By Robert Goldrich

NEW YORK --

While the number of national commercials in the database for the annual American Association of Advertising Agencies’ (AAAA) Television Production Cost Survey has decreased three of the past four years, the latest decline is more difficult to get a handle on. Does the drop reflect an industry trend or is it due to there being fewer participating ad agencies this time around as compared to the previous year?
    There were 1,282 national spots of all lengths reported in the latest AAAA survey, which covers calendar year 2006. That’s an 11 percent-plus decrease from the 1,444 spots reported in the ’05 AAAA National Advertisers’ database.
    Furthermore, the number of :30s dropped from 904 in ’05 to 818 in ’06, a nine-and-a-half percent dip.
    However, only 18 AAAA member ad agencies participated in the ’06 survey as compared to 21 shops in the study reporting on the state of the business in ’05.
    Indeed the AAAA issued a caveat to its members relative to the number of commercials in ’06 versus the prior year. In its cover letter to the ’06 Television Production Cost Survey, the AAAA said that the statistics reflecting a decreased number of national commercials and :30s “should not necessarily be interpreted to mean there is an overall decrease in commercial production industry wide. It only reflects a decrease in the number of entries’ input by participants which may be ascribed to reasons other than a reduction in overall commercial production.”
    The reasons behind this lower level of AAAA shop participation are at best a matter of conjecture. Word on the grapevine, though, is that a major agency didn’t provide input this year and if it had, then the numbers for ’06 in terms of commercial volume would be more on par with those in the ’05 database.
    Even with that, David Perry, chairman of the AAAA broadcast production committee, noted that generally there’s been a long-term downward trend in the number of commercials being produced as evidenced by the fact that there were 1,741 national TV spots in the ’01 National Advertisers database.
    Perry, who is executive VP/head of broadcast production at Saatchi & Saatchi New York, said that it’s fairly safe to assume that this trend over the past six or so years reflects that clients are indeed shifting more of their TV investments into alterative media.
    He added that there’s been a definite erosion across the board in terms of lengths–it’s not a case of more 15s emerging as less :30s were being made, for example.

Production costs    While the Association of Independent Commercial Producers (AICP) continues to question the findings of the AAAA survey and its viability as an industry benchmark, here’s an overview of the latest study’s results.
    According to the AAAA report, the average cost of producing a national 30-second commercial in ’06–without agency commission or any other form of agency markup–decreased 12 percent as compared to ’05.
    Extrapolating from a database of 818 national :30s as reported by 18 participating agencies, the AAAA study found that the average cost of a national :30 before agency commission was $335,000 in ’06. That’s a decrease from $381,000 in ’05, which is based on a pool of 904 national :30s.
    When combining the body of :30s in ’06 with spots of other lengths, the 18 agencies represented a database of the earlier cited 1,282 national commercials. The average per spot cost of those 1,444 commercials, sans agency commission or any form of agency markup, was $312,000 in ’06, five percent less than the $328,000 average in ’05.
    The total director’s fee per :30 was $21,000 in ’06, five percent less than in ’05. The production company’s average markup on a job came in at 24 percent for ’06, the same as in ’05.
    And the average total production company net costs went down eight percent from $250,000 in ’05 to $231,000 in ’06.

Integration
    Perry noted that 12 percent represents “a significant decline” in the average cost of a traditional broadcast :30. He conjectured that in part the decrease might be due to the fact that “every client and agency is trying to integrate different elements of a campaign to include new formats. We see them trying to take advantage of when they have a hot set and a full crew and camera to create an additional component–a web piece or something else–to carry an idea across to another medium.”
    So with that, surmised Perry, some of the costs of a shoot day are going to alternate media, translating into decreased expenditures on the traditional commercial being shot.
    Perry also related, “If my own agency’s experience is like others, as we’re moving into new digital media, we are occasionally finding new boutique production companies that are different than the ones we use for commercials. This means there’s a new category of lower cost production companies surfacing that we’re sort of inadvertently finding. We discover them for Internet work and give them some TV work which could be impacting the costs along the lines of what we see reflected in the AAAA survey.”
    However, Perry acknowledged that many mainstream commercial production companies are also called upon to take on alternate forms of content. This was certainly born out in the recently released independent study commissioned by the AICP in which it was reported that nearly 70 percent of AICP member companies are involved in nontraditional advertising projects (SHOOT, 12/21/07).
   
Post reflections    The latest AAAA survey also found that the average cost to edit and complete an original :30 in ’06 was $45,000, which is 12 percent less than in ’05.  Video finishing also decreased to an average of $19,000 in ’06 which is 21 percent less as compared to the previous year.
    While it’s difficult to pinpoint the cause of these declines, Perry cited one factor he thinks is in the mix–increased editing on Final Cut Pro as opposed to Avid. “Editing is becoming less expensive as a result in that the overhead costs are less when stacked up against the overhead attached to having a full Avid facility. And most of the new [edit house] startups seem to be opting for Final Cut Pro from what I can see.”
    As for the decreased video finishing costs reflected in the AAAA study, Perry said that Final Cut Pro usage can translate into less separate online costs and perhaps the same for certain color correction and compositing tasks which can be part of the Final Cut Pro suite of services.

