How to price rental gear?

[Val Volfson]

Hey guys,

Hope this isn't a silly question.

We are upgrading our gear quite a bit (mostly for our own in house production) but being that we are one of the few soon to be RED Epic systems in our city (and few in our area) how do you guys decide the rental price for your epics, or any other gear for that matter - I know a lot of it is market and availability based but would love to hear how some of you guys decided on your rates.

Thank you.

 

[Terry VerHaar]

General and simple answer... you have to take two things into consideration:

1) The total overall lifetime cost of the equipment. If it's a $10K lens that will last 10 years or more, you can take longer to amortize the cost plus make a profit. If the equipment has substantial maintenance costs, you have to figure that in as well. If the equipment will be obsolete in 2-3 years, like a camera, you had better charge enough to replace it in that time period along with earning a fair return on your capital expenditure. Don't forget that insurance, along with breakage/repair, can be a cost as well. And make sure you cover costs like storage and overhead, too.

2) The market. If there is a flood of Epics at $300/day, you are going to have a hard time getting $1000 for yours. At least until those competitors, who are operating at a loss, go bankrupt and stop ruining the market. But that is a real consideration. If there is a flood of rental equipment in your market, you may want to stay out of that business as "making it up in volume" is not viable approach in this case. Your market price should take into consideration the inflection point where your competitive price is just low enough to make sure you have a steady stream of rental; sufficient to provide a positive ROI.

It's not as easy as some think insofar as it requires a bit of a crystal ball. A whole lot of folks fail pretty miserably playing this game.

 

[Val Volfson]

General and simple answer... you have to take two things into consideration:

1) The total overall lifetime cost of the equipment. If it's a $10K lens that will last 10 years or more, you can take longer to amortize the cost plus make a profit. If the equipment has substantial maintenance costs, you have to figure that in as well. If the equipment will be obsolete in 2-3 years, like a camera, you had better charge enough to replace it in that time period along with earning a fair return on your capital expenditure. Don't forget that insurance, along with breakage/repair, can be a cost as well. And make sure you cover costs like storage and overhead, too.

2) The market. If there is a flood of Epics at $300/day, you are going to have a hard time getting $1000 for yours. At least until those competitors, who are operating at a loss, go bankrupt and stop ruining the market. But that is a real consideration. If there is a flood of rental equipment in your market, you may want to stay out of that business as "making it up in volume" is not viable approach in this case. Your market price should take into consideration the inflection point where your competitive price is just low enough to make sure you have a steady stream of rental; sufficient to provide a positive ROI.

It's not as easy as some think insofar as it requires a bit of a crystal ball. A whole lot of folks fail pretty miserably playing this game.

Thanks so much for taking the time to answer. I agree with you that many fail, I figure since the gear will be here anyway, why not push it. My area seems to have a bit of a different effect - not too many people rent the gear around here but most indie producers cant afford the rates of those who do...

 

[Marc Wielage]

The prices I see for camera and sound gear seem to fall into the "2% of retail price per day" category, so a $1000 item would rent for $20 a day, and a $50,000 item would rent for $1000 a day. But... there's a lot of qualifiers for that, like what area you're in, how much competition there is, how new the model is, if it's a package deal, how many days are involved. Paying 3 days' worth of the day rate for a 1-week rental is pretty standard in NY and LA.

In theory, at 2% you could pay the device off in 50 days. But the reality is, the costs of upkeep, repair, spare parts, accessories, insurance, and all that stuff make it tough to calculate.

 

[Tim Bradley]

there is an app, its called "rent me" that is rather helpful is deciding rental costs. At least it may give you a ball park figure to think about.

 

[Andrew clemson]

If the local market here is anything to go by, you check what everyone else is charging and set yours at 50% of that.

 

[Marc Wielage]

If the local market here is anything to go by, you check what everyone else is charging and set yours at 50% of that.

Although there's always the danger of a new competitor taking your rates and doing the same thing.

And people complain about the downward spiral of daily rates...

 

[Bruce Schultz]

Having owned camera packages since the late 1970's (Ikegami HL79) and pretty much every version of broadcast cameras from Ikegami, Sony, and even Panasonic (first Varicam) I can chime in and say that 2% of retail cost has always been the traditional way to price rentals. When I paid nearly $100,000 for the first F900H I was able to get nearly or nearly $2000 rental daily on it because they were in demand and as scarce as hen's teeth. When the F900R was bought for about $70, 000 I was able to get around $1500 daily for it because the saturation by then of the F900H made the F900R a premium rental item and dropped the F900H rental rate to closer to 1%. The other point I'm making here is that staying ahead of the curve with better camera versions can yield good results for your rental rates, the tradeoff being you have to "churn" your cameras sooner. I've had so many cameras now over the years that I can't even remember them all, but for the most part they have served me well as long as I didn't fall too much in love with them before having to upgrade them to a newer, better model or brand. The only camera that did not achieve it's ROI was the Varicam, which was my fault for not recognizing that I was in a 1080P market (Los Angeles) trying to use a 720P camera. That didn't last long though.

That paradigm has seemingly changed now with Red Epic coming in at around $45K built out, we are looking at closer to 1% - 1.5% rental rates for basic packages. What seems to be somewhat immune to this trend though is good glass which still commands a premium rental price, and should.

 

[Gavin Greenwalt]

Although there's always the danger of a new competitor taking your rates and doing the same thing.

I believe he was employing irony. Or put another way, "woosh".

My philosophy is simple for pricing. What is the hassle worth? At what price am I no longer willing to deal with it. For small items that's been up to 10% of the price per day. For larger items that's been 1% with the hope of future rentals.

 

[Christopher Mills]

Before you ever consider renting any gear out, spend some time in a rental house.
You may decide that you just don't want to risk your gear that way.
Bruce and I both rent gear that we are operating. He may rent some out on its own, but I bet he knows the people who are going to use it pretty well.
I have also run the rental department of a production company, and there were many different rates depending on who was renting, and the likelihood that extra maintenance would be required.
However, we found that equipment that could not be rented for more than 2% of its costs (including maintenance and insurance) per rental day, was not worth having in the rental inventory.

 

[Marc Wielage]

That paradigm has seemingly changed now with Red Epic coming in at around $45K built out, we are looking at closer to 1% - 1.5% rental rates for basic packages. What seems to be somewhat immune to this trend though is good glass which still commands a premium rental price, and should.

I agree -- lenses make a huge difference, and they also hold their value for years and years.

It is pretty stunning, all the new cameras coming out. I was really caught by surprise by both the new Blackmagic camera and the AJA camera, which came from out of nowhere. One can argue the sense of making an under-$10,000 camera that only shoots ProRes HD, but there's clearly a market for that if you need to turn stuff around very fast, like news material, documentaries, or stuff for the web. Not everything necessarily needs to be 4K. Not yet.

 

[Andrew clemson]

Thanks Gavin, sarcasm is ever difficult to employ on the internet!

I generally shy away from rentals unless the money is good enough.

Remember, without proper insurance even if you set your rate so high that you pay the item off in 10 days, the renter might smash it to pieces on day 1.

I believe he was employing irony. Or put another way, "woosh".

My philosophy is simple for pricing. What is the hassle worth? At what price am I no longer willing to deal with it. For small items that's been up to 10% of the price per day. For larger items that's been 1% with the hope of future rentals.