The advertising business is a strange mix of creativity and finance that often pulls agencies, production and post companies in opposite directions. Over the years, standards have been created concerning budgets, rates, the bidding process, contracts, negotiations and expectations. But even with standards of practice, budgets for the similar jobs can vary widely and vendors will sometimes lower their rates for an alluring creative concept. Not exactly lessons taught in business school.
Version 2's Linda Rafoss says post houses need to include time for revisions in their bids.
"You're always surprised with the budgets," says Michael Feder, executive producer at Hornet (www.hornetinc.com), a bicoastal design and character animation house. "A simple retail job can be over $200,000 and a major brand only has $150,000."
The bidding process all starts at the agency with an overall budget and reels. While this business is firmly rooted in relationships, agencies still scour stacks of reels to find new talent and determine who is best for a particular job. "You want to have as much diversity as possible, but you also want to have a family that you can depend on," says Janice Pietrangelo, VP/director of broadcast services at BBDO, Atlanta. "When you test out a new vendor, it's scary. [The person at] the agency who picks that new vendor has a lot of responsibility if it fails. We have in recent past failed with some vendors where we had to pull out and pay full price [somewhere else] because they just weren't delivering. It wasn't their fault. They were doing the best they could but it just wasn't something our head creative was satisfied with, and BBDO ended up eating the cost. And this was an animation house that is very well known and that we'd worked with successfully before. That's why it's crucial to match up the right agency creatives with the right production people."
Despite the fact that agency producers say they award jobs based on talent with money being a secondary consideration, post companies in today's highly competitive marketplace are still more apt to submit lower bids to win the job. Furthermore, if intrigued by the creative, they will lower their prices to the point where they may lose money.
"There are jobs we'll take on knowing that we'll only break even or even invest in it," says Rick Hassen, managing director of visual effects house A52 (www.a52.com) in LA. "The [production] business is not a great example of financial management per se. You're not going to find too many other businesses that consciously go into a project knowing they won't make money. If you sat down with investment bankers who don't understand this business, they'd probably scratch they're heads."
THE PHONE CALL
The bidding process for post houses begins with the agency notifying them that they'd like them to bid the job, which is no small accomplishment considering the agency has poured over hundreds of reels and selected about three from that group. "They don't give you the boards unless they like your work," says Hornet's Feder. "For us as a young company, just getting the boards and being asked to bid a job is a big step."
After the boards are received there is the all-important conference call between the post house and the agency creatives, a call that can win or lose the job. "A lot of times the creatives will talk to an editor or owner of a post house and say, 'This isn't going to work, there's no connection,'" says Pietrangelo. "The best thing I've seen is when creatives walk away from one of these calls enthusiastic because someone just added something to their work. It's exciting for the creatives to see their ideas grow and evolve."
BBDO Atlanta's Janice Pietrangelo says for a recent Cingular spot they were able to keep the budget at the average commercial price: approximately $350,000.
For the suppliers, this phone call is where the dance begins. "Creatively, you don't know whether they really want you to go in there and change it and add new ideas or whether they're happy with what they have. So you want to be very careful that you don't jump in there and say something that creatively is not what they are looking for. It's a communications game. The call is all about energy, and the thing you want to hear on the other end of the phone is, 'That's what I was thinking.' The reel is what really sells your company, and you can have a great reel but if your director can't talk effectively with the agency you're in trouble.
Feder explains that after a successful call with the agency, you have a few days to get the agency a budget and schedule. "Over those days it's good to call the agency just to make sure nothing has changed. You can find out if some other company's giving them a free test and you can decide whether you want to compete with that. Free tests have become a big part of the business," he says.
With editorial and many other aspects of post, it is not too difficult for experienced post producers to determine how much studio time a project should take. "Every edit house bids slightly different," explains Linda Rafoss, executive producer at Version 2 Editing (www.version2.net) in NYC. "A project's footage and the type of edit are big factors as you determine the number of Avid days. The price also depends on the editor - whether it's an up-and-coming editor or one that's been doing it for 30 years - and some of it depends on the creative. If we find that an editor is very interested in cutting a spot, we have incentive to wave part of the creative fee. Plus, there seems to be less and less of these desirable boards, so on a hot board the bidding between editorial companies is very competitive."
One thing that can throw a monkey wrench into the editorial budget is when they get into revisions. "Often you have to take into account the client, the agency and the job itself," says Mary Caddy Reigert, executive producer of Avenue Edit (www.avenue-edit.com) in Chicago, a full service post house. "If you're working on a new image campaign, the agency and the client are going to want to see it cut a number of different ways so they feel they've gotten the best possible product. There's a lot more exploration to make sure everyone is happy."
