Discerning Key Distinctions in Commercial Production

Transcription

1 Discerning Key Distinctions in Commercial Production

2 The 2011 Annual Member Survey was executed via an online survey from April 19 th, 2011 to May 13 th, 2011 among the AICP Member group. The table below illustrates the sample sizes and descriptions of the groups included in the study. Total Company Size* Total Main Location N = 112 Small (Sales <$5m) Medium (Sales $5m $19.99m) Large (Sales $20m+) n=68 n=24 n=20 N = 106 LA NY Other n=50 n=26 n=30 61% 21% 18% 47% 25% 28% The results show significant changes in 2010 Production processes regarding Production Expenditures, Sales, Projects and Shoot Days, Shoot Locations, Payments, Digital Production, Non Traditional Advertising Related Projects, and the Impact of Tax Incentives. The following slides showcase the changes in greater detail. *Categorized using mean sales figures 2

3 Preparation For AICP s Ninth Annual Membership Survey prior to questionnaire creation, Resolve Market Research and AICP held a focus group of AICP members to identify the most vital findings from previous years surveys and to discern gaps in the data that are needed for The result of this qualitative exercise was the expanded Digital and Non traditional sections along with more in depth distribution method analysis. Experience The presentation of the survey was also updated with members permitted to take both Part 1 and Part 2 of the survey in one session. This led to some of the highest response rates in the survey s history. In addition to the overall presentation, we included carefully worded definitions of production types and distribution methods prior to the beginning of the survey and in the questions themselves (via roll overs). Below are the exact definitions used to define each corresponding term. TERM Traditional (broadcast) commercials DEFINITION This survey will focus on questions about both traditional commercials and non traditional advertising related projects. For the purposes of this study, traditional commercials shall mean commercials produced for distribution via the following media channels: broadcast television, cable television, or theatrical Non traditional (non broadcast) advertising related projects Non traditional advertising related projects should include all those NOT distributed via traditional methods, including but not limited to internet (i.e. web films), mobile devices (i.e. cell phones, smartphones, PDAs, tablets/ipads, and other portable devices with a screen), in game advertising, experiential advertising, etc. Please note: for the purposes of this survey, both traditional commercials and non traditional advertisingrelated projects may include both live action and/or digital elements. 3

4 TERM Live action production & In house digital production Sales DEFINITION We will also be asking you questions pertaining to both live action production and in house digital production (i.e. production or elements produced by your company in house, which have not been subcontracted, such as visual effects, animation, design, motion graphics, interactive media, and/or combining physical production with digitally created content). For further clarification, in house digital production, for these purposes, shall NOT include the following: live action production captured in a digital medium; live action production distributed digitally (i.e. spots produced for the internet); visual effects produced digitally by a digital production company that you have subcontracted. Please think about the distinction between these types of production when recording your answers. You will be asked throughout the survey for data on your company's sales. In this survey, the term "sales" shall mean total revenue earned by your company during the period from January 1, 2010 through December 31, 2010 for all commercial or advertising related projects completed during that period. This would include the contract price plus any overages attributable to those projects. This would not include any items passed through from your client to a production or postproduction sub contractor, or noncommercial or non advertising projects such as feature films or television series. TERM Expenditures Live action production expenditures Digital production expenditures DEFINITION In this survey, you will be asked about expenditures incurred by your company in both live action and digital production for projects completed during the period January 1, through December 31, Live action production expenditures shall mean Total production costs for projects completed during the period of January 1, through December 31, Digital production expenditures shall mean nonadministrative labor costs attributable to commercial or advertising related projects. Nonadministrative labor costs shall include staff, freelance labor, as well as payroll taxes and benefits. 4

5 Content The latest survey pegs the commercial production as a $4.5 billion plus industry. While that would appear to be a decrease from the previously oft cited figure of $5 billion plus, the reality is that the two tallies jibe. The $4.5 billion plus represents the activity generated by AICP member houses. In the past, since AICP members account for approximately 85 percent of the commercial production house community, the $4.5 billion was extrapolated to account for that other 15 percent of companies, arriving at the $5 billion plus figure. This research did not do such extrapolation. Data Last year s data included an adjustment for a missing company which represented $100M+ in total sales. This year s data does not include this adjustment, therefore the estimates for 2010 should be viewed as conservative. Another change from last year s survey pertains to a small number of questions. In previous reports, depending on the context of certain questions, a few were labeled by the year the survey was fielded rather than the year prior. In this year s report, all of the data from the 2011 survey is labeled under the year 2010 to avoid any confusion. As previously mentioned, this year s Digital Section was expanded and for the first time digital expenditure questions mirrored Live Action expenditure questions (outside of regional queries) to ensure that equal detail was gathered for both project types. This, along with the new digital questions prior to the expenditures section resulted in the slightly inflated digital expenditure mean increased from last year of 47%. For the first time, both Expenditures and Sales Figures are reported without extensive rounding. While these figures are still estimates and were rounded, the 2010 figures represent a more detailed listing of the numbers. 5

6 Projects Overview For 2010, there is good news for AICP member companies, as the average revenue and production expenditures rose. Mid sized companies felt the largest bump in 2010, with those producing commercials reporting an increase of 8%. Live action production continues to make up the lions share of AICP Member projects at 75%, showing an increase of 7% over Sales As both the economy continue to improve from 2009 and the number of media channels continue to proliferate, the average sales for members rose by 8% to over $10,075,000, close to 2008 levels. Overall, total 2010 sales for members rose to over $3.13 Billion a 9% increase over 2009 s $2.87 Billion. Of the total sales, Live Action shoots were responsible for 86%, while Digital and Combination projects accounted for 7% each, respectively. 6

