managing television advertising production costs

marketing management consultants

Managing television advertising production costs

Prepared by TrinityP3

March 2012


12 facts about Television Commercial Production 1. Has complex and technical language that can make

the process mysterious and confusing.

2. Is still often the second largest, single advertising expenditure after media.

3. Costs have remained relatively stable at a time when increased media fragmentation is causing a shift in the productive to non-productive ratio.

4. There are literally hundreds of production cost variables making it difficult to apply a realistic net benchmark for bespoke productions.

5. The base cost of production is directly related to the level of complexity of the concept being produced.

6. There are many subjective production variables that can add cost to the production without necessarily adding to the effectiveness.

7. Film and production company estimates are often long, detailed and confusing, making assessment difficult while agency estimates often provide no significant insight or transparency in their brevity.

8. There are an increasing number of production options, beyond television commercials, becoming increasingly popular and requiring different skill sets and approaches, such as long form documentaries, programs and films for the internet and broadcast.

9. Careful uncoupling of parts of the production process from the agency can achieve savings due to economies of scales.

10. Deadlines will often mean that proper cost negotiations, due diligence and risk reduction are overlooked by the agency.

11. Production technology can be applied to reduce cost or add cost depending on the desired production outcomes.

12. The film production process is universal, however there are local market variables in government legislation and industry practices that can add cost or provide savings.


Television Production Process There are a number of steps in the television production process which have a major influence on the cost of the final production and are essential in setting expectations in regards to outcome quality.

Each step can directly impact the final cost of production and therefore must be managed to maximise cost efficiency.

Briefing

Concept

Estimating

Preproduction

Approvals

Final reconciliation

Setting budget and quality expectations

Concept directly impacts on cost

Selection of director and brief to production house impacts on costs

Many of the unknown costs quoted as a contingency are finalised by this stage yet often no refunds are provided

Changes in the production process are either billed as extras or built into pre-approved contingencies

While much focus is placed on the original estimate this stage is often overlooked due to fragmentation of the process


What should you do during Briefings

• Do you have a production pricing matrix in place with your agency? Afterall a sales promotion that runs for 3 weeks should have a different budget allocated to it than a branding campaign to run 3 years.

• Review your budget and expectations with your production consultant or agency to ensure you and the agency have the same expectations of the campaign, the production execution and quality of production proposed.

• Review current materials with your production consultant or agency to see if it can be reused, with or without modification. Could an existing commercial be rerun with or without modification?

• Check with the production consultant to see if there are any productions planned at the same time that could be pooled for cost efficiency.

• Be clear in the brief to the agency all possible media to be used in the campaign and ensure there is adequate time in the schedule to achieve the results you expect.

• Ask the agency to work with the production consultant to develop a project timeline indicating all milestones and approvals.

• Be clear in the brief to the agency what research is required and ensure there is adequate time in the schedule.

• As the concept, followed by quality, are the primary drivers of cost, ensure the script is briefed in with the allocated budget in mind.

• Allow the agency to present all ideas as long as they are viable ideas that they can guarantee can be delivered for the budget.

Briefing Concept Estimating Preproduction Approvals Final reconciliation


What you should consider at Concept Stage

• When approving concepts and scripts make sure there is adequate time in the schedule for proper consideration of the script and production issues.

• Approve a script or concept only if it is presented with an indication of the production cost that has been guaranteed by the agency or verified by the production consultant.

• If not, explore if another execution could achieve the same creative result, but be produced more cost and time efficiently.

• Are there any legal or approval bodies that might reject or change the commercial? It is wise to ensure they give an indication of acceptance prior to committing to the script and/or budget.

• Review all possible media (including online and in-house) that any actors might be used and revise the brief to the agency accordingly.

• Work with the agency and production consultant to identify any issues in the script that could affect the timing and cost of of the final delivery such as:

• Special and visual effects and animation

• Talent number or availability

• Music composing or licencing

• Locations including availability and cost

• Weather implications, safety issues, etc

• These issues should be considered here, rather than at the quote approval stage, because now is the time that you will have a significant impact on the outcome.

• Flagging these up front means you are less likely to be pressured by time, research commitments or approval by a higher authority which cannot be cancelled or changed.



Steps to ensure cost effective Estimating

• Have you uncoupled production house or post production services? If so, with the production consultant, make sure they are included in the estimating process.

• If not, you and the production consultant should review the director’s reels with the agency, as you would casting tapes, and make sure a minimum of three production companies are invited and that at least three genuine quotes are presented.

