Undercutting as a business model

[Bill Dewald]

“Will beat anyone’s written rates”

[searches for post-it note]

[Alan Smith]

Bad for long term business. Whenever undercutting the other guy becomes the mantra, you inevitably hurt yourself. It has a trickle down effect on the business in the area. If he is able to generate significant business by undercutting others, others will have to lower rates to compete. It perpetuates a ruthless cycle that is not good for business.

Alan

Alan Smith
Media317

Check out my blog – https://media317.com

[Mark Suszko]

Let him. You can only compete so far on rates alone, and it is never a good idea to undercut another guy’s rates unless you know to the penny what his true costs are and how much cushion he has in the bank. He could be living on cat food and ramen and sleeping in the back of his production van or his mom’s basement (or the edit bays, pew) to cover his margin, that’s not sustainable for long-term. At the low rate, he’s not investing any money in the gear or softwaer, he won’t be able to keep up with people that do. he also won’t be able to hold onto any talented staff. I think that means little repeat business.

[Steve Wargo]

This is fantastic. Their facility will quickly fill with grinders, price shoppers and those who want something for nothing. That will leave the quality minded people for us.

How can you deliver quality product when you know that everybody else is getting more?

There’s always somebody cheaper in the yellow pages.

If the general public bought solely on price, they would all be driving Neons and eating at McDonalds.

Steve Wargo
Tempe, Arizona
It’s a dry heat!

Sony HDCAM F-900 & HDW-2000/1 deck
5 Final Cut (not quite PRO) systems
Sony HVR-M25 HDV deck
2-Sony EX-1 HD .

[Terence Curren]

Sounds like you folks are in agreement with my opinion.

Terence Curren
http://www.alphadogs.tv
http://www.digitalservicestation.com
Burbank,Ca

[Arnie Schlissel]

Reading your original post literally, it looks like these guys are only renting rooms, not providing the services. If that’s the case, well, there’s certainly a market based on price. But all of the other arguments above still apply.

“We’ll beat any price” doesn’t suggest to me that they’ve outfitted each suite with reference grade audio & video production monitors. It suggests consumer TVs & computer speakers. It doesn’t suggest large, fast, protected RAID storage, it suggests long daisy chains of firewire & USB drives.

And it definitely doesn’t conjure up a vision of properly proportioned edit, color & mixing suites with recent hardware & software, Aeron chairs, Aurelex sound treatments and ergonomic furniture in a building with 24 hour security in a safe neighborhood. Nope, it suggests cramped rooms with leaking pipes & peeling paint, obsolete or consumer grade gear, folding chairs, “egg-crate” packing foam, doors for desks, no security in a dicey neighborhood.

Sign me up!

Arnie
Post production is not an afterthought!
https://www.arniepix.com/

[Mike Cohen]

seems to me the LA market would have an abundance of edit rooms for rent as it is. Sounds like the snow plow operator who gives you a discount at the beginning of the season, but then when it snows you have to call him to remind him to plow your driveway. Then he complains he can’t afford to upgrade his plow because of the great rate he gave you, so he’ll get to you when he can.

That being said, most markets have different tiers of service. Look at the difference in packaged meat at Costco vs Safeway – there is a market for both.

Mike

[Arnie Schlissel]

[Mike Cohen] “Look at the difference in packaged meat at Costco vs Safeway – there is a market for both. “

We don’t have Safeway here in NYC, but we do have Costco. And my personal experience is that Costco’s meat department is pretty good, good enough for Marc Bittman’s column in the NY Times to recommend them for some cuts.

But Costco has a different business model. They make most of their profit off of the annual membership fee, not on the markup on the goods they sell, so they can afford to sell meat (or flatscreen TVs) just above the net cost.

Arnie
Post production is not an afterthought!
https://www.arniepix.com/

[Terence Curren]

Here is the original post:

We are opening our doors on Dec 1st and we have edit stations and mixing rooms available for rent. We’re located on Magnolia in Burbank. We’ll beat anyone’s written rate.

1) Offline edit stations for rent

2) Non-linear editing (Online) in SD, HD, and 4:4:4

3) Color Correction on Avid Symphony or with Color

4) Full Television and Theatrical Mix, including Dolby 5.1
and 7.1

5) ADR Recording, dubbing, and looping

6) Tape duplication of D5, HDCAMSR, HDCAM, and Digital
Betacam.

7) File and Data compression, storage, and digital delivery

8) Visual FX via Motion/Shake/AE

9) Royalty free music and sound FX
Best,

Then signed by the post house.

[Terence Curren]

My response last night was to offer any producer a “written” estimate of any amount they chose that they could then take to this guy who has publicly said he will beat it.

So I could give then a complete finish with audio on paper for $10.00, and he would have to do it for $9.00. Or else he is a liar. :-0

PS: Yeah I know I was being a dick, but sometimes I just can’t be restrain myself…

Terence Curren
http://www.alphadogs.tv
http://www.digitalservicestation.com
Burbank,Ca