citrus 2012 case report

8/13/2019 Citrus 2012 Case Report

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Report for VYP

This report is prepared by Team Citrus

From Zhejiang University

Siyun Wu [email protected]

Donglei Ma [email protected]

Wenwen Bi [email protected]

Yanxin He [email protected]

CIMA Global Business Challenge 2012

CIMA 2012 精英国际挑战赛



CIMA英国皇家特许管理会计师公会 (Chartered Institute of Management Accountants)

T. 400 820 4080 E. [email protected] Web. http://gbc.cncima.com

CCoonntteenntt

1 Introduction

2 Terms of reference

3 Identification and prioritization of issues

4 Discussion of issues

5 Ethical issues

6 Recommendations

7 Conclusions

Appendix

1 SWOT analysis

2 Porter’s Five Forces Analysis

3 PEST Analysis

4 Prioritization Chart

5 Financial analysis of corporate advertising videos

6 The Changing Face of Corporate Video Industry in UK

7 The Breakeven Sales of Merchandising Sales





11 IInnttr r oodduuccttiioonn

Established in 2003, V and Y Productions (VYP) is an independent TV production

company based in UK. VYP's competitive products and good brand reputation has

placed it within the top 20 companies making TV programs in UK, with a reasonable

market share 1.4%. However, due to the current economic environment's affection, an

obvious reduction in commissioned and re-commissioned revenues for independent TV

production companies has exerted a severe impact on VYP's profitability.

In order to realize its aim of making successful programmes profitably, VYP needs to

evaluate different proposals on new business and to conduct necessary improvement in

existing business.

22 TTeer r mmss oof f r r eef f eer r eennccee

This report is to show the results of our analyses, to provide several solutions to the

problems the company is facing and to give assessments on the proposals presented in

the scenario.





33 IIddeennttiif f iiccaattiioonn aanndd ppr r iioor r iittiizzaattiioonn oof f iissssuueess

In order to achieve a long and prosperous business, VYP has always kept two values in

mind: Reputation, which represents programme quality, brand recognition and corporate

social responsibility, and Financial performance, which represents profitability, liquidity

and risk profile of its assets. When dealing with these issues, Urgency is also an

important consideration. Consequently, we have prioritized the problems and proposals

of VYP according to their Reputation, Financial performance and Urgency.

Issue Reputation w1 Financial w2 Urgency w3 Credit Priority

1 2

0.4

3

0.4

3

0.2

2.6 5

2 4 5 2 4 1

3 3 5 3 3.8 2

4 4 2 4 3.2 4

5 5 1 5 3.4 3

Priority 1 Expand into Corporate Advertising Videos

An old friend at Zubinos Coffee Shops Ltd has approached Steve Voddil with a request

to produce a corporate advertising video, which will be shown on local independent TV

and other modern media channels. Steve thinks that corporate advertising video could

be an exciting development exposing VYP to a new market for its services.

Priority 2 Fee Negotiation for New Children’s Programme

Following the success of a pilot programme, BBC is considering proceed with the first

series of VYP‟s children programme Sammy Squirrel. The negotiation is going very well

except for the ownership of merchandising rights. Given the comparatively high margin

on the sales of puppets and other items based on Sammy Squirrel, VYP is considering

whether to accept a lower fee in return for the right to sell the merchandise itself.





Priority 3 Accident at Studio

Recently a studio was urgently needed due to poor planning. VYP had the set builders

work over night with few breaks in the day before filming began. During the building,

one of the builders fell off a gantry and broke his arm as a result of tiredness and lack of

concentrating. This is not merely an accident, however, as VYP seldom takes seriously

its anti-social hours behaviour and even intentionally overuses the cheap labour.

Priority 4 “Banks – friend or foe?” – A new documentary of VYP

Currently, VYP is producing a documentary which attempts to explain the cause of the

financial crisis in 2008. However, this documentary is now forecasted to make a loss

due to the inaccurate anticipation and the poor cost control.

Priority 5 Re-commissioned Drama Series

Following the successful launch of a drama series, BBC offered to re-commission a

second series of the rowing show. Re-commission is beneficial to VYP both on revenue

and reputation. However, VYP finds that, the 10% reduction in the price squeezed its

profit. In addition, one of the original rowers, John Strong is already contracted for the

next 10 months.





