Planning (and Plotting) Your Budget - Part II

by Marshall Such

The thing that chaps my butt, frosts my cookies, just generally ticks me off is this: Radio is the only advertising medium where the production costs to station advertisers are free!

Go to your newspaper, or local billboard company, or the cable or TV station and tell them you'd like to buy some space/time. Find out what their production charges are, and you'll find that they range in price from $25 for a simple newspaper layout and up to $2,000 for a basic TV spot.

So what does this have to do with you getting money for new toys and cool efx packages? Plenty.

The way I see it is this: When you sit down to write a commercial for one of your station's advertisers, book a talent (even if it's Midday Monica), then record and produce the voice track, add the music and effects, and then mix your masterpiece, you (or actually the station that pays your salary) should be compensated.

And through this compensation, you will create revenue that will add to the station's bottom line that will make your request for a new DAT machine (if you missed the first part of this article, you should be a Radio And Production subscriber) seem inconsequential.

Reality Check

I know what many of you are thinking: There's no way our advertisers will pay additional fees when they are used to getting it free.

But think about this: Have you ever received a free service when purchasing a product? What immediately comes to mind is having business cards designed. If you go to your local print shop to have some snappy cards made up for your free-lance biz, you will be shown a catalog with stock fonts and standard clip art. You can choose from this catalog only. If you want a real Gen-X font with a cool retro logo design, you better come in with your own camera ready art. Sure, you may have a great sense of design and create something spectacular with these limited selections, but most often we're talking Helvetica font with a Happy Plumber holding a plunger. And doesn't that kinda prove that you get what you pay for?

So don't you think that advertisers perceive a free service from your station with the same attitude? Even though you may write/produce an Addy winner, isn't the perception of the advertiser going to be, "Okay. The spot sounds good. It brought people in the door, and it didn't cost me anything."

Looking At The Future

So how do we make the leap from "free service" to "profit center" for the station without screwing the pooch? And more importantly, how can you parlay this new direction in the production department into a bigger budget?

First, for you guys/girls in the larger markets: Chances are that your station has been sold at least once in the past year. (Or your parent company has bought a station or five in your market.) And if you haven't been living in a cave in the High Sierras, you know that the prices being paid for radio stations are, to say the least, the top end of market value.

That means that the big gamble the major groups are playing (basically, get a bigger piece of ad budgets without hassles from competitors since we own all the stations) has got to pay off...fast! My guess? It's going to take longer than the Randy Michaels, Mel Karmaizans, Scott Ginsbergs have projected to pay off these major purchases.

And if the ad dollars don't roll in as expected, you know what's going to happen? (ominous voice in echo) More Downsizing.

You, my production brethren, hold the key to not only job security, but to greater station profitability.

How It Works

To make the production department a profit center, you will first have to sell the Sales Manager and the GM on your plan. And believe me, when you start talking to them about making money, their ears and eyes will be wide open.

The way most businesses work is like this: They take their costs (labor, office, phone, cost of equipment, etc.) and figure what their cost per unit/service is. Then, they add an amount on top that is known in this great land of ours as "profit." This amount can be a fixed amount or a percentage of the cost.

As a Production Director/Creative Director, you have to do the same thing. (Sorry, but with a good attitude, this can be fun.) Have you ever analyzed your room? Looked at your salary and what it costs your employer? Figured what part of your job is devoted to imaging and what time is spent cranking out spots?

Budget Figure 1

Here is a spreadsheet I concocted. (See Figure 1, above.) Obviously your particular situation will vary, but you can get a general idea of what you need to do to make this happen. The assumptions are: 1) You spend 25% of your time imaging the station. 2) 75% of your time is spent creating/producing spots and advertiser sponsored promotions. 3) You write/produce 15 spots per week, equaling 780 spots a year. 4) Your salary is $35,000. (Sorry to those of you below this figure. This is based on stations in markets 1-35. If you're in one of these markets making less than this, please consider either a change of markets or another gig. If you're making more than this, you probably deserve twice the amount.) 5) The cost of your room is $15,000/year. (This includes amortization of equipment over 5 years, electricity, your portion of the phone, supplies, etc..)

Now, if you were to charge a client $100 a spot, would that seem out of the ballpark? I don't think so. In fact, that's really quite a bargain when you consider what is being provided: 1) Consultation, 2) Creativity, and 3) Construction. (Wow! "Three Cs! )

Small Market Scenario

Taking this one step further. Let's assume you're in a smaller market with only a limited talent pool, (like maybe 3 people) and you're running 20 units an hour. We have to modify our assumptions since you're probably working double duty as Production Person/MD or Production Person/AT. So we assign values as follows: 1) You write/produce 20 spots week or 1,040 spots a year. 2) The portion of your salary spent in production is $10,000. 3) The cost of your room is $8,000/year. (Again, this includes amortization of equipment over 5 years, electricity, your portion of the phone, supplies, etc..) 4) We'll add in the cost of a voice talent service which will supply you with professional voice talent to give your station additional voices worth paying for.

