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How to calculate if a gear purchase has paid itself off


Miguel Angel Calderon
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Hello everybody,

I'm trying to be a bit more thoughtful when making a gear purchase (who doesn't want to buy more lenses! haha).

I was wondering if you had any tips on what % to use to calculate if a gear purchase has actually paid itself over the number of "days" I've used it.

For example, if I bought a 2000€ camera, how many "days" would I need to use it? I'm looking at rental websites, to see what kind of return they would make, and I see anything between 2-4% of the "new" value per day. That also gives me an idea of what I would pay to rent that camera if I had never decided to buy it. So I'm trying to use 3% as a standard, which would mean every day I have it on set, it would make back 60€...

I don't know how fair is this thinking since I obviously use that camera outside of jobs/projects for tests, learning a bit more, just playing and having fun, etc.

If any of you have any thoughts or ideas I'd love to hear them! Or if you just don't think much about it, let me know, it might be less stressful that way!

Cheers

 

 

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The income situation changes depending on whether you follow a rental house model or an owner-operator model. If you’re the type of camera person who charge a day rate for each piece of rental equipment a la carte, then you’re basically following the rental house model. On the other hand, if you’re mixing your labor and rentals into a single rate, then it gets more complicated.

In the rental house model, big ticket items are supposed to pay off in a certain # of rental days. For example, an OConnor 2575D tripod head with a pan arm, tie-down, and a 2575-120 tripod plate costs around $17k USD and rents for around $115/day. That’s 148 rental days to make your money back. If your rental house mostly services films and tv shows that get deep discounts on long-term rentals, it might take several years to get that 148 days. But since a regularly serviced OConnor head will easily last you 20 years, that’s still a pretty good investment. 

ARRI/Zeiss Master Primes cost around $30k-$40k/per focal length and rent for around $300/day each. So that’s around 117 rental days to break even. Master Primes are very expensive to service, so factor that in as well. They were introduced in 2005, and 2019 was probably the first year that they were superseded by the full frame ARRI Signature Primes. So about 14 years as top dog, pretty good investment.

Going lower on the cost spectrum, the Sony FS7 came out in 2014 and cost $8k. It still rents for $400/day (I’m going to ignore the Mk2 for simplicity’s sake). That’s only 20 days of rental to make your money back. Of course, you have to also buy media, batteries, lenses, and other accessories to complete the camera package. So it might be closer to 30-35 days. But you get the idea. In general, the cheaper the item, the shorter the shelf life, and thus the fewer rental days it should take to pay off. 

If you’re doing the owner-op thing, then you need to factor the cost of your equipment into your day rate - for example, if your labor+gear rate is $2k/day, and your camera/support/monitoring/lighting should be renting for $1k/day, then you’re actually only making $1k/day as a DP. If your gear costs $2k/day to rent and you only charge $2k for your services, then you’re not making any money from your labor at all and just paying off the equipment.

I suspect there are some folks who are charging a day rate for labor and are not factoring in equipment costs. In which case, you’re not paying off your equipment at all, so it’s more of a business loss, I guess? Not really sure how that works.

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9 minutes ago, Satsuki Murashige said:

The income situation changes depending on whether you follow a rental house model or an owner-operator model. If you’re the type of camera person who charge a day rate for each piece of rental equipment a la carte, then you’re basically following the rental house model. On the other hand, if you’re mixing your labor and rentals into a single rate, then it gets more complicated.

In the rental house model, big ticket items are supposed to pay off in a certain # of rental days. For example, an OConnor 2575D tripod head with a pan arm, tie-down, and a 2575-120 tripod plate costs around $17k USD and rents for around $115/day. That’s 148 rental days to make your money back. If your rental house mostly services films and tv shows that get deep discounts on long-term rentals, it might take several years to get that 148 days. But since a regularly serviced OConnor head will easily last you 20 years, that’s still a pretty good investment. 

ARRI/Zeiss Master Primes cost around $30k-$40k/per focal length and rent for around $300/day each. So that’s around 117 rental days to break even. Master Primes are very expensive to service, so factor that in as well. They were introduced in 2005, and 2019 was probably the first year that they were superseded by the full frame ARRI Signature Primes. So about 14 years as top dog, pretty good investment.

