When you don't have a Demo Reel that needs to be edited. When you have a short film that needs to be assembled that may go on your reel, or make up your entire reel, but in reality you are just too cheap to pay for what you really need.
-OR-
When you are in need of an EPK - Electronic Press Kit - which is a longer version of a Demo Reel mixed with "slice of life" and "pseudo-reality" elements to promote a cause/product/business. EPK's need more attention and work than a simple demo reel. They usually involve lots of graphic design elements and logo's, which, it is commonly believed, will make a mediocre product, TV show or service more appealing to the average dolt. An average demo reel runs about 3-4 minutes and has minimal graphic design elements - mostly your name, video clip titles, transitions and mild color correction. A great demo reel runs under 3 minutes and sells you in under 30 seconds based on your work on screen - not the fancy work of the editor or designer - whose best efforts should be to make your reel play seemlessy and feel fast. If it ends before they can pull it - you've got a good reel.
-OR-
When your source tapes are in an uncompressed broadcast format like HD, DIGIBETA or good ol' Beta SP. I keep my prices down since I do not own the $45,000 Digibeta deck needed to play such tapes. If your footage is on HD, digibeta, or even beta sp, chances are that you will have to pay someone for their time on those decks, upwards to $95/ hour or more. I use these decks when I edit for television, usually at an online editing suite geared to get TV shows ready for air.
-ALSO-
A short film is still a film and needs much more attention to detail, storytelling, and sound design than a demo reel. Pulling various shots from an unfinished short film to go on your reel and laying in music or covering up timecodes is all part of making a reel - assembly of an unfinished movie, however short, is another. I charge $65 an hour to edit anything other than a Demo Reel.

What about those hourly rate demo reel places?

Let me tell you a story. About a year ago I answered an ad a friend forwarded me off Craigslist for "freelance Film Editor with lots of experience doing reality docu-drama stuff". Well that's right up my alley, so I shoot over a quickie reel to this Production Company, basically a DVD filled with clips of Reality TV crap and some Promo stuff that I had recently finished editing. They call, like my stuff, want me to edit a feature HD film they just wrapped on at their editing suite and yada yada yada... Long story short, I get the job, go to their editing suite in South Bay, and today, it turns out, I'm not cutting their movie - I'm cutting a demo reel for a client of theirs that is in their movie - and I get to go through the raw footage and build him a reel based on that and some other thing he did ten years ago that he doesn't even look like any more. I'm a fair sport - and hey, I drove to the OC from Hollywood, they hired me as an editor, and we have a contract, so what do I care how they use me? I am making the same hourly rate whether I feed their fish or clean their windows. So I'm like, "well OK, sure I can cut a demo reel, haven't you seen my website? I mean it was on the resume and all that..." Immediately I am hushed and shuttled into a side room where I'm quietly informed that this client is a very wealthy guy who wants to be an actor. He's got lots of money from real estate investing and they are billing him $100/hr. for me to sit there and spend the day with him going over the two things he's been in. Now, I'm like, "Are you fucking kidding me? You want me to spend an entire day doing an actor's demo reel? I turn this shit out in two hours for fifty bucks - a hundred bucks with copies - and this guy is stupid enough to pay $100/ hr. for it!" And they said with a big grin: "How do you think we paid for our film? Just watch his footage, he likes to watch himself. Let him watch all his stuff over and over again." Right. So, I got to sit there with Joe "I Want To Be An Actor" Rich Real Estate Guy - who was actually a very nice, very smart person, who was being scammed by his supposed friends - and we had a great time as we went through his 2 films and drank latte's (which he paid for). But there was no way I was going to help these losers with their shitty "barely-straight-to-video-if-they-were-lucky-HD movie" rob this guy - not becasue I am some good Samaritan, but because I am an impatient person and I already knew that I was never working for these Shiesters again. It was all about beating the traffic on the 405 back to Hollywood. It was easy to pick Joe Actor's best takes as soon as I saw them because ahem... I DO THIS FOR A LIVING. The good takes snap, the bad ones lie there like a dead dog. So I spent 4 hours with him and most of it was chatting and picking fonts for his name (which, I must say, I was happy to know he paid $100 /hr for - because any time people are so vain about shit that DOESN'T MATTER - like the font for your name - I think they should pay through the nose for it). Needless to say, I collected my $200 check for the half day and walked out knowing that I don't have the balls to screw people over every day of my life in order to make money. Hey, the reality is that this guy paid for their film, and was happy to pay the $100/hr fee, so what do I know?

So - Why would you pay hourly for a demo reel? Surely not everyone charging hourly is an abusive scam artist like the above example - yet the method is exactly the same. Keep them there, keep them editing, prolong the project. Make every decision seem like it is life and death because that is how you get someone to sit there and ponder about shit for hours and hours so you can bill them for it at the end of the day. Demo reels take about an hour or so to make, I mean, it is your footage, so I hope that you know what your best stuff is coming in to the session. My job is to assess, organize and present you in the best possible way in under 3 minutes. My average is 2 hours per client - and that includes making all the DVD's. Most of the time you are walking out at the end of the session with all of your stuff. If you get 25 DVD copies, then of course, you might have to come back for them. I try to make it easy, keep it honest, and give people what they want. You should be happy with your reel when you leave and not feel totally broke. I'll even let you pick the font for your name, you vain bastard. If you want to read through the process of what it is like doing a demo reel with me - then click here. And just to let you know - not once in the history of demo reels has the font for your name made an actors reel better.

The Moral: hourly rates are a convention of jobs that are open ended. Meaning they could literally go on for several days or weeks, depending on the unforseen changes of the work at hand (promo work, sound design, Voice Over work, Color Correction, dialog editing, graphic design are all examples of things that should be billed as hourly). Demo reels do not fall into this category. They are finite, 3-5 minute movies that fit a specific format. You walk in the door with all your best footage already picked in your head and I organize it, clean it up, cut it to time, adjust the sound, color correct, add titles and maybe cut a montage if the footage merits it. Maybe add some music to unfinished scenes. It does not need to be billed hourly. You will not have a better reel if you pay more for it. Got it? Good.