“In this country there is the perception that people can put up a website for peanuts and make millions,” says Mike Butcher, editor of New Media Age. And that really sums up a sector which remains highly fragmented in terms of who is providing a service and is highly competitive in terms of fees. Many design groups have set up multimedia arms but, unless they win major projects, they are unlikely to make much profit, considering the plethora of competitors and the scepticism of clients.
For Nucleus, the sector has become so competitive that Matthews claims it will only take on large projects involving consultancy work. “Most people in new media are just knocking out websites and there are always people who will do it cheaper,” he says.
Companies will also offer Web production for free if they think they can sell other services on the back of it. “We only do major strategic projects which tend to be technically complex,” adds Matthews. He says Nucleus’ charge-out rates for senior staff are higher than for corporate identity projects, “because good people are very expensive and there’s a real shortage of skills”. But he is only too aware that others are more than willing to tackle projects for ridiculously low fees, and knows of one technology company which charges fees of 25 per hour – less than most freelance designers.
According to Butcher, fees are edging up, and for key people are 500-plus per day, but are still way below comparable rates in the US. “In the US people can charge double,” he says.
The immaturity of the sector has led to a few early casualties. The former AMX Digital, now AMX Studios, was hit earlier this year as a result of the huge amount of development work it undertook for clients. “You’re offering a service that clients don’t understand, so if people don’t know what they’re buying they’re reluctant to pay for it. You also have to do an enormous amount of development work and, in the worst situations, find yourself doing work for free,” says design director Malcolm Garrett. Although a cut-throat climate is, to an extent, inevitable in a new sector, Garrett despairs of the free pitches and lack of understanding among clients. “It’s further complicated by the fact that clients aren’t sure of the scope of what we’re offering and we can find ourselves competing with two Royal College of Art graduates working from a basement in Shoreditch, who apparently look as if they’re offering the same thing as IBM. Somewhere in the middle are people like us,” he says.
Working out fee-rates is like trying to figure out what the market will stand. “We’re constantly revising it. People say they want a website and ask how much will it cost, which is like asking how much will a book cost to produce,” says Garrett.
Simon Needham, group creative director at The Attik, says larger companies are prepared to pay more “because they want professional results”, though agrees the problem with multimedia is that clients don’t know “good from bad”. He adds: “There are agencies which are blinding people with science and there are a lot of clients being duped.”
Find out what the competition is charging and what it is offering
Make sure clients understand what they are buying and how the service you are offering differs to non-design-led groups
For development projects make sure charges reflect consultancy input and include stages so fees can be paid along the way rather than at the end
Watch out for confused clients asking scores of groups to pitch for free
DBA members can check with the DBA/Willott Kingston Smith survey to gauge charge-out rates for multimedia