Video Production Rate Card Best Practices
I'm the Creative Director for a TV station in Virginia, USA and I'm looking to potentially overhaul our production rate card. However, in order to keep it fair, yet profitable, I just had a few questions for the production house owners/freelance video professionals out there:
- Do you have variable rates based on what equipment a client requests (ie. do you charge more for a shoot that requires a jib/dolly/steadicam than you do for just a standard camera/tripod shoot?
- Do you have a separate charge if a client wants to keep raw footage? If so, how do you determine that: flat rate, or charge by per minute of content?
- How much overhead do you build into your rate card? What safeguards do you have to ensure that you don't lose money on a video project?
As this is my first gig overseeing a Creative Services department, any and all feedback will be helpful. Thanks in advance!
My wife asked the immigrant owner of our neighborhood Chinese restaurant why she never closed, even on Sundays and holidays.
In broken English, she replied:
"Landlord charges me rent every day; so I work every day."
She meant, any day she was not billing people she still had costs to pay to stay in business. You could argue that she's not charging enough and if she charged more she could perhaps afford to take Sundays off. Anyway, it takes me to this:
You own all these cameras, jibs, etc. and are paying depreciation and other costs on them no matter if you bill specifically for their use or not. Isn't it easier and cleaner and more efficient, to just tell the client that one simple rate gives him access to "all the toys", whatever they might need - without the nickle-and-dime a la carte' pricing? If their budget is lower than another client, do you apply any less skill or creativity to their work, or do you treat every client like they are your biggest client? (I hope you do). Clients love to feel like they are getting special treatment, so you could do things like always charge a uniform rate, but mark the use of an expensive jib as "complementary: no extra charge". This can help mousetrap a competitor, if the client goes rate-shopping and asks what their rate will include.
Another 2 problems with line by line rates for each piece of gear used is that it tells your competition and clients every detail of what things cost you, and thus, also your profit and margin; this is all proprietary secret sauce you should keep to yourself. And, the laundry list of tools and prices invites the untrained client to start going thru them line by line, challenging the need for them, and telling you what tools to use to do your job. That's not the client's job, you're the pro. Outside of a few main details like can I afford pine or oak, and what paint color the walls are to be, I wouldn't expect to tell my carpenter what nails to buy and where, what hammers to use, or that a chalk line was good enough and I wasn't going to pay for him to use a laser level for truing-up the frame.
As to the raw footage, do some googling of the legal case of Flagler vs. Walmart or Walmart V. Flagler.
You will want a written memo in any contract that specifically lays out who owns the raw footage, the project files, EDL editing metadata, etc. and what the rate is to provide copies, BEFORE productions start. Typically, the client owns just a copy of the finished work, and dubs from that.
You can choose to keep the raw footage, which is no use to you except in the context of doing additional jobs for the client, or build the cost of the blank media and archival storage into the budget, charge the client, and then hand off the raw media when the project is over, one way or another.
I would not give away project files or EDL's or anything like that, and I would resist selling them too. That's also part of your "secret sauce", your proprietary work product. You give that stuff away, someone else can take over the project from where you left off, and not have to spend the same number of hours putting it all together. You want repeat business, so if they want to come back and tweak a tag on an existing spot you made them, they should get a discount because you still have those files and can make the change faster and thus cheaper than someone who has to build the spot from scratch. This way you capture their repeat business, instead of letting them escape to shop around for lower rates after your editors did allt he hard work. You give away the project files, and you're giving away billable time, so either refuse to release it or at least charge appropriately.
We mostly charge flat rates...
We have a rate for location or studio shooting, and that includes any and all of our toys that you want. Or none of them. It's basically the same rate if you've got a dolly, jib, 30' of track, 5 HMIs, with all kinds of frames and silks.... or just me and a handheld camera. The value of our company is the people, not the hardware... so if a crew and I are tied up it doesn't matter if we are using a little bit of gear or a truck full. SOMETIMES we'll have some add-ons, like if we have to rent a couple of extra HMIs or other pieces of gear, but it's mostly the flat rate. Our only real extra rate is for Steadicam work, and only because I have an aging and tired back. It's like a "God-do-I-have-to-wear-that-heavy-thing Tax."
