Blog · Production fee and markups
Production Fee in a Video Budget: Percentage and Base
The production fee is the only line in a video budget that pays for your company rather than the job, and it is the line clients question first. Here is the percentage I use, the base I apply it to, and why the same fee can mean two very different numbers depending on what sits underneath it.
What a production fee actually pays for
Every other line in the budget buys something the client can see. A camera package, a gaffer, a grade, a music licence. The production fee buys the company that holds all of it together.
For us at Solvo that means the office, the annual insurance policy, the accountant, the storage and archive, the software, and the three quotes I wrote last month for jobs that never happened. It also covers the cash risk. I pay the crew within 14 days and the client pays me at 45 or 60, so for several weeks the job is financed out of my account.
And then there is profit, which is not a dirty word. A production company with no margin cannot survive a bad quarter, replace a drive that dies mid-grade, or say no to a job priced below cost.
So when someone asks what a production fee is in video production, the short answer is: it is the price of someone being responsible. If the location falls through two days before the shoot, the fee is what pays for the person who fixes it at 11pm.
What percentage do I use for a production fee?
In commercials and corporate work across Europe, a production fee of 10 to 20% of direct costs is what I see on bids that come across my desk, and 15% is my default. That is practice, not a published standard, and it moves with the job.
I go up towards 20% when:
- The schedule is compressed and I am doing a week of prep in two days.
- There are many deliverables, many stakeholders, many approval rounds.
- The client's paperwork is heavy: supplier portals, security vetting, purchase order systems.
- Payment terms are long or the client is new to me.
I go down towards 10% when:
- The budget is large. On a €150,000 job, 10% is €15,000 and that is real money for the same amount of management as a €40,000 job.
- A big share of the budget is pass-through that I am not really producing: media, large talent buyouts, a subcontracted animation studio.
- It is a repeat client on a format we have shot five times and the prep is genuinely light.
One thing I do not do is quote a fee below 10% to win a job. Below that, a single bad day on set eats the whole margin and you have worked for free.
What base do you apply the production fee to?
This matters more than the percentage. A 15% fee on everything and a 15% fee on direct costs only are different numbers, sometimes by thousands.
My rule: the fee applies to what I actually produce and carry. Things I merely pass through get a reduced handling percentage or none at all.
| Budget area | In the fee base? | Why |
|---|---|---|
| Crew days, director, DoP, gaffer | Yes | I book them, brief them, pay them, chase their invoices |
| Equipment, grip, lighting, studio | Yes | Sourced, negotiated, insured, collected and returned |
| Locations, permits, catering, transport | Yes | Full management load, often the messiest part of the job |
| Post production done by me or my regulars | Yes | Scheduling, supervision, revision rounds |
| Talent fees for shoot days | Yes | Casting, contracts, callbacks, on-the-day handling |
| Talent buyouts and usage | Reduced | Large sums, little extra work beyond the paperwork. I use 5% |
| Subcontracted studio (animation, VFX house) | Reduced | They manage themselves. 5 to 10% depending on supervision |
| Travel and accommodation | Sometimes | Full rate if I book it, zero if the client's travel desk does |
| Media buying, ad spend | No | Not mine to produce |
| Contingency | No | A fee on money you hope not to spend is hard to defend |
| VAT | No | Obviously, but I have seen it happen in a spreadsheet |
Whichever base you choose, write it on the quote. A single line saying "Production fee, 15% on direct costs excluding talent usage and contingency" ends the conversation before it starts. Clients argue with a number that appears from nowhere, not with a stated method.
A worked example: two-day corporate shoot
Here is a real shape of job for us. Two shoot days in Warsaw, a brand film plus three cutdowns, two actors with a twelve-month online buyout.
| Line | Qty | Rate | Total |
|---|---|---|---|
| Producer | 4 days | €450 | €1,800 |
| Director | 3 days | €700 | €2,100 |
| DoP | 2 days | €900 | €1,800 |
| Gaffer | 2 days | €400 | €800 |
| Sound recordist | 2 days | €450 | €900 |
| Camera package | 2 days | €750 | €1,500 |
| Lighting and grip | 2 days | €600 | €1,200 |
| Location fee | 2 days | €500 | €1,000 |
| Catering | 28 covers | €25 | €700 |
| Transport, 2 vans | 6 van days | €120 | €720 |
| Editor | 6 days | €400 | €2,400 |
| Colourist | 1 day | €600 | €600 |
| Sound mix | 1 day | €500 | €500 |
| Music licence | 1 | €450 | €450 |
| Direct costs | €16,470 |
Now the lines that sit on top:
| Line | Base | Rate | Total |
|---|---|---|---|
| Talent buyout, 2 actors, 12 months online | €6,000 | ||
| Production fee | €16,470 | 15% | €2,470 |
| Usage handling fee | €6,000 | 5% | €300 |
| Contingency | €16,470 | 5% | €824 |
| Total, net of VAT | €26,064 |
Two things fall out of that arithmetic. First, my total fee income is €2,770, which is 10.6% of the invoice the client receives, even though the headline percentage is 15%. That gap is worth knowing before you negotiate, because the client is comparing the bottom line, not your base.
