I see whats happening.
First, your alphas look good.
I assume the problem is when the light turns off, you see near-black letters when you don’t want to see anything. Or you see a big square of black when the letters turn off.
There’s two ways to solve this. Have your friend use a Screen function when he supers this footage over his own. Light is additive so its an appropriate way to add a neon sign to a shot. When the light goes out, even though the black letters remain and are part of the alpha it will render properly due the Screen function not letting the black composite on top of the background shot. (“screen” lets pixels of the supered layer “add” to the brightness of the background layer – that is a gross simplification of what the screen function does but its close enough for this). So black pixels won’t add any brightness. You could also use “Add” or “Lighter Color” or “Lighten”, but for glowy things, “Screen” is usually the best.
If you use the “screen” function you don’t even need the matte – rendering your glowing letters element on black with no matte and you will get the same result.
Your “off” letters are slightly pink, just a bit brighter than black so they will still show up a little with a screen function even when the glow is turned off.
The second way is to turn off not just the glow (when the sign is not lit) but also turn off the layer the glow is generated from (the text) during the off-blink, so nothing is left in the alpha for those frames. Then using a “normal” blend mode, the alpha will control what gets composited on the background. If you look at the alpha with this method you will see white glowing letters and then nothing (all black) during the off-blink. Think of the alpha as a mask – the white parts let the RGB channels pass through, the black parts let nothing through.
But I think you would still want to see the structure of the light when the sign is off and that’s probably what you were going for with the dark but not black “off” letters. When a neon tube isn’t glowing you can still see the tube and the holders for the tube and the metal base that is a backer for the light or the structure of the channel letters, as they are called. At night this isn’t as important but can add some good realism. If there are no other lights in the scene to light the underlying structure it’s acceptable to just “turn the neon light off” and it’s a good enough illusion.
For extra realism don’t forget to have other objects close to the sign in the background footage get some of the light that would be coming from the lit letters. This can be done with simple masks. It doesn’t have to be much but it really grounds the sign in the shot. The flashlight that lights a page of a book you are reading is also bouncing off the page and lighting up the room too.
I think what you have here is correct, but perhaps not what you were expecting.
The only other comment is that neon or nighttime signage tends to blow out and over exposes at the core of the text. Like a lightsaber, the center tends towards white or a hot version of the actual color. Go watch Blade Runner (the original). This sign doesn’t really look like its glowing because its not “hot” enough. You can also try duplicating the sign layer and screening it again over its twin and the background – this will keep adding to the glow and core brightness. Also try Hardlight and Vividlight blend functions as they might be better to kick the brightness up. You can also add a Glow effect to the sign layer – but I don’t like the Glow effect’s roll-off and prefer just adding multiple copies with a blend function that works best.
Keep in mind that if you deliver this element in a compressed format – like H.264 – the alpha will be thrown away.
Let me know if I still haven’t hit the heart of the problem.