Time for Agencies to Change Production

This is a trend worth following. Look at the suite of services that an agency has traditionally provided: strategy, creative, production and media. Media has already been spun off and run as a separate P&L, arguably horizontalized, since they work across multiple creative agency groups within one holding company. There is plenty of evidence to suggest that the production process is going the same way. In just a few years, creative agencies will provide strategy and creative services — with production and media services being horizontalized across a holding company network. After all, the main reason people go to work at a creative agency today is for a strategic or creative, rather than a production-based, role.

One of the key drivers of this trend is the procurement department of major global marketers. They know that when it comes to production services they can receive the same quality for far more competitive prices in certain emerging markets. It’s no secret that marketers like General Motors, along with their agency partners, have been sending non-mission-critical work offshore for some time. There have been challenges to this approach, such as communication difficulties and delivery quality, but this is no longer the case as emerging markets have well-matured.

This is a big opportunity. The collective 2011 global revenues for the four big holding companies were just over $45 billion, according to AdAge. If one approximates that just
11 percent of that is spent on production (and that is conservative), there is a $5 billion market segment. Applying better processes and allocating resources more efficiently via a globally balanced delivery model can achieve savings of at least 25 percent across the board. That equates to over $1 billion that provides significant value for agency, holding company and brand owner.

The demand for content creation to be deployed across multiple channels will surely continue unabated. The costs of producing such content in multiple formats and languages, with quality video, photography and a commerce-enabled function, are now under the procurement microscope more than ever. It goes without saying that horizontalism is not simply a term but a call to action in a new advertising era. Brand owners must look to offshore non mission-critical functions wherever possible if they want to stay globally competitive.

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