Managing Television Advertising Production Costs

Managing television advertising production costs Prepared by TrinityP3 March 2012 marketing management consultants

12 facts about Television Commercial Production 1. Has complex and technical language that can make 8. There are an increasing number of production the process mysterious and confusing. options, beyond television commercials, becoming increasingly popular and requiring different skill sets2. Is still often the second largest, single advertising and approaches, such as long form documentaries, expenditure after media. programs and films for the internet and broadcast.3. Costs have remained relatively stable at a time when 9. Careful uncoupling of parts of the production process increased media fragmentation is causing a shift in from the agency can achieve savings due to the productive to non-productive ratio. economies of scales.4. There are literally hundreds of production cost 10. Deadlines will often mean that proper cost variables making it difficult to apply a realistic net negotiations, due diligence and risk reduction are benchmark for bespoke productions. overlooked by the agency.5. The base cost of production is directly related to the 11. Production technology can be applied to reduce cost level of complexity of the concept being produced. or add cost depending on the desired production6. There are many subjective production variables that outcomes. can add cost to the production without necessarily 12. The film production process is universal, however adding to the effectiveness. there are local market variables in government7. Film and production company estimates are often legislation and industry practices that can add cost or long, detailed and confusing, making assessment provide savings. difficult while agency estimates often provide no significant insight or transparency in their brevity. marketing management consultants

Television Production Process There are a number of steps in the television production process which have a major influence on the cost of the finalproduction 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 Estimating Approvals Concept Preproduction Final reconciliation Concept Many of the Changes in the While much directly impacts Selection of unknown costs production focus is placed on cost director and quoted as a process are on the original brief to contingency either billed as estimate this production are finalised by extras or built stage is often house impacts this stage yet into pre- overlooked due Setting budget often no and quality on costs approved to fragmentation refunds are contingencies of the process expectations provided marketing management consultants

What should you do during Brieﬁngs Brieﬁng Concept Estimating Preproduction Approvals Final reconciliation• Do you have a production pricing matrix in place • Be clear in the brief to the agency all possible with your agency? Afterall a sales promotion that media to be used in the campaign and ensure there runs for 3 weeks should have a different budget is adequate time in the schedule to achieve the allocated to it than a branding campaign to run 3 results you expect. years. • Ask the agency to work with the production• Review your budget and expectations with your consultant to develop a project timeline indicating production consultant or agency to ensure you and all milestones and approvals. the agency have the same expectations of the • Be clear in the brief to the agency what research is campaign, the production execution and quality of required and ensure there is adequate time in the production proposed. schedule.• Review current materials with your production • As the concept, followed by quality, are the primary consultant or agency to see if it can be reused, with drivers of cost, ensure the script is briefed in with or without modification. Could an existing the allocated budget in mind. commercial be rerun with or without modification? • Allow the agency to present all ideas as long as• Check with the production consultant to see if there they are viable ideas that they can guarantee can are any productions planned at the same time that be delivered for the budget. could be pooled for cost efficiency. marketing management consultants

What you should consider at Concept Stage Brieﬁng Concept Estimating Preproduction Approvals Final reconciliation• When approving concepts and scripts make sure there • Work with the agency and production consultant to is adequate time in the schedule for proper identify any issues in the script that could affect the consideration of the script and production issues. timing and cost of of the final delivery such as:• Approve a script or concept only if it is presented with • Special and visual effects and animation an indication of the production cost that has been • Talent number or availability guaranteed by the agency or verified by the production consultant. • Music composing or licencing• If not, explore if another execution could achieve the • Locations including availability and cost same creative result, but be produced more cost and • Weather implications, safety issues, etc time efficiently. • These issues should be considered here, rather than• Are there any legal or approval bodies that might reject at the quote approval stage, because now is the time or change the commercial? It is wise to ensure they that you will have a significant impact on the outcome. give an indication of acceptance prior to committing to the script and/or budget. • Flagging these up front means you are less likely to be pressured by time, research commitments or approval• Review all possible media (including online and in- by a higher authority which cannot be cancelled or house) that any actors might be used and revise the changed. brief to the agency accordingly. marketing management consultants

