PRODUCTION COST:

Why they are rising & how to reduce them?

As the country’s economic performance weakens, Filipino consumers have no choice but to tighten their belts. The same goes even for the business sector. As much as possible, they want to cut down on costs and search for the most cost-efficient means of accomplishing their business goals.

In line with their quest on how to save big bucks on their ad spend, the Philippine Association of National Advertisers (PANA) invited the Advertising Suppliers Association of the Philippines (ASAP) to enlighten the PANA membership on how to reduce commercial production costs. Mr. Jun Reyes, Unitel’s Managing Director, represented ASAP in discussing this topic during PANA’s 8th General Membership Meeting (GMM) at Ozeano, Manila Ocean Park.

For the advertisers to better appreciate the topic, Reyes explained the reasons behind the rising production costs. He said that the present economic conditions, combined with the evolving production advertising landscape were the main reasons for the increase in production costs over the years.

In the past, production houses only charge for the direct production costs. The pre-production (location hunt, research, storyboarding), production (professional fees, equipment and facilities rental, props and costumes, food and transport) and post-production (offline editing, lab processing, telecine/grading & online) are the components classified under direct production costs.

However, the removal of the media division in agencies caused the production houses to absorb the non-direct production costs (freelance producers’ fee, talent casters’ fee, on camera talents’ fee), which are then incorporated in the cost of commercial production. “Thus, the final costing of production houses are not reflective of the real cost due to the non-direct components tucked in,” explained Reyes.

ASAP’s proposal on reducing the commercial production costs include transparency, partnership and education. Reyes mentioned that ASAP encourages the production houses to be more transparent in their costing so clients would be clear on where their funds go. Being more open about the costs would lead to having a trust-based relationship, their second proposal in reducing costs.

A trust-based relationship will eliminate abuse on either party. A partnership will encourage production houses to keep costs at reasonable levels in order to maintain the client. It will also allow the clients to tap into the production houses’ extensive experience and expertise in commercial production in achieving the quality of output they desire, within their designated budgets.

Reyes expressed ASAP’s willingness to conduct seminars on the commercial production process for new brand managers. This is to facilitate their third proposal, which is education. According to Reyes, indecision equates to higher production costs. The buffer in budget is production houses’ way of protecting themselves from unplanned/unbudgeted requests which would require additional man hours, materials, and professional time. An informed decision, however, means less cost. “If the client knows exactly what he wants, we can focus all our energy in giving that to him, based on the time and resources he has given us,” he said.

Reyes also cautioned that despite the wonders that celebrities can do for certain brands, it is very expensive to have them as endorsers. Aside from the huge talent fees, they have specific demands that can spell out additional costs for the advertisers.

Moreover, Reyes suggested that both advertisers and suppliers review the finance and payment procedures based on the Memorandum of Agreement (MOA) in 2004. He pointed out that the ASAP production houses constantly invest in systems and technology upgrade to give the best quality of output for its clients. Stricter compliance to the payment policies would greatly aid the production houses in keeping their finances in order.

In closing, Reyes hopes that advertisers were able to better understand the rationale behind the costs and learned ways to trim down their production expenditure. He further assured the advertisers that ASAP will always be committed in providing them the best quality of output, within the specified time and most affordable cost.

Following Jun Reyes’ presentation, questions were raised by advertisers. After these inquiries were answered by various ASAP representatives, all the GMM attendees excitedly proceeded to the free tour of Manila Ocean Park’s Oceanarium.