At least five top advertisers have or are considering “decoupling” the selection of production and post-production companies from their creative agencies in order to create a roster of “preferred suppliers” they either deal with directly or through pitch and procurement firms like Trinity P3 and new British entrant, Murphy Cobb & Associates (MCA).
There has been decades of conjecture around the murky nature of dealings between production companies and creative agencies although contentious past practices are considered to have significantly dissipated and are probably non-existent for many players. But there is a renewed push to extract more cost and process efficiencies from the production sector, led primarily by corporate procurement departments.
MCA, for instance, is making a move on the Australian market after working with Woolworths last year in a major “downstream” production and digital asset management project. MCA is also understood to be involved with SABMiller – which bought Carlton & United Breweries in 2011 – as part of its strategy to leverage global relationships. Moreover, McDonalds, Suncorp and Parmalat have or are investigating their options and industry players say those projects are being run through TrinityP3.
Disruptors and disintermediaries
Some executives who have dealt with both groups say MCA is particularly aggressive. “They see themselves as industry disruptors and disintermediaries,” said one. “They’ve gone into the process with a very negative view of agencies. They’re quite successful in the UK. I think they’ve probably thought they can grab some market share from the established players like Trinity and Enth Degree.”
Last week AdNews published a story airing the concerns of the production and creative agency sectors over TrinityP3’s “preferred supplier” program - some called the move a “land grab” to wrestle control of downstream services in production and post production from creative agencies. Some argued there was unrealistic expectations of major cost savings and process efficiencies to be found and inferred there are plans for an industry wide preferred supplier program that would limit competition and the choices available to creatives for TV directors and post-production capabilities.
However, TrinityP3’s managing director, Darren Woolley, has responded to the initial story with disbelief. Woolley said TrinityP3 had offered the service for nearly a decade and projects for just two advertisers had been completed last year. He would not be drawn on the clients although industry sources said McDonald’s was one. DDB and Leo Burnett are McDonald’s creative agencies.
Woolley said the creative sector was rife with rumours and emotion and was too defensive about broader demands in business for transparency and governance.
Procurement will if marketers won’t
“Marketers are under pressure to get more bang for their buck and reduce costs,” Woolley said. “If marketers can’t do it procurement will.”
TrinityP3’s detractors also claimed that creative agencies, although unhappy with TrinityP3’s move, would not protest because they were fearful of reprisals from TrinityP3 in its other work as pitch consultants for blue chip advertisers.
“It’s highly emotive for some reason,” Woolley told AdNews. “There is nothing sinister about this. The only thing we can’t do is disclose who we are talking to but I would be committing commercial suicide to leave someone off a pitch list who should be there. I would be doing myself and clients a disservice. Anyone who feels that way must have something to hide or fear. This has been happening for 15 years, it’s not some hair-brained scheme we came up with. The UK did this in the mid-90s. We’ve learnt from their mistakes. This is not about lowest prices.”
Woolley said the focus on the production sector was about streamlining processes and also getting some cost efficiencies by delivering scale to preferred production partners for specific advertisers. There was frustration by some advertisers that production budgets were increasing while media costs were on the decline. There was also some concern that video content beyond TV commercials was not being managed “holistically” by creative agencies and creating more cost and duplication.
Media inflation has been all but contained since the GFC although it is unclear whether the additional human and technology investments needed to manage rapidly fragmenting communications and sales channels for marketers and the marketing services sector is fully understood and costed. The grand irony in many emerging digital channels is that they require far greater resource to execute and manage than traditional media.
Onerous financial disclosure
However, on the more narrow issue of production decoupling, many in the production sector, none of whom would talk publicly to AdNews, said there were onerous requirements in the preferred supplier program, including the demand by TrinityP3 to be across all correspondence between agencies, production companies and post-production houses. One said preferred suppliers also had to disclose their full financial accounts.
“A lot of people are furious about handing over their full company financials to TrinityP3,” said one production industry executive who said he was privy to the preferred supplier terms.
“It’s not just budgets on jobs. If you want to get on the preferred supplier list you have got to sign up for handing over your entire company financials and on top of that you have to sign up to an NDA promising not to discuss participating or details of the contract to any other production companies or agencies you are working with. There’s a whole lot of secrecy around it. It’s instilling fear in clients that their assets are not being properly protected, workflows are not handled correctly or they can get efficiency using three or four companies.”
Another production executive said: “Australian production is world standard. We are all working on an international playing field. We have to compete with other countries. We’ve got directors flying in from all over the place. Australia is a very, very competitive market. It’s true the production industry has been a bit silly in the sense we haven’t got around the table with clients because agencies are always in the middle. But agencies have been terrified talking to clients about this because Woolley controls the pitch list.”
They also asserted that in some cases, the agenda was being driven by corporate procurement and that marketing teams were frustrated with how the process was working.
European advertisers unhappy with “decoupling” trend
Another production exec refuted Woolley’s position about the success of production decoupling in Europe.
“Decoupling has been in Germany for the past 10 years and it has been the demise of the German creative industry,” he said. “They are trying to get back to an open supplier approach again. Clients as well. BMW and Mercedes-Benz want to go back to an open marketplace.”
