Wednesday, May 27, 2009

The Vendor Client Relationship

If you have ever worked in production, you'll understand this video. And if you've never worked in production, you may be surprised to learn that this is how business is done.

The teacher in me wants to explain things about this video and why something that looks ridiculous is actually just about economic leverage.

All of the above examples are from the world of retail. There are several important things to realize about this. First, items are relatively inexpensive. I don't know how much that meal or hair styling cost, but let's say $100 or less. Second, the market of potential customers is large. These two things give the retailer the right to tell a customer to take a hike. There are lots of other customers and the loss of a sale of a $20 CD or a $100 meal is not going to make much of a difference to the bottom line.

Let's amp it up a notch and talk about kitchen renovators. A reno is going to cost $10,000 and up. If the reno company is in a fairly large city (500,000 plus), there's no shortage of customers so they can still afford to tell a customer to take a hike. However, the length of time it takes to do a reno means that a company can only do so many in a year. This is fundamentally different than retail. A restaurant or hair stylist is capable of doing dozens of transactions in a single day, so time is not really an economic constraint for them.

Let's say the renovation company is able to do 20 renovations in a year and they need 15 to break even. It's now December and they've only done 14. They've got a possible client, but the client refuses to pay the price and wants a healthy discount. The reno company is faced with taking a loss or taking a smaller loss, so the cheap client has leverage and the reno company is likely to give in.

When you get to the film and television business, the clients have even more leverage. People with money to finance a project are rare. Each job represents a large chunk of money and your facility can only handle so many projects a year. Since clients are rare and each job is worth a lot of money, you can't afford to offend anyone. Losing a client in a retail situation is a petty annoyance. Losing a rare client client with an expensive job can be the difference between life and death for a company. Taking a hard line with those clients often means that the client won't come back. Both the client and vendor know it, and the client takes ruthless advantage of that fact.

While the video above looks ridiculous at the retail level, it makes economic sense based on supply and demand. There's a huge supply of retail customers, but there's a short supply of film and television customers. In film and television, production company demand for jobs outstrips producer supply. When the equation is so uneven, the scarce side inevitably takes advantage.


warren said...


painfully true.

*pinches nosebridge and cries a little*

Keith Lango said...

Oh dear...

So many flashbacks, so little time. And the sad thing is- while the rest of the world sees how patently offensive and ridiculous it all is, artists keep falling for this stuff.

Steve Schnier said...

They left out the one where the client decides upon seeing the final animated production - that "maybe the lead character shouldn't be wearing a sweater".

Just reshoot it - and have her not wearing the sweater.

But it's animated. We'd... We'd have to redraw the whole episode...

Okay. How much will that cost?

They never paid for the revision.

Anonymous said...

Clients didn't used to be this way. There used to be fewer production houses, and the clients allowed the production company to do their jobs. Jack Zander once told me "I have a lot to answer for. I was the first producer to allow the client to look at pencil tests and make changes at that stage."
Now, there are so many facilities in comparison to what was available in Zander's day there is always a production house that will take less money and less time and overwork their staff to do whatever it takes to enable controlling, lowballing clients.

David said...

"Now, there are so many facilities in comparison to what was available in Zander's day there is always a production house that will take less money and less time and overwork their staff to do whatever it takes to enable controlling, lowballing clients."-------

And those people must be ostracized and driven out of our community. It's not about squelching "healthy competition" ... rather it's about unhealthy , cancerous competition (the way cancer cells "compete" with your healthy cells in the "free market" of your body) . These people are destroying us (and themselves , ultimately) , but they've already lost their souls, so that was their choice and they made it , but the rest of us don't have to work with them or tolerate them or encourage them by our silence.

Anonymous said...

I did a little experiment. I felt like the rate I was asking for work was barely marginal- only something I would do for a short time to get a foot hold and figure out how to market my hard-earned skills. In order to measure the other suppliers out there and see what kind of hike might be possible, I made a fake ad with the bait of a tempting-sounding job. Yeah, a little dirty, but it's market research.

With very few exceptions, all of the dozens and dozens of responses were asking the same very marginal rate. Some of them had mega experience. Who pays their rent like this? Who pays for one of those ridiculously expensive school degrees? The burnout rate must be tremendous. I started a different kind of business and treat this stuff as part-time work I only do if I want to now- depending on it would be insane.

Anonymous said...

"there is always a production house that will take less money and less time and overwork their staff to do whatever it takes to enable controlling, lowballing clients."

You've just described the animation industry in Vancouver.

David B. Levy said...

A very fun video. I mentioned it to my dad who was a big wig in Advertising in NYC from 1960 to the 1990s. He said, "This is like comparing apples to oranges because a hair cut has a set price, and there is no set price in advertising/animation, etc."

No individual working in animation gets the same rate job to job or project to project. No two projects pay the same. The equation starts out with both parties agreeing to a price. And, yep, the client will try to get as much as possible out of the deal. And, the artist will try to please the client to get more work. But, when both sides are satisfied it can be a very happy equation.

Anyone who buys into old myths that all clients are bad and all artists are heroes is deluding themselves. There are crooked artists and crooked clients.