There’s no end to the number of options you have when it comes to finding an explainer video company. Prices range from $150 to $50,000, so what gives? How do you know how much to spend, and whether your investment is going to pay off or not?
Visiting the sites of many explainer video companies will give you an idea of what to expect in terms of the total price, but not how that price translates into the things you care about, like quality, service, and results.
So, we’re lifting the veil on how this all works to give you an inside look at exactly how pricing works and how to make sure you’re getting the best bang for your buck.
Price, as defined by Adam Smith in his book “Wealth of Nations,” is divided into three parts:
What you pay is the function of (1.) labor, (2.) rent (overhead), and (3.) profit.
LET’S TALK ABOUT LABOR
Labor is a calculation of the time it takes a group of humans to create your video, multiplied by the hourly rate that these people need to earn a living. There’s no getting around this one. This is the primary cost in your explainer video.
Let’s first examine where the time spent on your video goes as we dive into the mechanics of an animated explainer video.
In animation, as in most creative endeavors, the more time you put in, the greater degree of complexity, richness, intricacy and engagement will occupy the result. There is no such thing as a standard number of hours.
That being said, at a minimum, you can expect a decent creative to spend approximately 40-60 hours to illustrate and animate 60 seconds of custom designed 2D animated video.
This is assuming two things:
- They are creating custom assets (not stock or templated assets).
- They are providing a professional level of motion design. Meaning, the assets move smoothly and purposefully without any obvious flaws. (If you ‘notice it,’ a professional job has not been performed).
If you use stock assets, and don’t mind seeing things move robotically across the screen, you can probably drop this down to 20 hours (or even less) per 60 seconds.
On the other end of the spectrum, there is really no ceiling here. You could very well have a room full of animators working for a month on 60 seconds of animation if the style, design, and motion called for it (think Pixar).
But, that’s not really relevant to our discussion. We’re talking about explainer videos here, folks! In this case, you’d probably see the high end being 80-100 hours.
Ok, so to recap, for 60 seconds of high quality, custom created animated video, you’re looking at 40-60 hours on average, 20 on the low end of the quality spectrum, 80 on the high end.
Before all the aforementioned fancy animation comes to life, you must first write a script. The dirty little secret about scripts is that it’s not just about sitting down at a desk and typing out words.
A good script involves taking the time to understand the product, service, or idea, so that you can explain it in a way that it makes sense to your intended viewer.
To make sure you nail it, you have to start with a concept.
A high level idea that is tested to make sure it’s on the right track.
You also have to consider the visuals while writing. We are talking about a video, afterall. This means creating ‘beats,’ or simple visuals that lay out the key scenes in the video to ensure the visual story is cohesive with the script.
In our experience, to start from scratch requires the video studio to…
- understand the subject matter
- pitch a couple concepts
- write a script that works in video format
- create beats to outline the visual story
…for this, you’re looking at around 14-18 hours, assuming 1-2 rounds of feedback with the client (that’s you!)
Once again, this step can be rushed, or the client could provide the script.
On the low end, this hourly estimate could drop to around 2-5 hours (or even less, honestly). On the high end, if there’s a lot of back and forth, shopping the concept around, marinating on it, and playing around with multiple ideas, you could go as high as 30-40 hours.
After you have a script, you have to set style. This means someone has to draw a sample of the visuals to see if we’re on the right track with the overall aesthetic of the video.
A good quality set of illustrations that accurately convey a style direction will take 4-8 hours to create. Let me emphasize again, you cannot simply reduce this task to sitting down and drawing. It’s a bit more strategic than that.
These original assets have to be dreamed up and created so that they work with the script and the other elements of the video. They also have to be designed with the motion in mind.
A style that is disconnected from the planning of the video can throw the whole project off. What’s that ultimately result in? This disconnect can distract viewers to the extent of them “not getting it” or appreciating the message of the video. That renders this whole initiative a waste. So, you have to take some time here.
After animation comes sound design. Custom sound effects take about 4-8 hours to create. A professional VO (voiceover) takes 1-2 hours of studio recording time. And custom music composition takes about 8 hours. Once again, if you want stock music, no SFX (special effects), and ‘just anyone’ to record a VO, you can cut these estimates by 50%.
However, if you want a completely cohesive sound experience with your video, music that tracks with the action of the video, sounds that are recorded specifically for your video, you could easily triple this estimate to 40-50 hours.
