by John Pellegrini
When I was just getting outta high school, and trying to figure out that all important question, what am I going to do with my life and how am I gonna get laid on a regular basis, I worked for a couple of years in my Dad's steel fabrication plant. It wasn't a huge place, only about fifteen or so full-time employees. What I learned there was that I really wasn't cut out for the steel fabrication business. However, another thing that I learned there recently came back in a big way.
One of the jobs that I tried was providing price quotes on some of the different fabrication jobs that we did. The main thrust of our business was custom jobs for large corporations that didn't have the space or the equipment necessary for certain parts needed. I'd find myself on the phone giving cost estimates on things we'd never done before, and yet I could price them so we'd easily make a profit on the job.
Where am I going with this? Have any of us ever really sat down and figured out how much it costs to create a commercial for our clients? You may be asking, "Why would it matter?" Well, my friends, it matters a lot. Most of us could use this bit of knowledge as a weapon when the sales staff makes ridiculous production requests such as "multiple specs." (Thanks Mark Margulies!) We can also justify to our bosses (PDs, GMs, Owners, etc.) why we need bigger budgets, and why we're wasting all that money on things like tape, carts, etc..... Basic job survival techniques.
So how do you begin to do cost figuring on production? Fortunately, you have me and my experience in price estimation. There is a formula (naturally) that may be a bit tough to get nailed at first, because you have to do some price averaging. First, break your salary down to an hourly wage. Then, break down your assistant's salary (guess if you have to), and anyone else's salary who works on the spot you're doing (i.e. the jock that voices it, anyone else connected with the concepts and creation, and so on). Add to that figure approximately ten to fifteen dollars (for miscellaneous expenses such as tape costs, electricity used, wear and tear on the machines, etc.). The figure that you arrive at should be close to your per hour NET COST (how much your production costs without making any profit). Take that figure and double it. Now you have the amount that your station would charge a client per hour if it was an agency.
If the figure you arrive at sounds high, don't be alarmed. If you make some inquiries, you'll likely find out that most of the advertising agencies in your area charge even more than that figure for their work. That's because ad agencies have a variety of expenses that radio stations don't have. For starters, they've usually got to contract a recording studio, pay additional charges for meetings with the clients, a bigger staff of marketing, creative, sales, and on and on.
There is another way you can figure your costs, without having to guess at salaries and such. Make some inquiries to local recording studios and ad agencies. Get the average going rates for all they do regarding radio production. Figure your hourly costs at somewhere in the middle of the highest and the lowest prices. Now, some of you may be saying, "Hey, how can I charge as much per hour as 'God's Recording Studio' down the street? They've got all that high tech equipment, and all we've got is a couple of lousy 2-tracks?" True, but if you've ever been in on a radio commercial production session, you'll see that they don't use the high tech stuff for radio spots. Most radio production that's done by recording studios is done exactly the way we do it, on 2-tracks with minimal equipment. The recording studios save the high tech stuff for the elaborate jobs like album production and film audio (where they can make a lot more money). Even with all that, why should we charge any less? We perform the same function.
Another thing you'll find to keep in mind is that most recording studios charge per half hour. This is to allow for the fact that most production jobs never are exactly one hour, and it's easier to justify two and a half hours of production costs for a session that went two hours and fifteen minutes than it is to charge for three hours.
If you want to get more detailed, you can also figure in the costs and expenses that the salesperson used up when trying to get the client on the air -- getting the copy information, the amount of time the traffic and continuity departments spend scheduling and billing, etc.. The point is, all this work costs the station money. It's got to be paid for somehow. And the only source of income the station has is the commercials it runs. Production costs should be a prime consideration when reviewing the clients' schedules, and production requests.
Another way this information can be a weapon in your favor recently came up for me, and is the reason why I'm writing this article. We have a client who just began advertising for the first time on the radio. The client was extremely nervous, and the salespeople involved tended to comply with his every little whim in the mistaken belief that by placating him we're providing good service (hello again, Mark Margulies!). The result was I ended up having to do ten, count them, TEN commercials for this bozo. Only two of them ever got on the air, and they lasted four days before the client had us pull them in favor of a spot another station recorded. When my urges to murder the sales staff finally cooled down, I sat down. Using the old formula on price estimating, I figured out that we spent just under a thousand bucks on production costs. I then checked with the Traffic Manager to see how much the client's total schedule was. Guess what? We nearly blew as much in production costs as the client's total schedule amounted to.
With a very placid grin on my face, I calmly took my figures into the GSM's office and showed her my findings. Poop hit the fan. The result: we're now working up a production costs guide for the sales staff to use. We've worked up price averages of spots that feature, one voice, multiple voices, characters, sound effects, and so on. Why all those breakdowns? Because each of those specifics cost more money in production. Now we still don't charge the client for production, except for the usual talent fees and such, but what this does is show the sales staff how much a prospective client can expect for certain dollar amounts in on-air schedules.
Is this practice acceptable? Why not? Newspapers and television stations charge for this all the time. Quarter page ads are less than full page ads. Black and white, four color, and so on add to the price. The television costs are more for on location than in studio, and so on. Radio stations used to charge for this stuff, back when there was no TV. But, when competition came in, many radio people thought, "Well, we're not as expensive to operate as a TV station, so let's not charge for that anymore, and we'll get more business." Well, the old days are over. Expenses are expenses whether you choose to accept them or not. As my father used to say, "You can't make a profit if you don't know what your expenses are."
This also is a nifty way to eliminate unnecessary specs and revisions. When you suddenly see a price tag on everything, you begin to budget yourself better and make better spending choices. The usual response you'll get from the sales staff is, "I had no idea it cost this much!" Sometimes it helps to compare the production expenses to their commissions on schedules. Drive the point home, after all this is a business!
Incidentally, don't figure in talent fees to your production costs. They are a bonus that's paid to the talent and usually are not of any benefit to the station. Remember, you're figuring the cost to the station, so you get to do some of the General Manager's job with this. And what about job security? What do you think management is going to think of your abilities when you show them how you're looking out for the station profits, and trying to educate the sales staff to be more cost efficient? I'm sure they'll want to fire you immediately....
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