The Reality of ‘Cost Effective’ Video Production

June 3, 2013

Money makes the world go round… right? I mean we are employed at our jobs with the expectation that we will be paid an agreeable amount for the work we do, the company we work at provides goods or services to individuals or other companies and the expectation is that for the quantity of goods or services sold, minus the costs of overhead and labour, the company will earn a profit so that it can grow and continue to attract and retain talent and invest in new equipment and create value for its stakeholders. If that company cannot turn a profit then it will fail, and not only will the company no longer exist but the people who relied on it to provide them with their livelihood are also left having to find alternative work.

 

This problem exists at all levels of content creation, we have seen massive failures at visual effects companies like Rhythm and Hues, Digital Domain and others in the content creation industry, where the business models, combined with international competition were wholly unstable, unreliable and unsustainable.

 

There has been a trend over the past fifteen or so years, where there used to be small, medium and large companies servicing the advertising, national and regional markets, corporate video, and feature film markets, and these have been reducing into much more fundamental economies of scale. Over the years not only has there been a lot of consolidation in the top end of the market, where the top end continues to thrive with exceptional expertise and costs to go along with that experience.

 

Meanwhile the middle market has all but disappeared, leaving the really big companies and the rest; with the majority of Production and Post Production companies in the current marketplace being comprised of six employees or less. The thinning out in this market reality has come as a result of a lack of expertise, knowledge and capability. While the continued reduction in cost of the tools and hardware has led to more and more competitors entering the market.

 

What we are now seeing is the bottom of the market thriving, and the middle or medium sized company is a rarity, and usually exists to service niche markets which speak to their size. But becoming too specialized in a niche market is a dangerous endeavor. And make no mistake about it, when I refer to the bottom end of the market I’m referring to the size of the company, the two to six or eight employees, not the quality of their work, there are levels below ‘this’ bottom and I simply don’t include them in this discourse.

 

Sustainable Business Models

 

I’m not talking about being able to build and sustain a business model for a few years or even a dozen years but for decades. To create a legacy, a company with inherent value that has brand equity and can be sold in the future, to the next generation of mentored and nurtured talent. This, in my estimation is a really important thing when considering that behind a lot of these companies, are people who have families that depend on them, creating inherent value and longevity should be the goal of everyone in this business.

 

I am guilty of being more than a casual bystander that has an interest in leadership, not just who is at the helm of a company but why they are there, and I work on a fair number of projects that examine the Anatomy of a Leader… one thing I’ve learned is that the number of companies still around after a decade; that is, a company in existence at the beginning of a decade still being in operation at the end of that same decade is only 4%! And the root causes of failure amongst the 96% of companies that failed in that decade are almost entirely due to poor management, weak leadership and poor marketing…

 

This reality is arguably even more troublesome for companies in the content creation industry because they are almost always started by creative types who have little to no business acumen. Further complicating the situation is that the migration to digital production processes from acquisition through post and archive hasn’t made things simpler, rather it’s made things more complex; add to a lack of business acumen, a wholly deficient understanding of the technologies, the capabilities and possibilities along with the difficulties of our technological realities, and the problems are compounded, production values suffer and deadlines are missed.

 

The realities of business are still present in Video Production

 

What many seem to forget is that just because the services we provide are creative, this is still a business. And the realities of business are still present.

 

There has always been a triad of value; time, money, quality and we’ve been asked to pick two… This simple axiom holds true today, however what I have been witnessing in the marketplace is that the proposition is being reduced to a single factor..money. Claims that cost-effective can also include quality or time is disingenuous and unsustainable, because it doesn’t take into account value. While we are experiencing downward pressure in the marketplace to deliver higher production values on tighter time frames and at lower budget levels, that does not mean that cost can be the only consideration.

 

The problem with making cost the only consideration is that it will inevitably lead to the failure of the company because it isn’t sustainable. I turn down work that cannot or will not meet our minimum standards for value and that means value for the client and value to us in the form of being fairly compensated for our work.

