Nick Kozak for the Toronto Star
Case Studies

The price of popularity: Toronto’s VMG Cinematic gets big hits on youtube, but online marketer must reign in cost

Vital Stats
Name:
VMG Cinematic
Owners:
Mark Campbell, Reid Campbell and Nick Haffie-Emslie
Contact:
www.vmgcinematic.com, info@vmgcinematic.com, (416) 619-0949
Field:
Video Production and Social Media Marketing
Employees:
9
Last Year's sales:
$1.85 Million
Offering:
Video production, motion graphics, YouTube viral marketing and Facebook, Twitter and Pinterest profile design & management
Core Customers:
Consumer product brands and advertising and PR agencies
Notable:
Helped clients reach more than 12 million views on YouTube last year.

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 accurately. 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, or 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. Generally speaking, the more expertise a video requires (such as actors, musicians, animators, and so on) the more expensive it will be.

“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 says. “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 that 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 usually 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.

“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 pricing model. “It’s definitely challenging to make corrections and hit deadlines,”  he concedes.

But, at least, it beats losing out to competitors.

EXPERT VIEWS

As Interviewed by: Tom Henheffer

VMG have got a great website that showcases their quality work and an impressive list of clients. So the issue isn’t their online presence, it’s managing staff and resources. The company should look at their workflow and figure out how to make projects more accessible. The owner can render videos from his smartphone, maybe his cloud-based software can be expanded so other employees can do work while they’re on the go. This may also help address the staffing issues, because it would allow VMG to expand its geographic reach and hire staff from outside the GTA. And I’d also recommend the company try partnering with a non-competitive, but similar, agency to share workflow. They could use remote software to work with businesses in other cities, and also pair up when buying to get better deals on expensive video equipment. Another option would be using workforce staffing software that shows freelancer availability so the owners don’t have to run down a long list of people every time they need extra help. It makes things more predictable, and should help with those last-minute client demands .

by Tisha Rattos

Having a robust understanding of the client's needs is necessary before any production starts. VMG is already using remote software to make post-production more efficient, and could take a similar approach for screenwriting, storyboarding and other pre-production tasks. Celtx.com, for example, has great, cloud-based software that meets these needs. Their need to round up freelance editors last-minute and occasionally pull all-nighters makes me wonder if they should consider hiring a couple of editors, and contract out when special expertise or additional support is needed. Finally, I think their flat-fee strategy makes a lot of sense, but it might be worth seeing if there’s room to increase rates, especially if VMG’s prices are coming in at 30-50 per cent less than some of the competition. And it may make sense to introduce a multi-tiered system, where clients get a specific number of revisions or editing hours depending on the complexity of the work and how much they pay. This could help improve cash flow and buffer some of those unexpected costs.

by Mike Feaver

VMG Cinematic have customers lining up, so what they're doing is working. They just need it to work more efficiently. I think the problem stems from the freelance model, which isn't necessarily bad, it just needs to be managed properly. It sounds like they're running down a rolodex and phoning everyone to see who's available whenever there's last-minute work. This takes a long time, and doesn't get great results. Instead I'd recommend they use some kind of an electronic community, a collaboration tool that lets them see contractor availability, post jobs, get comments and match certain work to people with the right skillset. It wouldn’t cost much, and they don’t even need to build anything custom because there are lots of readily available tools out there. Even Cisco itself has Quad, which is a secured kind of "team room" community site that helps companies manage these situations while gathering feedback from their staff. It’s a method that really cuts down on time spent shopping jobs out because you always know who’s ready to work, and I think it could help streamline VMG’s processes to make them even more successful.

by Gary Isaacs

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