7 Production Expenditures Overall, 2010 production expenditures for members increased by 5% over 2009 with direct production expenditures now at around $2.49 Billion, an improvement over 2009 results of $2.37 Billion. Live action production makes up 93% of the total dollars expended at $2.305 Billion, while digital production is growing to over $181 Million. Whether Live Action (92%) or Digital (90%), production continues to be dominated by traditional broadcast distribution for AICP member companies. A geographic breakdown of production showed an increased in U.S. activity. In 2010, 88% of all shoot days were completed domestically compared to 12% abroad. Shoot Days & Locations As reported, there was an increase of 17% in shoot days for 2010 at compared with in Overall, 71% of all shoot days took place on location, with the remanding 29% being completed on sounds stages. 7

8 Shoot Days & Locations (cont.) While overall industry productivity is up, shoot days in Southern California remains stagnant at 51%, continuing an overall loss of approximately 3% since When reviewing shoot days by geography, 88% of all shoot days in 2010 were domestic compared to 12% abroad. Internationally, shoot days in the UK and Europe grew 5 percentage points to lead all international shoot destinations. South America increased by 6 percentage points to remain the second most filmed foreign location. Tax Incentives When determining project locations, tax incentives continue to be a significant factor in 25% of all location decisions. 8

9 Payments Data and Analysis by Fortunately, 2010 saw a significant improvement in On Time payments up a full 10 percentage points to 41%. Most companies saw payments arriving within 15 days of the agreed payment date. However, digital firms most often received payments late, from 1 60 days 95% of the time Overall, agencies top reason for paying late was that their clients had yet to pay the agency (85%). Digital & Non traditional Most often, graphic design is the most used digital technique and accounted for 29% of all in house digital production. Visual effects and animation also were significant sources of activity at 24% and 22% respectively. After Effects remains the most popular in house digital production tool, with 52% of member companies producing content digitally reporting using such tools. 9

10 Company Demographics Of member companies, almost half (47% ) are headquartered in Los Angeles with New York (25%) being the second most popular location. Diversity workplace initiatives have been engaged by 18% of member companies. For 2010, 22% of AICP companies were majority owned by a female. Most often (87%), the majority ownership of companies was Caucasian with Hispanics making up (7%) the second highest ownership group. Of note, 15% of member companies have been certified as minority owned, with 41% of that group designated as Women Owned Business Enterprise (WBE) and 35% Minority Business Concern (MBE). 10

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12 The average number of projects completed in 2010 rose slightly from last year. Mean Number of Projects Completed N=126 N=103 N=101 N=112 Q1: How many projects in total did your company complete in 2010? Projects include both traditional (broadcast) commercials and non traditional (non broadcast) 12

13 In 2010 there was a significant rise in the number of companies completing commercials. Mean Number of Projects Completed Base commercials 27% 37% 29% commercials 38% 25% 33% commercials 14% 16% 20% commercials 17% 17% 13% 101+ commercials 4% 6% 6% Q1: How many projects in total did your company complete in 2010? Projects include both traditional (broadcast) commercials and non traditional (non broadcast) 13

14 In 2010, live action production projects made up a larger portion of total projects compared to Data and Analysis by Mean Number of Projects Completed in Each Production Category Base Live action production only % of Total 80% 68% 75% In house digital production only % of Total 13% 22% 17% Both live action and inhouse digital production % of Total 7% 10% 8% Q2_a: Of the projects your company completed in 2010, how many were completed using: 14

15 Traditional commercials are the primary distribution method for live action production. However, for digital production, non traditional distribution is the most common method with internet films leading the way. Live Action n=111 Digital n=33 Traditional (Broadcast) commercials Non Traditional (NET) 78% 22% 43% 57% Internet or Broadband films Experiential Marketing Original content (branded entertainment) Mobile content (phones, tablets) In game advertising Other 15% 1% 2% 1% 0% 3% Q4B_a: What percentage of your live action and/or in house digital projects was intended for the following primary distribution methods? 36% 4% 3% 2% 1% 11% 15

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17 Total* Mean Median $3,133,328,110 +9% $2,870,000,000 4% $3,000,000,000 $10,075,010 $9,330,000 $10,400,000 $3,000,000 $2,790,000 $3,950,000 Q5: For all of the commercial or advertising related projects completed by your company in 2010, what were the total sales for your company, not including pass through items. *Numbers are estimates extrapolated from the mean to actual member size. Any fluctuation is attributable to rounding. 17

18 2010 saw a rise in mean sales by 8%. These numbers more closely reflect $10,600,000 $10,400,000 $10,200,000 $10,000,000 $10,400,000 Mean Sales $10,075,010 $9,800,000 $9,600,000 $9,330,000 11% +8% $9,400,000 $9,200,000 $9,000, N=102 N=101 N=112 Q5: For all of the commercial or advertising related projects completed by your company in 2010, what were the total sales for your company, not including pass through items. 18

