Ad production costs: the new battleground?

By By Wenlei Ma | 5 June 2012
AANA chief executive, Scott McClellan.

The Australian Association of National Advertisers (AANA) has questioned the cost of advertising production in the midst of the debate around decreasing agency remuneration.

The AANA said it will lead an effort to control growing commercial production costs, in an era where emerging technologies and media are increasing in prominence.

The industry body will convene with advertisers in July to discuss the changes in the media landscape and what that means for ad budgets. Issues on the agenda include changes to the production process, talent costs in 'new media' platforms, adapting global creative, social media and digital, working with agencies and industry trends.

AANA chief executive Scott McClellan told AdNews: “In this environment, we need to look at how advertisements are being produced for multiple screens and where there are better opportunities to drive better value from that process.

“I don't see it as more for less and we're not saying the pie for production is getting smaller. It's not really about agency fees. It's to drive better value for an increasing number of productions across a number of screens. We don't have the answers but we're asking the questions.”

However, a debate has been brewing for some time about the future financial viability of agency relationships, with industry leaders including Robert Morgan arguing procurement departments are driving down fees.

Communications Council chief executive Margaret Zabel told AdNews: “Agencies and companies with expertise in production are at the forefront of the changing technological landscape. They are under increasing pressure from clients to deliver high quality content, especially for online, at short notice and at reduced costs and they are meeting that challenge.

“This initiative can appear as if clients are focusing on the costs of doing business versus the value created. It can't ignore the value or x-factor that is created by production companies in terms of creation of content that builds and sets brands apart and creates consumer engagement.

“In a context where agencies and production companies often bankroll productions, and where clients want content faster and cheaper, we have to be careful quality and creativity do not suffer.”

McClellan said in a statement: “The days of the million dollar production as the the accepted norm in our industry appear to be coming to an end. Advertisers are increasingly turning to innovative, lower cost production and distribution techniques to reach their target audience.

“As advertiser budgets come under renewed pressure in a tough trading environment, AANA members are saying it's time to take a critical look at the commercial production process, clarify cost structures and define the cost implications of new production technology.”

The Communications Council has recently created the Commercial Producers Council.

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