Creative Production

Claire Randall: The impact of inflation on production

US vs Europe

“If you have a USD budget, it’s never been more cost effective to shoot in Europe, so US based advertisers are likely to take advantage of that, whilst the currency conversion works in their favour“

Claire Randall is Founder and CEO of production consultancy, Claire Randall Consulting

In light of all the buzz around inflation and an impending recession, I thought it would be helpful to assess the impact of these on production in particular.

However, isolating the specific effects of a potential recession become challenging when the pandemic and other factors have, and are still, impacting production.

In order to provide a global perspective, we canvassed our team of experts worldwide, to gauge what they have been witnessing on the ground and what they consider to be the likely impact over the coming months.

It’s no secret that crew rates were already increasing throughout 2021, or that they continue to do so in 2022. This trend is predicted to continue into 2023, although a reduction in pace is expected. Driven initially by covid, the 6% increase in the UK in 2021, is the biggest seen in recent years, while US crew rates are estimated to have risen by 10% in the same two-year period.

Furthermore, it is inevitable that rising fuel costs will also impact production in the coming months and are anticipated to be passed through to advertisers in 2022 and into 2023, in the main, through higher studio costs. In addition, studio inflation remains compounded by competition from the streaming services, driven by the high demand for content.

Prices remain high as the aviation industry continues to recover from covid, with hotel occupancy also high, as people travel once again following the pandemic. This is clearly impacting budgets for shoot travel, with increases ranging from 10-20% on these line items.

With rising costs and increasing competition, doing deals with production houses may be difficult or may require longer term commitment. 

The alternative is to use smaller, newer production companies which may be attractive based on cost, but the advertiser should be vigilant. These smaller businesses are more vulnerable to cash flow problems, proposing a greater risk to advertisers.

Agencies may also be looking to adjust personnel rates, particularly those that have existed for some time.

Covid rates continue to reduce worldwide but Covid protocols continue to impact productions, so we expect compliance costs to remain in place in many markets for the foreseeable future. These can add as much as 10% to any production budget.

As well as this, advertisers are also increasing diversity and sustainability messaging, which ultimately could impact the amount of talent required and locations used, elongating timings and increasing costs.

Impact of economic uncertainity  

We know that an inevitable result of inflation is likely to be shrinking budgets but not necessarily deliverable lists. So, it will be important for productions to be truly optimised, in order to maximise budgets – efficiency is key!

So, what can advertisers do to mitigate these increases and combat inflation?

In an effort to reduce costs, it may be necessary to consider alternative approaches to production. While shooting in low-cost centres is nothing new, we can expect to see this increase but travel obviously impacts sustainability goals, so the benefit must be weighed up in that context. 

Conversely, if you have a USD budget, it’s never been more cost effective to shoot in Europe, so US based advertisers are likely to take advantage of that, whilst the currency conversion works in their favour.

The pandemic accelerated the acceptance of virtual shoot attendance for those who didn’t need to be physically on set. This will continue as it saves the client both time and money. The use of virtual backgrounds/green screen, instead of location shoots where possible, will reduce cost and minimise travel.

We envisage more multi-channel, ‘super shoots’ to maximise the amount of assets captured on set. We are likely to see an increase in the use of stock footage, animation and CGI, where appropriate, to combat rising production costs.

On a creative level, we may also see a reduction in ‘indulgent’ Christmas campaigns, as advertisers take a more cost-conscious approach and shift messaging to focus on value for money and price.  

Regardless, the key to delivering cost efficient production has always been a streamlined and robust process and clear lines of communication. Inflation or not, there is a lot of wastage that occurs in production, which comes from inefficient processes, poor communication and over-production of assets that never see the light of day.

All parties need to align on expectations at the start of the project and appropriate time needs to be built in for decision making and approvals. Now more than ever, we need to be creative about how we approach production.