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Cost of Advertising - Production and On Air-Time

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Simon RoughanCost of Advertising - Production and On Air-Time
by on May 30, 2012 at 6:48:13 am

Hi Everybody! (Hi Dr. Nick!)
I was wondering if you guys in the states have something of a ball park figure / Ratio for a customer that wants to produce a TV commercial. We normally work here (Germany) on a 10:1 ratio. I mean if a client has 10,000 to spend, 1000 goes to production, 9000 goes to air time. Although alot of the time we produce for free, but thats another bone to chew, and it has already been spat out in the past on this thread.
But just curious.
Thanks
Simon

A picture is only as good as the glass it comes through. And the person using the camera has something to do with it too.


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Mark SuszkoRe: Cost of Advertising - Production and On Air-Time
by on May 30, 2012 at 1:54:44 pm

When I'm talking to a potential client who wants to put an ad up, I ask them what they expect their profit to be on the project. Then I aske them what percentage of that profit they are willing to invest, to get that success level. If they lowball, I repeat their words to them: "You only want to spend 1 % of x to obtain x? Do you think that's enough to guarantee success?"


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Simon RoughanRe: Cost of Advertising - Production and On Air-Time
by on May 30, 2012 at 4:13:59 pm

Thanks for your response Mark. many of our customers just come and say " I want a TV spot. We have X Budget." I have to work out how much to put into the production, that they still have a good whack for air-time. I can remember somewhere reading about this 10:1 cost ratio. I thought it might have been on this forum.
BTW, I have shot the commercial for the bus company. Finished up today. It was shot on a Panny AF-101, with Arri PL lenses. Very pleased with the pictures. I will give you a heads up when it finished in post. You might even see something you suggested in there...
Again, Thanks heaps for your input
Simon

A picture is only as good as the glass it comes through. And the person using the camera has something to do with it too.


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Mark SuszkoRe: Cost of Advertising - Production and On Air-Time
by on May 30, 2012 at 6:57:02 pm

I've been in those shoes. All I have to say is, you're lucky if you get what you pay for, and if you pay peanuts, you get...squirrels.


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Nick GriffinRe: Cost of Advertising - Production and On Air-Time
by on May 30, 2012 at 7:11:01 pm

Simon -
This reminds me of some of our older threads here on "how long is piece of string?" In other words, there are many, many factors affecting what percentage of a time buy is devoted to production versus airtime.

In single market, and especially smaller market TV, many advertisers are willing to accept almost anything for a spot so the ratio might be 1 to 99. On the opposite end of the spectrum we have the annual grand finale of the US version of the "football" season which is called the Super Bowl. Because the visibility is so high, not to mention airtime costs on the order of US$3 to 4 million for 30 seconds, it's not unusual for there to be spots that cost 50% or more of the time buy. Then hopefully that is amortized over additional time buys post-Super Bowl, but not always.

The figure I've heard often used for the larger regional and smaller national advertisers is 15 to 20% of the time buy going towards production. That is often lowered over time when spots are "renewed" every 13 weeks, meaning that the only on-going production-related cost is the renewal payment the on-camera actors receive as specified by their union contract. Some spots live on for years this way. (As do some actors who are receiving payments for spots they did many years earlier.)

Sorry to ramble, but, to the best of my knowledge, there are really no hard and fast guidelines here in the States. It varies.


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Simon RoughanRe: Cost of Advertising - Production and On Air-Time
by on May 30, 2012 at 8:24:59 pm

But Im not sorry to read you ramble. Thanks for the input. I find it cool and extremely helpful that we can discuss stuff and swap ideas and opinions around the world like this.

ps I look at the super bowl commercial line-up every year. But I prefer watching "real" football. that is, of course, Rugby Union. (I come from New Zealand) Sorry for the provocation! ;-)

A picture is only as good as the glass it comes through. And the person using the camera has something to do with it too.


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Todd TerryRe: Cost of Advertising - Production and On Air-Time
by on May 31, 2012 at 2:43:40 pm

Late to the party here...

This is a battle we too fight all the time. To me it's amazing that some clients will be happy to spend $50,000 on airtime and not think twice about it, but are more than happy to use that money to air a pitiful spot that the cable system or television station produced for $200... or even free.

Our usual argument to them is that it's much smarter to air a really good spot fewer times than to air a really bad one tons of times. Sometimes that works, sometimes it doesn't.

Unless we place the advertising ourselves (which we usually don't, as most of our clients are ad agencies), we usually don't know what the actual media budget is. I try to encourage clients though to earmark at least 20% of their total media budget for the actual production... or a little more if possible.

