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Low barrier of entry

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Bruce Frankel
Low barrier of entry
on Mar 17, 2009 at 11:19:10 pm

It is a fact of life in the video biz these days: the barrier to getting in is low, so the number of people getting in is large. The law of supply and demand says an oversupply of a product or services will lower the price. When I started in the editing business, an Avid Media Composer was nearly $100,000 per system. I bought three. Not too many people were willing to open a shop and take on that kind of debt unless they had a solid client base and talent.

Now, you can get in for less than $10,000 and have a pretty good set up for a single editing station. My clients bought FCP and Avids and hired college kids to run the gear. The quality is pretty good, not great, the creativity is passable, but the price makes everything look better ;-). When they need to be assured of a quality job, they call me, but my business has gone to...well, doo doo. I cannot compete with free or nearly free. I find people want me to work for half the fee they'd pay a plumber! I refuse to go there. I lose a lot of work. Anybody have similar stories? What have you done to promote higher fees in a saturated market?


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Craig Seeman
Re: Low barrier of entry
on Mar 18, 2009 at 12:46:54 am

Personally I don't find the low cost of entry the problem. It means I run a business profitably with much lower overhead.

You have to sell something different. It may be skills, it may be experience. You'll have to explain the value of either to your potential client. Skills "might" be obvious in your demo reel. Experience is something you need to explain. Experience means one has the ability to trouble shoot and deliver. It's like an insurance policy for the client's benefit. The cost of a failed project, no return on investment, etc. is far greater than paying more for someone who knows how to deliver a project which, ultimately, will yield greater value (greater potential profit) for your client.

What makes you a better bargain than the person working nearly free? Sell that!
They may be able to "push buttons" but you're offering the ability to solve problems, fulfill needs, grow your client's bottom line.



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Bruce Frankel
Re: Low barrier of entry
on Mar 18, 2009 at 3:01:30 am

I mostly agree with you. For the most part, more sophisticated clients understand the importance of hiring experienced people. However, these are abnormal times we live in. Budgets are cut and it is very tempting for smaller corporate clients to go for price over talent and experience.

I recently lost a job that was bid out to me and four other companies. The client went with a company that was 80 percent less (tens of thousands of dollars) than my bid and I thought I was too low to make a decent profit! I called the gentleman who requested the bid and asked him if he thought there was something odd in the vast price difference. He just grunted and said he liked the low-bidder's reel. This video job was meant to attract Fortune 500 companies to a suburban office center. The low bidder's reel was all wedding and event work, no corporate or commercial work whatsoever! I just shook my head and moved on. Price won out over suitability. Too many people willing to work cheap. Too many inexperienced people in decision-making roles.



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John Grote, Jr.
Re: Low barrier of entry
on Mar 18, 2009 at 10:38:21 am

Good day Bruce,

What you are saying is quite prevalent in todays market. A couple years ago I had an interview at a company that was doing things for HGTV and they were a little taken a back when I gave them my day rate. I explained to them that since they were looking for an Online editor to finish the show (Scopes, levels and even final audio mix), they could hire me or someone like me that has that skill set and get it right the first time. Or you could hire someone cheaper that has no idea what a waveform or vector scope is an have the show rejected, in which case you'd be calling me and paying double for you effort and also missing your air date.

I keep saying this, some of the clients want the easy button, because what a professional does, makes it look easy. But they don't understand why they are paying you to watch a blue bar go across the screen (render time) for the 10th time. But oh, they wanted to make the font different 8 times and wind up back with the original font to begin with and twice for changing the color. Because as we well know, a majority of them have art degrees and marketing degrees too. I'm not saying that they shouldn't have input, hell they are the client and they are paying for it, but don't bust my ball, because it is taking so long. So, back to the easy button. It magically changes and renders it all in a instant.

I have a small but loyal client base today. I have each of them setup with their own FCP suites that meet their needs. Once in a while one of them, will hire someone to do something down and dirty, but as per usual I have to come in a clean it up.

To answer your question, I have over the years expanded my skill set from an Online/Offline linear editor (CMX & Grass Valley) to AVID (starting way back with the Optical disks) to AVID Symphony Nitris, to Final Cut Pro (since version 1), along the way Cleaner, DVD Studio, Photoshop and After Effects. A long list, but I always seem to add to it.

In the end, there will always be price shoppers, who don't have a clue or for that matter know any better and then there are clients that do know better, especially when their show is going to air on PBS that will pay (a reasonable rate) because they do care and want the best product possible.

Think about this, do we go into the doctor's office and tell him to drop his rates or better yet tell him that he is not preforming the exam correctly?


Cheers,

John

J. Grote, Jr.


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Stephen Smith
Re: Low barrier of entry
on Mar 18, 2009 at 4:22:13 pm

[Bruce] my business has gone to...well, doo doo. I cannot compete with free or nearly free.