• Have the production or cost consultant review all quotes from the chosen production companies and negotiate with the agency and the companies on your behalf to obtain the best value solution.

• Request that production and creative agency personnel are there to present and discuss the estimates fully, in terms of creativity and cost.

• For jobs with obvious contingencies for unknowns, like unique or difficult locations, the production consultant will review with the agency the benefits of undergoing a location survey as a separate cost before committing to the total cost.

• At this stage the production timeline should be reviewed to ensure there is enough time allowed to minimise additional costs and loadings.

• Ensure all the necessary approvals both internal, legal and statutory are undertaken before approving the quote so to avoid any cancellation costs.

• Be sure there is clear understanding of who is responsible for which elements in the production.



How to effectively manage Preproduction

• Be involved as early as possible to approve talent, locations, props and other relevant elements of the shoot, don’t leave it to the final preproduction meeting.

• The preproduction meeting should take place at least 72 hrs or 3 working days prior to the first shoot day to ensure any changes required occur prior to the shoot.

• Understand that the final preproduction meeting is the last chance for any changes to be made without incurring costs or delays.

• Prior to the agency signing the approved talent contracts on your behalf, make sure there is a fee negotiated as an option for any other media or usage you may require at a later date.

• Review the budget with the production consultant and the agency to identify any cost issues.

• Ensure the agency provides you a preproduction package which includes:

• Script & schedule

• Story board or animatic

• Tape and/or photos of all talent

• Location photos or videotape

• Wardrobe photos

• Hero prop photos or written list

• Product sample, product styling photos, etc.

• Be sure not to give approval and then make a change once others in the organisation have seen the material. This could incur costs or delays at your expense.

• Just prior to shooting, evaluate the weather with the production consultant and the agency.



Getting the process right for Approvals

• Be clear on timing of approval stages and consequences of change outside these stages.

• Allow the film company and agency the right to present you their edit first. It is not necessary for you to review the rushes (raw footage).

• Be sure that you understand what you are reviewing and where the improvements in the next stage will be done.

• Be sure that approvals are given with a clear understanding of the implications of approval at all stages of the post production process.

• Be aware that any change in decision about the amount of product material or length of some shots may impact the overall edit since the whole commercial has been filmed with specific time frames in mind for each shot.

• Discuss with the agency the style of the final colour grade. Request samples or a test if necessary.

• Be involved in post production special effects as early as possible including work in progress.

• Be clear on the special effects brief and what is to be achieved with the end result.

• Request a copy of the TV supers as a mock up for approval prior to the final edit.

• Discuss with the agency the style and tempo of the music track that is proposed without being attached to one famous piece of music, (unless you are likely to be able to afford it). Having a style direction discussed in advance of the production will avoid wastage by redoing it.



Finding the right outcomes at the Final Reconciliation

• At the completion of the shoot and once the final master has been delivered and the station dubs despatched, the agency should prepare a complete financial reconciliation of the production.

• The production financial reconciliation should include copies of:

• All approved agency estimates.

• Purchase orders issued.

• Invoices from third party suppliers.

• Agency timesheets reconciled against estimate.

• All talent / actor agreements.

• All licencing and copyright agreements.

Briefing Concept Estimating Preproduction Approvals Final Reconciliation

• The production consultant will then check the reconciliation against all approved estimates and purchase orders and prepare a report.

• Any over-costs should be raised with the agency and discussed with the marketing team to determine the cause of the over-runs.

• The agency or production consultant should ensure that all digital and production and digital assets such as masters, wild reels, graphics and supers are filed.

• Talent contracts, music licencing or any other third party agreements are provided by the agency to the marketer or production consultant.

• History reel or digital files are updated with the latest versions.


Opportunities for managing television costs There are a number of proven strategies for managing television production costs more effectively including:

• PRODUCTION UNCOUPLING: some or all of the production process from the agencies and managing the suppliers directly.

• PRODUCTION COST ASSESSMENT: of some or all of the stages of the production process by either an external or internal production resources.

• PRODUCTION COST MANAGEMENT: with an external or internal production resource managing every step of the production process to ensure the maximum cost efficiency.

• PRODUCTION PRICING MATRIX: sets an agreed price for production services and works well for routine production functions such as adaptions of existing work, dubs and the like.