44 DDiissccuussssiioonn oof f iissssuueess

VYP is operating in a highly competitive industry: TV programme producing. In order to

achieve better understanding about VYP and its competitive environment, we made

SWOT analysis, Porter‟s Five Forces Analysis and PEST Analysis (shown in Appendix

1, 2 and 3, respectively), whose conclusions are the foundation of our discussion in this

report.

4.1 Expand into corporate advertising videos

4.1.1 Suitability

Growing market of corporate video

The market for corporate videos is huge and expanding, with video types growing from

less than 10 to more than 50. NewsMarket, the leading web-based video marketing and

delivery platform, reported a 41% increase in corporate video on its site in 2007, while

the number of clips ordered soared by 70% to more than 400,000.

Customers trend

Many companies take the trend to make corporate videos. BBC NEW BUSINESS

showed clear data indicating that video drives higher sales. There is a conversion lift in

the double digit percentages, and for some it translates into a 100% lift. Moreover, an

official website with corporate video will rank higher in Google rankings and keep

customers on their websites for longer period.

A corporate video represents an efficient marketing technique only when it is brilliantly

produced with best quality. Therefore, companies tend to hire a professional corporate

video production company to make their advertising videos.

Competitors situation





There‟re several existing corporate video competitive companies such as Creationvideo,

Tech-TV, and Harlequinproductions. Nowadays, the traditional video production

companies are getting squeezed from both ends. They are seeing tremendous price

pressure and are not able to sustain the same high rates that used to comfortably pay

their overhead. Big studios, lot‟s of expensive equipment, layers of management and

admin are all luxuries that few production companies can afford today.

4.1.2 Acceptability

According to our market research, it is reasonable for VYP get the contract of following

2 subsequent video. We make three different assumptions to simulate neutral, optimistic

and pessimistic situations of the actual cost. Under these three assumptions, the total

margin for 3 videos would be £5,467, £8,554 and £3,409 respectively (see Appendix 5).

Since nowadays corporate videos use less actors and more real people saying real

things (shown in Appendix 6), neutral and optimistic situations can be more plausible in

this case. Therefore, this proposal is acceptable as long as more than one subsequent

video is commissioned.

4.1.3 Feasibility

Rich experience in video production and directors ‟ reputation accommodate VYP for the

corporate advertising video market. However, VYP still have to bear in mind the

differences between broadcasted programmes and corporate videos. Unlike TV

programmes, corporate videos need detailed pre-production communication with the

client company. Moreover, although corporate videos also need script, shoot and edit,

the details and requirements can be very different from TV programmes. To smooth this

change of strategy, we suggest VYP hire a producer with experience in corporate video





company or advertising design company.

4.2 Fee negotiation for new children’s programmes

4.2.1 Suitability

Audience, especially children, would always hope to get further access to the cartoons

or TV series they watch. As a result, related merchandise, especially toys, are

extremely welcomed. Given the comparatively high margin, producers and broadcasters

are all interested in the revenue brought by merchandise. One of the most successful

examples of merchandise selling would be the puppets of Teletubbies. Teletubbies is a

famous children‟s television series created by Ragdoll Productions. The series was first

aired on BBC on 31 March 1997, and was syndicated in the United States on PBS on 6

April 1998. Teletubbies received much attention shortly after its first show, both for its

contents and for the related products. By 1999, Teletubbies were already the hottest

selling toys in Britain; meanwhile, the American toy industry watchers predict that

“Teletubbies” merchandise could generate up to $2 billion worth of sales within a year.

Another similar case is the animation Pleasant Goat and Big Big Wolf in China. The

intellectual property right of this animation is operated by Cartoon Express Co., which

generates 85,000,000 RMB by manufacturing, distributing merchandise and leasing the

Pleasant Goat and Big Big Wolf brand. The company is recently acquired by Imagi

International Holdings Limited at a price of $1b RMB. The acquisition indicates a

positive forecast on the merchandise market.