Of course, stock and expendables get added on... while we have the same rate for shooting 35mm film as we do crappy DV video (not that we really do much of that), obviously a client is paying for the filmstock, too. The same is true for extra crew members, if we need more than we usually travel with.
This is the complete opposite of another production company here in town, where everything is À la carte and they generate the most complex (and lengthy) invoices you've ever seen. A bill from them will literally list how much gaffer tape was used on a shoot. That's not an exaggeration. We like to keep it simple though.
The same is true for post production in our edit suites. Whether you just need to capture some tape... or do heavy-duty uncompressed editing with all kinds of compositing and using every program in the house... it's the same rate. Anything that happens in an edit suite has the same rate.
Fantastic Plastic Entertainment, Inc.
- How much overhead do you build into your rate card? What safeguards do you have to ensure that you don't lose money on a video project?-
How much of a gambler are you?
The longer you do this work, the better you are at estimating time and thus costs, and the better you are at planning, and the more pre-production organization you do, the more accurate those forecasts get, but there will ALWAYS be some kind of surprise that pops up and adds time to a job. This is why I hate to give a flat fee quote and always prefer to bill by hours. More hours = more costs to you = more costs to the client. If you charge a flat fee and unexpected costs come in, it comes out of your margin, might even make the job end up costing you money, or force you to charge the next guy more to cover your previous mistake.
I have heard markups for contingencies of anything from 2 and 5 percent to ten percent. I have also heard of guys giving the client a rebate or more often, a discount on the next job, after a gig, if the costs turned out to be way lower than expected. Not lately in this economy, tho.
Thanks for the tips/info, Mark! Everything you've mentioned is very insightful and is a tremendous help. Your second post did touch on another question I had thought of...
Do you every negotiate your rates based on a client's budget? Or is the rate card, the rate card? In other words, do you stand by your rates because you believe they are a fair compensation for your skills?
To clarify why I'm asking: this is something I deal with regularly in the TV station Creative Services world. My team's services are often thrown in as add-ons. Whatever the Sales Manager and GM of the station deem necessary to sell airtime to a client, they will do (ie. free spots, free commercial production, etc.) So I was just wondering if the same sort of thing has to happen in the independent production house-type world.
"Do you ever renegotiate your rates based on the client's budget?"
No, the rate is the rate, that's how it has to be. You got thru a LOT of work determining what the rate is, to come up with a figure that is competitive but that also is the least amount you can charge and still cover your costs, your profit margin, and a little something in the bank for the future of the business.
Anything below that set rate thus is a leakage, a loss. You would be better off doing something else like training on new software, or beating the bushes, marketing for new clients, than taking a job below that figure. Back when Amigas were cutting edge, an Amiga authority in the biz told me: "I don't turn the machine ON for less than a thousand." That's not arrogance: that's understanding Opportunity Cost and rates and knowing that below his magic number (different for each person), it's unprofitable to coddle certain clients that won't pay their way.
So what do you say to a client that says he can't afford to do the spot at your rate?
You use your skills to go over the spot with them, to see how your expertise can lower their costs in specific areas, then re-run the numbers for the bid... There's no budget for a jib? You can point out that you can still get a high shot off a ladder or a pole for less money... BUT, it reduces the ability of the shot to flow, and how much is that worth to the succes of ther project? You can use "free" actors, and save money over a pro actor, but... will they look as good? Will they take more time to perform the perfect take, and then what did you save? You can substitute zooms for some dolly moves, but explain how that affects the look and the perceived level of quality. Then the client can make informed decisions and maybe he gets over the mental cost barrier because he knows what he's getting for the extra money. It's about managing expectations and client education, and not just assuming a client knows enough about the process to be discerning.