19 Looking at the sales breakouts shows a healthy rebound reflective of 2008 sales figures. Data and Analysis by Base Mean Sales $11,600,000 $10,400,000 $9,300,000 $10,075,010 Less than or equal to $1 Million 25% 20% 28% 25% > $ 1 Million to $ 3 Million 22% 26% 23% 26% > $ 3 Million to $ 5 Million 15% 12% 12% 12% > $ 5 Million to $ 10 Million 12% 14% 10% 8% > $ 10 Million 26% 28% 27% 29% Q5: For all of the commercial or advertising related projects completed by your company in 2010, what were the total sales for your company, not including pass through items 19

20 Total Sales in 2010 consisted of 86% live action production, while digital and combined projects only accounted for 14% of the total Sales N=112 Total* $3,133,328,110 Mean $10,075,010 Median $3,000,000 Live Action Digital Combo % 7% 7% % 11% 5% % 7% 7% Q5: For all of the commercial or advertising related projects completed by your company in 2010, what were the total sales for your company, not including pass through? *Numbers are estimates extrapolated from the mean to actual member size. Any fluctuation is attributable to rounding. Q6_a: Of your total sales of in 2010, what percentage of these sales was: live action production, in house digital production, and acombination of the two? 20

21 Combined projects were made up of roughly 62% Live Action production and 38% Digital production. Combined Project Breakdown Data and Analysis by Live Action Project Sales N=112 Digital Live Action 62% Combo Digital 38% n=26 Q7_a: Of the combined projects, what percentage was live action and what percentage was digital? 21

22 Traditional commercials continued to drive more than 80% of total sales. Nontraditional showed some growth in Base Traditional (broadcast) commercials 83% 83% 81% Non Traditional (NET) 17% 17% 20%* Internet or Broadband films 10% 11% 13 % Original content (branded entertainment) 3% 2% 2% Experiential marketing 1% 1% 1% Mobile content (cell phones, tablets/ipad) 1% 0% 1% In game advertising (video games) 0% 0% 0% Other 2% 3% 3% Q8_a: Of your total sales of in 2010, what percentage of these sales was intended for the following primary distribution method? Please respond with percentages that add up to 100 percent. *NET reflects rounding 22

23 Digital firms out produced Live Action firms in numbers of projects. Mean # of Projects Completed $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $0 Mean Sales ,405,020 $9,334,690 $2,600,000 Live Action Digital Combo Live Action Digital Combo Q1: How many projects in total did your company complete in 2010? Projects include both traditional (broadcast) commercials and non traditional (non broadcast) advertising related projects produced in live action or digitally in house. Q5: For all of the commercial or advertising related projects completed by your company in 2010, what were the total sales for your company, not including pass through 23 items

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25 2007 Subprime market collapses 2009 Blue Monday global economic crash Lehman Brothers file for bankruptcy 2008 American Recovery and Reinvestment Act 2009 $2,550,000,000 $2,500,000,000 $2,510,000,000 $2,487,718,120 $2,450,000,000 $2,400,000,000 6% $2,370,000,000 +5% $2,350,000, Other expenditures such as talent payments, music and post postproduction costs are not reflected in these direct production expenditures. Along with all other ancillary and associated costs, this results in a total economic impact of $4.5 billion to the commercial production industry. Q12a: Traditional (broadcast) commercials How much did you spend in total on live action production in 2010 for the following: Q14: How much did you spend in total on non administrative labor for in house digital production in 2010 for the following? *Numbers are estimates extrapolated from the mean to actual member size. Any fluctuation is attributable to rounding. 25

26 Total sales and total expenditures both rose significantly in $3,300,000,000 Total Sales* Total Expenditures* $3,100,000,000 $3,133,328,110 $2,900,000,000 $3,000,000,000 $2,700,000,000 $2,870,000,000 $2,500,000,000 $2,300,000,000 $2,510,000,000 $2,370,000,000 $2,487,718,120 $2,100,000, N=102 N=101 N=112 Q5: For all of the commercial or advertising related projects completed by your company in 2010, what were the total sales for your company, not including pass through items. Q12a: Traditional (broadcast) commercials How much did you spend in total on live action production in 2010 for the following: Q14: How much did you spend in total on non administrative labor for in house digital production in 2010 for the following? *Numbers are estimates extrapolated from the mean to actual member size. Any fluctuation is attributable to rounding. 26

27 Live action production and traditional distribution continues to make up the vast majority of expenditures in Total Total Expenditures $2,487,718,120 Production Live Action $2,305,721,880 93% 7% Digital $181,996,240 Distribution Traditional $2,121,264,130 Non Traditional $184,457,750 Traditional $163,796,616 Non Traditional $18,199,624 92% 8% 90% 10% Q12a: Traditional (broadcast) commercials How much did you spend in total on live action production in 2010 for the following: Q14: How much did you spend in total on non administrative labor for in house digital production in 2010 for the following? *Numbers are estimates extrapolated from the mean to actual member size. Any fluctuation is attributable to rounding. 27

28 While overall expenditures have increased, live action production continues to make up 93% of all expenditures. Percentage of Digital and Live Action Out of Total Expenditures Data and Analysis by 2010 N=112 93% 7% $2,487,718,120 +5% 2009 N=101 93% 7% $2,370,000,000 6% 2008 N=102 96% 4% $2,510,000,000 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Live Action Digital Q12a: Traditional (broadcast) commercials How much did you spend in total on live action production in 2010 for the following: Q14: How much did you spend in total on non administrative labor for in house digital production in 2010 for the following? *Numbers are estimates extrapolated from the mean to actual member size. Any fluctuation is attributable to rounding. 28

