Costs and pricing
Part of What video marketing agencies costs and pricing means for England budgets
Video marketing agency contracts: the rights, VAT, revision and pass-through terms that change your bill
A guide to the contract terms that change what a video marketing agency costs: written rights, VAT, revisions, pass-through costs and payment dates, with an invented budget to show the arithmetic.
What to take away
A marketing manager planning video marketing in Leeds reviews an illustrative £14,000 video budget from video marketing agencies and checks whether rights, revisions and third-party charges are set out before signing.
- Put scope and charges in writing before signing; labels alone do not show what is included.
- Paying for a film does not by itself transfer copyright, so get rights terms in a signed document.
- Check whether the quote is net of VAT, which is 20 per cent at the standard rate.
- Ask for rights, revisions and third-party fees as separate priced lines in the proposal.
- Agree a payment date in writing, because late payment carries statutory interest.
Set scope and charges before signing
Make the signed proposal clear about which charges are included and which may arise later, whether a licence, reshoot or third-party fee. For each foreseeable extra, record what triggers it and how it will be priced.
Contract terms here follow the law of England and Wales. Scotland has its own contract law, so check the governing law clause before you sign anything. The costs and budget guide explains how day rates, project fees and retainers differ.
Rights: the line with the biggest swing
Copyright is the most expensive thing to leave vague.
Under section 90(3) of the Copyright, Designs and Patents Act 1988, an assignment of copyright is not effective unless it is in writing signed by or on behalf of the assignor. A verbal buyout, or a quote that says "all rights", is therefore a weak position.
Section 92 of the same Act requires an exclusive licence to be a licence in writing signed by or on behalf of the copyright owner. Under section 9(2)(ab), the author of a film is the producer and the principal director, so check who holds those roles on your shoot and who signs for them.
Ask for a rights schedule that names the licence period, the territories and the channels. Each one changes the fee. A workable schedule has one line for each of the following:
- Period:for example 12 months from first publication, with the price of each renewal stated.
- Territory:UK only, UK and Ireland, or worldwide.
- Channels:website, organic social, paid social, broadcast or events.
- Edits:whether you may cut down or caption the film, and who owns the cut-downs.
- Third-party material:the licence terms for each music track, stock clip and contributor.
This guide does not quote market prices for any of these lines, because they vary with the brief. Ask at least three agencies to price the same written brief and schedule, so the quotes can be compared line by line. A track or stock clip cleared for a website may not cover paid social, so list music and stock licences separately in the commercial contracts.
VAT, revisions and pass-through costs
Confirm whether each line is net or gross. HMRC gives the standard VAT rate as 20 per cent, so a £10,000 net line becomes £12,000 on the invoice. If your business cannot reclaim the VAT, that £2,000 is a real cost that was never in the headline number.
Revision rounds are the next swing. Ask how many are included and what a further round costs, and put the day rate for extra work in writing. A reshoot after approval may be charged at that rate, so agree it in advance.
Pass-through costs, such as location fees, talent renewals or music, are billed at cost and sometimes with a handling fee. Ask for a cap on them. Permits and talent renewals can be genuine third-party charges, which is why they should be priced as separate lines.
Payment terms and late-payment exposure
The relevant legislation includes the Late Payment of Commercial Debts (Interest) Act 1998 and the Late Payment of Commercial Debts Regulations 2013. Where a payment date is agreed, it must usually be within 60 days for business transactions, and an agreed period longer than that must be fair to both businesses.
The interest a supplier can charge is statutory interest, which is 8 per cent plus the Bank of England base rate for business to business transactions. A supplier may also charge a fixed sum for recovery costs, which is £40 for a debt up to £999.99.
As an illustration, GOV.UK's worked example uses a £1,000 debt and a 0.5 per cent base rate: annual statutory interest is £85, or 23p a day. Hold a clear payment date in the contract, and diarise it.
A worked illustration
The figures below are invented to show the arithmetic. They are not market prices.
Against the first quote of £14,000 net, or £16,800 with VAT, the final gross cost is £3,360 higher. Each added line was foreseeable and could have been priced at proposal stage.
Contract terms that cap the risk
Add a cap on pass-through costs and set a fixed number of revision rounds, with a day rate for anything beyond. A budget template that lists these lines keeps the discussion on scope, and it makes two quotes comparable.
Before signing, run the supplier through the vendor due diligence checks and the selection checklist, and ask for the rights schedule and the payment terms at the same time. Written service standards can also fix turnaround and revision commitments alongside the price.
A short glossary of contract cost terms
Glossary of hidden cost terms
- Buyout
- one payment covering a fixed licence period and market.
- Pass-through
- a third-party cost billed at cost, sometimes with a handling fee.
- Usage renewal
- the fee charged to extend a licence after the first term ends.
- Versioning
- extra cuts and caption files beyond the agreed delivery list.
- Rush fee
- a premium for a compressed production schedule.
Before you act
- Get the rights schedule in a signed document, with period, territory and channels.
- Confirm whether each quoted line is net or gross of VAT.
- Ask how many revision rounds are included and the day rate for more.
- Cap pass-through costs in the contract.
- Agree a payment date in writing and diarise it.
- List music and stock licences as separate lines.
Common questions
Does the agency fee include media spend?
No. Production and media buying are separate purchases, so check which one each invoice line covers.
Does paying for a video mean I own it?
Not automatically. An assignment of copyright must be in writing signed by the assignor, so ask for the signed document, and check any licence terms for period, territory and channels.
Can I cap revision rounds in the contract?
Yes. Agree the number of rounds and the day rate for extra ones before the shoot.
Are hidden costs always avoidable?
No. Permits and talent renewals are genuine third-party charges. The aim is to see them before you sign.