The other thing about violating the sanctity of the rate is, like your virginity, you only get to give it away once. That is to say, once a client gets a below-rate deal one time, they will always demand that rate, and worse, they usually blab about it to other potential customers and soon, you can't get anybody to take that rate seriously, they think it's just the starting point of a downward negotiation. You can't win this game. So you never lower your rate, rather, you annotate the bill with a "special one-time discount" here and there. See, psychologically, people don't truly value anything they got for free, no matter how good it is. A major rule of negotiation is that the other guy has to believe you're willing and able to walk away if you don't meet your price. I would rather do a production for free, as a charity decision, than do it for a bottom-feeder rate, because that doesn't allow people to nag my actual rate down, rather, they feel they "got away" with something by having something normally priced at several grand, for nothing. There is thus no automatic expectation created that the next project will also be free.
As far as the rest of the question, the creativity of your production team is not something easily commoditized as the price of a pallet of tape stock. When the Herb Tarlek guy in Sales tells a client he's throwing in your production services for free with a time buy, is Herb even considering what the real value of those services are? Is he communicating that to the client, or is he pulling a number out of his, em, hat?
When you're in a situation where you can't bill for money, like a corporate or academic revolving fund, it still makes sense to compute the bill and submit it as representative of the time and talent that went into the job. You can then say: "Look we put $2k worth of time and talent into the production at normal rates, which Herb here has invoiced as "N/C". The client needs to know that value, and Herb needs to know that there are only so many hours in a week and that the comped clients have to be held to a budget of x hours a week, or the jobs we DO charge for won't cover all our costs. Freebies past that limiting line have to wait until next month to get more freebies so we have room for the paying customers. If a client wants to jump to the head of the line for their "free" production, that needs to cost something".
When your production section gets reviewed at the end of the year, this paperwork is what proves you did x amount worth of work for the company that year, whether it was actually billed or not. This can affect what budget you get allocated for new gear and staff for the next round. If a bean counter only sees your costs for the year, and nothing that represents revenue or potential revenue or some kind of offset, prepare to become outsourced soon. You have to defend your existence with hard numbers.
Finally, some of the wise men here will give you anecdotes of exceptions to the rule, occasions where they did go lowball and it wound up the best move they ever made because they got a lifetime loyal and rich client that more than made up for the one-time loss.
I caution you: such wonderful stories are easy to remember - because they are comparatively rare. None of the old kahunas here who tell such wondrous tales will admit that because this one time it worked out like a lottery win, then it means they accept every lowball offer and ignore their rate structure with abandon.
Rather, I think what it means is, maybe they are shrewd judges of client character, or they are just good gamblers that got lucky a time or two; I mean, they all do occasionally. And those magic times are very memorable. But in the long run, the House always wins.
[Mark Suszko] "You can use "free" actors, and save money over a pro actor, but... will they look as good? Will they take more time to perform the perfect take, and then what did you save?"
It's my long-held belief that amateurs ALWAYS end up costing more than professionals. And even though I had a recent memory lapse and used a friend rather than a cast professional to get a certain look, I have once again had this adage proven to me.
Amateur talent simply doesn't know what they don't know. Whether it's something simple like repeatability for continuity between takes, or inflection and timing of delivery, or any number of a hundred other things that affect production, PROS are CHEAPER than amateurs EVERY TIME.
I'll chime on the same side as Mark & Todd. Dolly & jib are simply competitive extras that these days come in our toolbox of visuals. In my experience, even if the client doesn't necessarily know why, he or she can see that tools like these make our footage look more elegant, more smooth, more "Hollywood" than that from a fixed position. The same was true with the upgrade to HD about 4 years ago. In fact we still sometimes find that we are competing against (usually individuals) still shooting in SD. I just ask that they compare reels side by side and then bring up the whole "future-proofing" thing.
Whether it's for the shoot or the post, the clients get what we have. However if they want the look of a Chapman crane descending from sixty feet down to ground level that's not something we, or anyone we compete with, has. So that's the cost of the rental, the operator(s) and a modest mark-up. HMIs are in a grey area. If they can be included in the budget, great. If they're needed, ie.- for something BIG, and the budget is already bursting someone's seams we'll eat the rental to preserve the look of our work. That said, it's rare that I'll let someone see individual item costs -- especially the outrageous amount we charge for gaff tape.
