NEW YORK—While the figures change from year to year, the response from the Association of Independent Commercial Producers (AICP) remains constant. This latest case of deja vu has been triggered by the release of the American Association of Advertising Agencies’ (AAAA) annual Television Production Cost Survey—now in its 15th year—which the AICP peruses only to yet again question the study’s findings, methodologies and its viability as an industry benchmark.
First, here’s an overview of the study’s results this time around: The average cost of producing a 30-second TV commercial in 2001 increased eight percent as compared to ’00, according to the AAAA.
Extrapolating from a database of 1,189 national :30s as reported by 20 participating ad agencies—including the top 10 U.S. shops in gross income and 15 of the country’s top 20 agencies—the AAAA report found that the average gross cost of a national :30 before agency commission was $358,000 in ’01. That’s an increase from $332,000 in ’00 based on a pool of 1,230 national :30s.
When combining the body of :30s in ’01 with spots of other lengths (e.g., :60s, :20s,:15s, :10s), the 20 agencies collectively represented a database of 1,725 national spots as compared to 1,807 in ’00. The average cost of those 1,725 commercials, without agency commission or any other form of agency markup, increased five percent in’01. The average cost went up from $306,000 in ’00 to $322,000 in ’01.
Arguably the leading factor impacting the results was the same as last year: the six-month long SAG/AFTRA strike against the advertising industry in ’00. Last year’s AAAA study predictably reported a decrease in average costs when so much work went out of the country in ’00 due to the strike. Now ’00 becomes the prior year to which ’01 is compared. So it stands to reason that costs in ’01 would have likely gone up in relation to figures for ’00, a hike reflected in the new AAAA study.
Because of this strike-year dynamic, David Perry, chairman of the AAAA broadcast production committee and executive VP/head of broadcast production at Saatchi & Saatchi, New York, conjectured that a fairer comparison is one between ’01 and the AAAA report findings for ’99, the pre-strike year.
Perry noted that the average cost of producing a :30 in ’99 was $343,000 as compared to $358,000 in ’01, per the AAAA reports. "That’s only a three and a half percent increase over two years, which is not bad at all," said Perry. "You generally get a better overall picture of the business anyway when you stretch the findings over several years rather than just comparing one year to the next immediate year."
In that same vein, Perry pointed out that average production company net costs on a job have held pretty much steady from ’99 to ’01: $235,000 in ’99 compared to $236,000 in ’01. During the year of the actors’ strike, that figure dipped to $228,000.
Editorial/completion costs went up slightly but "by an allowable measure," said Perry when ’99 is used as a point of comparison. Average editorial/completion costs were $43,000 in ’99 as compared to $45,000 in ’01.
Perry added that the average production company markup remained the same-25 percent-when stacking up ’01 against ’99. However in the strike year of ’00, markup went up to 26 percent. According to Perry, that increase in markup in ’00 was linked to the strike. "The higher markup," he recalled, "had everything to do with the fact that U.S. production companies were taking work outside the country and having to split the markup [with a foreign production company or production services shop]. The agencies were a little more lenient about markup in 2000 as a result given that situation of markup being divided between two companies."
For ’01, the number of international productions—not counting Canada—went down in the AAAA study as compared to ’00. In ’01, agencies participating in the survey collectively had 127 "international" shoots, a 10.5 percent decline from the 142 shoots in ’00. Again, a comparison to ’99—which had 62 international shoots—offers a different perspective. International shoots in ’01 rose 51 percent over ’99, at least partially underscoring the runaway production dynamic, which was exacerbated by the ’00 strike and continues today.
Canada wasn’t covered under the "international" designation in the AAAA survey. As structured, the report made it difficult to ascertain how many U.S. spot shoots traveled to Canada. The number of shoots that New York production houses took out of town—which could be anywhere in North America, including Canada—decreased from 111 in ’00 to 87 in ’01. Los Angeles-based production companies were involved in 173 out-of-town shoots in ’01, as compared to 178 in ’00.
OUT OF TOUCH?
AICP president/CEO Matt Miller contended that the AAAA study "is once again out of touch with reality," citing the survey’s international shoot findings as a prime example. "The report pegs international shoots as being about 10 percent of the overall database, which is way out of line with what’s really happening. Production in foreign countries has increased dramatically in recent years and represents much more than ten percent."
As in years past, Miller noted that the study doesn’t fully take the flight of U.S. work to Canada into account. He conjectured that Toronto and Vancouver together, if not separately, probably rival the amount of spot filming that takes place in New York.
Miller claimed that the AAAA study has a detrimental impact on the marketplace. "When you take a manufacturing methodology and try to apply it to a creative process, you’re asking for trouble," he said. "You’re waving something in front of purchasing people who then try to apply some sort of cost-cutting measure, especially during these tight economic times. Buyers say, ‘We usually pay ten to fifteen percent below average for paper towels and ball bearings and therefore we should be paying such and such amount for our commercials.’ But that doesn’t apply to a creative process that is so disparate, in which so many elements are involved in order to achieve a successful piece of advertising."
This, continued Miller, only tightens the squeeze on an already contracted production community, which is reflected in the AAAA study itself. "The report says that the average cost of a commercial is going up while the cost to administer and produce it [markup] has gone down. That tells you why we’ve probably had forty companies go out of business in the last year."
Miller related that the AAAA study is counterproductive, not only for the damage it does to production houses, but also to the clients they serve. "It’s in the interest of the entire industry to help keep a healthy production community—and to channel efforts and energies to address the important issues we are all facing."
However, Miller concurred with the AAAA study on one finding—the decreased size of its database. "The only thing I have confidence in agreeing with is that less commercials were shot this year [’01] than last [’00]."
