When a pharmaceutical company charges $3 for a pill that may
only costs 3 cents to produce, they don’t justify the margin by speaking solely
about the costs of marketing, distribution and demand. They mostly justify the
margin based on the tens of millions of dollars they spent in research and
In other words, to bring that particular drug to market the
pharmaceutical company needed to design it, test it, and get it approved. There
are also many other drugs they invested in that didn’t prove to be successful.
This is the risk they take in developing their product. And, when it hits they
not only need to recoup their investment but also turn a profit. It’s called
Of course, in the talent driven production model we are hardly making
medical breakthroughs but we do make investment in product. It’s just
happens our product are directors.
When a young director meets with a production company they have
worked on building their own reel. Like a start-up company, they’re in the
beginning stages of developing a product they believe has worth but they need
help in scaling it and bringing it to market. That’s where we come in.
R&D begins when a production company
first recognizes a director’s potential. If they believe this individual
possesses the talents worthy of investment they make the commitment. They
leverage their reputations, their relationships and their checkbook to invest
in an individual’s career. In the simplest of terms this equates to time, money and resources, not an insignificant assets.
Let’s start with reputation. A production
company has built up a standing in the industry. They are a proven entity in
producing work and managing their talent. Because of this Reps want to sell
them, agencies seek to work with them and clients will pay for their services.
This requires building an infrastructure and creating work of note. It takes years to establish.
Relationships. A production company has
spent years nurturing relationships with their clients. They’ve wined them,
dined them and delivered on the impossible. It’s what service businesses do to the
benefit of their product. Every time we sign a contract to produce a job we
put our reputation and relationship on the line not to mention risk. Nice segue into the pocketbook.
In today’s climate
we must always be prepared to put money into creative
opportunities. This means investing in our reels whether it’s getting a spot
for a young director, helping an establish director get to the next level or a star
director maintain their status. This may result in asking for favors we need to
repay, doing a job for low margins or even spending money out of pocket. If you
are unwilling to make this investment chances are small of either building,
attracting or keeping talent. Without investing in the work, a
production company risks lessening their creative profile and ceding an
advantage to the competition.
What this illustrates is that production
companies are not to dissimilar from a tech firm that builds an algorithm or pharmaceutical
brand that creates a drug or an automotive company that designs a new car. The
only difference is that what we develop and nurture isn’t inanimate. It’s
human. But does this make it any less of an investment? If anything it makes it
riskier. As far as I know a Chevy never refused to be taken off the lot by a customer
or decided to leave and join the new line of BMW’s.
Speaking of moving to BMW, the investment
in talent isn’t exclusive to young "build" talent. It also applies to talent that was acquired talent or the established directors that stayed within
your sphere. The more sought after a director becomes the larger a percentage of
profits they command.The upside is a reliable revenue stream while maintaining, or increasing, a company's creative value. The downside is it decreases margins and adds potential overhead with increased exposure. Once again, its a risk
and an expense.
So, when a client seeks an overseas service
company to contact your director directly or an agency asks you to cut your
production fee or a cost consultant calls out a line and says its the cost of doing
business, remind them of the value you bring and the investment you made.
The talent and the reel they desire didn’t
appear overnight. It was discovered, developed and paid for in full. And just
like our clients, all we want is little return on investment.