So our spreadsheet looks like this: (See Figure 2)

Budget Figure 2

Now, if you guys/gals in the smaller markets were to charge, say, $50 a spot for production, would the world come to an end? Would Jerry Jones Infiniti squawk at an additional $50 for a top notch spot you produced, using an out-of-market voice talent, that set his message apart from the others? I don't theenk so, Señor.

Making The Pitch

So you want some new stuff? Well, Bub, you're going to have to take the woolly bully by the horns, so to speak. And you are going to have to spend some extra time making this all come to fruition. In fact, you might have to actually buy some stuff yourself. (Of course, you get to keep those goodies.)

The first thing that may come to mind in the smaller markets is, Jeez! Our spot rate is only $10 a spot. How can we charge $50 for production? The answer is simple; educate the client to your costs.

While this may seem like providing detailed plans for the wolf's entree into the hen house, most business people will respect your honesty and understand the reality of your dilemma. (This also means accompanying AEs on their calls.) But the benefits in the long run will pay off. Here are some salient sales points with which you can enlighten the client: 1) There is a tremendous amount of effort and time involved in creating great radio ads and you will give the client your utmost attention. 2) The station pays for the use of production music that will be used in the production of the client's ad. 3) Your station has contracted with an outside talent bank that provides additional professional voice talent for the client's spot, and this service costs pesos mejor. 4) By paying an additional fee, the client will receive your personal attention. (This means a lot to clients...trust me.)

If this is starting to frighten you because you've got to leave the laboratory to get out on the street, then you better am-scray uster-bay. The way the radio production person is going to operate in the '90s is to become involved in station operations. Which leads to...

Getting The Stuff

If you go back to our spreadsheets, you will see that there is money to be made in the production room. I know, I know. A bunch of you guys are doin' spots on the side, reading corporate/industrial scripts in your spare time, or are voicing a couple of stations. But what I'm referring to is this:

Larger markets: If you charged $100/spot based on 780 spots-a-year, you would create an additional $78,000 in revenues for your station. Net profit of $40,500! And these figures cover 75% of your salary!

Smaller markets: By charging $50/spot, based on 1,040 spots-a-year, the production department would provide an additional $52,000 in revenues for your station. Net profit: $23,812!

Can you say, "Job Security?"

The Bottom Line

If you can show the Cheesemeisters that your department can not only cover your salary, but create $$$ for the station, you will be hailed as a hero, walked through the halls on the GM's shoulders, and be given a substantial raise while being showered with the latest and greatest production toys and packages.

But if things are really dismal at your station, there are still ways you can negotiate for state-of-the-art stuff while keeping your anus intact.

First, put yourself in your GM's shoes. This person has got to deal with a finite budget for a bevy of hungry mouths. He knows that you need tape, carts, and cassettes, and that money will always be there. But anything past that point is probably out of the question, at least until the dust settles with the takeovers.

So why not buy what you need yourself? Here are some thoughts on setting up your own shop right there at the station: Ask the GM if he would mind you setting up a state of the art studio in the production room. (He'd have to be an idiot to say no.) Tell him that in exchange for letting you set up your studio, you will use your new gear on all the station imaging. Talk with the SM or individual AEs and explain that you are setting up a cool new studio and that it will be available for spot production for just $10 to $15 a spot. (You gotta pay this stuff off, right?) Create a real hot demo using your new toys, and then A/B it with the crappiest spot you did on the old analog gear. Obviously you could make some money above what your monthly payment is, but you want the salespeople to embrace your new plan and use it. Keep the fee per spot manageable because good AEs will take money out of their pockets to create killer spec spots. Don't forget the production music! There are several buy-out packages available at reasonable prices. If you've still got a dinosaur collection for production music, you may be able to charge a small fee on top of your production fee for using your library.

Here's a look at a fairly realistic budget and what you could make monthly with your own in-house (in-station?) studio. (See Figure 3)

Budget Figure 3

While you're not going to be playing the stock market with your profits, at least you have one killer studio that provides a win-win situation for everyone. The GM doesn't have to pony up bucks to upgrade the production room, and yet he can show the room to clients with pride. You get all the stuff you wanted and you get to keep it! The Sales Department now has additional ammo to help close sales.

Putting It All Together

Let's go back to one of our original spreadsheets and factor in the cost where you are providing the studio. Let's see what we could do by charging the clients our proposed $100/large market and $50/small market rates. (See Figure 4)

Budget Figure 4

Conclusion

I know that many of you will think I'm just nuts. But radio—no, make that business—is changing so fast every day that creative partnering makes good sense. And while your wife may wring her hands in trepidation at spending 12 Gs for your "toys," remember this: It's your future. Those who invest in themselves now, will be around in 2 years instead of being a statistic on an unemployment report.

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