Editorial markup    The average creative/labor fee in editorial/post cost $12,000, which is 14 percent less than the national :30 average in ’05. Editorial markup averaged $2,700 which is 13 percent less than in ’05.
    There were 44 alternate versions and 384 editorial lifts completed along with the 647 original :30s in ’06. This number of versions is 61 percent less than those done in the :30s database for ’05. The number of lifts is two percent less than in ’05.

Music & sound    Of the 818 :30s in the ’06 National Advertisers database, 639 used music of some type. This is 20 percent less than in ’05.
    The average total music cost for ’06 national :30 commercials was $35,000 per job. This represents a five percent decline as compared to ’05.
    Sound recording, mixing and other miscellaneous direct costs averaged $14,000 per original :30 in ’06, an eight percent increase over the tally for ’05.

Talent    Talent costs were 12 percent less than in ’05, costing $14,000 per spot. Of the 683 commercials using on-camera principals, on average four principal performers were used in each spot. That’s eight percent less than the average for national :30s in ’05.
    Of the 466 commercials in the ’06 database having extras, the average number used was 11 per spot. That’s 27 percent less than in ’05.

Shoot locales
    Reflecting the overall decline in the pool of commercials in the AAAA study, the number of shoots too were down in the major U.S. markets delineated in the survey. Shoots in Los Angeles decreased from 398 commercials in ’05 to 314 in ’06. And New York shoots declined from 119 spots in ’05 to 51 in ’06.
    However, shoots in other domestic locales did go up from 18 in ’05 to 44 in ’06.
    Out-of-town shoots for New York-based production companies also rose–from 44 commercials in ’05 to 59 in ’06. Out-of-town shoots for Los Angeles production houses dipped slightly from 64 spots in ’05 to 61 in ’06. The study defined “out of town” as lensing that took place in another U.S. location different from what where the production company is based.
    Meanwhile shoots outside the U.S. remained fairly static–118 commercials in ’06 as compared to 116 the previous year.
    Studio shoots decreased to 14 percent. Sixty-three percent of the :30s were shot on location in ’06, up three percent from the prior year. Combination shooting (encompassing both studio and location lensing) accounted for 23 percent of activity, the same as in ’05.
    The hours it took to shoot a studio commercial went down 20 percent from ’05 and the number of hours to shoot location commercials went up two percent in ’06. The average studio :30 took nine-plus hours to shoot and the average location :30 took 13 hours.  The average combination shoot took 13-plus hours, six percent less than in ’05.

Lensing costs
    There were 91 commercials shot totally in a studio. The average cost for a studio shoot was $162,000. This is 21 percent less than the average for a national :30 in ’05.
    There were 404 commercials shot totally on location. The average cost of a location shoot was $243,000 which is five percent less than the average reported for a :30 in ’05.
    And there were 152 commercials shot using both a studio and location. The average production facility coast to shoot a combo commercial was $244,000 which is nine percent less than the average for a :30 in ’05.

Custom fit
    Of the 647 “traditional” shoots (includes all commercial types except animation and/or special effects) in the ’06 national :30s database, 64 percent or 414 of them had custom sets built.
    The average constructed set cost $37,000 which is 16 percent less than the average :30 in ’05.

AICP feedback    As earlier alluded to, the AICP has long questioned the viability of the annual AAAA survey. “With a study based on a changing and shrinking database,” contended AICP president/CEO Matt Miller, “it’s difficult to trend things accurately, to come up with averages and then try to draw conclusions from one year to the next.”
    The number of agencies participating in the survey has gone down–from 21 to 18 during the past year, pointed out Miller, adding that in earlier studies, 15 of the top 20 ranked ad agencies provided data. That has since changed to the majority of the top 20 agencies being in the mix of survey respondents.
    “It concerns me that the AAAA bills the study as being an industry benchmark, particularly with fewer agencies participating and the fact that there may be different agencies and clients reflected in the study from one year to the next,” related Miller. “It’s risky to draw conclusions based on that kind of research. How can you compare one year to another with decreased participation on the part of major agencies?”
    Miller added that the AAAA study reports that the number of one-day shoots is up dramatically–accounting for 76 percent of studio shoots as compared to 60 percent the previous year, and 61 percent of location shoots as compared to 51 percent in ’05. Thirty-nine percent of combo stage/location shoots lasted a single day in ’05 and rose to 57 percent in ’06.
    Shoots of four or more days represented five percent of the spot database in ’05. In the ’06 database, there isn’t even one shoot of four days or more, Miller noted.
    Miller asked, “Are these figures the result of some major agencies not participating in the latest survey? Or because clients of some of the participating agencies didn’t want their data released?
    The AICP president/CEO conjectured that given the increase of one-day shoots, it might be a more accurate barometer to at least compare the cost of a shoot day in ’06 as compared to years past. Striking an average cost of a commercial based on a database in which one-day shoots have increased significantly is like comparing apples to oranges from one year to the next, he said.

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