Editor's Letter, March 2009

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The Directors Roundtable.
The Directors Roundtable.
Every year for the past several, we've assembled a dozen or so big directing talents around a table for a major gab on the work, the job, the industry and life. It's a treasure trove of insight into creativity and the human psyche for us, and for them, well, they seem to enjoy the chance to talk to each other (somewhat) candidly. One thing always resonates after these sessions— how much energy, care and ingenuity go into making and keeping something great.

As director David Shane noted in the roundtable talk: "We're all supposed to say... it's all about the story. But I think what people take away from a great commercial or a great movie is this f-ing line, this little moment..." Bringing together the team, the idea, the director, the editor and the other talents that can make those moments is a perilous proposition at the best of times. So in that context it's especially poignant to see the current and potential impact of harsh economic times on the process of making great content. Currently, all parties struggle with doing more with less money, and equally significantly, less time. And we have yet to see this climate's full impact on creative. The standard rap is that now is the best time for marketers to do bold things; the reality is that at least as many will do the opposite. But one potential change could affect the work that gets done in a more fundamental way—by dictating what companies will be left standing to do the work.

As the financial future of more clients becomes less certain, agencies are looking to lessen their exposure. And so, recently, we've seen holding companies, starting with Omnicom, looking to underline sequential liability language in production contracts. Sequential liability (meaning that the client, not the ad agency, is responsible for paying for production, unless the client has paid the agency for it—more on that later) came into use in another era, to protect agencies making giant media buys. The issue has surfaced at intervals since and bubbled over in the U.K. recently as Omnicom attempted to add these kinds of contractual payment tidbits. At press time, Shots had reported the holding company had stepped back from its position, coming to an agreement with the producers' body there, the APA. The AICP here recently held an L.A. meeting for members and others to discuss the issue.

The agencies' we-pay-when-we-get-paid stance becomes especially untenable as it translates to their payment of a percentage of the production budget up front (traditionally 50 percent, though this has increased in recent years as production companies struggled with later final payments). "The major point is that (Omnicom) has now taken what wording they have always had—'sequential liability,' or working as agent for, which was really a safeguard relating to bankruptcy," says AICP president Matt Miller, "and have expanded it to make it about 'sequential payment' to supersede, and even to evade and avoid contractual payment terms agreed to by the production company and the agency." As Miller notes, "the whole way this business is structured is one-offs. There is no guaranteed amount of work." The nature of production also necessitates ready cash flow, as a big chunk of the money goes to costs that must be paid in a relatively short amount of time. "I don't know a production company that can stay in business more than a quarter given these terms," says Miller. "All we've ever heard is that everything an agency does is for the benefit of its client. Well this is a moment where the agency is trying to protect its own business potentially to the detriment of the creative end product."

In these times, when we're all seeing the unthinkable become the commonplace on a daily basis, one understands the position of the holding company as a business entity. But leaving production companies holding such a crushingly heavy bag is bad for everyone—including the client. Compromising creativity is never a good idea. Right now it seems like an especially bad one.
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