4.2.2 Acceptability

In order to be equally profitable, the breakeven sales should be £22,050,000. (see





Appendix 7)

According to our research, the first year merchandise sales of Sammy Squirrel is

comparable to the sales of Teletubbies in 1997 in the UK. The report of BBC Worldwide

shows that Teletubby generated more than £125m in 1997. Taking the inflation rate,

which is 47.80% from 1997 to march of 2012, into consideration, we predict that the

merchandise sales of Sammy Squirrel would be £185m, largely surpassing the

breakeven sales. The result indicates that accepting a lower fee to get the intellectual

property right is very profitable.

However, the merchandising business also embodies certain risks. First, the

merchandised sales would be very unpredictable. The merchandised sales is largely

dependent on the popularity of Sammy Squirrels. However, VYP has no control over the

broadcasters re-commission behavior, audiences‟ taste or media exposure. Should

there be any changes in these aspects, the merchandised sales is very likely to collapse,

and if VYP has already ordered a large amount of products, it would burden a high

possibility of loss. On the other hand, cost control is also a problem that VYP would face.

Although outsourced, VYP still has to invest in design, manufacturing, sales &

marketing and distribution. Lacking of experience, VYP might encounter unexpected

costs that would affect its profitability.

4.3 Accident at studio

Poor planning, as one of the major causes of this accident, is the responsibility of the

programme producers. Their team uses the IT system and the spreadsheet to do the

planning work. Apparently, this problem can be solved by improving the IT system and

training the staffs to make better planning.





Now, VYP‟s anti-social hours behaviours are remained to be discussed. Admittedly, the

wages for set builders are cheap, but long working hours don't necessarily translate into

increased productivity. Recent Europe-wide research conducted by Eurostat has

demonstrated that those countries where workers put in the most hours don't

necessarily top the league when it comes to being productive at work. Research in the

UK has shown that a long-hours culture can in fact often be counter-productive in terms

of worker productivity.

Long working hours is also detrimental to work-life balance, health and safety. This

problem is related to the VYP‟s corporate social responsibility and we will further

discuss it in the ethical issue.

4.4 “Banks – friend or foe?” – A new documentary of VYP

4.4.1 Cost control expedient

In the short run, this problem could only be solved by cutting the cost since there is no

room to renegotiate the commission fee. The cost over-run is caused by the

investigation which took longer than anticipated and the repeated interviews which are

required for further clarification on a large number of inconsistencies in the evidence

gathered.

In order to achieve a breakeven position, the programme producer raised two possible

solutions:

1. No more interviews, VYP must reduce the programme based on evidence it has to

date;

2. Expensive computer graphics interface (CGI) usage will be cut back.





Otherwise, if more interviews as needed are included and CGI is made full use, an extra

cost would be as much as £32,000+£30,000=£62,000.

Besides, there are several other ways to cut the cost to avoid further loss.

1. If the programme is recorded outside the TV studio, the broadcast quality VT would

be used, as well as the VT crews. All of these would lead to a higher cost so VYP

should reduce the use of outside filming.

2. If the programme involves the use of actors or famous personalities, the fees will

affect the overall costs considerably, so VYP should try to avoid these fees.

4.4.2 Long-term improvement

Both the inaccurate anticipation and the poor cost control greatly influence VYP ‟s

profitability and its reputation. Considering that VYP‟s aim is to make successful

programmes for profit, it is of great importance for VYP to improve its ability to forecast

the cost for completion of programme and to make the programme come to fruition

within budget.

As mentioned above, the IT system is crucial to planning. Besides, the programme

producers, who are responsible for the programme budget, use a database system for

the submission of the forecast cost. The financial department then uses this data to

prepare financial forecast for each commission programme. Moreover, the finance team

works closely with the production team for each programme to closely monitor and

control costs against the agreed programme budget.

Obviously, the program producer and the financial department are responsible for the

anticipation and the cost control and their most efficient tools are database and





spreadsheet. To improve their performance, two measures should be taken: firstly,

more effort should be devoted to optimizing VYP‟s IT system and its database; secondly,

both the production team and the financial team should be given more training and

instructions on how to enhance the teams‟ working ability. Besides, VYP could also

introduce the production team some performance related bonus to stimulate their

motivation in cost control.

Moreover, as an independent TV production company, VYP has not fully equipped itself

to make TV programmes at its own premises and does not own any studios or employ

any videotape crews for VT filming. As a result, VYP has to hire studios and outsource

videotape crews. Actually, the company is now generating reasonable profit and strong

cash flows and during 2010 the VYP board even declared a dividend of £ 0.9 million.