One of the biggest concerns from those against preferred supplier programs is the limitations on using directors and post houses who are best suited to particular briefs. “If you are talking about widgets, I get it,” one said. “But as much as people hate the creative spiel, creative people tend to have particular capabilities in the creative industry.”
On the issue of demands for full company financials, Woolley said it was driven by corporate procurement departments, not TrinityP3.
“That’s not a standard from us,” he said. “That was dictated by a particular client’s procurement team. Many times in tenders, procurement will ask for the financials. I just turned down a tender from the Singapore Government because it wanted my company financials for the past three years. I refused to do it. If you have to turn down work because you don’t want to share that with someone else then that’s what you have to do. Our preferred recommendation is an auditors statement of financial viability. My point is if I’m a private company, the only people who know my particular financial details are the Tax Office and my accountant.”
Still, the Communications Council’s CEO Margaret Zabel is unconvinced about the current way decoupling is proceeding and wants more collaboration with advertisers and their advisors about how to make it work.
Threats to open market trade
“We have a genuine concern that the current roster system that is being advocated will not address the issues raised in practice,” she said. “In turn it can create process inefficiencies, compromise open market trade and disadvantage specialist companies.”
Ms Zabel said during her seven years in marketing at brewing group Lion, all production jobs were audited. “I never had anything unusual come up,” she said. “There was the odd little thing but there wasn’t anything that jumped out and we didn’t find any significant savings. A lot of the work and due diligence had already been done between the agencies, production companies and brand teams to look at and consider options.”
There does seem to be some argument, however, in what Woolley calls the “linear nature” of the agency process in creating TV ads without enough consideration for video for other channels and uses of content. “Digital agencies are more holistic,” he said. “Creative agencies are obsessed with the execution.”
More of that to come but here’s the full, unedited statements on the decoupling issue from The Communications Council, TrinityP3 and the AANA.
Darren Woolley, managing director, TrinityP3
"The requirement of production and post-production process has become increasingly complex for marketers. Technology and consumer demand means that television commercials and commercial production is no longer a linear process. Marketers are looking to adopt processes that maximise the value of their production investment through more efficient implementation, and to reduce waste without compromising quality. One approach pioneered in the UK and across Europe more than 15 years ago is the decoupling or unbundling of production and post-production commercial relationships. This is an approach well known to procurement professionals globally, where rather than having significant production suppliers as subcontractors, via the agency, the relationship is forged directly with the advertiser, fostering greater transparency and accountability.
"This approach has been implemented globally, across many other production categories, including print production and increasingly digital to great success.
"TrinityP3 has been working with our clients to explore and implement this approach in situations where the benefits delivered justify the process change. Key benefits for major advertisers include maximising the opportunities to reuse and repurpose existing assets, streamline production processes to minimise waste and reduce the risk of loss or damage to existing assets.
"The lessons from more than a decade of experience overseas means that the process is best undertaken with the collaborative input of all stakeholders to ensure the required outcomes are delivered. But it is also undertaken with a level of due diligence and corporate governance that has proven difficult to achieve with the current project base process.
"Ultimately the choice of structure for their production requirements sits with the buyer, who must determine what is the most beneficial arrangement for deliver their commercial needs."
Margaret Zabel, CEO, The Communications Council
"As The Communications Council, we advocate company compliance with trade practice and competition law and promote a fair and transparent process in an open market.
The current production and post-production landscape is highly competitive and offers clients a diverse choice of companies that can deliver a broad range of expertise and specialist services. Production in Australia is recognised as world class quality and cost effective relative to international markets.
Advertising clients have genuine and real issues that need to be addressed in a rapidly evolving communications landscape. There is greater complexity and cost pressure with a growth in content requirements and channels.
It is in the interests of the broader industry - advertisers, agencies and production and post production companies - that production in Australia continues to operate in an open and competitive market and has the opportunity to build specialist expertise to world class level.
We have a genuine concern that the current roster system that is being advocated will not address the issues raised in practice. In turn it can create process inefficiencies, compromise open market trade and disadvantage specialist companies.
The Communications Council has been consulting with advertisers to gather specific needs into the future, as well as, agencies and production companies so as to put together recommendations to assist decision-making. As there are a number of stakeholders to achieve the best business outcomes, it requires a collaborative and consultative process without bias or fear."
Sunita Gloster, CEO, Australian Association of National Advertisers
Each Advertiser's drivers for how they handle production and post-production are different. The desire among advertisers that produce a significant amount of content to want to manage where and how their IP and assets are archived/stored is not a difficult objective to understand.
The choice some larger advertisers are making to opt for a roster system I think reflects a desire to create deeper, consistent and continuous relationships with fewer partners. And that means fewer partners creating and managing content continuously. That trend isn't unique to the production industry it applies to many marketing relationships.
This is the second piece in a broader feature series AdNews is covering on the TrinityP3 initiative. Our aim is to facilitate a constructive, considered debate on the move and its implications. If you have a contribution, email AdNews editor-in-chief: firstname.lastname@example.org or use the comments section below.
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