Are Chop Shops Shrinking Your Media Profits?

Have you noticed people wanting to pay less for video production services? From the big boys to the non-profits down the street? Some chop shops are filling that niche, but what does that mean for the rest of us? In this blog post, we’ll look at video marketing trends and see if there’s room for change.

I recently had a production company that creates a well know reality series on a major cable network contact me for a half day of camera work for $250. I’ve run into that low of offer for a full day’s work as well. While it could work for someone starting out, it brings up a multitude of problems. For one, the half day of work is a myth, after prep and travel, your day is spent. But that’s also simply not enough for the freelancer or production company to function when you include the cost of equipment, marketing, dues, healthcare, etc.

Companies are popping up to meet that need. Companies like Pixel Fish, Demand Studios, Knowlera. These companies rely on a large database of independent producers, camera operators who are willing to work at a cut rate in order to offer their client a very inexpensive product. A few of these companies offer livable payment levels if you work with them in bulk, however, most do not offer rates at a sustainable level. They do meet the needs of a niche market.

On a larger scale, there are companies willing to pay an appropriate rate, but it seems like the national conversation about the increasing divide between the middle and upper class also applies to the film and television industry. The good paying film and media jobs are getting fewer and farther between.

Part of this has to do with the cost of equipment coming down, which, lets face it, has been overpriced. I remember paying $400 for a one foot long custom monitor cable for a studio camera about 10 years ago, or $25,000 to $50,000 for color correction software. And these are just low budget examples.

The broadcast verses cable verses the internet is another factor. Ad dollars spent on most forms of television dropped while ad spending for cable increased by 5% the first quarter of 2013 compared to the first quarter of 2012.

The slowed economy has likely played a part too.¬† According to ComScore, video views have increased by 1290% since 2006. However, ComScore’s research also notes that ad dollars for video marketing have fallen notably behind the amount of video being viewed, as indicated in this graph:

130818-Graph

But research also indicates that advertisers simply don’t trust internet video advertising yet like they do the old standbys, broadcast and cable.

So what does all this mean?

First, there are market places for video that are not being taken advantage of. It’s up to us as professionals to find them.

Second, our clients need to be educated. Video is effective at making them money, whether by entertaining or by direct solicitation. We need to identify those ways and talk our clients about them.

Third, hiring someone at a cut rate, whether a large company or a local outfit comes at a cost. A well studied and exacted media piece is far more effective than a quick edit filled with stock footage. Successful companies still understand this and know paying extra for experience and specialized services will equal a greater return.

In summary chop shops and those new to the business can and will manufacture video at a cut rate that is less effective and not sustainable. It’s up to us as production and post facilities to either seek out the fewer clients who know the difference effective media can make or educate the large group of “middle class” clients about the increasingly underutilized world of video marketing.

Written By: Nikia Furman, Filmmaker

Next Month: Give Yourself A Creative Tune-up

This Production and Post thread discusses current issues filmmakers  and media professionals face everyday in production and post. For the most part, it will focus on issues the average filmmaker is facing, from software and equipment choices to budgets and organizational solutions with interviews and advice from people who have been there before and know how to get the job done. You can get monthly tips and insights, participate in and learn from the results of related surveys, join in the discussion and ask questions. Click here to sign up.

Budgeting for Video Marketing: Where to Start

nConnect Urban ForestryIt can be difficult knowing just how much you should budget for media marketing. Here are some factors that will help you know how much to spend.

First lets look some statistics. The Online Publishers Association says 80% of people remember watching a video on a website they visited in the last month. Of those, 46% took action and 12% purchased the specific product featured in the ad.

According to ComScore, website visitors are 64% more likely to buy a product after watching a video.

A typical business will spend between 3% and 8% on marketing.

Conservatively, you can then break that down into spending about 5% of your marketing budget specifically on video, or about 5% of the expected profits from a campaign.

However, many spend considerably more than just 5% on video marketing simply because video can be so effective. For example, if video is a key component for an event that includes your primary call to action, you could justify spending 50% or more of the event budget on the media piece.

You can also get more bang for your buck by using a specialized media company. For example, my company can usually deliver 10% to 40% greater results than media clients create in house or by using other companies. That difference is due to a 15 point analysis I’ve developed for my non profit clients. (We will save the topic of how not all video marketing or fundraising is created equal for another post.)

Lets look at a small campaign where the goal is to raise $100,000. If you use a video to make your key appeal at an event, you’ll likely increase your returns by at least 10%. So by spending under $10,000 on a video fundraising piece, you will likely still make a profit. In fact you could make $20,000 to $40,000 or more.

In a larger campaign, say a $1,000,000 campaign, the results could be even better. You could bring in as much as $200,000 to $400,000 more. Again, I have to stress these results would only come from a stratigic media piece and not likely from a video created by a volunteer or internal staff member who “does video on the side.”

Alternatively, you don’t want to spend too much on a video. If you are working on a smaller campaign and you expect the profits to be around $50,000 for example, it doesn’t really make sense to spend more than $5,000 where you would just be breaking even.

Keep in mind that a video’s worth is more than what it might bring in at a single event, since it will likely have a long shelf life and can be shown over and over again in various ways and places for a year or two.

Also, the bigger your budget is, likely the less you’ll need to spend on marketing. Walmart, for example, spends only 2-3% of its budget on advertising simply because it’s total budget is so large. However, the larger your available budget, the more you’ll want to maximize your resources by creating videos that focus on segments of your market or constituency, using surveys or focus groups to make sure you are meeting their needs and using higher end video production techniques, talent, graphics, etc. In a larger campaign, these elements will add hundreds of thousands, possibly millions of dollars, in income.

Questions or comments? Feel free to post them below or contact me personally.

Next month we’ll take a look at video analytics and what results you can expect from posting a single video versus multiple videos.

July Video Marketing Recap:
I had some good feedback from last months post, A Helpful Video Marketing Checklist. No takers on the survey however. Let me know if you have questions you would like addressed or topic suggestions for upcoming posts.