The Ad Agency Market Shift Part III:
A poor representative for Commercial Film Production
Primary Audience: Production
Secondary Audience: Agency, Brand,
Site Tags: Advertising, Creative Market Shift
Overview
This is Part III of a 3 part piece exploring the creative advertising market shift.
Part I: debunks the myth that the creative slowdown is caused by the economy.
Part II: explores the structural incentive issues of the agency holding company model.
Part III: explores the limited leverage production has in the pipeline, and what the industry should push for.
Sections Below
A. The Conditions of the current economy
B. The Schematics of how the business works at a basic level, and where the mishaps happen.
C. 3 Systemic Fixes that will improve the conditions of film production.
To the detriment of those who work in commercial film production, a couple of three things are happening in increasing amounts.
Commercial film work is going nearshores, and over-shores.
Commercial film work is going in-house at agencies.
Existing "budgets are often.. shrinking"
The Conditions
Anyone who works in film knows the industry is undergoing a major contraction. While government job reporting does not accurately capture the freelance economy, informal polling has placed unemployment between 50% to 75%.
Currently more than 75% of our members are unemployed and many have not been working for 18 months or more. (Art Directors Guild, May 9 2024)
Prod. Pro cites a ~50% decrease in Production Volume over the last 12 months. 'History offers no point of comparison' FilmLA President Paul Audley states, when speaking on the subject of today's job market.
Elsewhere service companies in Mexico, Romania, Slovenia, Croatia, Bulgaria, Poland, are pushing a quality for less-cost bargain- to increasing effect. Mexico City service company The Lift touts claims of upskilling their workforce, to make themselves competitive with US crews. Spanish publication El Pais cites a 2023 spend of $5.3 billion from foreign investment, compared to 23 million in 2020.
When I reached out to AICP President Matt Miller to get the AICP's position on AICP Production Companies increasingly shooting offshore + nearshore for US media, this was his response.
AICP has the mission to give our members the best information and representation to more effectively and efficiently run their businesses. We don’t run their businesses for them. Companies using foreign locales is nothing now, although we have certainly seen a real spike in people taking advantage of the economics of shooting abroad in certain circumstances. Increased labor costs in the US (which AICP tries to keep in check with organized labor) is certainly a component as well as current global exchange rates. As an American Trade Association, we spend an inordinate amount of resources to lobby for many tax incentives and work with US States and Cites governments to try to keep work in the US, as I am sure you know. However, we do not have a position nor are we empowered (legally or otherwise) to impose limitations on free commerce.
Elsewhere Miller has moreover expressed concern for the "arms race" Holding Companies are having with one another, in terms of beefing up, consolidating, and integrating their own (in-house) production houses.
It has gotten to the point where, "the agency in-house production unit - once a proud innovation - is increasingly an expected part of the agency offer."
The Schematics
For commercial production the order of events is typically as follows:
The Brand Client hires -> The Creative Ad Agency hires -> the Film Production Company
The Agency solicits Production Companies, which in turn bid against one another. The Brand Client is largely left out of the procedure of this, readied only for the final presentation.
It is in this modicum of interaction, in which the Brand Client and Production Company are both entirely dependent on the intermediary agency for communication of the other. When presentation is made, the production vendor is reliant on The Agency to act as its own representative.
Sometimes this works out well. There are agency producers and EPs, who expend particular effort to be transparent stewards & honest facilitators of their client's business. However this is not always the case.
This use of an intermediary like so is inherently opaque in design, providing no checks to bad behavior, and even a haven to bad actors.
It removes the film vendor's ability to a) bargain directly with Brands who are in-effect the true client here and b) creates an outsized dependency on the dealmaking discretion of intermediary individuals.