Going lower on the cost spectrum, the Sony FS7 came out in 2014 and cost $8k. It still rents for $400/day (I’m going to ignore the Mk2 for simplicity’s sake). That’s only 20 days of rental to make your money back. Of course, you have to also buy media, batteries, lenses, and other accessories to complete the camera package. So it might be closer to 30-35 days. But you get the idea. In general, the cheaper the item, the shorter the shelf life, and thus the fewer rental days it should take to pay off. 

If you’re doing the owner-op thing, then you need to factor the cost of your equipment into your day rate - for example, if your labor+gear rate is $2k/day, and your camera/support/monitoring/lighting should be renting for $1k/day, then you’re actually only making $1k/day as a DP. If your gear costs $2k/day to rent and you only charge $2k for your services, then you’re not making any money from your labor at all and just paying off the equipment.

I suspect there are some folks who are charging a day rate for labor and are not factoring in equipment costs. In which case, you’re not paying off your equipment at all, so it’s more of a business loss, I guess? Not really sure how that works.

I was just saying this on the fx9 FB forum .. its a camera you can pay off in a good month of work..22 days , based on $400 per day rental ..  compared to the old 3 years general target for the old $70K ENG beasts .. its mad not to buy gear these days.

Also in my experience its better to charge a day rate including labour and gear .. the only time I have production insisting on a break down ,is to try to get the prices down compared to some low rental rate they can get from the massive rental houses (are there any small ones left) ..which is a totally different business model to an owner operator .. the best response is to tell them to feel free to make their own breakdown "for their budgets" as they say they need it for ..

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10 minutes ago, Robin R Probyn said:

Also in my experience its better to charge a day rate including labour and gear .. the only time I have production insisting on a break down ,is to try to get the prices down compared to some low rental rate they can get from the massive rental houses (are there any small ones left) ..which is a totally different business model to an owner operator .. the best response is to tell them to feel free to make their own breakdown "for their budgets" as they say they need it for ..

Yes, for corporate/industrial/documentary the prod co often wants the DP to give them a labor+gear rate and avoid dealing with a rental house, pickups & drop-offs. Of course, then the responsibility is on you to make sure the gear and the backups all work, and that you’re getting a COI from them (which is often like pulling teeth for some reason).

Personally, I much prefer the commercial/feature/tv style of working where I’m only at the rental house to shoot tests and say hi to everyone, and can otherwise just concentrate on keeping the director happy and never touch the gear myself unless the camera’s rolling. But I don’t think that’s very realistic for the vast majority of us anymore. We live in an owner-op world, for better or for worse.

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7 hours ago, Satsuki Murashige said:

Yes, for corporate/industrial/documentary the prod co often wants the DP to give them a labor+gear rate and avoid dealing with a rental house, pickups & drop-offs. Of course, then the responsibility is on you to make sure the gear and the backups all work, and that you’re getting a COI from them (which is often like pulling teeth for some reason).

Personally, I much prefer the commercial/feature/tv style of working where I’m only at the rental house to shoot tests and say hi to everyone, and can otherwise just concentrate on keeping the director happy and never touch the gear myself unless the camera’s rolling. But I don’t think that’s very realistic for the vast majority of us anymore. We live in an owner-op world, for better or for worse.

Yes Im just talking about the doc/corp work thats true .. and yeah I think for good or bad , the more polarized it gets in all markets ..you will have the high end stuff that Mr Deakins and the 15 or so guys that seems to shoot all that stuff .. high end streaming shows ..and the 15 guys who shoot all those .. and the commercials they shoot between projects .. and the rest !..

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As Mr. Calderon's question is now framed as a discussion of business-models and investment returns, let me add this.

The business model of a rental house and the business model of the rental portion of an owner/operator should be identical. In other words, the owner/operator must charge for a specific piece of equipment what a convenient and accessible rental house would charge for the same item. Any variations should either be trivial or balance out over a short period of time.

If equipment rental should be $1000 per day and and operator is $1000 per day the owner/operator can word-play and say I'm charging 800 for equipment and 1200 for me, but any producer would ignore that statement, and if they don't it's meaningless anyway.

As for a producer trying to "get the prices down compared to some low rental rate they can get from the massive rental houses (are there any small ones left)," that seems to that the owner/operator is overcharging for his equipment or, more likely, undercharging for his services, or even more likely, more word-play is involved. If a rental house consistently charges less than marginal costs to producers, it will go broke. If it overcharges a large segment of its market, the operators, it will also, soon, destroy its own business model and go broke, or stop doing it.

