The little guy is being screwed along every part of the ad production line
From clients to agencies to production companies; along every stage of the ad production process, someone is getting screwed. Here, Darren Woolley details the industry's worst offenders.
Last year the ANA responded to an investigation by the Department of Justice into agency production practice. The concern was that agencies, and especially the holding companies, were competitively tendering for advertiser commercial productions against the independent production companies in an unfair and biased manner.
Effectively it was claimed that the agencies were lining their own coffers by undercutting the independent production companies by having them tender and then providing competitive services at a lower price, effectively and unfairly squeezing them.
This lack of transparency exists at every level of the production process in some form. All parties, from the advertiser whales down to the smallest minnows, could be more transparent in the process.
The sad fact is that the people who ultimately end up suffering are the smallest – such as the crews that subcontract to the production companies.
Advertisers and their agencies
Let’s start at the beginning and follow the money trail. The whole process starts with an advertiser wanting to produce a television commercial (or these days some video or film content).
This starts with the brief and becomes the first point where lack of transparency impacts the process. Very few advertisers feel comfortable providing the agency or production company with a budget.
The perception is that if they provide a budget, the agency or production company will use the whole budget and then some. But here is the kicker for the lack of transparency: it can end up being incredibly inefficient and costing you a lot more by not providing it.
The budget should represent your level of investment or the value of the project.
Without a budget, the agency and production company have no idea how much they can spend. It is in their interest to make the creative idea as outstanding as possible (read: as expensive as possible) to build their reputations. So they come back with ideas and you fall in love with one of them only to find out it’s going to cost you ten times more than you had budgeted.
At this stage the client should drop the idea and get the agency to do the work again, this time with a budget in mind. But because the clock is often ticking and because the advertiser has fallen in love with a concept they cannot afford, the way forward is to try and get the concept delivered for a cost closer to the budget. If these cost reductions are substantial, it leads to corner cutting and compromises the production and quality of the final product.
In one case, the agency concept was found to cost more than $1.5m, when the advertiser’s actual budget was $300,000. The production cost was slashed though a series of decisions and significant pressure on the production company to just $650,000 (still a significant amount of money). But the resulting television commercial was never broadcast, because the quality reflected so badly on the brand and the company.
In another case, three days of unseasonal rain incurred weather days, which were not budgeted for. The additional cost was made up for by cutting the media budget, leaving media reach below optimal performance. While the advertiser got the concept they loved, it came at a significant cost that could be avoided if they were more transparent with the budget.
Agencies and the production companies
Agencies and their holding companies have for many years realised the benefits of providing production capabilities to their clients. By mounting the production within the agency, or creating a wholly-owned production company, they were able to capture more of the advertisers’ budget.
These agency-owned and run production companies are a legitimate alternative to the independent production companies in the market and can be ideal for particular clients and projects. The problem arises when the agency production company is not only completing with the independents, but is running the selection process as well.
Likewise, the independents have been complicit in this practice, providing to the agency production department what is known in the industry as “check quotes”. These are quotes provided to the agency to create the appearance of a competitive process, where the production company knows they will not win the tender, but are promised future work for compliance.
But even if the agency does not have their own production company, the lack of transparency in the agency production process can be seen in the way the agency presents the quotes to the client for approval. Typically, the agency will present a summary of the costs with around two thirds of the cost, in a line item called Production House or Film Company.
Behind this cost centre is often multiple pages of production company estimate details prepared by the production house in developing their cost proposal. But it can also hide agency fees, rebates and payment. In one case the agency had inflated the production company cost on their estimate to hide thousands of dollars of un-billable agency hours. It was only once the film company cost was requested that the discrepancy was discovered.
Production companies and the crews
It is not just the clients and the agencies that lack transparency in this process, the production and film companies are also guilty. A major issue is the standard production company contract.
It is usual that this is a fixed price estimate with no right to audit. But increasingly it contains the line: “We (the production company) reserve the right to negotiate all contracts upon award”. This means that the production company reserves the right to negotiate their supplier contracts after appointment.
It is apparent that the production company is happy to charge the client full price, then negotiate with the crew or suppliers and pocket the difference. What a surprise!
What is more distressing is the production houses say the desption is due to the “pressure to reduce costs” coming through the agency from clients.
In the end it is the smallest vendors in the supply chain who are paying the price for the behaviour of all those above them.
The little guy pays for the lack of transparency
The advertiser often lacks transparency in the budget they are willing to spend and what they expect for the cost.
Agencies often lack transparency in their effort to maximise their share of the client budget and recoup revenue they have lost in other areas of their remuneration.
Film and production companies lack transparency in the way they quote their services and the terms and conditions in their standard industry agreements that preclude the ability to audit.
But who misses out?
Certainly advertisers are not always getting value for their production budget, but it is the smaller vendors and suppliers to the production industry, mainly the crew, who are paying the price. Often overtime is negotiated out of their deals, while it is charged to the advertisers.
Or, they are asked to work three days for the price of two. These are often sole traders, partnerships and small companies who are the life-blood of the production industry. This is the talent that makes the film and television industry function and thrive.
