Depending on your perspective, number crunching takes on different meanings when it comes to the annual American Association of Advertising Agencies (AAAA) Television Production Cost Survey. The Association of Independent Commercial Producers continues to question the validity of the AAAA study, with AICP president/CEO Matt Miller crunching down hard on the numbers and finding then increasingly insignificant in light of ongoing changes in the business.
Conversely David Perry, chairman of the AAAA broadcast production committee and executive VP/head of broadcast production at Saatchi & Saatchi New York, regards the Production Cost Survey as a viable industry benchmark, particularly when looking at its results beyond a one-year-to-the-next comparison. He finds great value in a relatively new aspect of the study which for the second consecutive year compares annual findings dating back to 2000.
But first, the immediate findings of the latest survey, which covers commercial production in ’08. Extrapolating from a data base of 689 national :30s as reported by 19 participating ad agencies, the AAAA study found that the average cost of a :30 before agency commission was $342,000 in ’08. That’s a five percent decline from $361,000 in ’07.
Also in the newest AAAA study when combining the body of :30s in ’08 with spots of other length, the 19 agencies represented a database of 1,120 national commercials. In terms of the average per spot cost of those 1,120 commercials, the AAAA reports a figure of $302,000 in ’08. That’s a five percent decrease from the average of $318,000 in ’07.
Arguably more significant than the decrease in average costs for :30s and for the overall body of work is the continuing drop in the number of spots in the AAAA database. In ’07 there were 1,266 commercials as compared to the 1,120 in ’08–that’s an 11.5 percent decrease. And the 689 national :30s in ’08 represents a drop of 13.8 percent from the 799 of ’07.
The decline is even more dramatic when you go back to earlier in the decade. For example, the AAAA database of overall national commercials was 1,741 in ’01. The ’08 tally of 1,120 national spots marks a 35 percent decrease from ’01.
Going back to comparing between ’08 and ’07, production company markup held steady at 23 percent according to the AAAA study. The director’s fee per :30 went down nine percent from $23,000 in ’07 to $21,000 in ’08. The average total production company net costs for a :30 per AAAA respondents went down 10 percent from $256,000 in ’07 to $231,000 in ’08.
The survey reported that in 2008, 99 percent of the :30s reported were identified as firm-bid, while one percent were cost-plus–five percent less than ’07. Also, 46 percent of the :30s were single bid, while 54 percent were multiple bid. This represents an eight percent increase in single bids over ’07.
The average cost to edit and complete an original :30 in ’08 was $51,000, which is four percent less than in ’07. Video finishing decreased 19 percent in ’08 and sound recording mixing increased seven percent.
Creative/labor fees remained the same and the cost of an editor’s markup decreased 14 percent to $3,200. Music costs decreased in ’08, averaging $32,000 per job. Talent costs were 18 percent less than in ’07. costing $14,000 per spot. Commercials using on-camera principals averaged four on-camera principals, and commercials using extras averaged 14 extras.
In terms of lensing locales, international shoots declined from 86 national :30s in ’07 to 75 in ’08. New York shoots of :30s increased from 59 in ’07 to 95 in ’08 while L.A. shoots declined from 338 in ’07 to 246 in ’08. Out-of-town :30 shoots for New York production companies declined from 36 in ’07 to 24 in ’08. Out-of-town :30 shoots for Los Angeles production houses rose from 76 in ’07 to 116 in ’08. Other domestic shoots for national :30s declined from 47 in ’07 to 37 in ’08.
Big Picture Perspective
Standing out for Perry relative to the latest AAAA study findings is their relation to survey results dating back to ’00. He noted, for example, that the average cost of a :30 in ’00 was $332,000. While there have been fluctuations over subsequent years (to a high of $385,000 in ’04), the bottom line is that the average has held relatively steady from the $332,000 in ’00 to the $342,000 in ’08.
During this same stretch, costs in other industries–from healthcare to education to real estate–have increased significantly, in some cases exponentially. “It’s a good statement for our industry that for the better part of a decade we have managed to keep costs in pretty much the same range,” said Perry. “Either we’re getting smarter about how we’re spending money or we’re doing less expensive work–or both.”
What hasn’t remained in the same range is the number of spots in the database. “The number of :30s in 2000 was 1,200 or so. We have a little more than half that in the database for 2008. The biggest news is the decline in the number of TV ads done by advertisers in the survey–and we have close to the same clients every year,” observed Perry who attributes the decline primarily to clients shifting more of their TV investments into alternative media.
AICP feedback
While the AICP has long contended that the AAAA study is flawed, Miller said the survey is even more lacking now in light of the dwindling number of commercials over the years. “Even they acknowledge that this is a smaller database and that individual spots can skew the numbers.”
He noted for example that the ’08 database contained only two commercials in the beer/wine category. “How can you glean anything from such a small sampling?”
Miller added that the AAAA study reports an increase in studio shoots for national :30s whereas the soon to be released AICP shows a decrease. “Some of their [AAAA] findings are inexplicable,” said Miller.
A bit of good news, added Miller, is that cost-plus appears to be on life support, according to the AAAA survey. At the same time, Miller wondered whether the extent of cost-plus is at least a little greater than the AAAA study would suggest. “Verizon alone does a lot of cost-plus. Clearly they are not reflected in this database,” said Miller.
The essential bottom-line dynamic for Miller, though, is the ever changing industry landscape. “Here I am in the first quarter of 2010 reading about the business in 2008. The business in 2008 is a different world from where we are today. Trying to make sense of what happened in 2008 based on this report and making it relevant to 2010 and 2011 is quite a reach. Things have evolved and are evolving so quickly. I’m not sure that the AAAA study accurately reflects 2008, much less provides any lesson of relevance for 2010.”