Second, if I had lazily applied 15% to everything including the buyout, the fee would have been €3,370.50 instead of €2,770. Six hundred euros of difference on a modest job, purely from the base. On a job with a €40,000 buyout, that decision is worth four thousand.
Markup or margin? They are not the same number
A 15% fee added on top of costs is a 15% markup. As a share of what the client pays, it is 13%. Procurement departments sometimes ask for margin, and if you answer with markup you have quietly given away a few points.
| Markup on costs | Margin on the total |
|---|---|
| 10% | 9.1% |
| 15% | 13.0% |
| 20% | 16.7% |
| 25% | 20.0% |
| 30% | 23.1% |
If a client or your own business plan says "we need 20% margin", the fee you type into the budget is 25%. I keep that table taped inside my head because the mistake is easy to make at 1am when a bid is due in the morning. If you want the full anatomy of the lines underneath the fee, I went through them in this breakdown of budget line items.
Agency fee vs production fee: who charges what
On agency-led jobs there are two fees and they are not competing for the same work. The agency charges the brand for strategy, creative, account management and often for overseeing the production. My production fee covers producing the shoot and delivering the files, and it sits in my budget, not theirs.
Where it gets awkward is when the agency has already promised the brand an all-in number and asks you to absorb the squeeze. I have had a client ask me to drop the production fee to 8% because the agency's own markup had eaten the room. The honest answer is to cut scope instead: one shoot day instead of two, fewer setups, a tighter post schedule. Cutting the fee to fit someone else's margin means you take the risk and they take the profit.
When the brand books you directly, there is no agency fee, and that is usually the moment to be clear that creative development, scripting and concept work are a line in the budget rather than something the production fee quietly swallows.
When the client gives you the number first
Half my enquiries arrive as "we have €25,000 all in, what can you do?" That is a division problem before it is a creative one.
If I want a 15% fee and 5% contingency on direct costs, then direct costs plus 20% of direct costs equals €25,000. So direct costs are €25,000 ÷ 1.20 = €20,833. That is the real envelope for crew, kit, locations and post, and if the brief needs €24,000 of production, the brief does not fit the money.
Telling a client that on day one, with the arithmetic shown, is a better conversation than discovering it in week three. I keep standard fee and contingency percentages set per client type in the quoting tool I built after my spreadsheet broke, so working backwards from a target number takes a minute rather than an afternoon of fighting formulas.
Common mistakes
Burying the fee inside crew rates. Padding the DoP from €900 to €1,100 to hide margin works until the client asks for a rate card or hires that DoP directly. Fix: one visible fee line, honest rates underneath.
Charging the fee and billing full producer days. If the producer appears as four days at €450 and there is also a 15% fee, be ready to explain the difference. I do, and the explanation is simple: the producer days are the job, the fee is the company. If you cannot say that with a straight face, drop one of the two.
Applying the fee to contingency. It makes the quote look padded and it is the first thing a sharp client spots. Fix: contingency sits after the fee, calculated on direct costs only.
Letting the fee percentage ride on every job size. Fifteen per cent on €8,000 is €1,200, which does not cover a week of prep and three revision rounds. Fix: set a minimum fee in cash, not just a percentage. Mine is a number I will not go under regardless of how small the job is.
Forgetting that discounts come off the fee first. When a client negotiates 10% off the total, the cost lines do not shrink. Fix: when you are asked for a discount, reduce scope by the same amount and show the revised budget, which I cover in more detail in how to write a quote clients approve.
No overtime or weather day policy next to the fee. The fee is not a blank cheque for extra days. Fix: a line under the total stating the sixth-hour overtime rate and what happens if a shoot day is lost.
FAQ
Is a production fee the same as a markup?
In practice they describe the same money, but the base differs. A markup is usually applied to third-party costs you resell, while a production fee covers your management of the whole job and is quoted as a percentage of direct costs. The important part is stating which costs the percentage applies to, because 15% on everything and 15% on direct costs only can differ by thousands.
Should I show the production fee as a separate line?
Yes, on any budget a client will read line by line, and that includes agency bids and most corporate finance departments. A visible fee with a stated base invites one question and answers it. Hiding margin in inflated crew rates invites a rate audit you will lose.
Do you charge a production fee on talent buyouts?
I charge a reduced handling rate, typically 5%, rather than the full fee. Negotiating and papering a usage deal is real work, but it is not the same work as managing a shoot day, and buyouts are often large enough that a full fee on them looks opportunistic. Say which rate applies to which base on the quote.
What production fee percentage is normal on a small corporate video?
Percentages behave badly at small budgets, so I set a cash minimum. On a €6,000 job, 15% is €900, which rarely covers prep, management and delivery. I would rather quote a flat producer and management figure and skip the percentage entirely on jobs under roughly €10,000.
Does contingency go before or after the production fee?
After, calculated on direct costs rather than on the fee. Contingency is money for things that go wrong in production, so applying a fee to it means charging margin on spend that may never happen. I use 5% on controlled studio work and up to 10% on location-heavy shoots with weather exposure.