For both the rental house and the owner/operator equipment is a fixed cost; the owner/operator can live in a studio apartment with a roommate in a run-down area, but he must pay his fixed cost, that is, charge fully for it.

As an aside, yes, "payback period," is a rule-of-thumb, but it is the least-best of established valuation methods, especially in a business like equipment rental or the owner side of an owner/operator business where inventory (for rental) is basically the business as a percentage of assets. It ignores the very significant opportunity costs.  

 

 

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On 12/11/2020 at 4:07 AM, Miguel Angel Calderon said:

I don't know how fair is this thinking since I obviously use that camera outside of jobs/projects for tests, learning a bit more, just playing and having fun, etc.

That's one way to look at it, that purely considering only the rental costs would be an underestimation. Because that doesn't fully capture the value you gain from owning one yourself, and thus knowing it inside and out. 

But also a counter argument could be made that you're overvaluing the estimate because how many of those jobs could have been done with cheaper gear? (or even entirely without) But you just took along what you've got, even though it is fancier, because it is "what you have". 

For instance, consider a person who upgraded from a C300mk1 to a Sony FS7, and in their first year did 33 days of work (@ 3%) with the FS7, does that mean they've "paid off" the FS7 in just one year? No, not at all, not if 30 of those 33 jobs could have still been done with their C300mk1!

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On 12/13/2020 at 3:39 AM, charles pappas said:

As Mr. Calderon's question is now framed as a discussion of business-models and investment returns, let me add this.

The business model of a rental house and the business model of the rental portion of an owner/operator should be identical. In other words, the owner/operator must charge for a specific piece of equipment what a convenient and accessible rental house would charge for the same item. Any variations should either be trivial or balance out over a short period of time.

If equipment rental should be $1000 per day and and operator is $1000 per day the owner/operator can word-play and say I'm charging 800 for equipment and 1200 for me, but any producer would ignore that statement, and if they don't it's meaningless anyway.

As for a producer trying to "get the prices down compared to some low rental rate they can get from the massive rental houses (are there any small ones left)," that seems to that the owner/operator is overcharging for his equipment or, more likely, undercharging for his services, or even more likely, more word-play is involved. If a rental house consistently charges less than marginal costs to producers, it will go broke. If it overcharges a large segment of its market, the operators, it will also, soon, destroy its own business model and go broke, or stop doing it.

For both the rental house and the owner/operator equipment is a fixed cost; the owner/operator can live in a studio apartment with a roommate in a run-down area, but he must pay his fixed cost, that is, charge fully for it.

As an aside, yes, "payback period," is a rule-of-thumb, but it is the least-best of established valuation methods, especially in a business like equipment rental or the owner side of an owner/operator business where inventory (for rental) is basically the business as a percentage of assets. It ignores the very significant opportunity costs.  

 

 

Large rental houses that buy 30 x fx9,s ,for example, and will get a big discount ,and can charge less .. an owner operator will have paid the full price .. and pay for maintenance at a much higher rate .. this is a problem in the UK for owner operators , production wants to employ them because they are like their work.. but do not want to rent their gear .. rental houses are virtually giving it away because they are renting out a large amount of gear each day so anything is income .. this is why I will only work with my own gear .. if they want me its with my gear only .. this is the only way to have a decent life style as a freelancer in doc/ corp world these days .. no one is "over charging " its called keeping the rates at the  established levels .. without being undercut by very ow rental rates.. BTW it used to be the other way round .. rental fees were high and the owner /op could actually provide cheaper rates as an all in deal .. but now with way cheaper cameras thats been turned on its head ..  you should probably go into dentistry .. much better prospects ..:) 

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On 12/12/2020 at 6:39 PM, charles pappas said:

 If a rental house consistently charges less than marginal costs to producers, it will go broke.

The problem, to at least an extent, is that this is what's happened to all the small ones, which has left the big ones free to do exactly as they damned well please, which is not a good thing.

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I’ve owned my camera rental company for 31 years. My payoff model is for large ticket items, I want the piece of gear paid off within 2.5 jobs. These purchases are mostly $100,000 or more so the return takes a little longer. For smaller rentals, you can get a payoff in much less time. 
 

I would say that before you buy anything, make sure you have a market to employ the gear FIRST! You need to know that you can indeed rent the gear immediately after the purchase otherwise your investment will simply sit in the box earning nothing. I would also insure any costly items for your protection. 
 

