.

``That's how we got started,'' he said. ``Producers don't always want to go to a Costco; sometimes, they just want to go to a 7-Eleven. Big companies like Procter and Gamble want to deal with a public company like us.''

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Photo: (Color) Prima Equipment owner Jesse Hurtado says much of the problem stems from a glut of smaller players drawn to the glamour of show biz.

John Lazar/Daily News