Gaff tape: REAL gaffer tape - costs more than home center duct tape, and it costs more for a reason. The gaffer tape is dependable for one thing, but more importantly, it's adhesive is special: it won't remove paint or other finishes from the location walls and other items, it won't mar a gym floor, for example, or tear up an expensive carpet like duct tape. Nor will it leave a sticky area that gathers dirt later. Those qualities cost more so we charge more.
That's my gaffer tape speech I give people when they watch us using the stuff and marvel that it's $20-odd dollars a roll, and they are aghast at the cost. The cheap stuff is two dollars a roll, but you might have to spend $50 to repaint the wall or fix a floor after you pull it. Pros use professional tools.
[Mark Suszko] "That's my gaffer tape speech"
Here's mine, or more like an anecdote...
My mom was in the hospital last week, fairly serious in Cardiac ICU (she's better and home now, thanks for asking)....
The air conditioning unit in her hospital room had two settings: ZERO and ARCTIC BREEZE. There simply was no in between, it was either a sauna or a 30mph-wind-in-a-meat-locker. We ended up putting up some loose towels to partially obscure/deflect the vents, all gaffer-taped up good so they were attached at the top and bottom but billowed out like a sail in the middle. I happened to have a roll in my bag.
Well, now I wish I had gaffer tape stock concession there. I bet I coulda sold 50 rolls of it that week. Almost every single nurse, orderly, doctor, therapist and every other visitor marveled "What is that great tape?"
I ended up promising to email links to at least five different people where to buy it.
Fantastic Plastic Entertainment, Inc.
[Mark Suszko] "it won't remove paint...from the location walls"
Okay, Mark. I agree with everything you said EXCEPT that part. I've had gaffer's tape pull enamel paint off wood surfaces. Other than that, especially things like marking spots on carpet and flooring with no residual marks whatsoever makes it worth $20+ a roll.
Thanks for the feedback, Todd! I really appreciate it!
Everything you said makes perfect sense, especially the idea of not "nickel-and-diming" the client. It sounds like your competition down in Huntsville is a bit over-zealous with the details. Charging for gaffer's tape is ridiculous!! I'm shocked they have any business.
On another note, I believe I was in contact with your colleague Phil Schmidt a couple years ago when you all were looking to hire. The economy tanked, and you had to reconsider bringing in someone new. Ask Phil if he remembers the guy whose email spit out a bunch of duplicate replies (I still don't know why that happened!) I'd love to get back in contact, and get your feedback on my video samples:
Haha, ok Nathan, I'll ask Phil.
Yes we casually looked for an additional editor a couple of years ago, but never hired anyone. Fortunately our work is busy and production schedule is full, but so far we're handling everything with the staff we had.
I'm just glad the economy didn't hit us too hard and we managed to stay afloat and relatively booked up. I can not say that for several other production companies here, who all went bye-bye.
Fantastic Plastic Entertainment, Inc.
Sorry I know the "let me know what you think" wasn't directed towards me but I just took a look at your site and have some thoughts.
I'm not meaning to be harsh at all, but I felt like I took a step into the 90's when I went on your page. I have a feeling you have a ton of great, new and modern work, your site should reflect that. I use square space for my portfolio website, stopped using wix years ago because of the clunky look their sites can give. The cleaner your site can be the better. For the contact page, you should have an email form rather than your actual email (this gives you a more of a pro look). The thing that confused me the most at first was the 3 pages labeled portfolio. Your website is literally your online resume so only include the top 3-6 videos you've ever made.