It really just depends on the client and the particular production, and as I'm sure you know it can vary wildly. We had an automotive client in the distant past that had well well over a $100K-per-month media budget... but they would gripe if a commercial cost them more than three or four grand. Conversely, we've had clients with a media budget that was a fraction of that, but they were happy to spend half of it to get the production values up. Certainly no hard and fast rules.

T2

__________________________________
Todd Terry
Creative Director
Fantastic Plastic Entertainment, Inc.
fantasticplastic.com



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Nick GriffinRe: Cost of Advertising - Production and On Air-Time
by on May 31, 2012 at 9:37:58 pm

[Todd Terry] "it's much smarter to air a really good spot fewer times than to air a really bad one tons of times"

If ANYONE has any research as proof of this I'm sure lots of us would like to get our hands on it. I've looked, but not recently. Anybody have access to the Harvard Business Review archives? They may have done a study on this.


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Mark SuszkoRe: Cost of Advertising - Production and On Air-Time
by on May 31, 2012 at 10:43:25 pm

Oh, yeah?



Explain that, then...


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Malcolm MatuskyRe: Cost of Advertising - Production and On Air-Time
by on Jun 1, 2012 at 12:15:21 am

I cannot run a "profitable" business competing with $200 productions, that is a joke, and not a very funny one. The "Ad buy" is irrelevant to me, the production budget is the only thing I can work with. If someone want's a cheap commercial, fine, but I will still make a profit on it, if not I pass on the "job" otherwise I am subsidizing someone else s business and lifestyle, and I am not too interested in that. I am very happy to tell a "client" (prospect) to shop elsewhere, I will not loose money on their job, just because they need it.

M

Malcolm
http://www.malcolmproductions.com


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Richard HerdRe: Cost of Advertising - Production and On Air-Time
by on Jun 1, 2012 at 7:20:37 am

Funny you should ask.

Disclaimer: I can't name names. Sorry.

HBS -- colleagues of mine -- hate advertising dollars (and I mean hate) because it's so hard (he said "incommensurate") to track actual ROI. It has been proven that Customer X saw the tv Ad and received the direct mail and also is friends with other customers (meaning they heard word of mouth). When you ask customer "how did you hear about us" they say "friend told me." Yet it can be proven (via other data streams) that customer saw ad and received mail.

You'll recognize this from another point of view, so let me say I've been reading your posts for quite some time and have profited well from it, so thank you! In return let me say...

You've said some if not many of your contacts (long term, familiar advertisers) were laid off and now you're forced to work with newbies.

Here's why, from an HBS analytical point of view.

It's a better ROI to fire all the advertisers and retrain some employees as direct sales associates. That means, they make telemarketing phone calls.

Sorry it isn't good news :(


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Todd TerryRe: Cost of Advertising - Production and On Air-Time
by on Jun 2, 2012 at 5:28:46 pm

[Nick Griffin] "If ANYONE has any research as proof of this I'm sure lots of us would like to get our hands on it."


Well, I didn't say it was true, Nick... I just said that's what we tell clients. :)

After all, we are in advertising, too....

But obviously we want them to put some of their money into creating a decent production, rather than bombarding the airways with crap. Not only because it's how I make a living... but I don't want to sit at home and watch the bad stuff either (and see it keeping the quality bar low).

T2

__________________________________
Todd Terry
Creative Director
Fantastic Plastic Entertainment, Inc.
fantasticplastic.com



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Michael HendrixRe: Cost of Advertising - Production and On Air-Time
by on Jun 1, 2012 at 2:23:58 am

Another thing to really consider is, typically, agencies and station reps get commission on air buy only. I spent 16 years in broadcast and worked with many reps who pushed hard for cheap production because it cut into their commission. Agencies get paid percentages from stations as well. Usually, they outsource 95% of the production budget so they are not making much off of the production as well. Agencies do have more at stake because at least they have somewhat of a reputation to protect.



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Simon RoughanRe: Cost of Advertising - Production and On Air-Time
by on Jun 1, 2012 at 6:21:30 am

Testify, Brother!
I spent a great deal of time and stress fighting with the sales on this exact point. Production has real, calculatable costs, where as air time is only a file in a playlist. One suffers at the cost of the other, because the sales people make commision just with air-time. its taking money out of the left pocket, and sticking it in the right. But the trousers still belong to the company.

A picture is only as good as the glass it comes through. And the person using the camera has something to do with it too.


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Jim LillisRe: Cost of Advertising - Production and On Air-Time
by on Jun 12, 2012 at 3:22:03 am

After many decades in the production business, I found that by completing the full circle of production/air-time buys, I had less %'s to worry about.

Produce the commercial with us, buy the air-time with/through us, everyone comes out as a winner then.

Do the math.
A 15% buy commission can do what to your production costs?

If it moves . . . Shoot it!


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