Production companies, hoping to generate repeat business from agencies and brands, often spend above the budget of a commercial to improve its production value. Instead of asking agencies or brands to pay that extra cost, production companies instead eat the cost hoping to prove their worth and build out a longstanding relationship. But as brands zero in on price, spending above the allotted budget doesn’t make sense anymore. In the latest edition of our Confessions series, where we exchange anonymity for candor, we hear from a commercial line producer who has seen budgets shrink and tensions between production companies and agencies and brands grow.

The margin for a production company has been reduced in recent years. 
It’s gone from 32% down to 15% for some companies. The model has changed. It’s still changing. I don’t know where it’s going to end up outside of having clients just do their own advertising and get on with it.

How has the model changed?
In the ‘90s and the ‘00s, you’d work on a campaign for a brand and you’d probably lose money on the first job because you had cost consultants. You still have them. P&G really set the tone for that when they did a lot of work as a cost-plus because you’d only pay based off of receipts, so they knew exactly how much things cost. With these particular campaigns, you would bid on the first job and you might lose money but if you did a good job they’d come back to you. You would continue to work on that brand for the course of 10 years. That just doesn’t exist anymore.

What’s it like now?
It’s really just based off of money now. Can you make the number work? And, if you can, we’ll probably give it to you. It seems like they’ve taken any creative out of the equation.

Why do you think it’s changed?
You could almost attribute it to the Screen Actors’ strike in 2000, where the talent got fed up with the way the advertisers were making money off of certain things and they weren’t being included in it. Suddenly, you’ve got a strike on your hands and people are going out of town to produce stuff. That opened up the clients’ eyes to what the budgets were, and, as a result, the agencies were very fearful of more or less going against the grain with what the client wanted, what they wanted to sell and how they wanted to sell it because the client would just pick up and say we’ll get this agency to do this work, more or less make this project work.

So there’s more project work now? 
[With some brands], it’s all project work. There’s no agency of record. So you’ll bid on something, they’ll put out a brief and whoever comes up with the best idea and can get the best talent and do it for whatever the budget is wins the prize. It’s a different world. No matter how hard you try to appease everybody and make it all work, it really just comes down to the number. If you can do it for the money, that’s the bottom line.

To make that number work, you probably have to make cuts in production staff. How does that play out with agencies and clients?
[Sometimes] you won’t have video playback and you won’t have a script person. You’ll have a hybrid makeup artist and wardrobe stylist. [There are times when you] get to a pre-production meeting and suddenly the client or maybe someone higher up at the agency will find out that they don’t have a script person or playback. That’s when it gets ugly because someone hasn’t been keeping the client or the agency up to speed; they’ve just more or less said, “That’s all you can afford.” There’s no real education process between the agency and the client because everybody knows the client will just pick up and go somewhere else if they’re not going to get what they’re looking for. It comes back to the money. It’s always about the money, but it’s more so now than it has ever been.

But with the need for more content now across various social channels for brands, isn’t there more work than ever?
This is the other problem. You’ve got production companies that are vying for this work so they’ll go the extra mile. You might have a budget that reflects everything being shot on an iPhone, but they’ll go out and get a broadcast-quality camera and all the accouterments with that. They’ll probably go out-of-pocket hoping that they’ve made a friend and that more work will come to them. But in the long run, the budget still only reflects an iPhone. It’s really just for social, and social is a 1080 or 1920 kind of resolution that makes it overkill if you have any broadcast [equipment].

If there’s no repeat business anymore, then what’s the incentive to go out-of-pocket to boost production value?
That’s something that remains to be seen.

Does it impact the production company-agency relationship? 
[That’s more strained now.] We’ve been in a situation where it’s a check bid, [or a bid that’s not an actual bid for a job but a bid that’s used to check what the cost of a production should be], but you haven’t been told that. What happens is that you think you’re in the running for this commercial only to find out the decision was made well before you even got a piece of it. Really all they’re asking you to do is bid the thing to keep the other guys honest and keep the money where it’s supposed to be. They had no intention of giving you the job. In the old days, that was friendly business. An agency producer, if you’d done some work for them, would say, “Hey, I need a check bid.” It would be no problem. We’d give them that check bid. We’d know we weren’t going to get the job, but it’s a favor and the favor would be repaid. Somewhere down the line, something would come to you. Now, we’ve done a couple of jobs where it was clearly a check bid and we didn’t find that out until after the fact. You never even get the call of who got the job. It’s cutthroat.

Where do production companies go from here?
You probably end up cutting your overhead in half. Instead of having a legitimate brick-and-mortar place you end up in a WeWork position where you can grow and deflate on a month-to-month basis on the work that’s coming in. You hope that doesn’t change the perception in anyone’s mind of your ability to produce something with efficiency and creativity to the best of your ability. You have to change as the change happens.

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