Lastly, throughout this whole process, someone needs to be managing the project, communicating with the client, coordinating the creatives, and making sure everything is running smoothly.
Over the course of a 4-6 week video project, you can reasonably assume 10-15 hours of project management would be required. On the low end, you could see 5, and on the high end, 20-25.
Ok, so let’s recap. For 60 seconds of 2D Animation, your time estimates are below:
This covers the first part of our labor price figured out: labor (aka time). Next, let’s estimate how much each hour costs.
THE HOURLY RATE
First, let’s focus on cost. We’ll cover overhead and profit next, but first we’ll address the money that goes directly to the person doing the work. Their “take home” pay, if you will.
The average salary at a creative agency in the US is estimated to be about $61,500. (Source) There are many assumptions here, but you can connect the dots on what level of skill a person working at a reputable creative agency in the US would have, and therefore would command this level of salary.
Now, no one can work at 100% efficiency, meaning, within that salary, some of their time is spent on vacation, being sick, attending company meetings, training and development, etc. So to be accurate we have to apply a utilization rate to their time to come up with the true hourly cost. Let’s assume 75% utilization for this scenario.
If this creative person works:
–> 40 hours per week [x] 52 weeks per year = 2080 hours x 75% utilization = 1560 hours
–> $61,500 divided by 1560 hours = $39.42 per hour
Not every studio will pay their employees/contractors the same, and not every employee/contractor’s talent and experience level warrants the same pay, so there is a scale here as well. We could say the scale is something like:
–> Below average labor rate = $20 / hour
–> Average labor rate = $40 / hour
–> Above average labor rate = $60 / hour
Armed with a good comprehension for the hourly rate as a function of the cost (take home pay to the individual doing the work) let’s examine the two other categories that affect your investment.
OVERHEAD & PROFIT
Studios have services they provide to the employees and freelancers that are going on “behind the scenes” called overhead. Every studio (any business, for that matter) needs to create some sort of margin for dips in business, capital investments, and profit distributions.
Let’s take a look at what goes into overhead for a studio:
There certainly can be more, but this paints an average picture.
For context on profit, based on various studies, a 15-20% profit margin is pretty indicative of the goal for most studios. Some might be lower, around 10%, some might be higher, say 30%. But for our purposes, 15-20% is average.
To account for their overhead and profit, creative agencies in the US will generally apply a 100% markup on direct costs. Of course, this is a generality. Smaller agencies might be lower, larger agencies might be higher, or there could be anomalies, but this is a good average for sake of simplicity.
Now let’s apply some multipliers to our costs to get an idea of the sales price of a 60 seconds 2D animated explainer video:
WHAT TO EXPECT FROM EPIPHEO
Epipheo is a premium video studio.
We’re not the highest end, but we’re definitely above average.
We put the extra time, attention, and resources into our videos to make sure the end product is worthy of the investment. We know the value of a well-crafted video and strongly believe that in most cases, to cut corners and costs just doesn’t work out well in the end. For over 10 years, and for thousands of clients, we’ve seen the impact of great video – and most likely, so have you.
What are the benefits of a premium video product?
- Premium video is the difference between recognizing a video as just an ad, or as a compelling story
- It’s the difference between remembering it or immediately forgetting it
- It’s the difference between picking up your phone to distract yourself, or actually watching the video to completion
- It’s the difference between sharing it with people or not
- It’s the difference between getting goose bumps or feeling nothing
- It’s the difference between reaching the end and saying “Aha, I get it!” or just moving on with your day.
That said, should you overextend yourself, take out a bank loan, or sell a kidney to pay for a premium video? Probably not.
Should video be where your team “cuts corners” to save an extra buck? Probably not.
Take a look at what a good investment becomes: https://epipheo.com/portfolio/
TL;DR – What Goes Into Pricing Your Explainer Video?
There are three factors that impact the pricing of explainer videos:
- Time it takes to perform the work of creating the video
- Costs the direct costs associated with creating the video (primarily labor)
- Profit margin the studio builds into their pricing.
In most cases, for a video that is priced under $5,000, the studio is either using overseas labor, or not putting much time into your video.
Videos in the $8-10,000 range are considered average priced.
Videos in the $15-20,000+ range is a premium product, where there is a high degree of time being put toward your project.
See Epipheo In Motion:
Check out our video work to get inspired.