G

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Gregory Irwin:   I’ve owned my camera rental company for 31 years. My payoff model is for large ticket items, I want the piece of gear paid off within 2.5 jobs. These purchases are mostly $100,000 or more so the return takes a little longer. For smaller rentals, you can get a payoff in much less time. 

Mr. Irwin, would you not agree that the only viable business/payoff model for an equipment rental firm or rental/owner side of an owner/operator is in renting big-ticket items? I think this would true in any business-to-business rental model. Guesstimating for the film rental business, I'd bet between $25,000 and $50,000 per camera or grip/lighting package, and $100,000 per lens set. Renting lower cost items, I would think, is in the long run, not a viable business-to-business model in any industry (whether renting to a  film operator or producer, AC technician or commercial roofer).

Not to say that in the beginning stages of a technology shift in any industry some money can't be made renting the new equipment as contractors first learn about it and it is just starting to work its way into their workflow. I know little about the digital imaging workflow but I think truly professional digital cameras costing under $25,000 (and also substantially under that) are a relatively new thing, so there was that. But now those cameras have now been around long enough that I don't think there should be any market at all to rent those lower-priced but professional cameras (except to keep some around for renters whose own equipment is broke, or need multi-camera for a while). 

Not to denigrate the cameras, or any other lower-price equipment for that matter. I know that all sorts of contractors, including camera operators, just have $25k (to pick a number) worth of their own equipment but make fortunes per year. I just don't think there is or should be, a rental market for that equipment. 

This is not to say that the camera owner/operator should internally charge off his lower-priced equipment for any more or any less than the rental house charges or would charge if they rented that equipment. To put it another way,  the only reason an owner/operator would own his lower-priced equipment instead of renting it would be "convenience," i.e. the costs associated with renting it (like time and travel) and the costs of "convenience," would also be the reason the equipment renter or owner/operator renter would not rent out lower-priced equipment.

The fact that it has been said here there is a somewhat viable, worthwhile business model in renting lower-cost professional film-making equipment to professionals I can only attribute to a great turn-over of raw beginning professional operators, and perhaps a tiny bit to the tradition of rentals in the film industry (going back to when DP's only owned a light meter). 

 

 

 

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On 12/14/2020 at 4:02 PM, charles pappas said:

Gregory Irwin:   I’ve owned my camera rental company for 31 years. My payoff model is for large ticket items, I want the piece of gear paid off within 2.5 jobs. These purchases are mostly $100,000 or more so the return takes a little longer. For smaller rentals, you can get a payoff in much less time. 

Mr. Irwin, would you not agree that the only viable business/payoff model for an equipment rental firm or rental/owner side of an owner/operator is in renting big-ticket items? I think this would true in any business-to-business rental model. Guesstimating for the film rental business, I'd bet between $25,000 and $50,000 per camera or grip/lighting package, and $100,000 per lens set. Renting lower cost items, I would think, is in the long run, not a viable business-to-business model in any industry (whether renting to a  film operator or producer, AC technician or commercial roofer).

Not to say that in the beginning stages of a technology shift in any industry some money can't be made renting the new equipment as contractors first learn about it and it is just starting to work its way into their workflow. I know little about the digital imaging workflow but I think truly professional digital cameras costing under $25,000 (and also substantially under that) are a relatively new thing, so there was that. But now those cameras have now been around long enough that I don't think there should be any market at all to rent those lower-priced but professional cameras (except to keep some around for renters whose own equipment is broke, or need multi-camera for a while). 

Not to denigrate the cameras, or any other lower-price equipment for that matter. I know that all sorts of contractors, including camera operators, just have $25k (to pick a number) worth of their own equipment but make fortunes per year. I just don't think there is or should be, a rental market for that equipment. 

This is not to say that the camera owner/operator should internally charge off his lower-priced equipment for any more or any less than the rental house charges or would charge if they rented that equipment. To put it another way,  the only reason an owner/operator would own his lower-priced equipment instead of renting it would be "convenience," i.e. the costs associated with renting it (like time and travel) and the costs of "convenience," would also be the reason the equipment renter or owner/operator renter would not rent out lower-priced equipment.

The fact that it has been said here there is a somewhat viable, worthwhile business model in renting lower-cost professional film-making equipment to professionals I can only attribute to a great turn-over of raw beginning professional operators, and perhaps a tiny bit to the tradition of rentals in the film industry (going back to when DP's only owned a light meter). 

