A few years ago I noted that the strong Australian dollar at the time meant that shooting offshore was an attractive opportunity for advertisers and their agencies. My how much has changed in a couple of years and with the vagaries of the foreign exchange rate.
Today the Australian dollar makes shooting domestically more attractive, yet there are still many overseas markets that represent great value for advertisers, especially in a global production market hit by the low growth economic conditions.
One of the issues stopping many advertisers realising the economic benefits of shooting in markets with a lower cost base is the use of facilitation companies and their role in the production process. Especially the way they block savings being returned to the advertiser.
What is a facilitation company?
Say you are an advertiser working with your local advertising agency and they come up with a concept that either needs to be shot offshore or will be more economical shot offshore.
The agency will not necessarily know the production scene in the location they plan to shoot and besides, for many of these low cost shooting locations the agency will prefer to take a director they know into that location rather than recruit one from the location.
Therefore the agency recommend a director and production company that is more local, who then will engage a production company in the shoot location market to ‘facilitate’ the production process on the ground. This is the facilitation company.
So in effect to shoot overseas you may end up with two production companies working on the project for you.
The one the agency recommends may be simply supplying the services of the director and producer, but more commonly the director will also want to work with their team including a Director of Photography, Art Director and more.
The facilitation company supplies the rest of the team on location, plus plans and co-ordinates the shoot.
What do they do for the production company?
The facilitation company basically provides the local knowledge, infrastructure and logistics for the production. This means they leverage their existing commercial relationships and arrangements to help mount the production for the production company they are facilitating.
This includes everything from organising crews, locations, wardrobe props, art department equipment, catering and all of the various requirements of the shoot.
It is rare that the facilitation company will be involved in the post shoot production process as it is usual for the production company to take the footage shot back to their home market (or to another offshore market) to undertake the post production.
Recently we had an Asia based client with a concept from their local agency shoot with a local production company on three continents with a different facilitation company on each continent and then post in the UK, which was not one of the shoot markets.
There were five production companies involved in the process, including the post-production company and excluding the agency. Effectively more than six producers were involved.
How is it costing you money?
There are two main issues with the use of facilitation companies. The first problem is much like the digital media process. The more parties involved in the process the less transparent it is as each party takes their cut on the way.
The facilitation company will have local deals and will have negotiated local rates with the local suppliers in the market they are facilitating. But that does not mean they will necessarily pass back those discounts to either the production company engaged by the advertiser or that they will pass back any savings and discounts to you the advertiser.
There are some great deals to be had in production that can save up to and in some cases more that 50% of the rate card cost, such as for crew shoot loading being waived, equipment hire being extended at no extra cost and the like.
These significant savings are often simply pocketed by the facilitation company as additional margin and neither the production company nor the agency enforces the return of these savings, unless they intend to pocket this money for themselves.
After all there is nothing in it if they return the savings to the advertiser.
The second issue is the application of the production fee. This is the percentage mark-up added to the production cost. The issue is that both the facilitation company adds this mark-up and then the production company adds their production mark-up to the total cost.
What does this mean for the advertiser?
Lets say the production cost is a round $1 million. If the facilitation company adds their 20% to this cost it is $1.2 million to the production company who add their 20% to this making the cost $1.44 million instead of the $1.2 million it should be as why should the advertiser be paying a double production mark-up or an additional $240,000?
What can you do about it?
There are a number of strategies that advertisers can deploy to ensure they are getting the value that they are paying for when using a facilitation company to ensure the savings and discounts are passed back to them.
- If the investment is significant enough you could both decouple production from the agency and go direct. In this case you would need to consider all production and not just television commercial production.
- Alternatively you could contract or employ a production manager for yourself to oversee all aspects of your production both through your agency and direct with production companies to ensure transparency, accountability and efficiency.
- If your production needs are ad-hoc then you could engage a production consultant on a project-by-project basis to assess your production costs and identify cost savings and opportunities.
There is great value to be had in taking advantage of the competitive international production market. Shooting offshore can provide excellent value and provide great creative opportunities.
But you need to make sure you get exactly what you are paying for and not more. And we are happy to help make this happen.
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