Voodoo Accounting vs. True-Cost Prizing (Part 2)

Read and understand

Voodoo Accounting vs. True-Cost Prizing (Part 2) Between voodoo accounting and true-cost pricing: Calculations for Film and Video – Read and Understand

Part 1 of this article series looked at how to present costs in a film calculation. Now in part 2 about voodoo accounting and true-cost pricing we shall, insofar as is possible in an overview, go deeper into the material and look at how to correctly read a budget for films and videos and, more important when making adjustments for the quality of the planned work, how to correctly deal with calculations for a film or video. 

The price for a marketing campaign with moving images is of course simple to find in the total calculation.  But it becomes more difficult if a budget is understood not just as a necessary evil and simple costing factor, but rather as a blueprint for a film – and you, the client, want to take a look behind the scenes. We have taken it upon us to put together some brief instructions for beginners about calculating costs for film and video:

Preparation

The correct analysis of a film calculation does not begin with getting hold of the budget and studying it. It starts with the question as to which aspects of the planned film are of relevance. If you don’t know what you’re looking for, you will either be lucky and make some findings (or worse: partial findings) or you will find nothing. That is why anyone who is reading a film budget should first ask the following questions and, be it alone or with expert assistance, find the respective answers. Ideally that should not be too much work because these answers can already be found in the client’s briefing or rebriefing or in their tendering offer.

Content

As astonishing as it may be, time and again we experience how a budget is judged independently of the content to be produced. Anyone who is not a video maker or is not familiar with the message to be conveyed via film or the storyboard to be filmed will confuse the production of a film with the manufacture of screws. Indeed, the latter can be produced in according with German Industry Norms (DIN). Films and videos cannot.

Production Values

What are known as production values are one of the greatest myths in commissioned film. Just as seldom as they adhere to a fixed definition, just as often they are used and misused as an argument in budget discussions. We use the term in this article and in conjunction with calculations as an element of product quality:

Production values are the drivers with which the desired quality goal of a moving image communication campaign can be achieved with optimum use of resources.
Kristian Widmer

In other words: it is about budget allocation. Not about voodoo accounting. Where do we use which resource with what effect? Does it make sense to invest in actors? Or in digital effects? Or rather in the soundtrack? Ideally there will be enough resources for all important positions. But unfortunately the ideal scenario is only in the film, not in its making. Anyone who has been in the film industry for long enough is well aware of what feature film industry representatives claim: no budget is big enough to fulfil all wishes. Anyone who knows the content they are trying to convey should think about production values. What should be emphasised in the calculation to ensure that quality standards are met.

Quality standards

Quality standards usually arise from benchmarking. What quality levels do competitors have and what estimated or proven effect do they achieve? Whilst production values denote how resources are allocated within a budget, the quality standard affects the calculation as a whole. It determines at which level a film or video is placed, i.e. whether high-end or low-budget.

Deadlines

The creation of moving image content is not only oriented around quality standards and budget values, but also around deadlines. Ambitious deadlines can be compensated with lower quality or, where quality is sacrosanct, a higher budget. A deadline layout should therefore always accompany a budget analysis.

Risks

Films are projects. Projects have a different potential for generating risks than standardised, serially-produced industry products. Before studying the figures, the risks should be put into words and numbers. That is the only way of determining whether critical success factors have even been considered and how and where they have been integrated into the calculation. To be clear: if a risk materialises, somebody is liable for it. Whether budgeted or not.

Film budget: what should be included

The answer as to how detailed a budget should be is as varied as the the number of different film projects. The only correct answer is: it depends. Not only the scope and the genre of the planned film as well as the standards communicated in the briefing are decisive, but also the type of commission. People who work with a lump sum budget will not necessarily expect the same information as for a project in mark-up mode.

Analysis

Budget analysis is just like reading the music for a classical orchestra piece. You have the target audience in mind, know about a professional orchestra’s and its soloists abilities, identify the theme, the variations and they are glad of ingenious solutions. But what do people do who cannot even draw a clef from memory? They are in a similar situation as someone who gets a film budget and has no experience to rely on. But two tricks will get you to the finishing line: use the information about asking the right questions provided above in point 1 and have the service provider guide you through the calculation. Or you do not ask the creator of the calculation for information about individual values, but rather for an explanation and presentation of the mutual dependencies of the different budget items.

You can then quickly identify how competently the calculation was put together. Every budget and budget item must be explicable. Everything else is voodoo accounting. Creating non-verbal communication is not the responsibility of the head of manufacturing or production; it is the director’s privilege, who may or even ought to strive to use their artistic talent to forge something that is more than the sum of the individual parts.

Reverse budgeting

As already mentioned at an early stage in this forum, reverse budgeting elegantly prevents the three aforementioned effects in budget analysis.  At the same time, and almost more importantly, working with reverse budgeting in film budgeting and when discussing calculations for moving image communication places the focus on quality and the associated production values.

Part 3: Voodoo Accounting

Let us finally return to part 1 of this article series, where the opinion was stated that anyone who puts their budgets through the mincer can rightfully expect sausages in return. Whilst in principle nothing changes in that regard, for the sake of completeness it is worth saying that sausages can be produced to the highest quality, and that necessarily requires the use of a mincer. In an almost philosophical dimension, sausages and calculations are very similar: where expectations are openly communicated from the very beginning, (almost) everything is possible.

Part 3 of this series will present the most common trapdoors dealing with budgets.

About Maurus Eugster
Maurus Eugster is Head of Finance and Member of the Management Board at Condor Films.

3 Comments

  1. Again an interesting article. Nice to read some anecdotes from the field too.

    I’m not sure if we see ‘reverse budgeting’ the same way. To me ‘budgeting’ is the act of summing up various costs –preferably based on a script to enable a proper breakdown, but more often estimated based on briefing plus experience– which leads to a total cost.

    Reverse budgeting would then be starting with a fixed total and spreading the available money the best way across all people and elements. This is in my own experience most often the case, as a client expects to hear a fixed number that needs to fit in their bigger (marketing/advertising) budget.

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