 

The reality is that cost effective usually means the opposite for the service provider, it might be cost effective for the client in the short term but it almost certainly is cost ineffective for the company offering it at that price. The practise of getting the business in the door, even at a loss, not only hurts the company engaging in that practice but also the client, because it devalues the service, the creative, and the expertise but more importantly, it also makes it impossible to attract and retain top talent and to cover overhead in the medium to long term, which means that there is no intention on the part of the service provider to build a long term value oriented relationship with the client.

 Craig :: Getting up to date on a new build of the Nucoda Film Master in London

 

I am a huge proponent of mentoring and nurturing talent, (I’ve been lucky enough to learn from a lot of really talented people in both business and the creative sides) there is simply no substitute for building a career and knowledge base in this, and arguably many other industries, than mentoring. The idea of an apprenticeship in the past, whether someone was in the trades or in a creative vocation, mentoring and apprenticing was the defacto way to learn and grow. And the best way to continue to attract and retain really top notch talent is to offer an environment where they are challenged, given opportunities to explore and grow, provides positive feedback and that also means some corrective or negative observations as well, be mentored and encouraged to pursue their own passion projects and to be fairly compensated for their work and time. And that requires the company to charge a fair price for their work so the talent can in turn be properly treated.

 

The bottom line is that it takes a lot of investment in time, and human capital to really grow and develop solid teams who are well versed in multiple disciplines of media and video content creation. And that isn’t something that comes from formal school programs, it comes from an investment in people at a company level, which has its own costs. Part of what pricing fairly means, is that what the company providing the creative service is able to do when costing responsibly, it allows for two extremely important things to occur. First, it means that the time and energy into the personal development of our most important asset, people, can be made. Second, it means that there is oversight and guidance for everyone involved in the production from concept through execution, delivery and archival, that directly benefits the client in terms of value, peace of mind and ease with which their project is realized.

 

Mentoring and Nurturing People is Critical

 

A great many creative companies fail because they are started by well meaning and often very talented creative people, who woefully lack the business acumen to operate a successful company. An extremely big part of that is pricing properly. On the other side of that coin is creative companies started by business minded people who are not very creative and seek to staff out their shops with the talent but can’t deliver on the really important nurturing, learning and mentoring environment because they don’t possess that knowledge or skill to impart in the first place, making it difficult to build quality teams with excellent oversight.

 

There really is a delicate balance of team alignment, the business and the creative. To be perfectly honest, it’s an incredibly difficult thing to achieve. But like any other business, finding the right people is paramount, getting the right advice and finding the right management balance is critically important. So what does that all have to do with money? Well, everything. It costs money to run a company, to pay staff, to invest in the technology and human capital needed to grow and prosper, and the business of video production is not an inexpensive one from a capital cost perspective. All of this collides at the intersection of the entire purpose for the creative business to exist in the first place, to provide a valuable service to the customer that balances the Time, Money, and Quality trifecta as perfectly for each and every project as can be achieved.

 

Many companies perceive creative work like video production and graphic design as an expense rather than an investment, which is very shortsighted. Consider a corporate identity video that is used for years before being updated or replaced, hopefully that video is paying dividends in new business for that customer over that period of time… and that, is an investment not an expense. There will always be a place for the lowest price bidder, but from what I can see, more and more companies are re-evaluating their approach to the production of video communications, after being disappointed in the results and value received from lowest cost providers. These companies are realizing the value in paying a fair price for what can easily be translated into exponentially more value on-screen. And that… Is a really good thing.

 

Has this been a definitive look at this subject? Absolutely not… This topic is huge, and there are so many facets to it that covering everything wouldn’t be a blog post, it would be a book. And why does this topic concern me? Because I’ve made the mistakes I talk about, I’ve made bad decisions and I’ve learned from them; but they are costly lessons. Luckily for me, I was able to weather those times and after almost thirteen years of working independently I’ve beaten the odds. But I want my business to grow, I want to mentor more talented individuals and I want to be working in this business for the next twenty five or so years, support my family and my crews and my staff, and that takes proper planning and appropriate billing for that goal to be realized and sustainable. I want to keep beating the odds.

 

The business of video production isn’t getting easier or simpler, its getting more complicated. And that means we (everyone in our business) need strong business leaders, and a more concerted effort to nurture and mentor talent in order to survive.

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