Why Does A Second Of Production Cost The Same Whether Anybody Watches Or Not?

It was the brand manager of a large package goods company that asked the question: "Why does a second of production cost the same whether anybody watches or not?"

The agency producer who was dining with us, slowly put down her glass of wine and looked at me for help. As if somehow I would have a better answer than she.

Seeing her perplexed look, the brand manager interjected, "Let's start with an easier question," he said. "What's the average cost of a second of production for a national 30-second TV commercial?

Looking somewhat relieved at having a question that she could answer, the agency producer started doing some quick math on the tablecloth, "The average 30-second spot costs around $380,000. So each second comes out to, twelve, wait, $12,666."

The brand manager nodded, as if he knew the answer already. "So," he continued, what if viewers just watch the first ten seconds? Could I get a discount on the twenty seconds that weren't used?"

Interesting choice of words, I thought. A discount on seconds not used. The industry has never had the ability to look at creative in this way before -- as seconds used or not used.

Digital changes the paradigm. When viewers opt-in to a commercial on a digital platform, we can now accurately measure how much of the commercial they actually watched.

Should a marketer get a refund for seconds paid for, but not used?

The answer is, of course not. The cost of producing a commercial covers the production company's direct costs, overhead and profit. Production companies couldn't sustain a business if they gambled with their direct costs and overhead.

"But what about profit?" the brand manager asked. "Would a production company be willing to put their profit into play -- payable only after the spot ran and dependent on how long the viewer was engaged in the spot?"

"Fat chance," the agency producer said, as she refilled her glass with a generous helping of wine.

Interestingly enough, I had wondered about this question myself for some time now. Which is why I recently made a trip to L.A. to talk to some production companies and directors. Not just your run-of-the-mill production companies, but those that house film directors, great storytellers, the ones who generally make movies rather than commercials for a living.

After asking the heads of these companies if they would put their profit into play -- under the auspices that they would make more than they normally would if they maintained interest in the commercial -- they all answered identically: "Yes."

What's more, after discussing the idea further, most also offered to put the director's day rate into play. Which meant that, on average, without sacrificing the quality of the production, the upfront costs were reduced by 20% to 25%.

Their only caveat? The advertiser had to relinquish creative control back to the agency.

In other words, if the advertiser wants some accountability over the costs of production, the advertiser needs to loosen the reins on trying to control the creative.

So, I asked the brand manager about it. "Would you be willing to give up creative control?" I asked.

"If I approve the strategy and the script, and the agency knows their job is to bring back that script in the most involving way possible, then yes," he said. "I'd be foolish not to, wouldn't I? After all, under this model, both the agency and I are working towards the same objective, getting the commercial watched."

The agency producer was at a bit of a loss for words. "You mean, they can measure how long people actually watch commercials?" she asked.

"Not only that," said the brand manager, but I'm going to start paying based on that measurement."

The producer looked at me and I had to smile. For I saw in her eyes that she just finally grasped what this meant.

Advertising, which is now designed to fill a length of time - 30-seconds - will soon need to be designed to fill a viewer's imagination. When it does, then those who created the commercial will be rewarded well.

When it doesn't, the opposite will be true.

For the brand manager, it meant that he finally gets to pay for actual value received.

And, since I figured that he received more than his share of value at this dinner, I felt justified in handing him the check.

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