Rather than rely on legislation to give them the upper hand over ad agencies, production companies should focus on the quality that differentiates them from in-house units in order to prevent being undercut, believes Derek Moore of independent VFX company Coffee and TV.
Last week production companies held a last-minute meeting to discuss the issue of agencies soliciting bids from in-house production, post and editing companies and competing for the work themselves.
Dividing the room was whether legislation preventing agencies from entering into same pitch as production companies is the answer to their woes, or if the companies should take responsibility for having old business models and adapt.
“The view is if it is legislated people will do whatever they want anyway,” said Derek Moore, managing director of Coffee and TV, an independent VFX company.
The issue of agencies intentionally rigging pitches for production work to favour their in-house divisions is “not a new phenomenon”, Moore admitted , but one that is getting more prevalent.
“For me it is not at a critical level yet but getting more obvious,” he continued.
Agencies do this by asking production companies to up their bid for a piece of work, to get to a point where they can go underneath that bid and compete for the same work using their in-house capabilities. Since it is impossible for a production company to know the budget a client has to spend on a piece of work, it doesn’t know if it is being asked to up its bid to add more value, or if it is a ploy from an agency to undercut its offer.
Such issues came to light in December following an investigation by the Department of Justice in the US into the behaviour of holding companies Publicis and Omnicom, which uncovered a more widespread issue that victimises production companies in the UK too.
However, it is not just advertising agencies that are guilty of competing with independent production companies. Moore said that the bigger production companies are competing with post-productions by swallowing up their skills, while direct relationships are becoming more common.
Speaking as one of the founders of a post-production company, Moore voiced concerns about specialist companies losing their ground as technological advances have made equipment more accessible.
“It used to be really expensive to have post-production equipment. It is no longer expensive, it can all be done in-house by production company or advertising agency.”
This has widened the playing field of what is possible, forcing specialist companies to replace those traditional revenues by focusing on quality, something that “isn't readily available” anywhere else.
“Generally if a client asks you to put your price up, they wont be able to do the same quality of job for the price you offer,” he said. “I don’t resent anyone doing that to us. It is a competitive world.”
But proposed legislation to improve transparency of the bid process is a “wishy washy” answer, opined Moore, and something that people “can always find ways around”.
Instead, he believes it is better to look at your own company and how you can improve: “There is a rebalancing where we are finding the old business models may not be fit for purpose, an opportunity for younger more agile companies to adapt to the market.”
“The cream will naturally rise to the top. If we can encourage people to produce better quality films that is good for the industry,” he added.
Earlier this month the IPA suggested that ad agencies and production companies could come to some form of mutual arrangement where an agency does not use any information disclosed to it by a production company to enhance its own bid. But a group of 15 production companies said this system is “impossible to achieve in practice” and “rigged against us”. The IPA denied any evidence of an unfair system.