29 While lower than 2008 levels, 2010 saw a significant rise in total expenditures for both traditional and non traditional media and the continued growth of nontraditional distribution expenditures. Data and Analysis by Mean Expenditures Traditional* Non Traditional* 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 15% +5% $8,420,290 $7,131,370 $7,486,110 6% 5% 8% 94% 95% 92% n=101 n=100 n=111 *Traditional commercials are commercials produced for distribution via the following media channels: broadcast television, cable television, or theatrical *Non traditional advertising related projects includes all those NOT distributed via traditional methods *Q12_a: How much did you spend in total on live action production in 2010 for the following: Please enter all dollar amounts without dollar signs or commas and including all zeros. 29

30 While shoot day activity in Southern California remains lower than 2007 levels, larger budgeted shoots in major production centers such as Los Angeles indicate a rise in expenditures. Furthermore, 88% of all shoot days in 2010 were made domestically compared to 12% abroad. While similar to recent years, this is in sharp contrast to the 24% of foreign shoot days companies produced almost a decade ago in 2002; a trend reflecting the lower value of the U.S. dollar and increased availability of U.S. state incentives. Foreign 9% Other US 26% California 50% 91% Domestic New York 15% n=111 Q13A_a: Of the $ you SPENT on live action production in 2010, what percentage did you SPEND in each of the following regions? 30

31 Domestic expenditures are on the rise despite requests to shoot internationally. Data and Analysis by Approximate Total Live Action Expenditures by Region* CA: $1,153,000,000 NY: $345,000,000 Other US: $600,000,000 Foreign: $208,000, Domestic: 86% Domestic: 86% Domestic: 91% California: 39% New York: 13% Other US: 34% International: 14% n=101 California: 42% New York: 15% Other US: 29% International: 14% n=100 California: 50% New York: 15% Other US: 26% International: 9% n=111 Q13A_a: Of the $ you SPENT on live action production in 2010, what percentage did you SPEND in each of the following regions? *Numbers are estimates extrapolated from the mean to actual member size. Any fluctuation is attributable to rounding. 31

32 Digital expenditures increased significantly in 2010 by an average of 47% per company, with the vast majority going toward traditional distribution Mean Expenditures $1,179,300 $1,348, % +47% $1,978,220 n=28 n=42 n=33 10% Traditional* Distribution Method 90% Non Traditional* *Traditional commercials are commercials produced for distribution via the following media channels: broadcast television, cable television, or theatrical *Non traditional advertising related projects includes all those NOT distributed via traditional methods Q14: How much did you spend in total on non administrative labor for in house digital production in 2010 for the following? 32

33 Looking at costs for in house digital production in 2010, a significant portion went to freelance support as opposed to salaried staff positions a reversal from Mean Expenditures $1,179,300 $1,348,030 $1,978,220 70% Labor Category 60% 50% 40% 30% 20% 43% 57% 56% 44% 61% 39% +21% Freelance Staff 10% 0% N=28 N=42 N=33 Q14: How much did you spend in total on non administrative labor for in house digital production in 2010 for the following? Q15: Of the you spent on non administrative labor for in house digital production in 2010, what percentage was spent on each of the following labor categories? 33

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35 Companies average number of total shoot days increased by 17% from 2009 as live action shoot days now closely resemble the averages from Data and Analysis by Traditional Non Traditional Mean Total n=101 N=100 n=111 13% +17% Q9: In 2010, approximately how many live action shoot days did your company have for the following projects? 35

36 Of the total live action shoot days companies had for projects, the majority were conducted on location. Only 29% were done on a sound stage. Data and Analysis by Live Action Shoot Stage 29% On Location 71% 2010 Days: Traditional: n=111 Non Traditional: 7.44 Stage 33% Stage 29% On Location 67% On Location 71% Q9_a: In 2010, approximately how many live action shoot days did your company have for the following projects? Q10_a: Of the live action shoot days you completed in 2010, how many were conducted on location and how many were conducted on a stage? 36

37 Production levels in California remain almost stagnant at 51%, with an overall 3% market loss trend since New York received 15% of all shoot days, with the Mayor reporting a 10% increase in activity over 2009 due to the positive economic impact of that state s tax credit implemented in % 55% 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% So Cal 54% 48% 48% 51% New York 12% 15% 16% 15% Illinois 3% 5% 5% 4% Other US 16% 20% 19% 18% Foreign 15% 12% 12% 12% Q11A: Of your live action SHOOT DAYS in 2010, how many WERE SHOT in each of the following regions?

