If a client is only distributing their video via the web, they are already saving money vs. traditional distribution methods, i.e., they are not paying for broadcast airtime or for DVD replication, packaging, postage.
For web video, distribution is where the client finds savings. The savings are not to be found in reducing rates for pre-production, production, post-production when those parts of the project take the same amount of time as you would take to work on a video for traditional distribution methods. Sell the benefit of saving money via method of distribution, but don't undercut your standard production rates.
And Mick makes great points in his post: re-purposing a video for a variety of distribution methods is another benefit to the client.
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