 

 

 

I disagree.  All equipment has a market value whether or not it's rental house gear or owner/operator gear.  The main difference between the two is who is responsible if the gear fails and costs the production unexpected costs?  Smaller ticket items have a market as well.  In fact, they are much easier to turn around to a profit.  For example, a Small HD 1303 monitor sells around $3,500.  In the film world, that is considered a small ticket item.  These monitors rent between $600-900 per week (list rental price based on a 3 day week).  As you can see, the math is very simple.  A 4x5 filter may cost anywhere between $150 - 450.  It rents for around $36 per week.  The daily rental price would be the weekly divided by 3.  Of course, there may be a discount applied and that will lower the list price but you get the idea.

The small amount of gear that I reserve for myself on my productions, mostly small ticket items since I don't want the liability of larger ticket items failing when I'm involved with the movie, can add up to a significant annual income.  Two studio, big budget feature films per year can easily account for well over $200,000 of annual rental income that is separate from my salary and from my outside rental business income. The initial investment can be tough but the return can make it worth the risk IF you have the avenues to keep the gear employed no matter how big or small.

G

Edited by Gregory Irwin
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On 12/14/2020 at 12:15 AM, David Peterson said:

 For instance, consider a person who upgraded from a C300mk1 to a Sony FS7, and in their first year did 33 days of work (@ 3%) with the FS7, does that mean they've "paid off" the FS7 in just one year? No, not at all, not if 30 of those 33 jobs could have still been done with their C300mk1!

I disagree with this analysis - you pay off individual pieces of equipment based on their rental day rate. Assuming that you've factored that cost into your total day rate as an owner operator, the FS7 was paid off in the 33 days worked.

The question is, what did you do with the C300? Assuming that it has long been paid off already, there are a few options:

1. Sold it after acquiring the Fs7 - all profit.

2. Continued to rent it out on the side after acquiring the FS7 - all profit.

3. Kept it and didn't use it - not a loss since it's been paid off, though you could argue it is a lost opportunity cost to sell or rent it out.

Either way, the new camera has been paid off though.

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51 minutes ago, Gregory Irwin said:

I disagree.  All equipment has a market value whether or not it's rental house gear or owner/operator gear.  The main difference between the two is who is responsible if the gear fails and costs the production unexpected costs?  Smaller ticket items have a market as well.  In fact, they are much easier to turn around to a profit.  For example, a Small HD 1303 monitor sells around $3,500.  In the film world, that is considered a small ticket item.  These monitors rent between $600-900 per week (list rental price based on a 3 day week).  As you can see, the math is very simple.  A 4x5 filter may cost anywhere between $150 - 450.  It rents for around $36 per week.  The daily rental price would be the weekly divided by 3.  Of course, there may be a discount applied and that will lower the list price but you get the idea.

The small amount of gear that I reserve for myself on my productions, mostly small ticket items since I don't want the liability of larger ticket items failing when I'm involved with the movie, can add up to a significant annual income.  Two studio, big budget feature films per year can easily account for well over $200,000 of annual rental income that is separate from my salary and from my outside rental business income. The initial investment can be tough but the return can make it worth the risk IF you have the avenues to keep the gear employed no matter how big or small.

G

Sir, I could not possibly agree with you more in that everything has a market value (and I'm no free-enterprise parrot) - I think that has been the thrust of my two posts above, noting an exception for, as Mr. Calderon said, purchases that have a component of "learning a bit more, just playing and having fun, etc.," in which case I posted that the purchaser should just go ahead and buy if his personal finances allow it.

Subsequent posters seemed to say there was a difference in the valuation of equipment, or in the business-models, between a rental house and an owner-operator and I attempted to say I didn't think there should be.   

I also digressed a bit and say that I didn't think there should not be a viable business-to-business-rental model in the film business for items costing less than (and I guessed an somewhat arbitrary number) at least $25,000, and that if a somewhat viable, worthwhile business model exists in renting lower-cost professional film-making equipment to professionals, I could only attribute that to a great turn-over of raw beginning professional operators. (I also said there would a minor market in renting to pros whose equipment was broke, or lost, or were doing multi-camera set-ups.) 