38 N=111 Sum of all shoot days in this location % of all shoot days % of domestic shoot days Q11A: Of your live action SHOOT DAYS in 2010, how many WERE SHOT in each of the following regions? Mean for those with shoot days Median for those with shoot days Mean for those who shoot in this location Data and Analysis by Median for those who shoot in this location Q11a. L.A. County % 53% Q11b. Southern California (Outside L.A. County) 277 4% 5% Q11c. Northern California 85 1% 1% Q11d. New York City % 15% Q11e. New York State (Outside New York City) 128 2% 2% Q11f. Connecticut/MA 27 0% 0% Q11g. Illinois 294 4% 5% Q11h. Florida 136 2% 2% Q11i. Southeast Outside Florida (GA, NC, SC) 179 3% 3% Q11j. Louisiana 19 0% 0% Q11k. Southwest (TX, NM, AZ) 233 4% 4% Q11l. Other U.S. locations 531 8% 9%

39 40% 35% 30% 25% 20% 15% 10% 5% 0% Europe/UK 20% 14% 24% 29% Vancouver 16% 17% 19% 11% Toronto/Other Canada 7% 6% 13% 10% Other Foreign 21% 26% 25% 25% Central/South America 36% 37% 19% 25% Q11A: Of your live action SHOOT DAYS in 2010, how many WERE SHOT in each of the following regions? Data and Analysis by The past year saw fluctuation in the most common foreign shoot location. Shoot days in the UK and Europe increased significantly to take the lead for the first time as most filmed location abroad. After a 49% dip in activity in 2009, shoot days in South America rebounded to 25% to remain the second most filmed foreign location. Canada again fell slightly to 21% of all shoot days abroad. 39

40 N=111 Sum of all shoot days in this location % of all shoot days % of foreign shoot days Q11A: Of your live action SHOOT DAYS in 2010, how many WERE SHOT in each of the following regions? Mean for those with shoot days Median for those with shoot days Mean for those who shoot in this location Median for those who shoot in this location Q11m. Vancouver 88 1% 11% Q11n. Toronto 60 1% 8% Q11o. Other Canadian locations 14 0% 2% Q11p. United Kingdom 154 2% 20% Q11q. Central/Eastern Europe 72 1% 9% Q11r. Australia/New Zealand 56 1% 7% Q11s. South Africa 44 1% 6% Q11t. Mexico and Central America 33 0% 4% Q11u. South America 158 2% 21% Q11v. Other non U.S. locations 89 1% 12%

41 Argentina accounted for 60% of the shoot days and 63% of the spend in South America significantly higher than all other countries. Average Shoot Days % Shoot Days % Spend N=24 N=24 N=21 Argentina % 63% Brazil % 16% Chile % 12% Venezuela % 0% Uruguay % 8% Columbia 0 0% 0% Peru 0 0% 0% Other 0 0% 0% Q11b: Of the live action SHOOT DAYS in South America, how many days WERE SHOT in each of the following locations? Q13b: Of the you SPENT in South America, what percentage did you SPEND in each of the following locations? 41

42 International requests dropped by 3% in 2010; however, the majority still receives such requests. Data and Analysis by % % % 43% 55% 39% 55% 42% 52% Yes No Not Sure Q21: In 2010, did any clients or agencies specifically request that you shoot outside the U.S.? 42

43 Even if they are requested to shoot overseas, the majority of companies are not seeing an increase in these requests year to year. Data and Analysis by 100% 80% 60% 68% 67% 68% Yes No Not Sure 40% 20% 22% 17% 22% 16% 10% 10% 0% Q22A: So far in 2011, have you seen an increase in requests to shoot overseas compared to previous years? 43

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45 While somewhat diminished from previous years, tax incentives still heavily impact 1/4 th of all project locations. Data and Analysis by 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 28% 31% 25% 64% 58% 70% 8% 11% 5% N=103 N=101 Q18: In 2010, did you make any decisions about locations for your projects based on tax incentives? N=112 Yes No Not Sure 45

46 The last two years have seen a steady increase in advertisers choosing a location based on tax incentives. However, as of now, respondent companies make this decision most often. Data and Analysis by 41% 35% 39% 7% 14% 23% 19% 25% 25% N: Your company An advertiser An advertising agency Q20: How often did each of the following entities make the decision to shoot at a location based on tax incentives? 46

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48 2010 saw a significant rise in On Time payments Base Prior to Due Date 6% 6% 6% 5% On Time 34% 34% 31% 41% 1 15 Days Late 18% 16% 21% 17% Days Late 16% 16% 18% 18% Days Late 12% 14% 13% 9% Days Late 8% 7% 7% 5% More than 60 Days Late 7% 7% 4% 4% No Payments 0% 0% 1% 0% Q24_a: A major issue in the commercial production industry has been timely payment of agreed upon agency contracts. In 2010, approximately what percentage of final payments from your clients arrived during each of the following ranges of time? Please enter percentages that add up to

49 Overall, companies were seeing at least half their payments come within 15 days of the agreed upon time. Medium size companies faced later pay dates. Company Size (Sales) Data and Analysis by Small Medium Large $10m $20m Total Sales<$1m $1m $4.99m $5m $9.99m $50m+ $19.99m $49.99m Base Prior to Due Date % 5.14% 6.08% 4.16% 3.64% 8.54% 5.5% 2% On Time % 41.2% 56.46% 42.55% 22.27% 36.54% 31.06% 42.5% 1 15 Days Late % 17.04% 10.83% 21.84% 13.64% 14.15% 16.63% 22% Days Late % % 18.07% 15.91% 26% 15.75% 15.75% Days Late % 8.99% 6.38% 6.93% 24.09% 6.23% 10.81% 7.5% Days Late % 5.4% 3.63% 4.45% 6.82% 3.08% 11.63% 5.25% More than 60 Days Late % 4.38% 1% 2% 13.64% 5.46% 8.63% 5% No Payments % 0.09% 0% 0% 0% 0% 0% 0% Q24_a: A major issue in the commercial production industry has been timely payment of agreed upon agency contracts. In 2010, approximately what percentage of final payments from your clients arrived during each of the following ranges of time? Please enter percentages that add up to

