• by Joe Mandese  @mp_joemandese, October 13, 2004

At a time when Madison Avenue is scrambling to find the means to produce the kind of lower cost TV commercials that will be essential to a successful addressable advertising marketplace, the average cost of producing a TV commercial has reached an all-time high. The cost of producing a national 30-second TV commercial rose to an average of $372,000 in 2003, up 4 percent from $358,000, according to results of an annual survey of member agencies released late Tuesday by the American Association of Advertising Agencies.

In fact, the average cost of producing a TV commercial has more than doubled since 1989, the base year of the tracking study, when the average :30 cost only $180,000 to make. While the absolute cost of producing TV commercial may seem relatively modest when compared to the skyrocketing costs of purchasing media time to air them, the costs are still a concern because many experts expect the future of TV advertising to rely much more heavily on delivering many different versions of TV ads to specific segments of the TV audience via various types of addressable advertising.

The TV industry calls this process "versioning," a term borrowed from the Internet, and has spawned several new players, including Visible World, which are developing digital commercial production studios that are capable of rendering multiple versions of a TV commercial at significantly lower costs than the national average.

Interestingly, the TV commercial production cost inflation comes even as Madison Avenue has shifted away from relatively expensive "location" shoots to more studio-based production. However, while location shoots declined 2 percent from 2002, they still accounted for 62 percent of all TV commercial productions in 2003.

TV Commercial Production Costs Continue To Soar

Year   Average Cost   Vs. Prior Year 
1989       $180,000               NA     
1990       $188,000              +4%

1991       $210,000             +12% 
1992       $217,000              +3% 
1993       $242,000             +11% 
1994       $268,000             +11% 
1995       $263,000
-2% 
1996       $278,000              +6% 
1997       $308,000             +11% 
1998       $295,000              -4% 
1999       $343,000             +16% 
2000       $332,000
-3% 
2001       $358,000              +8% 
2002       $358,000               NC 
2003       $372,000              +4% 

Source: American Association of Advertising Agencies' Television Production Cost Survey. Average cost for producing a national 30-second TV commercial.