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Are you auditing your film costs?

Are you auditing your film costs?
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First Published: Tue, May 20 2008. 11 51 PM IST

Pruning costs: Production bills for TV commercials have gone up by 20% over the past few years.
Pruning costs: Production bills for TV commercials have gone up by 20% over the past few years.
Updated: Tue, May 20 2008. 11 51 PM IST
Mumbai: Advertisers are bringing in audit specialists to keep a tab on film production costs. With the cost of filming TV commercials going up due to rising costs of talent, studios and art/input, overall production bills have shot up by at least 20% over the past few years, say ad men.
Pruning costs: Production bills for TV commercials have gone up by 20% over the past few years.
Film production costs come under various heads such as raw stock, location, staff and top-drawer directorial talent, models, camera, lighting, sets, editing, special effects, sound recording, etc. That’s where film audit specialists and services such as Spatial Access Media Solutions Pvt. Ltd are increasingly stepping in, auditing everything from cost of film production, royalties, airing rights in India and abroad and film buyouts, to lists of directors. Their aim: to rationalize the cost of production and look for savings. This could benefit not just the advertiser, but also the production house, which sometimes underestimates costs involved and underbills the client.
Large advertisers are also appointing in-house audit specialists. Sharon Pereira is responsible for managing the film production process for Unilever in South-Asia (including India) and for certain categories in South-East Asia. “She works closely with ad agencies and film producers. Her job is to ensure that the ‘best value’ is secured while ensuring that the final output is as per the ‘creative brief’. Her expertise is about providing production solutions that ensure excellent quality of output and film production at the most optimal costs,” says a Hindustan Unilever Ltd spokesperson.
Earlier, agencies’ film departments kept an eye on budgets, but that role is increasingly going to audit specialists who work for advertisers. Says Anita Mundkur, business head, Spatial Access Media Solutions, “For advertisers, expenditure on films is a large component of costs. Most brands make more than one theme film a year. A brand makes between three and six films a year, so outlays have increased substantially.”
Film audits are getting a mixed response: Many big-spend TV advertisers are signing up auditors, while some ad agencies and film-makers are wary of what they perceive to be interference from an outsider who will crimp their margins. Advertisers in categories such as telecom and carbonated beverages would be among the largest buyers of film production services.
TV advertisers from competitive new-age sectors, such as retail, particularly, are hiring auditors. Says Samar Singh Sheikhawat, vice-president, marketing, Spencer’s Retail Ltd, which did a film-production audit recently: “What this got us was transparency, a clear line of sight on costs which helped us cut costs by about 25%.” The audit only eliminated fat from the system, and they did not touch producer or agency fees. Also, they had no face-to-face interaction with the producer and hence no unpleasantness, he adds. Advertisers also demand no compromise on ad quality, since 80% of the (TV ad budget) money goes towards media buys, only 15% for production and the rest is miscellaneous.
In contrast, many agencies are not happy at the prospect of yet another audit, since various stages of the ad production and media buying cycle already face audits.
Moreover, some agency executives who did not wish to be identified, say that since they write the brief for a commercial they would know best how to optimize budgets.
An agency’s response to a film audit may be linked to how it is paid by its clients. Many agencies work on flat fees for film supervision and hence their remuneration is fixed or not linked to film cost. Such agencies are supportive of meaningful film negotiations that deliver value to the advertiser, says Meenakshi Madhvani, founder, Spatial.
Sometimes, however, agencies build in buffers for exigencies that may not be returned to the client if unutilized, and that’s where audits could work. Most production houses, however, retain a safety margin for exigencies. This is justifiable since the production house does not come back for a hike if the film has gone above budget, says Mundkur.
Film-maker Sneha Iype Varma, executive producer of Nirvana Films, says she would not hire film auditors since there are too many variables involved in a project. Varma says they outsource everything from teams to vendors to equipment and work out special bargains and packages based on their relationship with them. “Sometimes, we work on slimmer margins when we want to do a script badly or have a special relationship with an agency. But usually there are margin buffers, and you make up in one project what you lose in another,” she adds.
Milind Dhaimade, film producer at Equinox Films, however, says that a neutral auditor can give the client a balanced opinion on costs. If an audit service views its role as optimizer than mere cost-cruncher, it can help a client understand if its expectations are feasible.
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First Published: Tue, May 20 2008. 11 51 PM IST