Steps to ensure cost effective Estimating Brieﬁng Concept Estimating Preproduction Approvals Final reconciliation• Have you uncoupled production house or post • For jobs with obvious contingencies for unknowns, production services? If so, with the production like unique or difficult locations, the production consultant, make sure they are included in the consultant will review with the agency the benefits estimating process. of undergoing a location survey as a separate cost• If not, you and the production consultant should before committing to the total cost. review the director’s reels with the agency, as you • At this stage the production timeline should be would casting tapes, and make sure a minimum of reviewed to ensure there is enough time allowed to three production companies are invited and that at minimise additional costs and loadings. least three genuine quotes are presented. • Ensure all the necessary approvals both internal,• Have the production or cost consultant review all legal and statutory are undertaken before quotes from the chosen production companies and approving the quote so to avoid any cancellation negotiate with the agency and the companies on costs. your behalf to obtain the best value solution. • Be sure there is clear understanding of who is• Request that production and creative agency responsible for which elements in the production. personnel are there to present and discuss the estimates fully, in terms of creativity and cost. marketing management consultants

How to effectively manage Preproduction Brieﬁng Concept Estimating Preproduction Approvals Final reconciliation• Be involved as early as possible to approve talent, • Ensure the agency provides you a preproduction locations, props and other relevant elements of the package which includes: shoot, don’t leave it to the final preproduction • Script & schedule meeting. • Story board or animatic• The preproduction meeting should take place at least 72 hrs or 3 working days prior to the first shoot day to • Tape and/or photos of all talent ensure any changes required occur prior to the shoot. • Location photos or videotape• Understand that the final preproduction meeting is the • Wardrobe photos last chance for any changes to be made without incurring costs or delays. • Hero prop photos or written list• Prior to the agency signing the approved talent • Product sample, product styling photos, etc. contracts on your behalf, make sure there is a fee • Be sure not to give approval and then make a negotiated as an option for any other media or usage change once others in the organisation have seen you may require at a later date. the material. This could incur costs or delays at• Review the budget with the production consultant and your expense. the agency to identify any cost issues. • Just prior to shooting, evaluate the weather with the production consultant and the agency. marketing management consultants

Getting the process right for Approvals Brieﬁng Concept Estimating Preproduction Approvals Final reconciliation• Be clear on timing of approval stages and • Discuss with the agency the style of the final colour consequences of change outside these stages. grade. Request samples or a test if necessary.• Allow the film company and agency the right to • Be involved in post production special effects as present you their edit first. It is not necessary for early as possible including work in progress. you to review the rushes (raw footage). • Be clear on the special effects brief and what is to• Be sure that you understand what you are be achieved with the end result. reviewing and where the improvements in the next • Request a copy of the TV supers as a mock up for stage will be done. approval prior to the final edit.• Be sure that approvals are given with a clear • Discuss with the agency the style and tempo of the understanding of the implications of approval at all music track that is proposed without being attached stages of the post production process. to one famous piece of music, (unless you are• Be aware that any change in decision about the likely to be able to afford it). Having a style direction amount of product material or length of some shots discussed in advance of the production will avoid may impact the overall edit since the whole wastage by redoing it. commercial has been filmed with specific time frames in mind for each shot. marketing management consultants

Finding the right outcomes at the Final Reconciliation Brieﬁng Concept Estimating Preproduction Approvals Final Reconciliation• At the completion of the shoot and once the final • The production consultant will then check the master has been delivered and the station dubs reconciliation against all approved estimates and despatched, the agency should prepare a complete purchase orders and prepare a report. financial reconciliation of the production. • Any over-costs should be raised with the agency• The production financial reconciliation should and discussed with the marketing team to include copies of: determine the cause of the over-runs. • All approved agency estimates. • The agency or production consultant should ensure that all digital and production and digital assets • Purchase orders issued. such as masters, wild reels, graphics and supers • Invoices from third party suppliers. are filed. • Agency timesheets reconciled against • Talent contracts, music licencing or any other third estimate. party agreements are provided by the agency to • All talent / actor agreements. the marketer or production consultant. • All licencing and copyright agreements. • History reel or digital files are updated with the latest versions. marketing management consultants

Opportunities for managing television costs There are a number of proven strategies formanaging television production costs more effectivelyincluding:• 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. marketing management consultants

