More Shops Pivot To Production As The Race To Make Faster, Cheaper Content Heats Up.
When Martin Sorrell revealed the longterm plans for his new venture, S4 Capital, earlier this month, he listed several key elements in the “advertising delivery chain,” including “content, data analytics, media planning and digital media buying.”
Notably absent from this list was the work of traditional creative agencies like the ones Sorrell acquired via hostile takeover some three decades ago.
The ex-WPP CEO’s $350 million purchase of digital production company MediaMonks, which forms the core of his new business, signaled a potential industry-wide shift as marketers place greater value on the production and postproduction work that turns a concept into a campaign.
“There’s absolutely no question that, over the last several years, more agencies and holding companies have been setting up production divisions,” said Dustin Callif, managing partner at Tool of North America. Many compete directly with their third-party production partners for business as clients spend less on broadcast campaigns.
At the same time, these agencies’ actions have drawn the ire of some production company executives who believe they may be using unethical methods to win bids. They even led the Department of Justice to launch an investigation into potentially illegal practices in 2016.
GOING WHERE THE MONEY IS
Matt Miller, CEO and president of the Association of Independent Commercial Producers, said his group launched in 1972 to address “production companies’ concerns that agencies were trying to start in-house entities.”
Those efforts initially failed due to an inability to secure directorial talent, according to Miller, but in recent years the trend has turned into a race to meet client demands for faster, cheaper, more ephemeral content.
The past 12 months alone have seen Deutsch (Steelhead), 72andSunny (Hecho Studios) and Anomaly (Unreasonable Studios) spin their production departments off into separate businesses. On the holding company level, WPP’s decade-old Hogarth recently announced a global partnership with Ogilvy and Grey, which officially launched its own Townhouse unit in 2016, while Publicis Groupe’s Prodigious and Omnicom’s eg+ celebrated their fourth anniversaries.
This shift also followed The Wall Street Journal’s reporting about the DoJ investigation into the practice of “bid rigging,” by which agencies allegedly act as both buyers and sellers of production services. According to the reports, these companies beat out other bidders by either asking them to share their budget proposals in exchange for later favors or disguising in-house production teams as outside vendors competing in three-party “triple bids” designed to ensure an equal playing field.
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