“It’s about change management’: Sir Martin Sorrell says the billable hour is dying, but getting clients to move in is proving harder

Sceptics call it the agency retainer rebranded. Believers see it as an on-ramp to a world beyond the billable hour. The truth is probably somewhere in between — at least for now. The reasons are outlined here and here, but Sorrell’s own framing cuts to it. 

“The far more important thing is, what is going to be the pace of AI adoption?,” he told analysts on the call. “Because the simple fact is, consumers have adopted AI faster than companies, and companies aren’t doing it because it’s not just about technology or workflow — it’s about change management. And companies find it difficult to do that.”

The ones that do are buying into subscriptions. One enterprise client signed up last year and restructured its entire agency relationship around the model. Three more are in discussions with more expected to follow since subscriptions are now baked into every new business pitch S4 runs. By year-end, it wants a quarter of its revenue running that way.

Getting there is another matter. For subscriptions to work at scale, a lot has to align: existing clients have to be willing to reopen contracts; procurement teams have to get comfortable pricing outputs rather than hours; rising inference costs have to stay absorbable within a fixed fee; and the pace of AI adoption across the broader market has to quicken. None of those things are moving as fast as S4 would like.

“I don’t think anybody in marketing procurement teams is against a change,” said Wes ter Haar, co-founder of Media.Monks and executive director at S4Capital on the call. “Everybody understands that the traditional model really isn’t sustainable in any meaningful way, but doing this at scale in a running business is not the easiest thing to do.”

There are, however, pockets of momentum. Chiefly, in automotive and financial services — sectors pushed by existential threat rather than enthusiasm. Chinese EV competition in one case, fintech disruption in the other. FMCG, arguably the most valuable category for marketing groups, is starting to stir too. And counterintuitively, the conflict in the Middle East could accelerate things further: if its reverberations push inflation higher and keep rates elevated, that macro pressure may yet do what enthusiasm alone hasn’t: force the kind of AI adoption at scale that makes the new model viable.

“It may be that that acts as a catalyst,” Sorrell said on the call. “If global growth slows, inflation rises and interest rates are stickier – which seems to be the scenario already being built in by some of the analysts and the investment banking firms – that might be the engine for increased tech adoption and AI adoption.”

Should that happen, it might finally give the agency model’s critics pause. So far, nothing has — not the workforce automation, the M&A, nor the push into agentic services.

Or as as Gartner vp analyst Jay Wilson, put it: “More advanced client-side organizations are starting to pivot to enterprise-wide platforms from the hyperscalers — and the agency AI platforms, which are basically just connectors of Salesforce and Adobe and Workfront, we don’t believe are going to be as relevant going forward.”

Which is why the subscription model’s internal economics matter as much as its commercial logic. The pitch to clients is simple: as AI improves, they get more for the same price. Fifty assets a month becomes seventy, no fee increase. But that only works if S4 can keep absorbing rising compute costs inside the fixed fee. With video models and always-on usage expanding fast, pass-through costs may eventually be unavoidable. That would mean variable pricing — the one thing procurement teams are least equipped to sign off on.

“On personalization at scale, I would say there’s more opportunity,” said Sorrell. “But on visualization and copywriting, we’re seeing compression — if you charge on time, that is compressed.”

As it stands, it’s the latter two where most AI work done at scale is happening. CMOs, despite what they say, see AI more as an efficiency play than an effectiveness one — technology to get things done faster and cheaper, not necessarily better. AI only compounds for a marketing services company like S4 if it can do all three. Without the effectiveness part — the bit where real outcomes can be pegged to results — the agency model becomes an even slipperier slope to commoditization.

How S4 got to this point is a sobering illustration. The group reported revenue of £754.8m for 2025, down 11% on a year earlier, with net revenue falling 10.8% to £673m. Nearly half that revenue historically came from big tech — but marketing spend at Amazon, Meta and Alphabet has been essentially flat since 2022, while their AI infrastructure spending has grown over 133%.

Tech clients spending more on AI and less on agencies: that’s the burning platform behind S4’s model shift, and the reason subscriptions are no longer just a commercial experiment.