Apparently, VYP currently has the ability to equip itself its own premises. Even though,

these investments may incur a considerable expenditure, in the long run, further costs

could be saved. Even if VYP need to keep certain liquidity and cannot afford purchasing

such equipment, it may consider financial lease.

It is worth noting that VYP has seen its average operating profit margin on

commissioned revenue fall from 10.1% in the year ended 30 September 2010 to 9.4%

in the year ended 30 September 2011. This reduction is mainly due to the reduced

commission revenues that the commercial TV broadcast companies are prepared to

pay. A better cost control may alleviate this profit margin reduction.

4.5 Re-commissioned drama series

In order to make more profit from the re-commission programs, VYP should both

negotiate with BBC on the re-commission fee and pay attention on the cost control. The





re-commissioned programmes are usually priced lower because of the savings such as

the built studio “sets”, the ready research and ideas and the experience from previous

series. In the case of the rowing show, however, the above savings are not all

applicable. As a drama series that reflect the training and preparation of a rowing team,

the programme has to take a lot of outdoor scenes and the shooting scene may have to

take place in the city where the world championships would be held. As a result, the

studio setting fee is very unpredictable and may cost even more than the previous

series. In addition, the preparing processes for competitions are very similar to one

another; to attract more viewers, VYP has to do more research and write more

attracting stories. In a word, the case is very different from other re-commissioned

programmes, and to guarantee the quality of the drama series, VYP should re-settle the

price with BBC. On the other hand, VYP should also well apply its experiences gained

from the previous drama, make good planning and save its costs to the greatest extend.

In regard of the problem of actors, a flexible arrangement and good negotiation would

be needed. John Strong has signed a 10-month contract while the drama series will

take 4 months to plan and shoot, and will be broadcasted after 12 months. The best

arrangement would involve only two months‟ overlapping, and the arrangement is

shown in the following graph:

John Strong’s 10 month 4 month plan and shoot

Apr Dec Feb

As a result, VYP should make good planning, negotiate with John Strong and GGG in

advance and try to shoot as many John‟s parts as it could in February and March.

March 31st 2012 April 1st 2013





55 EEtthhiiccaall iissssuueess

5.1 Employees

Now VYP is condemned for its anti-social hours behaviours. The Working Time

Regulations (1998) govern the hours anyone can work. They determine the maximum

weekly working time, a limit of an average 48 hours a week on the hours a worker can

be required to work. Violating the regulations may both incur unnecessary penalty and

harm VYP‟s social image. Moreover, long working hours is detrimental to employees‟

work-life balance, health and safety, thus negatively influencing the efficiency. VYP

must take timely measures to avoid this problem and improve its employer-employee

relationship.

5.2 High-quality TV Program

Some broadcast companies have countered that the viewing public will not necessarily

notice the difference in program quality. However, as a responsible TV production

company, VYP cannot be opportunistic. VYP must stick on strict standards of program

quality to improve viewer ‟s experience and more importantly, to show the truth to the

world.

5.3 Charity and Public-benefits Programmes

Under the motion of Steve, the VYP has donated £128,000 during the last financial year.

VYP has also made documentaries concerning natural disasters and plight of child

labour around the world. To further enhance its charitable activities, VYP could utilize

the platform of telecasting. For instance, VYP can consider producing a programme for





people to seek for their relatives lost in disasters, making corporate video for charity

organizations, or offering discount to NGOs who advertise on ethic issues.

5.4 Development of the Youth

VYP has been working on providing positions for young people to gain training or an

insight into how TV programmes are made. VYP has a scheme allowing school children

access to view VT filming of certain programmes several times each year. The scheme

costs VYP around £24,000 each year in total. The penetration of corporate video

requires new staff with design and advertising background, so VYP could offer some

full-time junior positions to the graduates they have paid attention to.





66 RReeccoommmmeennddaattiioonnss

6.1 Expand into Corporate Advertising Videos

VYP should take trend to penetrate the market of corporate video. In order to survive in

this market, VYP should make efforts to initiate production meeting with clients and hire

experienced corporate advertising staff.