Examples of intermediaries engaging in bad-faith behavior might consist of
check-bids or straw-bids (prohibited by the DOJ)
triple-bidding projects that ought be bid-exception single bids
quadruple⁺ bidding
requesting bid on projects that haven't been sold through to client yet
not disclosing peer-bidders, or at least peer-bidder types
undisclosed agency conflict-of-interest (such as in-house facilities)
Not announcing award to parties that lost the bid
Bid rigging, such as complimentary bidding schemes,
Bid manipulation, such as not presenting bids or treatments to Brand Clients, or actively misrepresenting them
3 Things that can be done
Broadly I think there are three changes that need to happen on an organizational scale to improve the tenor of the film production industry. Be it by regulation, organization, or normalization is beyond me, but these are my thoughts.
1. A Mechanism to Prevent Offshoring
Generally speaking there is little federal regulation or limitation when it comes to outsourcing domestic labor. This is unlike importing commerce from abroad, which is subject to tariff & regulatory scrutiny intended to protect domestic industry.
What the ethics here are – is for the industry to decide. But I am of the opinion a conversation should be had. And if elected, a standard should be set.
Given that this issue effects crew members more than Production Company Owners, Agencies, or Brands, this is not an issue that will be moved by trade groups. It will need to be implemented either on a regulatory front or a union front.
2. Unionize Creatives
It's long overdue. Art Directors, Creative Directors, and Copywriters are in need of change. There are growing accounts of low quality of work-life balance for agency creatives, and a growing want (1, 2, 3, 4, 5, 6, 7) for unionization.
The lack of procedural know-how is likely a major impediment for those interested in organizing. The complexity of the advertising economy is particularly apparent when comparing to simpler movements of unionization, (such as that of a Staten Island warehouse.)
The big six is likely the best place to start, especially given it anecdotally ranks the lowest on the work-life-balance measuring stick.
Increase the quality of life of the core constituents of the creative economy, and quality of practice will increase across the board.
3. Push for Greater Bid Transparency
Greater bid transparency brought on by using centralized bidding platforms.
History
In 2016, the DOJ made headlines by investigating a number of top Holding Companies, for alleged bid-rigging. In 2017 the AICP released updated guidelines on best practices as a response. And in 2018 the holding companies declared themselves cleared. Earlier that same month the AICP expressed the concern for transparency was ongoing.
In 2020, with justice department review and approval, the AICP released the bidding platform ABID.
At the Cannes Global Summit 2023, production leaders expressed concern regarding the bidding process stating
Transparency with bidding is [still] an issue in many companies such as the US, where sometimes it’s five or six production companies bidding, but this information is often obscured. A company recently spent $40,000 on a treatment, one summit member claimed.
Platforms like ABID are intended to increase the transparency on all sides. To the best of my knowledge it's only been used in a limited capacity.
Bid Platform = Bid Transparency
ABID is a platform that centralizes the advertiser, the agency, and the bid into one place. Presenting creative the way it was meant to be presented, but also protecting it.
Use of centralized platforms like ABID do the following
All parties, productions, agencies, clients are provided with shared bid access
It ensures all bidders receive the same materials, - RFP, Creative Brief, Etc,
It makes cross comparison much easier for the brand, and less dependent on intermediary presentation
Guarantees various standards and norms are enforced
To be clear, i'm not advocating for ABID in particular, rather it or any platform like-it that centralizes the bid process in a transparent way.
Using like-platforms, removes faulty communication interdependencies, and it insures the money Production Companies spend treating a prospective job, are rightfully presented to their true client.
Without wading into the various operational aspects of it, such as firewalling productions from accessing one another's proprietary information, or ensuring bids are kept bids to a triple— the main thing is the byproduct of transparency is more transparency. This in turn encourages the enforcement of soft norms such as prod. co. feedback, or refraining from requesting bids for creative work or budgets that haven't been sold through to client.
Greater Implications
Use of such platforms becoming widespread could have net positive effects across the industry, not just those that relate to bidding. Increased transparency is better for the marketplace as a whole. Transparency ensures fair competition, which in turn promotes a higher quality and more diverse range of work. It is in this kind of landscape in-house competitors stands to become differentiated as second rate, bad actors become easier to identify, and offshoring becomes easier to discuss.