You said that you make a great deal of money renting small-ticket items for big studio high budget films you are working on, which would contradict what I think, that there should not be such a market. But are you really renting the producers a $360 4x5 filter for 36 dollars a week, or are you renting them a box of 30 4 x 5 filters worth $10,000, for 1,000 dollars a week? Are the producers renting the $3,500 monitors, only, from you for $600 a week, or are those monitors attached to a $50,000 camera the producers rent from someone else? 

Regarding my digression I acknowledge in advance I'm wrong if you say so. Thanks for your reply. Also, I found it very interesting that you prefer not to rent large-ticket to productions you are involved in, but after reflection it makes perfect sense. 

 

 

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One final observation regarding this, as you get an inventory of equipment working for you, the gear that is already paid for and generating a profit will ultimately put new gear into profit faster. The money that is received for overall inventory will accelerate the profit potential of individual pieces of gear. As the old adage goes, it takes money to make money. Happy Holidays to you!

G

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Well, it turns out that this thread got more replies than I expected!

Thanks everybody for the answers. Very glad to see an interesting discussion on business models and how to evaluate revenue from investments. As I assumed, it seems it wouldn't be a bad idea to put a fixed value "per day" for every piece of gear, that way I can see how much I've really invested in every project. It's also a good way to realize how much I should really be charging! It seems there were a couple of jobs where, actually, I didn't really make any money (considering the gear I brought)...

Yes, a lot of this may have to do with the fact that I have not treated my video purchases as business-minded purchases. As many other young artists, I've financed my gear through other means. But let's face it, since I want this to be a viable profession, then it would be wise to be more business oriented.

Happy holidays everybody!

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I think there are a few ways to approach this.

The sort of work I do (or at least used to do) rarely had budget for proper equipment, and the only choice really was to simply own it, supply it, and treat it as a loss leader. I have never owned equipment I expected to pay for itself directly. There is a part of the market in which equipment buys work. This invariably means you aren't buying and owning the very best gear, just whatever it takes to get the job done.

The only alternative was to use very poor gear which led to poor results and a miserable working experience.

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On 12/17/2020 at 8:39 AM, Satsuki Murashige said:

I disagree with this analysis - you pay off individual pieces of equipment based on their rental day rate. Assuming that you've factored that cost into your total day rate as an owner operator, the FS7 was paid off in the 33 days worked.

If only a small percentage of the jobs needed the FS7, the you could have avoided buying it, and made pure profit on the rental of your paid off C300mk1, and only spent the money on renting the FS7 for those three days which you needed it. (which is a far lower cost/risk than buying outright an entire FS7)

If you disagree with this assessment, what if it had been only one day out of the 33 that the an FS7 was needed? Or even zero days?

There is a tipping point somewhere along there, which will vary from person to person and from one piece of equipment to another, and will depend on when in the life cycle you're buying in, and will depend on a dozen other factors too.

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13 hours ago, David Peterson said:

If only a small percentage of the jobs needed the FS7, the you could have avoided buying it, and made pure profit on the rental of your paid off C300mk1, and only spent the money on renting the FS7 for those three days which you needed it. (which is a far lower cost/risk than buying outright an entire FS7)

If you disagree with this assessment, what if it had been only one day out of the 33 that the an FS7 was needed? Or even zero days?

There is a tipping point somewhere along there, which will vary from person to person and from one piece of equipment to another, and will depend on when in the life cycle you're buying in, and will depend on a dozen other factors too.


It seems to me that you’re talking about lost opportunity costs - whether you could have made more net income by not buying gear that you didn’t use? I think that’s more of a business strategy discussion, rather than a simple accounting discussion. 

I’m just saying that from the accounting perspective of an owner-op or rental house, each line item in the inventory is supposed to generate its own return. If you own a C300Mk1, you should be charging a fair rental rate for it in addition to your labor rate (whether you wrap that up into a single rate for your client or not). If the camera has worked enough days to make its cost back, then it has paid for itself. You’re in the black with that particular line item from that point on. 

If you then buy an FS7, that’s new inventory. It should pay for itself in the same way, by being rented out when requested. The C300 hasn’t gone anywhere, it can continue to generate income as: 

1. 2nd camera body on your job alongside the FS7. Pure profit, assuming you are charging for the 2nd camera (which you should always do). 

2. Separate camera pkg rented to other productions. If you are also shooting another job with the FS7 on the same day, the C300 rental is passive income. Pure profit.

