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The effort and cost associated with digitally driven creativity has been a misunderstood and, sometimes, thorny issue. Unlike TV-commercial production, where there are some established cost parameters and you can typically see the budget on the screen, it’s tough to price innovative web work.

Though comfortably out of the “Bro, can you make me a website?” phase, digital-production pricing has yet to be standardized to the point where many have a good understanding of what things cost. Conventional wisdom says prices for interactive work are rising, but what’s informing the increases and how does the industry determine where costs should be?

Digital-production leaders often tell the we-did-it-cheap-back-then story. “I worked on Volkswagen from 1999 to 2004 for Tribal DDB,” said Dave Bedwood, a creative partner at Lean Mean Fighting Machine, Cannes’ cyber Agency of the Year. “They were spending a million pounds on production on the floor above for the TV ad, whilst me and my partner were shooting videos ourselves on digital cameras.”

Those days are quickly fading into history. The Interactive Advertising Bureau says internet advertising revenue is up 18.2% from the first quarter of 2007 to $5.8 billion. But what, if anything, does this mean to the relative outlay for the making of digital work?

Complexity price
It bears stating that interactive production does not lend itself to generalizations. “The same way you can’t compare the costs of a Sony ‘Bravia’ or a ‘Happiness Factory’ with a ‘Mac vs. PC,’ you can’t compare the investment needed in a ‘Get the Glass’ with an ‘Elf Yourself,’” said PJ Pereira, founder and creative director at Pereira & O’Dell. “And that has nothing to do with the quality of the idea or even the return it will bring, just the complexity it takes to produce it.”

But while prices vary with the nature and scope of the work, digital projects generally have larger budgets now, and with them comes a greater demand for expertise. For Lean Mean’s “Nonstop Fernando” site for Emirates, Mr. Bedwood said the team “actually did a proper casting, found a proper actor and had a real TV production company and director film and produce it.”

So, according to Mr. Bedwood, audience expectations rise, budgets rise, the level of craftsmanship involved goes up and, eventually, you have equality between the online and off.

But there are no ready standards for these newly significant budgets. Unfortunately, a lack of media buy is often equated with a lack of production money. The loose 10% to 15% standard, where that percentage of the media spend is put into production, is disregarded. “Clients still have trouble understanding interactive can be just as expensive as executing a TV spot, just without having the media spend,” said Paul Collins, interactive creative director at Swedish agency Åkestam Holst.

There are ways to channel needed funds into production, according to Bob Mackintosh, interactive director at Syndey agency Host. “We seem to be able to snaffle more production dollars from a media budget when the idea is positioned as a ‘media idea,’” he said. “Some viral content comes into this category.”

Among the agency producers assigning the work and bringing together production partners, there’s a strong sense of which company will come in at what number. Several of the interactive executive-producers we spoke to at large agencies had fundamental ideas about what different shops would charge for specific pieces of work. Watch out, they cautioned, because if you aren’t sure going in what things should cost, you’re likely to overpay.

Negotiations
As with nearly everything, there’s room for negotiation, and top production companies can afford to be more selective. “The top dogs can pick their projects and be tough in their negotiations, knowing there’s a line of agencies waiting to get in,” said Anders Gustafsson, senior creative at Sweden’s Daddy. “As traditional agencies get better at digital, this will change.”

And newer, faster and younger companies will always be arriving. But aside from having to constantly worry about being underbid on projects by garage shops, Mr. Webb said there are some cost advantages to being a well-known shop. “Our costs per hour of average employees in certain roles have actually gone down in the last few years. If you have a boring place to work, you have to pay a lot to keep people there, so perversely a lot of the middling work is actually more expensive to produce than the awesome work,” Mr. Webb said.

Standards, a word on the lips of anyone who’s been on the wrong end of a bad deal , seem to be slowly developing among the production community, at least in an informal sense. Mr. Webb said he doesn’t think formal standards are necessary, but terms of engagement are, such as those offered to traditional production companies through the Association of Independent Commercial Producers. “[There should be] clarity on work for hire and attribution, and award shows and staff poaching,” Mr. Webb said.

Looking forward, it’s conceivable on- and off-line production may reach parity. “At some point, the investment that you need to make to have A-Class digital stars such as the Barbarian Group or North Kingdom will get close to what you can pay to a director like Spike Jonze,” Mr. Pereira said. “I wonder if that will mean that one day we will see people like (A-list Flash artist) Erik Natzke working directly with Michel Gondry to produce cross- media content. If the prices continue to rise, this day may be about to arrive.”
Putting a Price on Digital Production - Advertising Age - Digital

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