The reel you had featured was ok, but I feel like (either you should replace it or) there's a few things you can do to improve it. First things first; take away the awkward titles in the beginning, its giving me a blast to the past. If you want some titles in your reel, make them integrated in a way thats more modern. I've never been a huge fan of titles in reels personally, but if you're gonna do them you should do them in a style thats more relevant to today. Combine your two reels, they shouldn't be separate and you should only show your best stuff. An awesome reel I stumbled upon recently is this one: This guy's got it down, I think it would be great to look at to come up with some ideas. His website looks great too: http://jasoncalhoun.net/
Sorry if what I'm saying seems harsh, I'm just trying to give you a push in the right direction.
if you look down a bit, I started a thread with more or less the same topic a couple of weeks ago. I too am a producer at a regional TV station in Germany, and believe you me, everything you and everyone else here has touched upon, is relevant here in Europe too. The sales people giving away the production without the slightest inkling of what is involved, is a constant thorn in my side. Lsat year, I started a topic looking for advice on how to deal with this particular situation, and have responses ranging from helpful and productive, to basically saying "quit if you don't like it!" My biggest problem is that when they give a production away, the costs never go down on the accounting books. It looks like my job loses money. I do quite a few bigger jobs, with a (sometimes) healthy budget, but I also do a lot of these freebies. Mark said "That is to say, once a client gets a below-rate deal one time, they will always demand that rate, and worse, they usually blab about it to other potential customers and soon, you can't get anybody to take that rate seriously, they think it's just the starting point of a downward negotiation." Thats where the shite starts.
When a company sells a custom kitchen, and advertises that over $5000 the oven is free, it doesn't mean that they are giving the oven away. It means they are covering that cost elsewhere. Its still on the books. When you sign a mobil phone contract, and get an iphone for no cost, it doesn't mean the $700 phone is a "giveaway".
My sales team see the world through blinders. There is a world of difference between "You only have $5000? Then we can produce a spot for nada, and you get 3 weeks air-time" and "You only have $5000? For that we can make you a super cost-effective package, that includes the production of a spot, and 3 weeks air-time."
But the sales people just cannot see it like that.
But anyway, good luck, and just know you're not alone in this boot...
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.
Thanks, Simon! It's good to know that I'm not alone when it comes to these kinds of issues. I'll check out your previous forum thread for some ideas/solutions.
I think the more perspectives I have from other video professionals, the more "ammunition" I can bring to the table when the topic of free production comes up. I've come to realize that I have to pick my battles. Some clients are too important to my station that whatever deal has been cut, it just has to be that way. But I can put my foot down to avoid some of these "built-ins".
Thanks again for the support, and God bless in your video endeavors!
This thread is in serious need of a dissenting opinion.
Sure, there are standards that you use. But you want to decide what you consider your "standard" package. A dolly and a jib? Depends on the dolly and jib.
As for the same rates for 35mm film and miniDV, that's crazy. It's not just the stock, it's the cost of the camera, its maintenance, and its peripherals. You're not going to bill the same for an Alexa as you would a 5D. Decide what you consider standard, but cameras, HMIs, a dolly, and a jib should be line items.
You can always give your client a deal but you DO NOT want clients to assume that certain things are included. What happens when the house across town decides that they're going to include free Corvettes for their clients? They get the work and you don't but neither side makes money on the production.
Don't nickel and dime but the big-ticket items should be line-itemed. This includes each individual actually working on set.
Also, markup is a funny thing. That's where you make your real money. It used to be that industry standard was 50% markup. It still is for some things but it's hard to get that for industrial/local-type productions. Personally, I feel the 2-5% is quite low. Why even charge markup at all if it's 2%? Minimum should be 10%. But project management, contingency, and markup are all different things.
PROJECT MANAGEMENT: What you charge for running a project, including everything from quotes to execution. If you're the creative director for a station then you are probably salaried. This is where the station (or production company) makes the money to pay your salary. 10% of production cost is standard.
CONTINGENCY: This is what you bill in case your estimate was not adequate. Perhaps a computer crashes and you have to go out and buy one. Maybe the DP gets food poisoning and you have to bring someone else in after lunch (they still both need to be paid). You're building a buffer with contingency so that this doesn't eat at your profit. You don't have to charge a contingency if the production doesn't go into these extra costs.
OVERHEAD: This accounts for things that you can't bill the client directly like rent, electricity, equipment, support staff salaries, etc. Overhead is not profit.
MARKUP: This is where you make your money. Don't charge less than you think you should. Pick an amount and bill it, but you have to charge some.
The important thing to remember is that your client includes all of these costs in their own budgets. Sure, they're going to want the lowest budget possible but it needs to be worth your time.