Ford Motor Co. has spent much of the past two weeks explaining a cost-saving initiative that has left worried suppliers (including commercials-production companies) facing a drastic cut in mark-ups on their work for the automaker. But this is just the tip of the iceberg for a commercials-production community that, en masse, is facing arguably the most difficult economic climate of its half-century history.
Yes, there's clearly a discernible upturn in ad spending. But it is not really trickling down to the production companies. Without wishing to be too Cassandra-like, it is difficult to disagree with the many in the business who argue things will never return to what they used to be.
The `70s, `80s and much of the `90s offered rich pickings for many directors and their producers, buoyed by the dominance of TV as an ad medium and the explosion of niche channels within that medium. The 30- or 60-second mini-film also grew larger-in ambition and expense. Production companies operated on mark-ups of 35% or more. There was enough money around for everyone. The line "we open on a tropical beach" was just another bonus.
Today, consolidation and globalization have seen brands culled, resulting in fewer individual commercial executions. Recession has lingered. Clients squeeze agencies, and agencies pass on the cuts to suppliers. Cost consultants are everywhere.
There is no longer any rhythm to the year, no predictably busy or down times. Jobs are subject to last minute budget cuts or, worse, are pulled on the eve of shoots. Directors shoot batches of three commercials (often as runaway productions in South Africa or Toronto) for the budget of two.
Production houses, still run largely along the old models, undercut each other in a savage price war-even to feed B-list directors C-list work. Leading directors take too much "back-end" out of a job for their companies to make money.
Enter Ford with its 12%-to-15% mark-up proposal. The real concern is that Ford will surely not be the last major advertiser to do so. Many companies, with reps and/or full-time support staff to pay, simply cannot exist on 12% mark-ups.
I write before knowing the outcome of the meeting. Long term, the future lies in far greater diversification into content creation to avoid over-reliance on a volatile sector such as advertising. In the nearer term, the commercials-production community can only survive in its current guise if it sticks together and presents a meaningful united front.
That's tricky when a self-preservation instinct kicks in that forces individual companies into under-cutting one another, but it is a challenge to be faced as a mature profession. Production has been united before (over the long running Screen Actors Guild pay dispute). Back then there was a common foe. Today the enemy is within. It is not a time for faint hearts.
Stefano Hatfield is contributing editor of Advertising Age and Creativity.