Understanding the Value of AV Services

 

The audio visual (AV) industry has always struggled to capture and monetize intellectual property, ideation and pre-production work that goes into any event. Typically, an audio visual company is paid for the rental of equipment that is used in an event, and services such as pre-production time, creativity, experience or innovation have been treated as a condition of the cost of the unit cost of that equipment. This presents two distinct but very different problems.

First, it unfairly commoditizes a creative business and devalues the expertise and creativity provided by the production team. At our company, the minimum team compliment working on any given event is an account manager, a production manager with a backup, a production coordinator, a digital content coordinator and a technical manager. If the event warrants it, we will also involve a director of digital services, and a director of creative services (and often both). Each of these positions have a wealth of experience and by rolling the costs for this team into the unit cost of pieces of equipment, our industry exposes itself to the vicious undercutting that is so common in a commodity industry.

Second, the experience of the pandemic has shone a bright light on the problem when a firm’s value is treated as a commodity. When the commodity is no longer required, the only source of revenue has disappeared. At the beginning of the pandemic our business lost almost all its equipment-based revenue. The spread of the virus made live and in-person events untenable for clients and the climate of uncertainty made it impossible for any long-term planning. However, our clients needed our services to communicate with their employees. They needed to continue to plan, to ideate, draw and visualize their future events so that when the pandemic restrictions were lifted they were ready. They also needed to figure out how to meet in the virtual space: virtual event platforms, camera and lighting direction, runs of show, screen states, rehearsals and technical checks. These are all services that do not have an equipment component to them but are critical to the successful execution of an event.

We do live event production and the pandemic was a challenge but also an opportunity to think outside the traditional audio-visual business framework. We needed to do things differently, challenge the expected situation and bring new ideas forward to have the same impact on our client events. The pandemic also gave us a perfect opportunity to right the ship that had been listing for so many years. We knew we needed to migrate the business from a commodity model to a services model and the pandemic provided ideal conditions to reimagine the structure of our business to both correct an historic wrong and to help our business survive.

In The Innovator’s Dilemma, author Clayton M. Christensen talks about having the courage to cannibalize a piece of your business to innovate and to create something new and that it takes foresight to find the right inflection point to innovate. We applied this approach to our commoditized pricing model. We knew that our clients’ budgets weren’t simply going to increase by the value of our services so it meant we needed to offset any of our pricing increases by applying a lesser value to our equipment. In other words, we needed to reduce margin on equipment and make space for a new model. In the post-pandemic environment we now put a monetary value on the amount of time we will invest in a project. We use an objective formula and allow some subjectivity for expertise and we commit to a budget for the project. We don’t track time, we don’t account for hours, we put a price on the value of our team, the experience we are going to bring the project, how many members of our team are going to be involved and how much effort we feel the project will take.

The migration from commodity pricing to service pricing has had three great benefits. First, it puts a much higher value on our team and their expertise, everyone feels valued which creates a deeper employee investment and employee satisfaction in the work they are doing. Second, it puts a much lower value on the pieces of equipment that our team uses to do their jobs making us much less susceptible to commodity-based competition. And finally, it has reshaped the conversations we have with our clients. We can talk about what is going to make an event successful, what they are trying to achieve, what’s on their wish list and how they want their guests to feel.

We started our company to help our clients create meaningful, thoughtful and creative moments of engagement with their audiences and the evolution of the pricing model is another tool to allow us to continue that journey.

 

Kyle Brooks is CEO of Bespoke Audio Visual in Toronto. Bespoke is a full-service audio, visual equipment rental, and event staging company.

 

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