I have devoted quite a bit of this column space to the virtues, struggles and wages of the audio labor force. I am still convinced that the best equipment is only as good as the people using it. That said, I believe that free enterprise and competition make for good business. Audio, lighting and staging companies make their money not on labor, but on the equipment itself, and therefore, equipment-based companies assume the responsibility of placing a fair market value on each piece of gear that goes out the door.
Dollars and Sense
Large items such as consoles, depending upon the company and market place, can be rented for anywhere from $400 to $800 dollars a day or approximately one percent of the item’s cost. If the cost of the piece is $75,000, then a company would have to rent out the item approximately 144 times at an average rate of $500 per day to just break even. Or, at a weekly rate of $1,500, the company would need to rent out the piece for 50 weeks before they are able to recoup their initial cost.
Often on smaller items the rental company can charge five to ten percent of the item’s purchase price and a piece of equipment. For example, a wireless microphone that may cost $1,500 could easily rent for $75 per day. At this price, it would only take 20 daily rentals to recoup the initial investment or, at the rate of $150 per weekly rental, the audio company could break even after 10 weeks of rental. Of course, none of these rental rates take into account any type of overhead such as warehousing, computers, phones, trucking, repairs, advertising or depreciation of said equipment. If we do add in the overhead of running a company, then it takes that much longer to break even or to see a profit on items that are rented out to customers.
Get a Game Plan
Correctly procuring gear is of the utmost importance to a company and the purchaser is required to be a savvy business person who is abreast of the newest technologies as well as being aware of currently requested items on tour riders. I have witnessed much hand wringing by company owners when faced with the daunting task of buying equipment. Especially intimidating is the fact that technology is moving at such a rapid pace, and each piece, whether it is a wireless microphone, a powered speaker, digital console or the newest line array means a huge investment on behalf of the buyer. Therefore, it is a good idea before buying any piece of gear to truly assess the current market place and the company’s position within it. Make a game plan according to where the company is in the business and where the company wants to be. Who is the competition? Evaluate what a certain market can truly yield. Don’t buy occasionally requested items, and do not acquire large ticket items that may not bring in a return. Make sure that the items needed for your particular type of gigs are in your inventory, but try not to bring more gear than needed just to show up the competition.
While we are all in this business to make money, and competition is intense, it does not make sense to under bid market value to get a gig — this ends up hurting the whole market. Conversely, charging three times as much as the competition for the same gear has the same effect. I have often received calls from a prospective client who wants to know if I can beat a price given to them by one of my competitors. I listen to the price, and usually if it’s in the ballpark of my own pricing I tell the client I might be able to save them a few dollars, but I definitely will not give them a huge break just to get the gig. If the price given is hugely different from my own, I let the client know I will have to get back to them. I then call the other company, as I know most of my competition, and ask them why they’re charging so much. It usually turns out that the potential client forgot to relay a vital piece of information such as a need to carry everything up a flight of stairs or that the engineer would be required to mix the show while riding sidesaddle on a horse.
Deal or No Deal?
Speaking of giving away equipment, I recently was in charge of a show that took place in New Jersey. The act was a huge star in Portugal and their crew insisted upon us bringing in a large lighting system. I called my favorite lighting guru, and for a couple of weeks, we vacillated between a smaller system and the one they wanted. The theater’s capacity is about 2,500 and the stage is only 40’ x 30’ deep. The promoter, when given his choices, decided to bring in the large system with a $16,000 price tag. That, coupled with the backline, the DVDOSC system, Clair monitors, a couple of PM5D consoles and all the labor came to about $28,000. I decided to let the promoter pay the lighting company directly so he could save the contracting fee of having it go through our company.
All was good in Jersey, and the show sounded great and the light show was as fantastic as it should be for $16 grand. Somewhere near the middle of the show the theater owner approached me and asked how much everything cost. I told him the cost of both the sound and the lights and figured that I would let him approach me if he was interested in having me do any work for him. A short while later, my lighting guru — with whom I have contracted work for about 12 years — came to me and informed me that he was approached by the theater owner and he had decided to leave the lights in the theater for the following two days for another $2,400. My deal-making lighting guru based his decision for such a low quote on the fact that he wanted to low ball another lighting company who notoriously brings in gear for undermarket value.
The Bidding Wars
His decision was wrong on so many levels! The company I represent was the primary contractor, and the lighting guru should have checked with me first before making any deals. Not that I am “El Capo,” but if he had consulted me he probably would have made more of a profit on the deal since I would have never allowed the system to stay for that price. I know that the guru’s company made an extra couple of thousand dollars on the deal, but if my client, after being billed $16,000, had gotten wind of this incredible arrangement he might question the veracity of the company I represent as well as the guru himself. Underbidding another company that already bids below market value benefits no one and in the long run hurts everyone. It not only devalues the equipment and your skill, but also the ability to negotiate a decent contract. When the word gets around that you’re the “inexpensive company,” then your company will end up in bidding wars in the low-ball league. On the other hand, if word gets around that you are a player, then you will get the “playa” phone calls. Just be aware that when you take the call it is your responsibility to act accordingly.