Production Uncoupling What is it? • Advertisers with significant spend can realise the

economies of scale by uncoupling the production process from the agency and/or film company and dealing direct with a smaller number of suppliers.

• The uncoupling process can typically be for:

• Production House

• Post Production / Visual Effects

• Casting

• The ideal areas for uncoupling are those where the largest investment currently occurs.

How are savings derived?

• The direct engagement of suppliers eliminates all commissions, mark ups and rebates, which go directly to the advertiser.

• Consolidations of services with a smaller number of suppliers also provides economies.

When is it appropriate? • When there is significant production investment.

• When there is a smaller number of agencies.

• When the production requirements are reasonably consistent in type and volume.

What are the risks / success factors? • The agencies need to be engaged in the process as

it can directly impact their creative options.

• The advertiser needs to be able to manage the additional suppliers who will bill directly.

Assessment of risk / reward • Timeline for implementation: 12 – 16 weeks.

• Degree of Difficulty / Complexity: 4/5

• Savings: 20% - 30% of the cost of the spend being uncoupled, but requires a significant spend level to justify undertaking the process.


Production Cost Assessments What is it? • The advertiser either recruits or outsources a

number of production consultants (depending on the volume of productions) to provide expert assessments of the cost and cost implications at each stage of production.

• Production consultants are typically involved in:

• Briefing / Budget setting

• Concept review to assess affordability

• Quote / Estimate Evaluation

• Production reconciliation

How are savings derived?

• The production cost consultant provides industry expertise to set and manage expectations against budget.

• They are able to negotiate with all suppliers to ensure the maximum savings are achieved.

When is it appropriate? • When there is significant production investment.

• When there is a diverse number of agencies.

• When the production requirements vary greatly.

What are the risks / success factors? • Involving the consultant at the quote stage is often

too late as cost commitments are often undertaken or agreed prior to this.

• Marketing needs to have trust in the consultant to act on their behalf and achieve the required outcome.



• Savings: 5% - 10% of total production cost depending on the level of commitment from marketing.


Production Cost Management What is it? • The advertiser either recruits or outsources a

number of production managers (depending on the volume of productions) to manage the production on behalf of the client at every stage of production.

• Production managers are typically involved in every stage including:

• Briefing / Budget setting

• Concept review to assess affordability

• Quote / Estimate Evaluation

• Shoot and Post production

• Production reconciliation

How are savings derived? • The film company producer looks after the financial

interests of the film company. The agency producer looks after the financial interests of the agency. Here the advertiser has a producer too.

When is it appropriate? • When there is a large volume of diverse, complex or

high cost productions.

• When there is a diverse number of agencies and suppliers required.

What are the risks / success factors? • Some see the provision of an advertiser production

manager as duplication of services and responsibilities and this can lead to disputes.

• The production manager can develop their own preferred suppliers and exert undue influence on the outcomes.



• Saving: 15% - 20% of the production budget depending on the mix/type of productions.


Production Pricing Matrix What is it? • Multinational or global marketers who have central

origination often have a high volume of adaptations across multiple markets.

• These adaptations and other “routine” production services can be costed in a pricing matrix to fix the cost of this work.

• This includes production processes such as:

• Super and voice over changes

• Simple product or packaging changes

• Re-edits from exiting footage

• Simple desktop shoots or post retouching

How are savings derived? • By assessing and categorising these production

requirements you can negotiate and fix the price for the service based on volume and eliminate cost creep.

When is it appropriate? • When there is a large volume of standard or routine

production requirements that can be categorized.

What are the risks / success factors?

• The volume of the requirements needs to be accurately estimated to negotiate the best price up front.

• The categorisation of the project types is important to ensure there is no dispute or creep in production cost.



• Savings: Initial saving on the current cost of the services provided.


Production Summary • Television production is a complex and technical

process, with many cost variables.

• There are a number of opportunities to manage this process to deliver greater cost efficiencies.

• These approaches fall into two main types:

• Cost management – cost consultants and production managers.

• Supplier management – uncoupling and pricing.

• The best approach depends on:

• The level of investment.

• The mix and type of productions.

• The range of suppliers currently used.

• The consistency and stability of the requirement.

• The choice of outsourcing these capabilities or recruiting these into the organization depends on the volume of productions and level of investment


For further information contact: TrinityP3 Pty Ltd

Sydney +612 8399 0922

Melbourne +613 9682 6800

Hong Kong +852 3589 3095

Singapore +65 6884 9149

[email protected] www.trinityp3.com

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