6.2 Fee Negotiation for New Children’s Programme

We suggest that VYP accept a lower fee to make use of the high margin of

merchandised sales. In regard of the potential risks, we also suggest that VYP consider

leasing the merchandise rights.

6.3 Accident at Studio

At the moment, VYP should immediately take actions to respond to the set-builder ‟s

injury.

In the long run, the IT system should be improved and VYP should offer more training

projects to the program production team. VYP should also convert its perspective on the

balance between its interest in profit and its care about the employees.

6.4 “Banks – friend or foe?” – A new documentary of VYP

At present, VYP should try to cut cost in every possible way that does not affect the

quality of the programme. Besides the two proposals raised in the scenario, VYP could

also reduce the use of outside filming and the use of famous actors.

In the long run, VYP should improve its IT system and enhance the employees‟





performance by offering training project and performance related bonus. VYP should

also equip itself with studios and hire VT crew to save cost in the future.

6.5 Re-commissioned Drama Series

For the relatively low margin of the re-commissioned programme, VYP should negotiate

with BBC on the re-commission fee and execute more strict cost control.

For the actors‟ contracts issue, VYP should make good planning, negotiate with John

Strong and GGG in advance and try to shoot as many John ‟s parts as it could in

February and March.

77 CCoonncclluussiioonnss

According to our analyses, by following the recommendations of this report, VYP is sure

to succeed in strategic transition and have wider development space.





Appendix 1

SWOT analysis

Strength Weakness

1. Experienced and skilledstaffs

2.High reputation inproducing documentaries,comedies andentertainment programs

3.High team spirit

1.The producer teams‟weak understanding ofthe cost control and poorperformance in financialanticipation and planning

2.Lower margin on re-commissioned works

3.Lack of equipment4.Routine anti-social hours

behaviors

Opportunity

1.A renewed interestfrom viewers fordocumentary programin Peak viewing time

2.The huge andgrowing market forcorporate videos

3.The new area of

merchandising rights

SO WO

Expand into the newmarket for corporatevideos

Ensure the high qualityof the new documentary,Banks, Friend or Foe?

Expand into themerchandised salesmarket

Improve the IT systemoffer trainings to theproduction team andthe finance team toenhance theirperformance inplanning and costcontrol

Facilitate itself with its

own studios and hireVT crews

Threat

1.The common practiceof TV broadcastcompanies to offer alower commission feefor re-commissionedprogrammes

2.The high competitivemarket of TV programproduction

ST WT

Well apply experiencesgained from previousseries to the re-

commissioned programs

Negotiate with BBC onthe re-commission feefor the program series

Eliminate the anti-social

hour behaviors andcare more about theworkers





Appendix 2

Porter’s Five Forces Analysis

Factors increasing Force Factors lowering Force

BuyersPower

High

Large powerful customers:BBC, ITV, CH4, CH5

The customers currentlyoffer a commission feewhich is adequate toprovide VYP a 10% profitmargin

SuppliersPower

Low

The outsourced companiesprovide VYP with theequivalent of around 400person years of work

Small companies who work

exclusively for VYP havelow power

Not over reliant on anyoutsourcer

Able to exert pressure toreduce fees of suppliers

CompetitorsPower

Medium

Severe competition fromother indies

Reducing commissionrevenue due to a pricecompetition

A growing market

New EntrantsPower

Medium

Low entry barrier: rentingfacilities and availability ofoutsourcers enable start upat relatively low cost andlimited expertise

Existing competition in amarket where revenuesare under pressure

Substitutes

Medium

In-house production Acquired programs Other forms of

entertainment the Internet,sports

Customers‟ need fororiginal and innovativeprogramming





Appendix 3

PEST Analysis

Political

Broadcasting policy has made most effort focused onpromoting competition and ensuring shared ownership ofintellectual property (IP).

