Monday, May 05, 2008

Lowering Costs and Keeping the Work Here

Over the months I've been talking to quite a few project to project freelancers. Whether they work on features, commercials, direct to video, whatever. They seem to all have commented on the lowering of their wages.

While those with steady studio gigs may not see their rates fall all that much, those that work from job to job are getting hit hard. There are a number of factors going into this. Competing with outsourcing countries, ad agencies are getting pinched and want to see animation and effects budgets drop, the dollar doing so badly. You name it.

This not only has affected individuals, but the studios themselves. They are getting hit hard too. It isn't always a case of greed when they pay their freelancers less money, it is a case of necessity. They've got to be creative if they want to stay in business when they face competition from abroad.

Take Reel FX in Texas for example. Despite all the work going overseas, they continue to get some pretty big projects from the big studios. They're currently working on the direct to video project "Open Season 2" among others. They are constantly doing commercials that include characters from films such as Ice Age, Shrek, Open Season, Kung Fu Panda, and more. I do not know what the budget for OS2 is, however, I imagine it is pretty small if any of their previous projects are an indication.

So how do they keep the costs low enough to attract this work that would perhaps otherwise go overseas? For one, they are located in Texas. The cost of living is lower than California, and they can get away with paying their employees less. On top of that, they tap the freelance market by hiring people who work out of their homes. By only paying them for the work they do, they can control the costs and avoid the tax burden. Not to mention the avoidance of software, hardware, and facility overhead. Keep in mind that these remote artists aren't getting paid by the hour. Animators are getting paid by the approved second and others for completed task. The rates end up being bargain basement prices that don't normally work for those in the more expensive zipcodes, but could be fine for students or those in the less expensive areas. Imagine working for two or three weeks for a couple of grand. That was one figure that someone recently told me. This would of never worked in the 90's, but with today's out of work talent and boat load of students, it does.

In the past, when someone was a freelancer, they have generally been paid more per hour. After all, their rates should be higher since they are on call and have to survive those down times. Further, those that work as sub-contractors should theoretically get an even higher rate since they are working from home and burdening the hardware and software costs. So what happened? Why are freelancers and contractors getting paid so terribly by some companies? Thank the law of supply and demand. There is simply a larger supply of talent than there are jobs.

What I'm getting at, is that in order to be competitive and to have a chance against outsourced work, you need to be creative. Reel FX does pretty good work and they've built a system that allows them to get that work at discount prices. Maybe this should be a lesson to other studios.

I also know of a few studios in Los Angeles that have shuttered their expensive office space and sent everyone home to work from their individual spaces. A small office is rented for weekly meetings and to give a legit business address, but almost everyone is at home. The overhead costs are dropped and they can be more cost attractive to clients while still paying everyone good wages.

That is the key. Developing ways to be more streamlined, but still pay everyone fairly. Some are more successful than others. The ones that can do both will go farther. The ones paying bargain basement prices will have to keep targeting students or professionals looking for some after hours cash. Neither is a long term answer to retaining talent.

It is a balancing act. However, if you are shrewd, it is possible.