Video firm’s success brings struggle
Client demands can cut into VMG Cinematic’s tricky profit margins
Mark Campbell is used to working at a brisk pace.
His web video and marketing firm, VMG Cinematic, has just nine permanent employees and makes between 15 and 20 videos in an average month.
Its clients range from national brands such as Bell and Gillette to regional players — the Vaughan Mills shopping centre, for example.
Once a video is shot and edited, VMG also handles ad buys and social media marketing, for a fee.
The company has seen revenues grow by 243 per cent over the past two years, but underlying its success is a constant struggle to control costs and manage staff while keeping clients happy.
The fact that VMG is a small contractor in an industry filled with larger operations makes this balancing act even more difficult. It means VMG has to negotiate prices with clients on a project-by-project basis, in a very competitive market.
Calculating the right amount to charge requires forecasting each job’s length and complexity accu- rately. But video production, by its nature, is prone to last-minute changes in creative direction, occasional delays and lengthy revisions. That’s because video, more so than any other medium, is difficult to edit. Even minor changes can take hours, even days, to implement.
This gets expensive for clients when hours add up and budgets balloon out of control, so VMG takes away the price uncertainty by charging a flat fee upfront. The practice brings in clients, but also means costs have to be estimated, and staff managed perfectly.
Otherwise, VMG has to absorb additional costs.
The company’s permanent staff handle client relations, production and administration. For video editing, VMG uses freelance subcontractors. If a job goes longer than expected because of client demands, or if a customer needs a change made unexpectedly, the company can find itself scrambling to marshal freelancers, who aren’t always available at a moment’s notice. This makes it very hard for Campbell, founding partner and CEO, to know what his expenses will be on any particular job in advance. In other words, pricing is an art, not a science. The cost of a single video might range from $5,000 to $15,000, depending on the complexity of the project. “With video, compared to other forms of media, there’s a real domino effect of changes that impact a lot of other things,” Campbell says. Every time a client gives feedback — they want new music, say, or faster cuts — VMG’s crew has to edit and render all over again. That takes time, eats up money, and cuts into profits. Setting fees too high turns off clients, but so does setting them too low. According to Campbell, VMG’s prices are 30 to 50 per cent less expensive than traditional television-production companies — thanks in part to the company using non-union cast and crew and handling all production in-house. “Sometimes when (clients) see our prices are lower,” Campbell says, “they automatically assume that we’re the discount option.” Complicating matters further is VMG’s cadre of freelance editors, who are paid per day. They’re generally very loyal, and as such make themselves available for work from VMG, although they do also handle other projects. But this doesn’t prevent the occasional all-nighter as staff work to avoid pushing back deadlines. Campbell says these hassles are just a part of the job. “It’s behind the scenes,” he said. “We’re playing chess to get the right prices. But from the client’s perspective, it’s seamless.” VMG isn’t the only media-related contractor paying this game. Michael O’Reilly, president of the Canadian Freelance Union, represents independent media workers nationwide. He recommends small operators like VMG take a client’s corporate culture into account and adjust project estimates accordingly. “If it’s a project that engages a lot of people,” O’Reilly says, “we usu- ally apply a factor of at least double what your best estimate of time is.”
That time cushion is supposed to defray the costs of the meetings, consultations, and revisions that come as part and parcel of corporate work. Campbell already makes these allowances when he sets his prices, but they don’t always cover additional expenses.
When a job takes significantly more time than anticipated, O’Reilly thinks a contractor should renegotiate the fee, if it can.
VMG’s model puts it in a weak bargaining position when those types of situations occur. An upfront price is difficult to renege on, unless the scope of the project changes.
“As an independent contractor, it’s always difficult to renegotiate a fee once it’s been set,” O’Reilly says.
Campbell knows this, but stands by his flat-rate model.
“It’s definitely challenging to make corrections and hit deadlines,” he concedes.
But, at least, it beats losing out to competitors.