The Truth About the Probe Into Agencies' In-House Production: You Can't Turn Back Time
The news of a DOJ investigation into ad agency in-house production/post units is big news recently -- for those that haven't heard, the trouble is that advertising agencies are allegedly collecting check bids from vendors in order to undercut them via their in-house or in-network groups. Agencies of course have greater insight into their clients' true stomach for production costs and can use this information to come in cheaper than independent shops. For anyone in the know, this is not newsworthy -- it's been the way of life.
I ask "What's the big deal really?" The direct connection to the end client is a strategic advantage that these large agencies have with their even larger holding company clients. Strategic advantage is what a good business plan is about, right? For a long while, the post industry had their strategic advantage: a deft focus on a super complex, super expensive and a super niche ability to create content in multi-million-dollar Inferno and Flame suites.
Well, as we all know, this is a past-tense statement. Software tools once sequestered to only high-end shops are completely portable, easy to set up and many times less than $50,000 all in. Agencies and their clients are fully able to deploy these systems quite easily. What was once our strategic advantage is no longer. Plain and simple: the gig is up and no DOJ investigation is powerful enough to turn back time. Check bids or not, if an agency can leverage their scale to produce content cheaper internally, they are going to do it.
The days are numbered for businesses constructed entirely on the idea that you can make $800 an hour in conforming, titling and cleaning up some production equipment in the background. It was fun while it lasted, folks. You've got to do more -- and people do. One-stop shops are an example of a search for models that can and do still work.
I believe that others exist as well. Creating mid-to-complex visual effects, the field my company works in, is an all-in proposition that in-house agencies or client-side units simply won't have the stomach for. It's a deep commitment. It's about supporting and protecting senior artists with experienced management as well as development of a serious codebase to pull it all together, all while executing and bringing vision. You might be able to make some stuff that looks pretty good… but you probably burned out your team doing it. You can't dabble and achieve at the same time.
The search is on for an affordable, approachable and flexible model where both agencies and end clients can tap into the creative capacity of larger VFX houses while providing decent and repeatable margin for the VFX creators. I plan to make 2017 the year of rolling out new models, not pining for the old ones.
In order to encourage innovation and experimentation, you've got to let go of what worked a decade ago.