50 Like medium size companies, digital companies were also subject to later payment dates. Company Production Type Total Live Action Digital Combo Base Prior to Due Date % 5.14% 6.06% 0% 3.03% On Time % 41.2% 44.65% 0% 33.97% 1 15 Days Late % 17.04% 16.13% 20% 19.22% Days Late % % 30% 22.88% Days Late % 8.99% 8.59% 30% 9.31% Days Late % 5.4% 4.44% 15% 7.47% More than 60 Days Late % 4.38% 4.48% 5% 4.13% No Payments % 0.09% 0.13% 0% 0% Q24_a: A major issue in the commercial production industry has been timely payment of agreed upon agency contracts. In 2010, approximately what percentage of final payments from your clients arrived during each of the following ranges of time? Please enter percentages that add up to

51 Continuing the trend started in 2009, companies are seeing fewer clients delay payments overall. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 3% 3% 7% 4% 43% 4% 50% 35% 1% 61% 35% 11% 47% 54% 7% 35% N=117 N=103 Not Sure No Change Decrease Increase Q25: Comparing your experience in 2010 to your experience so far in 2011, have you seen an increase, decrease, or no change in the number of payment delays from clients? N=101 N=112 51

52 A delay with the client paying the advertising agency is the top reason companies receive late payments. Data and Analysis by 2008 Client hasn t Paid agency yet 85% 2009 Client hasn t Paid agency yet 82% 2010 Client hasn t Paid agency yet 85% The agency payment procedures do not allow it 6% Other 9% The agency payment procedures do not allow it 6% Not Sure 6% Displaying Top 3 Reasons The agency payment procedures do not allow it 8% Displaying Top 3 Reasons Not Sure 6% Displaying Top 3 Reasons Q26: When trying to collect late payments, which of the following is the explanation you hear most frequently to explain why you have not been paid? 52

53 Means TOTAL D C B A Base Timely payments of agency contracts 4.23 A 4.51 AD 4.29 A 3.8 Client guidelines D Influence of cost consultants Wrap up insurance and liability issues 2.61 A Top 2 Box TOTAL D C B A Base Timely payments of agency contracts 78% A 85% A 82% A 59% Client guidelines 42% 58% D 50% 47% Influence of cost consultants 38% 48% 44% 46% Wrap up insurance and liability issues 31% A 19% 26% 17% While timely payments still play the most significant role in the health of a company, its impact is significantly less than years prior. Q27_a: Please rate the impact of each of the following factors on the health of your company. Use a 1 to indicate a very low impact, and a 5 to indicate a very high impact. 53

54 Means TOTAL C B A Base The economic climate 4.58 A Unrealistic advertiser or agency expectations Fragmenting media landscape Changes in contract language or agency practices 3.66 AB Top 2 Box TOTAL C B A Base The economic climate 92% A 88% 82% Unrealistic advertiser or agency expectations 59% 60% 63% Fragmenting media landscape 65% 54% 54% Changes in contract language or agency practices 60% A 51% A 37% The economic climate remains one of the biggest factors affecting companies. Contract language and/or agency practices play less of a part. Q28: Similarly, rate the impact of the following factors on the health of your business. Use a 1 to indicate a very low impact, 54

55 First payment is generally received prior to commencement of principal photography / work. This is primarily the case in live action and traditional projects. Total Production Type Distribution Type 2% 1% 6% 6% 16% 10% 3% 9% 16% 16% 50% 18% 16% 76% 82% 100% 63% 90% 50% 71% N: Total Live Action Digital Combo Traditional Non Traditional Both Prior to commencement On the day After the first day Other Q23: When do you usually receive the contractually agreed upon first payment? 55

56 This year saw a rise in on the day payment levels comparable to % 5% 3% 2% 10% 6% 15% 6% 16% 79% 81% 76% N: Prior to commencement On the day After the first day Other Q23: When do you usually receive the contractually agreed upon first payment? 56

57 There was an overall uptake of AICP recommended payment guidelines for US jobs for the fourth consecutive year 1% in For international jobs, the guidelines dropped to its lowest percentage since Proportion of Jobs Paid Using AICP Recommended Guidelines Data and Analysis by US Jobs % % % % International Jobs % % % % N=117 N=103 N=101 N=112 Q29: In 2010, what percentage of your jobs produced in the U.S. were paid using the AICP recommended payment guideline of 75% / 25%? Q30: During the same period, what percentage of your jobs produced outside of the U.S. were paid using the 75% / 25% guidelines? 57

58 Uptake of these guidelines for international projects is directly proportional to companies sales and number of projects. % of International Jobs Paid Using AICP Recommended Guidelines Total Company Size (Sales) Number of Projects 30% 17% 19% 33% 36% 64% 60% 13% 21% 41% 51% 69% Total Less than $1M $1M $5M $5M $10M $10M $20M $20M $50M $50M N: Q30: During the same period, what percentage of your jobs produced outside of the U.S. were paid using the 75% / 25% guidelines? 58

