The Rise and Fall of Propaganda

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On November 8, the management of Propaganda Films called a meeting. After months of keeping both staff and stable in the dark about the company's future, there was finally news. On that Thursday, however, the news was not good. The plug had been pulled on Propaganda and its various divisions, including Satellite, Propaganda Independent and Extension Films.

The demise of Propaganda came swiftly, but it didn't come as a surprise. When SCP Private Equity Partners, a Pennsylvania-based investment fund, purchased the company for $10 million in 1999, many felt it was only a matter of time. Most of the company's key players - like co-founder Steve Golin and longtime commercials head Stephen Dickstein - didn't make it through the transition, and many directors - like David Fincher, Stephane Sednaoui, and Michael Bay - had followed them out. "I kind of knew that going in, but it was a risk I was prepared to take," says Philip Fox-Mills, who left production company Headquarters to become Propaganda's East Coast rep earlier this year. "It didn't surprise me that it happened the way it did."

Signs of trouble began this summer. Expense accounts were suspended, and other expenses, for both vendors and staff, were slow to be paid, if they were paid at all. "It was making it difficult for us to book jobs, because the word was on the street and the agencies knew something was up," Fox-Mills says. "By the middle of the summer people were spending too much time persuading the accounting department to pay them what they owed them."

In October, management arranged a cash infusion to fund a restructuring. By that time, however, the magic number for the company to appear profitable - to current or potential investors - was $1.5 million in billings a week, ambitious even in a good economy. An eleventh-hour deal to sell the company, reportedly to Minnesota Twins owner Carl Pohlad, never materialized, which led to the November 8 meeting. "It's hard to believe it's gone," says one staffer. "Whatever you thought of those companies, some great work came out of both Propaganda and Satellite over the years. It hurts everyone in the business."

That's because Propaganda, in a sense, was the business. The shop won four Palme d'Or awards for Best Production Company at Cannes in seven years, and many U.S. production houses - from Anonymous Content to Partizan to Palomar - were grown from seeds planted at Propaganda. As Bryan Farhy, executive producer at production house BrandTV observes: "They really were, and maybe still are, the only real brand we've had in this business."

Propaganda was founded in 1986, when Generation X wasn't even a book, never mind a demographic. Producer Steve Golin and music video director Nigel Dick, both of Mark Freedman Productions, joined with directors David Fincher, Greg Gold, Dominic Sena and producer Joni Sighvattson - all of N. Lee Lacy Productions - and forged out on their own with the idea of forming a production company run by directors. "We were all dissatisfied for various reasons with our current homes, so we decided to join forces," says Dick. "Initially, it was wonderful because we were all high on having our own shop. Every piece of work you did, you thought you were contributing to a bigger machine. It felt great to have control."

At the time, pitching music video directors to ad agencies was a tough sell. "I was selling the idea," recalls Dickstein, who repped the company for commercials, initially via Directing Artists, and later as head of the commercials division. "People would really ask me, 'What does this have to do with advertising?' " At the same time, hiring video directors to shoot visually cutting-edge spots had a readymade niche in the rise of MTV-inspired youth marketing. "They were making images that people weren't using in commercials, and it was really attractive to young art directors who were trying to do cool, groovy stuff," he says.

Dominic Sena led the way with a Chic jeans ad for FCB/New York, followed by Fincher, who scored three Clios in 1988 with a Colt 45 spot, out of W.B. Doner. Coupled with video work for the likes of Madonna and Sting, Propaganda was hot - an attitude the company wore proudly. "It was a great thing to have," Dick says of the shop's ultra-hip mystique. "We had a coffee bar in the first real building we had. There were beautiful women walking through the door all the time. Everybody wanted to work there." In 1989, Golin and Sighvattson sold 49 percent of the company to Polygram with the hope of moving into features.

One thing Propaganda proved very successful at was spotting talent. Dickstein, who had by then been hired to run Propaganda's commercials division, added directors Michael Bay, David Kellogg and Simon West to the roster. As the company's success drew its top talent toward features, they drifted away from spots. "The day Fincher got Alien 3, we were thrilled for him," Dickstein recalls. "Then we realized we had no commercials division." But the company had more talent waiting. As Fincher and Sena - who led the shop to its first Palme d'Or at Cannes in 1992 - concentrated on films, the spot work passed on to up-and-comers like Bay, and later to a young video director whose reel consisted of long-form skateboarding videos.