Hornet's Michael Feder: "Free tests have become a big part of the business."
Revisions can eat away at a budget and lower profitability. And the post pros we spoke with say the number of revisions is increasing. "Projects are taking longer to get approval so lessons are learned the hard way," says Rafoss. "You need to make sure you err on the side of having extra Avid days. Otherwise you end up working for pennies a day on revisions. If a client demands a flat rate, I bid a flat rate not to exceed a certain number of days. If you don't do that you get into this hair-splitting thing where you are arguing over what constitutes a change in specs."
Agencies usually make it clear with the way they operate and how long the approval process will take. "Our agency is a tough place for suppliers," says David Frankel, senior VP/associate director of TV production at BBDO, New York. "We like to try things, we like to change things, we like to sit with a change and then see it with fresh eyes a day later. Then we may want to change it again. If an editor knows that at BBDO - no matter what we say - it's going to take two weeks before we get a rough cut everyone is happy with and they only budget for a week of Avid time, that's a difficult situation."
While editorial and other post suppliers can usually be bid accurately, the process for production and visual effects is another ball of wax as budgets can vary widely depending on the company's approach.
"If the visual effects are very complicated, we have to be confident in our choice of suppliers and their estimate of how long it will take," says Frankel. "We did a Pepsi Twist spot and there was one effect the spot was built around. I got bids from two days to three weeks. At that point I had to wonder if I had expressed myself properly. But sometimes effects are hard to visualize and explain. You tell someone that a motorcycle will morph into a rocket ship and then blast off to Neptuneâ€¦ well everyone has a different concept about what that should look like."
Spots with a lot of effects require the agency and visual effects company to be as concise as possible to ensure an understanding, creatively and monetarily. "We try to get a treatment from the director and have talks with them and the agency so we can accurately bid the job based on their vision," says A52's Hassen. "We try to be up front about what responsibility we're taking on. Do we have a post supervisor on set? Are we getting the live-action elements we spelled out in our methodology letter? If it's a flat bid and we don't get the elements that were expected, then we tell them that it's going to probably run over."
Often, agencies will tell bidders what the overall budget is. Sometimes they prefer to withhold that information to see where the bids come in. And other times agencies will simply issue a flat rate for the work. "Sometimes we will offer a flat fee but you have to be careful, you don't want to offer $50,000 if it can be done for $20,000," relates BBDO, Atlanta's Pietrangelo.
A52's Rick Hassen says it's financially wise to have a visual effects supervisor at shoots. They did just that for this recent effects-heavy AOL spot.
Hornet's Feder will often ask what the total budget is before submitting a bid complete with budgets and schedules. "When I ask them for the overall budget, I tell them, it's not a trick question," explains he. "If something is $100,000 or $200,000, there's different ways of approaching it. There's different ways to do effects, character animation and design."
With more effects required in spots these days but with shrinking budgets, visual effects artists are finding themselves thrust into the role of a quasi-agency creative. They are now being asked to come up with a plan that will achieve the desired result but will also fit in with the budget constraints. "Being on set, working with production can help," notes Hassen. "We can figure out what elements we can get on set and have the same essence without spending all the money to do it in post. Everyone across the board now has to work more collaboratively. It's nice to sit down with the directors and the agency creatives and have them actually listen to you."
If a spot is based around the effects, the agencies are more likely to let the production company, or the editorial company, handle the supervision of the visual effects.
THE SOUND OF MUSIC
While sound design and audio post remain fairly constant in terms of rates, music production can fluctuate tremendously depending on the style and scope. "If you're wanting an 80-piece orchestra to score an original piece of music, that's going to be very expensive," notes BBDO's Frankel. "If you do it electronically, that's much less costly." Even though music can be quite expensive, competition among a wealth of talented composers makes music production "a buyers market," he explains. "You can shop around and get bargains. There's lots of deals to be made and lots of music houses will do stuff very inexpensively, and just about all will do demos."
The demo process is essential to the music bids because it gives the agency an idea of what a certain composer can bring to the project. In addition, it has made the life of agency creatives much easier when dealing with their clients. "If you show a client a rough cut with the Beatles on the track, and the client loves it, you're in big trouble," says Frankel. "Instead of using an existing piece of music that you're not going to be able to get, you can explain to a composer what style you're going for. Most music houses will crank out a lot of variations on the same theme."