Ad industry's stance on actors blind to importance of talent

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At the heart of the Screen Actors Guild/American Federation of Television & Radio Artists strike against the advertising industry is the latter's misunderstanding of New Economy principles, an error so profound that it will doom marketers and their ad agencies to the irrelevance they so richly deserve.

Yes, only from those wonderful consumer-goods makers who gave you commoditized products and the agencies that supported their descent into indistinguishability could you get a strategy that calls for wounding the one thing capable of elevating their look-alike offerings: the talent.

You remember the talent, don't you? It's the object of the vaunted "war for talent" that all intelligent companies currently are fighting. The reason is apparently a little too straightforward for the ad industry's strike negotiators. As technology impels increasing commoditization of goods and services, driving prices lower and lower, companies have to be able to transform themselves, rapidly and continuously -- finding new businesses, inventing new business models, adding new forms of value to their offerings -- in order to attract and keep fickle customers facing a new world of choices. And who drives this kind of change for companies? The talent.

Ah, there's a difference between performing talent and business-development talent, you say. Of course there is. The latter create the products and services which, ideally, fill unmet customer needs. The former are the faces and voices that attract the public and, more than occasionally, close the sale. If it was so easy, Procter & Gamble's John Pepper would be doing both.

Moreover, in what some are dubbing the "entertainment economy," a firm's ability to infuse its wares with the esthetic allure that only creative talent can provide is becoming the most valuable source of sustainable differentiation.

That the ad industry doesn't get this goes way beyond cluelessness into the realm of self-abuse. I am a dues-paying member of AFTRA, but my argument here is not motivated by union solidarity or personal economics (I haven't earned a dime from this type of work in a decade). Instead, I'm driven by a compulsion to rid the world of boneheadedness, which is running rampant in the advertising-actor wars.

Hollywood studios pay upwards of $20 million a pop plus points to land the right stars for their films. These same studios are ratcheting up to similarly stratospheric levels the fees for directors, screenwriters and cinematographers. They know well that talent -- and only talent -- is the difference between profit and loss. Now consider that Madison Avenue (abetting its clients in places like Cincinnati, Minneapolis, Chicago and elsewhere) is not only disregarding the lessons learned by its West Coast brethren, it wants to cut the fees paid to some on-air advertising talent.

It gets even more brainless. The reason advertisers want to limit talent fees is that, thanks to TV channel proliferation and audience fragmentation, TV commercials have grown so progressively ineffective they have to be broadcast more times than ever. So, the advertisers reason, they have to cut the talents' residuals.

A rational industry might look at the situation and determine to re-allocate incentives where they might credibly improve the effectiveness of advertising. Advertisers could, for example, tie agency compensation to results. Better yet, they could reduce salaries for brand managers who wouldn't know a real consumer benefit if it was on the end of a 2x4 planted in their skulls. Or they could even pay TV networks less for their decreasing reach, instead of rewarding them for their declining viewership with ever-higher CPMs in the upfront market. Less money for a lesser product -- now there's a radical notion for you.

The industry's bargaining team was due to meet last week with the Screen Actors Guild and AFTRA. By the time you read this, the bitter strike may have been settled. I hope so. Marketers and their agencies have better things to do than exposing their numb skulls to the world.

Mr. Rothenberg can be reached at rothenberg_randall@strategy-business.com.

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