Spike Jonze signed with Satellite Films at its formation in 1992, just as the remaining 51 percent of the company was being sold to Polygram. "We needed to have a company that would be big enough to support directors in their goals and still be able to support a business plan," Dickstein says. Jonze's first spot was for the Gen-X event par excellence, 1994's Woodstock II, and he'd eventually inherit the Nike legacy with spots like "Guerilla Tennis," in which Andre Agassi and Pete Sampras play tennis in the middle of a New York intersection.

By then, however, some of the original founders were leaving. Sighvattson, now chairman/CEO at Palomar Pictures, left in 1994, as did Nigel Dick. Nonetheless, revenues continued to grow and Propaganda/Satellite won its second Palme d'Or in 1997. The following year, Polygram was bought by Universal, and the former's assets were divided up piecemeal. Propaganda's commercials, music video and management divisions were sold to SCP for $10 million in a deal that is still the subject of controversy. The deal was engineered by SCP head Gary Beer, who, according to Dickstein, planned to install himself as Propaganda's CEO. Shortly after the deal, however, Beer left the company. Three outsiders - COO Trevor Macy, president Rick Hess and CFO Severin White - were brought in to run Propaganda. Dickstein was fired; he's currently suing both SCP and Beer for fraud, claiming he only backed the deal with the understanding that he and Beer would run the company.

Other key figures departed as well. Co-founder Golin left to form what would bcome Anonymous Content, eventually taking fellow founders Fincher and Kellogg with him. Satellite head Jeff Armstrong resigned, and head of production Tim Clawson left. Yet the company continued to thrive, at least for awhile, billing $90 million in pre-strike 1999 and winning back-to-back Palmes d'Or at Cannes in '99 and 2000. But there was a sense, both inside and outside the company, that the new rule by committee was lacking. "Creatively, yes it was there," says one ex-staffer. "But I don't think the leadership was there."

Even in the competitive world of commercials production, Propaganda's passing is less a victory for other companies than a warning. "We talked to a lot of competitors after it closed, and I think everybody was saddened by it," says Vince Landay, longtime producer for Spike Jonze. "As much as they want to be the best and beat everybody else, the competitors are like, 'This is a bad sign.' " But if Propaganda's fall is a cautionary tale, what is the moral? Defenders of the chestnut that the production business is a people business - as opposed to, say, a money business - might find ammunition in the end of Propaganda. With management gutted, the house was left without a public face. "My outside perspective is that there were some very talented people involved in trying to keep the company running in the later years," says Dick. "But I think it needed one visionary person to run it, rather than a collective."

The company did continue to spot hot talent - including the team of Kuntz & Maguire, who took home a Gold Lion this year at Cannes - and bagged a third and fourth Palme d'Or behind young, prolific talent like Dante Ariola. According to the Gunn Report's rankings of the winningest production houses at 2001 awards shows, Propaganda/Satellite placed fifth. Tellingly, the top spot went to Partizan, a shop headed by jilted Propagandist Dickstein.

A contributing factor in the demise of the legendary house may have been the legend itself. Propaganda gained a reputation for great creative by choosing projects carefully, and in the end - when the company needed to shoot anything it could get its hands on to survive - the boards weren't there. "Over the years, the agencies had gotten used to the directors being kind of arrogant and passing on a lot of boards," Fox-Mills observes. "It's a Catch-22. We wanted to see the work, but there was a lot of work the company had alienated."

Others blame the demise on a lack of focus; a vice that has claimed many in the dot-com bust, including broadcast design firm Pittard Sullivan earlier this year. "They just tried to do to much all at once, instead of focusing on the core business," one staffer says. "I think it was very brave of Propaganda to have a management wing and features wing and spinoffs like Satellite," Dick adds. "But after awhile, it became difficult to tell what the core business was." At the end, Fox-Mills says, "they tried to tighten up, but it was too late."

Of course, the reason behind Propaganda's fall may be much simpler - and more universal. Any successful revolution risks falling prey to the things it revolted against; Propaganda, a shop run by directors, became a shop run by venture capitalists. "You set out to reinvent the business, and by the time you're done, you are the business," says Dick. "It's like punk rock. At first you're the Sex Pistols, but before you know it you're the Sex Pistols on a reunion tour."

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