Competition brought benefits , but too much fragmentationand rivalry amongst competing suppliers has also provencounter-productive

Helped by the 2003 Communications Act, the most recentcorporate trends have been towards consolidation ofownership within independent television production and areduction in the number of rival suppliers

Economic

Britain exhibits a continuing recession and a worseningdeficit in the balance of its international trade in televisionmaterial

In this highly competitive industry, indies tend to lackbargaining power in their negotiations with broadcasters,who offer limited prices and delay payment

A production environment conducive to creativity andentrepreneurialism can be seen as the necessary bedrockfor a healthy and vibrant indigenous television economy

Historic data about the state of financial health of theindependent production sector confirms that turnover tends

to be volatile and profit margins generally very slender

Social

There‟s renewed interest from viewers for documentaryprograms

More and more people would spend time on Internetinstead of watching TV

Exports of UK-made entertainment programs and formatshave grown strongly in recent years

Technological

Computer graphics -- a key element for future development-- must retain lead in this area Website broadcasts/YouTube channels -- both an

opportunity and an threat New technologies -- 3D/HD TV could be costly to adopt IT system -- improve cost-control and efficiency





Appendix 4

Prioritization Chart

Issue Reputation W1 Financial W2 Urgency W3 Credit Priority

1 2 0.4 3 0.4 3 0.2 2.6 5

2 4 0.4 5 0.4 2 0.2 4 1

3 3 0.4 5 0.4 3 0.2 3.8 2

4 4 0.4 2 0.4 4 0.2 3.2 4

5 5 0.4 1 0.4 5 0.2 3.4 3

Explanation on credits given:

Reputation:

We take three factors into consideration when giving credits to Reputation. The factors are:

program quality, brand recognition and corporate social responsibility. Among the proposals and

problems, we think the accident at studio has the greatest impact on the reputation of VYP, so

we gave it the highest rate of 5 points. The new documentary problem will affect both the

programme quality and VYP‟s social responsibility; the corporate advertising video intensely

increases the brand recognition of VYP, as a result, these two issues are given 4 credits. The

merchandised rights will also increase the brand recoginition but only on a moderate skill and

mainly on the existing viewers, so it is given a medium credit of 3. The re-commissioned fee

problem will only shadow a limited impact on the program quality, so it is given a low credit of 2.

Financial:

The credits of Financial impact are given on three factors: profitability, liquidity and risk profile.

We think the corporate advertising video and the merchandised rights have the greatest impact

on VYP‟s financial condition as they would generate more profits and put VYP under greater

uncertainty. The re-commissioned fee is a problem mainly affects the profitability, so the

problem is given 3 credits. The remaining two problems, the cost control of documentary and





the accident at studio, wouldn‟t have a very serious impact on the financial profile considering

the relatively small budget.

Urgency:

From the Urgency prospect, we think the issues already in operation are given the highest

credits, so the accident at studio and the new documentary are given 5 and 4 points

respectively. The two contracts issues, re-commissioned fees and merchandised rights, also

needs to be negotiated within a short time period, and are given medium credits. The corporate

advertising video means entering a completely new market and involves a lot of consideration,

investigation and preparation, and it is not regarded as an urgent issue.

Consistency with CSR:

The issues facing Papy are more or less consistent with CSR. Penetrate Health Store Market

promotes Papy‟s idea of “Healthy eating”, while Internet Shopping of Organic Expansion greatly

reduces the amount of carbon emission. These two issues are given the highest credit.

Acquiring AW and Customer Loyalty all involves adjustments that either corrects the

inconsistency or reduces waste and energy consumption. These two issues all have medium

impact on the CSR. Fundamental Analysis only entails trivial matters concerning CSR, and

that‟s why it is give the lowest consistency.

Impact on Shareholders‟ Value:

Starting up a new business has a significant and long-term impact on shareholder‟s value, that‟s

why Penetrate Health Store Market and Acquire AW Superstores both get our highest ranking.

Besides, the analysis of current operating performance can also reveal the existing problems

and may greatly increase the shareholders‟ value, so Fundamental Analysis is also given a high

credit. Organic Expansion and Customer Loyalty only aim to increase Papy‟s revenue in a

highly competitive market. Moreover, these two issues do not require a substantial initial input.

They are given a medium level of impact.