They feel they are being screwed because of the advertisers’ stinginess. At the other end, the advertisers feel like they are being overcharged by their agencies. Perhaps the problem is that the agency is providing concept and ideas the advertiser cannot afford? Perhaps the advertiser is wasting the agency’s time playing guess my budget? Or perhaps the problem is that everyone is out for themselves?
But change is coming, and we are seeing an alternative to the current structure, where the advertiser is being put directly in contact with the large number of small and talented film and television production talents, effectively eliminating the intermediaries and providing access to a much broader talent and skill base than even the agencies can access.
Darren Woolley is the managing director of TrinityP3. The full version of this post first appeared on the TrinityP3 blog.
Totally agree that the ‘small fish’ are being abused along the process. Not to mention the delayed payment terms that can be crippling for the smaller fish too. The bigger businesses holding onto their cash until breaking point of the little guys.
I think we need new ways to manage the whole production pipeline. There is so much wastage throughout the process that is actually damaging agencies for the long term and then impacting all the suppliers in the chain down the line.
There are some crew that are being cheated of their fair working rights, but to be honest there are some expecting more than a fair deal too, with overtime on pretty big rates and expecting profit share as well. We need to get the balance back.
The industry award rates are actually far lower than some of the crew rates we see in advertising, even before overtime is added. Of course we need to pay good talent what they’re worth and rate cards don’t apply when there is value. We need to be sure there is value though, and the loudest voices complaining about a bum-deal are not always right.
I’m not 100% in agreement about the right to audit – I feel that this is the root of all evil in our industry and perpetuates a time sheet focused model, which in turn pushes out the best talent and inflates the bill to clients and demishes what is left for actual production. I think agencies and production companies should have the right to offer a fair price for fair deliverables and how they resource the job up to them (providing no excesses in the first place and no one is being exploited in the process). Fixed bidding will breed a culture of efficiencies, and follow the practices of Conscious Capitalism (my mantra) – we all should get fair pay for fair work.
The brands who expect ‘transparency’ by way of auditing post-campaign don’t expect to absorb cost overruns either, so it doesn’t go both ways. Let’s aim to buy fairly up front, with clear details on outcomes and let businesses be fairly remunerated for that in order to pay our teams fairly too.
The whole model needs a shift. I’m happy to be vocal on this topic as I feel we need to be protecting the creative talent on the floor and get the best people for the jobs and not just the cheapest rates with inflated time sheets to maximise revenue.
I respect @TrinityP3’s mission to protect brands from excesses and for talent to be respected. I’d like to think we’re on the same page there, but we can do things differently to achieve that outcome.
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Some of what he says is true, however he has an vested interest in perpetrating this story, he also appears to have a severe case of the Agency Hater virus, commonly known as “FringeitusAgencyInteruptus”.
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The agency principals and their indulged ECDs and others won’t agree to “working three days and being paid for two”, yet they’ll screw others into the ground for that. I’ve personally witnessed this too many times in agencies, where overpaid buffoons are grinding suppliers who actually have talent and experience, while complaining that they cost too much. Clients need to be told – with verifiable proof – what agency principals’ salary packages are, so clients have context in assessing budgets. That’s the kind of transparency that will change everything. Come on clients – demand to see the payroll of your agency and reveal how much the senior management are being paid – from your pockets!
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“We’ve got no budget for this job, but there’s loads of bigger projects coming up soon”
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I wonder how many of those working at various agencies recognize these familiar lines that “the little guy” receives on a daily basis …
“We’ve received a brief which we’re about to send you, we haven’t had a chance to look through it yet but we wanted to get you across it and get your creative thoughts on what we could do!”
“Thanks for those ideas the client loves the 3nd one, how much would that cost roughly?”
“Can you script it up, prepare a treatment and quote? No, we don’t know how much they want to spend, they haven’t indicated at all”
“We just spoke to the client unfortunately they don’t have anywhere near that amount but DEFINITELY want to do it, what can you do? We really want this to go ahead – is there any way we can squeeze this into this (1/4 of the actual quote) amount?”
“Sorry, I know its the 7th revision (because we lied and did 3 internal revisions before we even showed the client even though what you submitted was ready for client review) – and I know you asked for consolidated feedback from all stakeholders – and yes you’re right you only quoted for 2 revisions, but the account manager was on holidays and only just got back today (what are the chances) and wants these changes made. Yes, I know its back to what you had before. No, there’s no extra money unfortunately. But this HAS to be done, (insert name of account manager) insists. No, it goes live tomorrow and is part of a larger comms piece we’ve been working on, sorry but there is no way around this – we need it by 7am ready for the launch at the absolute latest if you can’t get it done by COB (yes I know its 4:23pm”
“Thanks so much for staying up all night – the client LOVES it! Please send in your invoice and we’ll try and it get it paid as quickly as possible”
“No, it didn’t go out on Friday in the end is why you can’t see it, its going out next week, there was a hold up on something else unrelated. Now just quickly, the CEO has seen it and LOVES it – but he was just wondering if we could change the title of the intro, and also we gave you the wrong logo – I’ve attached the correct one now. Sorry, I know, but its the CEO, so we don’t have a choice”
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