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60 Compared to 2009, which showed an increase in use of graphic designs and visual effects, 2010 reported an increase in Other techniques. Graphic design, however remained the most used technique and accounted for 29% of in house digital production. Data and Analysis by Base Graphic Design 27% 21% 32% 29% Visual Effects 29% 24% 28% 24% Animation 20% 26% 25% 22% Other 24% 29% 16% 26% Q3a: In 2010, what percentage of your company's in house digital production was accounted for by the following techniques? Please respond with percentages that add up to 100%. 60

61 More than half of the in house digital production involves using after effects. In house Digital Production: 2D vs. 3D In house Digital Production: Tools / Packages 24% 31% After Effects 3D packages 15% 52% Other 2D tools 13% 22% 23% Flame Smoke 4% 13% 2D animation 3D 2D compositing Other Nuke 2% N=33 Q3b: What percentage of your in house digital production is accounted for by 2D animation, 2D compositing and 3D? Q3c: What percentage of your in house digital production is accounted for by the following tools/packages: 61

62 Companies with low sales and those headquartered in New York are more inclined to finish their work in High Def. About one third of high def work is originated in Film. Total Sales Main Location 80% 91% 76% 88% 76% 72% 86% 88% 74% 86% N: Total Less than $1M $1M $5M $5M $10M $10M $20M $20M $50M $50M+ NY LA Other Original Format of High Def Work 68% 32% N=110 High Def Digital Format Film Q4d: What percentage of your work is finished in High Def? Q4e: Of your work that is finished in High Def, what percentage originates in a High Def digital format, and what percentage originates in film? 62

63 For in house digital production projects, staff work days continued to decline this year and are almost comparable to freelance work days. Data and Analysis by Staff % 4% 79 Freelance % +21% 70 N=28 N=42 N=33 Q16: For your in house digital production projects completed in 2010, how many work days did your company have in each of the following categories: 63

64 Almost half of AICP company digital labor costs can be attributed to production facilities in Los Angeles a significant increase since Similar increases were seen in New York as well, but to a lesser extent. Data and Analysis by Base Los Angeles County 27% 41% 48% New York City 15% 23% 24% Other U.S. locations 22% 10% 12% Illinois 21% 9% 6% Southeast Outside Florida 9% 8% 6% Southwest (Texas, New Mexico, Arizona) 5% 0% 3% Florida 2% 6% 1% New York State (Outside New York City) 1% 0% 0% Southern California 0% 1% 0% Connecticut/Massachusetts 0% 0% 0% Northern California 0% 0% 0% Louisiana 0% 0% 0% International locations 0% 1% 0% Q17: Of the you spent on non administrative labor for in house digital production in 2010, what percentage was attributed to your production facilities located in the following regions? 64

65 On average, one fourth of AICP member companies business is made up of nontraditional projects, a marginal increase since Companies with low sales do more non traditional advertising related projects. % Non Traditional Projects % % % % N=72 N=103 N=101 N=112 Sales Production Type Distribution Type 55% 35% 28% 13% 9% 24% 19% 21% 20% 35% 13% 29% Less than $1M $1M $5M $5M $10M $10M $20M $20M $50M $50M+ Live Action Digital Combo Traditional Non Traditional Both N: Q34: Currently, what percentage of your company s business (i.e., time and effort) is made up of non traditional (non broadcast) advertising related projects? 65

66 Digital assets outside of the agreed upon contract are generally requested and delivered, but not paid for. Are you asked to deliver those additional assets? =Never (12%) Rarely (18%) Sometimes (30%) Often (30%) 5=Always (9%) Do you deliver those additional assets? =Never (18%) Rarely (15%) Sometimes (21%) Often (18%) 5=Always (27%) Do you get paid for those additional assets? =Never (24%) Rarely (33%) Sometimes (21%) Often (15%) 5=Always (6%) N=33 Q43: Regarding digital assets outside of the deliverables originally contracted (e.g. data files) on a project, how often 66

67 An advertising agency is primarily the direct client across project types and distribution methods. In house digital and non traditional projects have a higher proportion of advertisers as clients as compared to live action and traditional projects respectively. Live Action Project Type In house Digital Distribution Method Traditional Non Traditional Base An advertising agency 78% 57% 78% 62% An advertiser 17% 30% 16% 29% A branded entertainment specialist not part of a traditional agency 3% 3% 2% 4% Other 2% 9% 4% 5% Q37A: For each project type, what percentage is each of the following the direct client? Q37B: For projects involving these distribution methods, how often is each of the following the direct client? 67

68 The concept is primarily generated by the advertising agency. Live Action Project Type In house Digital Distribution Method Traditional Non Traditional Base An advertising agency An advertiser Your company A branded entertainment specialist not part of a traditional agency Q38A: Overall, how often do the following entities generate the concept for each project type? Use a scale from 1 to 5. Q38B: Overall, how often do the following entities generate the concept for projects involving each distribution method? Use a scale from 1 to 5. 68

69 The contract is primarily generated by an advertising agency across project types and distribution method. For in house digital and non traditional projects, respondent companies also play a part. Data and Analysis by Live Action Project Type In house Digital Distribution Method Traditional Non Traditional Base An advertising agency 67% 41% 62% 49% An advertiser 8% 14% 11% 15% Your company 22% 41% 22% 31% A branded entertainment specialist not part of a traditional agency 2% 1% 2% 1% Other 1% 2% 3% 5% Q39A: What percentage of the following entities generate the contract for each project type? Please enter percentages that add up to 100 percent. Q39B: What percentages of the following entities generate the contract for projects involving these distribution methods? Please enter percentages that add up to 100 percent. 69

