Agency bid-rigging scandal highlights the friction that exists between agencies and independent production companies

Agency bid-rigging has underlined the friction that exists in the agency and production landscape.

Alex Vero is co-founder of Movidiam.

It’s a story that first broke at the end of last year, and the bid-rigging production scandal, first exposed in the Wall Street Journal, keeps gathering pace. What started with an investigation by the US Department of Justice into agencies requesting that independent production companies inflate their prices to ensure their in-house team won the work, has resulted in leading independent production companies stating that they won’t pitch on work where the advertising agency is also competing against them.

Blink, Stink, RSA, Rattling Stick and Smuggler are amongst 84 independent production companies who have signed the hard-hitting, open letter by chief executive Steve Davies from the APA. In a response, Paul Bainsfair from the IPA said it was ‘unreasonable’ to suggest agencies should not pitch against production companies for the same work.

So where does this leave agencies and independent production companies, locked in this stalemate?

Over the last couple of years, both the agency and production industries have felt seismic changes and been forced to restructure their businesses. Budgets for TV commercials have been steadily declining, client expectations have increased, and more ‘content’ than ever is being created across multiple channels. Agencies bottom lines have been hit, and, as a result, there has been a knock-on effect for production companies; agencies have identified production as a way of increasing revenues and have subsequently set up their own in-house production units to capitalise on this.

Pitching has always been an expensive, time-consuming and unforgiving process, but it goes with the territory of being in the creative industry. In the past, I’ve personally experienced the frustration of losing pitches only to see our creative ideas and approaches being produced by other companies. It happens, but now independent production companies are essentially pitching to, and alongside, their competitor - the agency. The odds of winning are now unfairly stacked against from the start.

I’ve spoken to many production companies about their pitching experiences. In some cases, they later found out that they’ve been in pitching with up to 12 other companies as well as the in-house team.

Steve Davies from the APA calls for more transparency and stricter guidelines: "That doesn’t mean agencies can’t do the work, simply that they need to decide at the outset if they are doing the work or if they are having production companies treat and bid on it, not both."

While agencies have been moving into production, we’ve also seen an increasing trend from production companies combating this encroachment by going directly to clients and offering creative as well.

As the realignment of the industry continues and the lines blur between who is doing production, does this signal the end for production companies as we know them or will the current situation result in an uneasy truce?

As you might expect, at Movidiam, we feel the answer is somewhat nuanced, with bid-rigging representing the wider change in both the advertising and production industries. There are real and relevant parallels being drawn between our industry and others; look at how platforms like Uber or AirBnB are changing travel. The march of technology into areas of the economy and society is perhaps the elephant in the room. The points of difference we see today reflect the friction and blurring of the ‘way things have been done’.

The opportunity for every brand, agency and production company is to step back, to rethink and find ways to disrupt themselves. Technology alone is seldom the answer; it’s the creativity of agencies, combined with the resourcefulness and expertise of production companies that will remain. Technology is merely the enabler.

Alex Vero is co-founder of Movidiam.

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