3. Sold. Pure profit.

4. Donated to a non-profit org. Tax write-off.

Now, if you choose to do none of those things, ignore the financial numbers, or are unable to make your inventory work for you, then yes it’s probably a bad business move to buy the FS7. That doesn’t change how the accounting is supposed to work though.

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There are a couple ways to look at this:

Pure return in rentals vs. marketing value.

I’ve made some purchases such as my Steadicam and Arri BL camera that paid for themselves many times over.

I also invested in an early digital cinema camera system that was quite expensive and only returned about 25% in rentals. But owning the equipment taught me much about digital acquisition and helped me make a couple key relationships which enabled me to transition from operator to DP.

And one relationship was built on donating the camera package for free on a short film. I’ve only worked for that producer one day since... but she introduced my daughter to what had become a career as a writer / producer at a major network.  So, in the end, it paid off very well. More than what I spent on her university education!

lesson: don’t over look the marketing potential of a purchase and.... happy holidays!!!

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3 hours ago, Bruce Greene said:

There are a couple ways to look at this:

Pure return in rentals vs. marketing value.

I’ve made some purchases such as my Steadicam and Arri BL camera that paid for themselves many times over.

I also invested in an early digital cinema camera system that was quite expensive and only returned about 25% in rentals. But owning the equipment taught me much about digital acquisition and helped me make a couple key relationships which enabled me to transition from operator to DP.

And one relationship was built on donating the camera package for free on a short film. I’ve only worked for that producer one day since... but she introduced my daughter to what had become a career as a writer / producer at a major network.  So, in the end, it paid off very well. More than what I spent on her university education!

lesson: don’t over look the marketing potential of a purchase and.... happy holidays!!!

Yeah thats a good point , Ive always bought my own cameras , number 7 to date , and you do learn them inside out .. nothing will ever catch you out ..  and you are learning generally about sensors , gamma curves , menus, etc..  Im no camera tech but on more than few multi camera shoots ,same camera as mine ,Ive been able to sort of some problems / settings the camera ops who were renting couldn't solve .. or questions the director / producers had .. it gets remembered .. you were the guy who knew the gear the other folks didn't .. 

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5 hours ago, Satsuki Murashige said:

It seems to me that you’re talking about lost opportunity costs - whether you could have made more net income by not buying gear that you didn’t use? I think that’s more of a business strategy discussion, rather than a simple accounting discussion. 

Yup, always considering the opportunity cost. I think it is a basic economics concept everyone should be aware of! (or maybe I'm just an economics nerd)
Not just financial opportunity costs, such as the cost of buying a cup of coffee vs buying a newspaper, but also the opportunity costs of time: the opportunity cost of going to the beach vs going to the gym. (or the opportunity costs of posting to a forum vs writing up a year end newsletter... oops!)

Which is why you need to always not just look at the costs/benefits of a purchase, but also the costs/benefits of not doing it. 

 

4 hours ago, Bruce Greene said:

I also invested in an early digital cinema camera system that was quite expensive and only returned about 25% in rentals. But owning the equipment taught me much about digital acquisition and helped me make a couple key relationships which enabled me to transition from operator to DP.

Yes, that is what makes it so tricky to do the economic calculations for your next gear purchase!
As sometimes you need to calculate the second or third order benefits of ownership. (first order benefits being the direct rentals you get from owning it)

For instance I own far more sound gear than I "should" for my current stage I'm at, doesn't make "logical" sense (I'm a tech nerd so I'm definitely a sucker for buying more than I need). But on the flip side, it's opened doors to do for instance a tv series that I'd never have had the chance to otherwise because I was literally the production's only option! Was an opportunity for me to leap frog my career ahead by a few years, and gain a massive learning experience.  

But then again, if I wasn't someone who lived extremely frugally , operating off the smell of an oily rag when it comes to my own personal expenses, then someone else in my shoes should never ever have invested this much into gear! As they'd be too heavily in debt to service those debt levels. (I'm almost debt free, aside from mostly some interest free student loans)

Plus I am an extreme bargain hunter, thus if my sound gear takes five or even seven years plus to "pay itself off" then that is ok. I've got them at such fantastic prices secondhand, I'm not going to be losing heaps of value in just the next couple of years from depreciation that has to be recouped. Unlike if someone was say making a brand new Sony FX9 / RED Gemini / ARRI Mini LF / etc purchase, which depreciate in value very very fast. 

 

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