70 A traditional commercial agreement is used most often across both project types and distribution methods. Live Action Project Type In house Digital Distribution Method Traditional Non Traditional Base A traditional commercial agreement A traditional commercial agreement amended specifically for this project An AICP.next Agreement or digital contract Other non traditional media agreement Q40A: For projects generated by an advertising agency, please rate how often you use the following types of contracts for each project type: Q40B: For projects generated by an advertising agency, please rate how often you use the following types of contracts for each distribution method: 70

71 Standard AICP bid forms are used primarily for Live action and Traditional projects, while a bid letter is marginally preferred for in house digital and non traditional projects. Data and Analysis by Live Action Project Type In house Digital Distribution Method Traditional Non Traditional Base The standard AICP bid form A bid letter The AICP Spec Sheet The AICP short form Other Q41A: When producing a project, how often do you provide the following for each project type? Use a scale from 1 to 5. Q41B: When producing a project, how often do you provide the following for each distribution method? Use a scale from 1 to 5. 71

72 Across project types and distribution methods, companies are primarily compensated with a percentage of production costs. Live Action Project Type In house Digital Distribution Method Traditional Non Traditional Base A percentage of production costs A combination of a percentage of production costs and a creative fee A creative fee not related to production costs A licensing fee and the retention of ownership of the materials produced Other compensation Q42A: How often are you compensated in the following ways for each project type? Use a scale from 1 to 5. Q42B: How often are you compensated in each of the following ways for projects involving these distribution methods? 72

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74 On average, companies have 13 employees on staff. This is directly proportional to Sales. Companies with low sales have a higher proportion of part time staff compared to those with higher sales. Data and Analysis by Employees on Staff: N=112 Average Employees < $1M $1M $5M $5M $10M $10M $20M $20M $50M $50M+ Base: Full time: 97% N=96 Part time: 3% N=96 Base: Full Time 85% 95% 99% 95% 100% 99% Part Time 15% 5% 1% 5% 0% 1% Q50A: How many employees does your company currently have on staff? Q50B: Of the employees who work at your company, how many are full time vs part time employees? 74

75 Has your company been engaged for work based on diversity initiatives? 18% Gender of the majority ownership 22% Ethnicity of the majority ownership 1% 5% 7% 82% 78% 87% Yes No Male Female N=112 N=112 Caucasian Asian N=112 Hispanic Other Q51: Has your company been engaged for work based on diversity initiatives? Q52: Please indicate the gender and ethnicity of the majority ownership. 75

76 Yes 15% Data and Analysis by For the first time in our survey we are monitoring minority company ownership. 15% of our member companies report being minority owned and participating in a wide array of government sponsored programs on behalf of diversity initiatives. Is your company certified as minority owned? If so, please identify which programs your company currently has certification for: WOMEN OWNED BUSINESS ENTERPRISE (WBE) 41% MINORITY BUSINESS CONCERN (MBE) 35% WOMEN OWNED SMALL BUSINESS CONCERN (WBC) 29% SMALL BUSINESS CONCERN (SBC/SBE) 12% Other 6% No 85% N=112 If your company is not certified, is it because: Have not applied, but plan to. 9% Have elected not to apply. 82% Are in the application process. 8% Q53A: Is your company certified by appropriate government agencies as minority owned? Q53B: If your company is not certified, is it because: Q53C: If so, please identify which programs your company currently has certification for: 76

77 Females, African Americans and Hispanics most desire to be on AICP s publicly available self identified list. Total Gender Ethnicity 28% 13% 73% 86% 72% 79% 100% 88% 100% 100% 27% 14% 21% N: Total Male Female Caucasian Asian Hispanic African American Other Yes No Q54: The AICP has created a publicly available list of member companies that self identify as a minority or female owned business, would you like to be noted on such a list? 77

78 Large companies and those with high sales have offices in California and New York. Data and Analysis by Sales Total <$1M $1M $5M $5M $10M $10M $20M $20M $50M $50M+ Base California 67% 50% 57% 55% 92% 100% 100% New York 41% 33% 27% 55% 31% 75% 100% Florida 1% 0% 2% 0% 0% 0% 0% Georgia 2% 0% 5% 0% 0% 0% 0% Minnesota 2% 4% 2% 0% 0% 0% 0% Illinois 9% 8% 9% 18% 8% 6% 0% Texas 3% 4% 5% 0% 0% 0% 0% London 7% 0% 5% 0% 0% 25% 50% Other 18% 21% 23% 9% 0% 13% 50% Q49: Which of the following locations do you have offices? 78

79 Almost half of the companies are headquartered in Los Angeles. Total Sales Less than $1M 32% 27% 41% N=22 28% 47% $1M $5M $5M $10M 30% 48% 14% 40% 38% 30% N=42 N=10 25% $10M $20M 83% 17% N=12 $20M $50M 50% 38% 13% N=16 Los Angeles New York Others $50M+ 50% 50% N=4 N=106 Q47: What city and country is your company headquartered? 79

80 As expected, number of offices are directly proportional to Sales and Company Size. Almost 90% of the companies have 1 or 2 offices. Data and Analysis by Total Sales N: Total Less than $1M $1M $5M $5M $10M $10M $20M $20M $50M $50M Number of Offices 63% 25% 9% 2% 1% Q48: How many offices does your company have? 80