Production Uncoupling What is it? When is it appropriate?• Advertisers with significant spend can realise the • When there is significant production investment. economies of scale by uncoupling the production • When there is a smaller number of agencies. process from the agency and/or film company and dealing direct with a smaller number of suppliers. • When the production requirements are reasonably consistent in type and volume.• The uncoupling process can typically be for: What are the risks / success factors? • Production House • The agencies need to be engaged in the process as • Post Production / Visual Effects it can directly impact their creative options. • Casting • The advertiser needs to be able to manage the• The ideal areas for uncoupling are those where the additional suppliers who will bill directly. largest investment currently occurs. Assessment of risk / rewardHow are savings derived? • Timeline for implementation: 12 – 16 weeks.• The direct engagement of suppliers eliminates all • Degree of Difficulty / Complexity: 4/5 commissions, mark ups and rebates, which go directly to the advertiser. • Savings: 20% - 30% of the cost of the spend being uncoupled, but requires a significant spend level to• Consolidations of services with a smaller number of justify undertaking the process. suppliers also provides economies. marketing management consultants

Production Cost Assessments What is it? When is it appropriate?• The advertiser either recruits or outsources a • When there is significant production investment. number of production consultants (depending on the • When there is a diverse number of agencies. volume of productions) to provide expert assessments of the cost and cost implications at • When the production requirements vary greatly. each stage of production. What are the risks / success factors?• Production consultants are typically involved in: • Involving the consultant at the quote stage is often • Briefing / Budget setting too late as cost commitments are often undertaken or agreed prior to this. • Concept review to assess affordability • Marketing needs to have trust in the consultant to act • Quote / Estimate Evaluation on their behalf and achieve the required outcome. • Production reconciliation Assessment of risk / rewardHow are savings derived? • Timeline for implementation: 4 – 6 weeks.• The production cost consultant provides industry • Degree of Difficulty / Complexity: 1/5 expertise to set and manage expectations against budget. • Savings: 5% - 10% of total production cost depending on the level of commitment from marketing.• They are able to negotiate with all suppliers to ensure the maximum savings are achieved. marketing management consultants

Production Cost Management What is it? When is it appropriate?• The advertiser either recruits or outsources a • When there is a large volume of diverse, complex or number of production managers (depending on the high cost productions. volume of productions) to manage the production on • When there is a diverse number of agencies and behalf of the client at every stage of production. suppliers required.• Production managers are typically involved in every What are the risks / success factors? stage including: • Some see the provision of an advertiser production • Briefing / Budget setting manager as duplication of services and • Concept review to assess affordability responsibilities and this can lead to disputes. • Quote / Estimate Evaluation • The production manager can develop their own preferred suppliers and exert undue influence on the • Shoot and Post production outcomes. • Production reconciliation Assessment of risk / rewardHow are savings derived? • Timeline for implementation: 4 – 6 weeks.• The film company producer looks after the financial • Degree of Difficulty / Complexity: 3/5 interests of the film company. The agency producer looks after the financial interests of the agency. Here • Saving: 15% - 20% of the production budget the advertiser has a producer too. depending on the mix/type of productions. marketing management consultants

Production Pricing Matrix What is it? When is it appropriate?• Multinational or global marketers who have central • When there is a large volume of standard or routine origination often have a high volume of adaptations production requirements that can be categorized. across multiple markets. What are the risks / success factors?• These adaptations and other “routine” production • The volume of the requirements needs to be services can be costed in a pricing matrix to fix the accurately estimated to negotiate the best price up cost of this work. front.• This includes production processes such as: • The categorisation of the project types is important • Super and voice over changes to ensure there is no dispute or creep in production cost. • Simple product or packaging changes Assessment of risk / reward • Re-edits from exiting footage • Timeline for implementation: 6 – 8 weeks. • Simple desktop shoots or post retouching • Degree of Difficulty / Complexity: 2/5How are savings derived? • Savings: Initial saving on the current cost of the• By assessing and categorising these production services provided. requirements you can negotiate and fix the price for the service based on volume and eliminate cost creep. marketing management consultants

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 marketing management consultants

For further information contact: TrinityP3 Pty Ltd Sydney +612 8399 0922 Melbourne +613 9682 6800 Hong Kong +852 3589 3095 Singapore +65 6884 9149 people@trinityp3.com www.trinityp3.com marketing management consultants

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Managing Television Advertising Production Costs

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Managing Television Advertising Production Costs Presentation Transcript