Voodoo accounting vs. true-cost prizing (Part 3)

Three classic stumbling blocks

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

In many years of experience with the analysis of film calculations and dealing with video budgets, time and again you will come across almost exactly the same trapdoors.

The 3 most common types of misunderstandings are: The domino effect, the electric shaver effect and the excel spreadsheet effect.

The domino effect

The domino effect refers to the lack of understanding for interconnected parameters in a budget. For example, process-dependent, technical processes involved in image and sound editing can be mutually dependent, as indeed the composition of an expert team can also be.

Not only in large projects are key talents often brought together by experienced producers in such a way that the talents of the key people involved complement each other (the complementary principle in talent packaging). If an element is removed from the original orchestration, it triggers a chain reaction.

A practical example:
A medium-sized town wants to launch an image campaign. In order to convince the decision makers of the necessity of a film, the well-known agency commissioned with the project negotiated with big names.  Finally, the budget was announced, but in reduced scope. The overriding opinion was that the preferred director would be able to perform the task with a less experienced team. At the kick-off meeting the young camera man was greeted by the award-winning director with the following words:  “So you’re the donkey that I’m supposed to win a horse race with!” (It continued as follows: at the behest of the producer, the director was graciously relieved of his duties two days later with fair compensation and a completely new team was put together. They created a wonderful film.)

The electric shaver effect

The male population knows: unlike with a cut-throat razor, nothing can go wrong with an electric razor. However long the day or short the night was, you roll the device over your tired face and can be assured that every single hair will be trimmed to the exact same length.

In film and video calculations, the electric shaver analogy rears its head when all budget items, regardless of their content, are cut – or more rarely increased – across the board. Designer stubble has a different quality to a freshly-shaved face. The same is true of linear adjustments of budgets. The quality is being tinkered with.

A practical example:
The buying department of a well-known car manufacturer asked to have a meeting about their tendering offer for a product film. When there, in the presence of the Head of Marketing, the Chief Buyer started to dictate new prices for all items of the 14-page film calculation to the film team. It took a while until it became clear that the buyer had simply cut all prices across the board. (It continued as follows: still at the meeting, the customer’s desired budget reduction was put into practice.  That was possible because the marketing manager agreed to a scene that was secondary to the product and film plot being considerably simplified.)

The Excel spreadsheet effect

Oscar Wilde (1854 – 1900) must seem a little creepy to many buyers at large companies.  One hundred and fifty years ago, the Irish dramatist already postulated that we know the price of everything, but know the value of only very few things. If the music for a commissioned film is to be composed specially by a composer and the soundtrack shouldn’t sound like the jingles in a supermarket, it soon becomes a question of talent.

Talent, or its price, can be displayed in an Excel spreadsheet. But anyone who tries to break down a composer’s fee (the same applies to authors and other creative jobs in film) to a daily or hourly fee on an Excel sheet in the belief that they can better understand the service will end up very wide of the mark. Talents in the creative industries have their price. Like all prices, it is oriented around supply and demand. Even if the value of a creative service may appear difficult to pin down, it also follows rules.

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

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