The person doing the job for free or nearly free can't continue to do the job at that price forever. Some use it as a way to gain a client or break into the bizz. What I'm getting at is this, some people that where in this industry last year probably won't be by the end of this one. When a business such as yours, that has been around for a long time and has a big client base starts to hurt, it hurts even more for the person starting out with a very small client base.
Bad economic times helps get rid of companies that provide a bad product.





Stephen Smith
Salt Lake Video

Check out my DVD Money Making Graphics & Effects for Final Cut Studio 2


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Craig Seeman
Re: Low barrier of entry
on Mar 18, 2009 at 4:40:39 pm

One thing we have to contend with is there are people who undervalue themselves. They will inevitably go under with an unsustainable business model but unfortunately that supply is constantly replenished. As long as that's the case, businesses will find "bargains."

It's worth competing against that. One thing we have over that is experience and one has to know how to sell that.

Another observation just by being here on the COW is the large number of people who don't have experience, dig themselves in over their heads, and then come here for help. People promise what they can't deliver, or discover they can't deliver unfortunately.

Keep in mind this all cuts both ways. While anyone can put together a cheap production/post production facility for less then it costs to buy a car it also means those of us with experience can also charge lower rates and still make a profit.

The real issue is learning how to sell value and return on investment to potential customers against those who are primarily selling price.



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Andy Stinton
Re: Low barrier of entry
on Mar 18, 2009 at 6:12:08 pm

Another point of view is that many production houses have not lowered their prices. A young person living at home with a $300.00 a month lease on a FCP set up and camera can do a job for a lot less. Now we always have the skill and talent level to contend with.That's a different issue. Having said that I have seen some work from college students that blow mucho expensive production house out of the water.

Perhaps some of companies have not adjusted to the new reality.

Andy Stinton
Corporate Video
Live & Stage Events
Business Practices


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Craig Seeman
Re: Low barrier of entry
on Mar 18, 2009 at 6:35:53 pm

[Andy Stinton] "A young person living at home with a $300.00 a month lease on a FCP set up and camera can do a job for a lot less."

Which leads to an important business lesson. One may be able to cut overhead and price to maintain profit margin rather than simply cutting price.

It really depends on your client base and their expectations.

If the clients are more concerned with price then maybe you don't need that fancy office and all its expenses and the volume of work to maintain those expenses.

If the client prefers the professional office then they'll pay for that instead of the kid working at home.




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Stephen Smith
Re: Low barrier of entry
on Mar 18, 2009 at 9:01:29 pm

This post may be of some help.

http://forums.creativecow.net/thread/17/864321#864356






Stephen Smith
Salt Lake Video

Check out my DVD Money Making Graphics & Effects for Final Cut Studio 2


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Tim Kolb
Re: Low barrier of entry
on Mar 18, 2009 at 10:37:34 pm

I think that a prominent point here is that not every client is a good fit for each of us.

If someone is looking for basic transportation, how in the world could you make the case for a Mercedes over a Hyundai to this person? You can't.

You have to find buyers who value what you're selling whether it's leather seats and a quiet ride or expert, skillful post production.



TimK,
Director, Consultant
Kolb Productions,


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Bill Dewald
Re: Low barrier of entry
on Mar 19, 2009 at 11:28:26 pm

[Stephen Smith] "The person doing the job for free or nearly free can't continue to do the job at that price forever."

Maybe not, but when he quits, there's another one ready to take over.



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Tracy Peterson
Re: Low barrier of entry
on Apr 4, 2009 at 10:54:05 am

I think this is just an extension of my other post, but lets look at some facts:

1. costs are down but pricing isn't going down, at least for the guys who are the "old salts". they aren't used to the lower pricing yet.

2. much larger "low end" pool : more people afford gear

3. slightly larger high end pool : more people can afford training

4. client pool INCREASING : that's right, it's getting bigger

I'm sure there's more information we could put together and find some illuminating points, but I figure we can start here. The first big realization is that the client pool is actually growing. Because of the web and the huge number of self publishers, people who would never have the budget to have broadcast media, can now self broadcast and use video. This doesn't mean they should waste the time of seasoned pros with their three minute talking head introducing their used car sales team. Those danged kids can do that work!

In the meantime, you can still do broadcast and film work! The trouble is that corporate video gets lumped in with small business video and with wedding video for some reason. When you compare it as an equal to the work you are doing, it obviously will start to feel like you are being forced down a road of reduced returns.

Sadly, some of those returns ARE reduced by the current costs. Technology shifts change industries, it's a fact and has been happening since long before anyone here has worked.

The upside is that there is a lot of help to be found online, in broadcasting or promotion. You can blow away a lot of these kids with a great website using cheap/free services and try to nab a client on the upper end that doesn't BS with "the cheapest rate". The sad fact is that now just investing huge money in gear won't guarantee your success.

One more factor: the recession. Business SUCKS EVERYWHERE. What you may have been thinking occasionally about the young turks at the gate, you probably are just feeling it a lot more acutely when business drops off due to budgets slashing left and right.

Good luck!



Tracy Peterson
http://www.onetwomany.com


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