Appendix 5

Financial analysis of corporate advertising videos

Neutralism 1st video/ £ 2nd video/ £ 3rd video/ £ Total of 3 videos

Revenue 17,000 17,000 17,000 51,000

Studio hire 5,000 4,250 3,613 12,863

Actors 4,000 3,400 2,890 10,290

Film crew 6000 5,100 4,335 15,435

Scripting 1,200 1,020 867 3,087

Music 1,500 1,275 1,084 3,859

Total costs 17,700 15,045 12,788 45,533

Margin -700 1,955 4,212 5,467

Margin % -4.12% 11.50% 24.78% 10.72%

Optimism 1st video/ £ 2nd video/ £ 3rd video/ £ Total of 3 videos

Revenue 17,000 17,000 17,000 51,000

Studio hire 5,000 4,250 3,613 12,863

Actors 2,800 2,380 2,023 7,203

Film crew 6000 5,100 4,335 15,435

Scripting 1,200 1,020 867 3,087

Music 1,500 1,275 1,084 3,859

Total costs 16,500 14,025 11,921 42,446

Margin 500 2,975 5,079 8,554

Margin % 2.94% 17.50% 29.88% 16.77%

Note: there are 40% chances of the optimistic situation





Financial analysis of corporate advertising videos (C’td)

Pessimism 1st video/ £ 2nd video/ £ 3rd video/ £ Total of 3 videos

Revenue 17,000 17,000 17,000 51,000

Studio hire 5,000 4,250 3,613 12,863

Actors 4,800 4,080 3,468 12,348

Film crew 6000 5,100 4,335 15,435

Scripting 1,200 1,020 867 3,087

Music 1,500 1,275 1,084 3,859

Total costs 18,500 15,725 13,366 47,591Margin -1,500 1,275 3,634 3,409

Margin % -8.82% 7.50% 21.38% 6.68%

Note: there are 60% chances of the pessimistic situation





Appendix 6

The Changing Face of Corporate Video Industry in UK

Traditionalapproach

What works today What’s changed?

Focus of

corporate

video

Your business or

product

Solving your

customer‟s problems

The focus of video used to be

just about promoting your „brand

„- that usually meant a lot of talk

about yourself.

Budget Large Small – Medium

Production costs have dropped

and corporations are being far

more tactical with their use ofvideo today.

Access to

videos

Tightly controlled

by the sales team

or marketing

Created with the

express purpose of

being shared

everywhere.

People trust friends and

colleagues considerably more

than they trust corporations.

Primary

delivery

method

- Tradeshows

- Meetings

- Sales Calls

Web, as well as other

traditional methods

Soon, everything will be „online‟

– broadcast media, corporate

communications, presentations,

etc.

Typical

message

delivery

Actor, presenter or

professional

voice-over

Real people saying

real things

Actors still have a place in video,

but nothing can replace the

value of a real employee

representing your company in

your corporate video.

Desired

perception of

a corporatevideo

Authoritative Informative

Sounding helpful is better than

sounding important. „Important‟

is about you. „Helpful‟ is reallyabout the customer.

Frequency of

production

1 or 2 videos a

year

10‟s or even 100‟s of

videos

It used to be that marketing

would set aside $50,000 for one

video. Today it might make more

sense to set aside $50,000 for





ten or more videos.

Scope of

video

production

Broad – a single

video covered as

much ground aspossible

Narrow – video

focuses on a specific

audience with atargeted message

There will always be a place for

large scale video productions

but the vast majority of videos

will be targeted videos deliveringa single message to a single

audience.

Where videos

should be

found

On your website

Wherever your client

happens to be:

YouTube, a business

portal, on their mobile

phone, searching, etc.

Your website isn‟t the

„destination‟ you think it is.

Creating content that can be

viewed wherever your customer

happens to be makes a lot of

sense.

Uses of Video

- TV Commercials

-Sales

Presentations

- Homepage of

your website.

- Customer

Testimonials

- Video Case studies

- Product „explainer‟

videos

- Product FAQ

- Event promotion

- Recruiting

- Viral Video

- Content marketing

- Infomercials- Interactive video

- Video press releases

- Community relations

videos

- etc.

The number of uses of video

continues to grow every day.



Appendix 7

The Breakeven Sales of Merchandising Sales

£

Revenue 6,300,000

Program fee 6,300,000

Revenue/h 350,000

Total hours 18

Cost C

Profit 6,300,000-c

£

Revenue 4,095,000+0.4sProgram fee 4,095,000

Revenue/h 227,500

Total hours 18

Merchandised sales 0.4s

Cost a+0.3s

Program cost C

Merchandised cost b*0.75*0.4

Profit 4,095,000-c+0.1s

Breakeven sales 22,050,000

citrus 2012 case report

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