Tuesday, April 5, 2011

The Controversial Topic of Disc Jockey Pricing

What is an appropriate rate for professional DJ services?  Using weddings as an example, rates can range from several hundred dollars to $10,000.

I've always been fascinated by this topic at multiple levels:  as a holder of a degree in finance, as a fan of economics, and as a working mobile disc jockey.  On disc jockey chat boards, pricing is typically a controversial topic with full-time professional DJs branding part-time, lower-priced DJs as "bottom feeders."

The market for disc jockey services is a dynamic, competitive market, just like any other!  Pricing is determined by supply and demand factors.

At the most fundamental level, pricing should be related to the cost of providing the service.  Owners are not in business to lose money, so at a minimum they must charge enough to recover their costs.  Expenses for a typical mobile disc jockey include equipment, music, labor, transportation, insurance, advertising and taxes.  Full-time professional companies may also need to pay office rent, fund health insurance premiums and allocate funds for retirement.

Barriers to entry for the industry are low.  No license is required to to call oneself a professional DJ.  Gear - whether laptop computers, external hard drives, LED lighting or audio components is inexpensive and widely available.  In fact, major retailers such as Best Buy now offer DJ sections, with affordably priced gear to allow just about anybody to become a "DJ."  Back in the 1980s, DJs were relatively rare, and it was not an inexpensive endeavor in the pre-internet and pre-MP3 era to build a sizable vinyl music collection.

Regarding music, while professional mobile DJs purchase their music legally, many unscrupulous DJs opt to use filesharing sites or copy entire hard drives, thereby foregoing the tens of thousands of dollars to collect a well-diversified and updated music library.  These providers' music cost is effectively zero, giving them an unfair competitive advantage and the ability to discount prices.  For example, assume that DJ A spent $4,000 a year on music, while DJ B spent nothing.  If each DJ performed 100 parties, then DJ B would be able to charge $40 less per party and still earn the same profit.

I estimate that it would take about $1,500 for an individual to enter the mobile DJ industry, utilizing a set of cheaper powered speakers, a basic laptop computer, controller, cheap wireless mic, one LED light and a free music library (obtained by filesharing).  Clearly, this DJs' breakeven point is low.  For those DJs who hold a job during the week (and health benefits), income from this primary job can be used to subsidize pricing in his or her weekend DJ operation.  These low barriers to entry are helping to spawn a new wave of competitors in our home state of New Jersey where the supply of disc jockeys seems  virtually unlimited.

Within the private party market, there are various segments running the gamut from basic private parties to elaborate weddings or corporate events.  The meat-and-potatoes private parties are generally treated as commodities.  Clients booking these events are seeking a "professional" DJ who can get the job done.   After meeting this criterion, bookings are determined primarily by the lowest price.  One of my industry colleagues describes this phenomena as the "race to the bottom."

For formal, once-in-a-lifetime events (e.g., weddings), differentiation becomes important.  Clients are willing to spend more for the perceived benefits of their unique mobile DJ entertainer.   These unique benefits may include experience, personality, talent, skill and equipment.  Yet, similar to the world of fine wines, prices for these differentiated DJ services are scattered across a very wide range.  Prospective clients are often baffled by the large gaps in price quotes received for a wedding, for comparable packages.  These differentials can span thousands of dollars.  Back to the analogy of wines, prices for the finest vintages can range from $100 a bottle to $10,000 a bottle; surely both vintages taste really good, but the price gap is extreme.  Some consumers will opt for the best wine (DJ service) regardless of price, while others will select the best wine (DJ service) that they can afford.

Using our company Ambient DJ as an example, we have won bookings where clients simply couldn't afford another company that they liked.  Recently, we won a wedding booking where our quote was more than $1,000 lower than a competitor company's for an identical package.  However, we have also lost jobs in the past to more expensive competitors who were able justify their level of differentiation.  And of course, we've lost jobs to a family friend who offers to perform the job for a nominal fee.

As a Disc Jockey, what should you charge?

* For beginning DJs, we recommend that you research local market rates and price your rates at a 10%-20% discount below the market average;

* For intermediate DJs, we recommend that you charge the market rate, and perform at as many parties as possible until demand for your services outstrips supply;

* For the most sought-after DJ entertainers, we recommend that you charge a premium, capping prices at a level where your quantity of bookings does not drop off dramatically;

* It's all about supply and demand!  If you feel that demand for your services is abundant, then raise prices and give yourself a raise.  However, if your calendar has more holes than Swiss Cheese, then you must step up your marketing efforts, reduce prices, or both!

* Educate prospective clients on DJ pricing.  Most have never shopped for a disc jockey and will appreciate the tutorial.   Gain their trust and you may book the party;

* Charge what you're worth.  There are many successful professionals in the mobile DJ industry who consistently earn top dollar for their services;

* For those who are not booking many parties due to higher pricing, ask yourself if it's better to book one party a weekend at $700, or two parties a weekend at $500 each?  Depending on personal circumstances, DJs will answer this question differently;

* Try to place yourself in the shoes of your prospective client.  How much money do they earn and what can they afford for DJ services?  If you were booking a DJ for a private party, how much would you be willing to spend? (some DJs live in a fantasy world where they believe that every family has thousands of dollars to drop on DJ entertainment).  

* Implement annual price increases to reflect the higher cost of living;

* Don't be ashamed to discount rates in off-peak periods if it helps you financially and serves your long-term interests;

* For bar/club engagements, your fee is ultimately determined by revenues at the venue.  Be flexible when business is soft, but be assertive in asking for more money when times are good!  Long-term bar/club engagements are possible only when all parties are happy (bar owner, DJ and patrons);

As a Client, what should you pay for DJ services?

* We recommend hiring the best DJ that you can afford.  Revisiting the wine analogy, there will be some great buys - excellent DJs at a very good price; there may also be some overpriced DJs who are not worth their hefty fees.  Focus on "value" - the benefits received against the price paid;

* If your prospective DJ is the low-rent variety with old equipment and an illegal music library, realize that this individual may be less professional than the more expensive alternatives;

* Do not automatically assume that a lower-priced DJ is a weekend hack, or that an expensive DJ is the best DJ.  Recall that rates are in part determined by the level of overheads being carried by a particular DJ.  Regarding part-time or weekend DJs, consider that there are many talented part-time DJs who have great gear and deliver a top notch party experience! 

* Realize that the majority of Disc Jockeys are dedicated professionals running legitimate businesses and supporting their families through their work.  Do not insult a professional mobile DJ by asking them to perform a party for free food or drinks!  

* Do not compute an hourly rate for your DJ and assume it to  be ludicrous.   "What, a DJ earning $200 an hour? " Keep in mind that this rate includes the myriad costs of running a business, as well as preparing for and getting to and from the party;

* Take joy in rewarding deserving artists such as Disc Jockeys who spread happiness to the world, making your guests dance and smile!

By, Gregg Hollmann, President, Ambient DJ Service (www.ambientdj.com)

2011, All Rights Reserved

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