Document released during 9th World Producers Summit at Cannes Lions International Festival of Creativity
The Association of Independent Commercial Producers (AICP), the Commercial Film Producers of Europe (CFP-E) and the Advertising Producers Association have released what they regard as a breakthrough document–the Universal Principles of Engagement–at today’s World Producers Summit in Cannes.
For the first time ever, producers associations from around the world have worked on and endorsed a set of core principles aimed at establishing a foundation for producing commercials that transcends borders and is truly universal.
The document outlines a recommended set of principles for production companies and the agencies, clients and other organizations they serve, putting forth best business practices for production of commercials worldwide. Adherence to these principles, contend the architects of this document, will help ensure structure, clarity and fair practices globally.
Now in its ninth year, the World Producers Summit is a side event held during the Cannes Lions International Festival of Creativity, where 100 production company owners from around the world gather to share insights about industry affairs. Previous summits have addressed issues such as procurement, the pitching process and slow payments, but this year the discussion has translated into action.
“We saw the same basic issues coming up over and over again and in different markets, so decided there was value in addressing those in a document that could be applied to any production market in the world,” read a joint statement from Matt Miller, president/CEO of the AICP, Steve Davies, chief executive of the APA, and Francois Chilot, chairman of the CFP-E. The three executives spearheaded the initiative.
The Universal Principles of Engagement is focused on a written contract, something that exists in some territories but not in all. “The contract is beneficial to all parties because it ensures that what the production company thinks it is providing and what the agency/client thinks it is getting is the same thing, minimizing the risk of misunderstanding, costs that are in dispute and/or an unhappy client,” stated Miller, Chilot and Davies.
“Other basic principles–such as an upfront payment of at least 50 percent of the budget–are vital to create a basic structure in which a production company can operate,” they continued. “As we do not have retained clients but rely on projects, the 50 percent upfront is crucial to both the fiscal survival of production companies resulting in allowing our people the space to remain passionate about producing great work and set new agendas.”
The Universal Principles have been endorsed by producers associations around the world, including (but not limited to) the AICP (US), CFP-E (Europe), APA (UK), Produzenten Allianz (Germany), APFP (France), AMFI (Mexico), APRO (Brazil) and CPAT (Canada). It will be each association’s responsibility to propagate the use of the principles in its own region, although it is not essential for a company to be a member of its local association to adopt them in its business approach. Other associations will be bringing this document and philosophy back to their regions from the summit.
“Territories with the least developed production frameworks will benefit most from the Universal Principles of Engagement,” stated Miller, Davies and Chilot. “However, production companies in the markets with sophisticated business and contractual structures will benefit too because when they work in other markets it will give them a better basis for contracting with the agency, engaging them in a clear and fair way. The agencies will benefit for the same reasons.”
10 points
Here’s a rundown of the Universal Principles of Engagement:
1. Meeting the client’s objectives
It is in every party’s best interest that client expectations are met, as the goal of commercial production is to deliver the highest artistic and technical quality commercial to the client within their expectations regarding cost, time and policy. To this end, it is important that all of the client expectations are realistic, fair, fully disclosed and contemplated in the production contract from the start of the project.
The agency, when engaged as agent for the client, should assume the role and as such should be empowered to make decisions, voice concerns and approve changes during production.
Mutual respect, collaborative spirit and professionalism in the end will determine the success of each project.
2. Try to establish a common vision for all parties
It sounds obvious, but sometimes misaligned expectations are the route all problems that can arise in a production. With as many business entities collaborating, this can be the most important fundamental building block to having a successful project.
3. Non-Disclosure Agreements (NDAs).
It has become customary for advertisers and agencies to request NDAs as part of the contract. Such NDAs should be reciprocal as the production company’s approach, bidding information, and intellectual enhancements are specific to that project and should also be kept confidential by those entities soliciting their input, and ultimately any entity working on behalf of the buyer.
4. Maximum of three bids
There should be a maximum of three production companies invited to bid for a commercial project. The bidding entities should be advised of others they are bidding against, as it helps shape the expectation of the desired outcome. In the situation where there will be more than three companies asked to bid on the same project, all participants should be notified in advance (or as this situation arises) so that companies can better assess whether they would like to participate in the bidding pool.
5. Contract in writing
A production company should be contracted in writing, so that there is a clear understanding of what the production company is producing for the advertising agency (on behalf of the advertiser)*. The contract should clearly establish the rights and responsibilities of each party. The contract ensures that what the agency is expecting of the production company and what the production company is expecting to deliver to the agency are the same thing. The parties are then legally obligated to the terms they have agreed. The contract should provide a mediation and arbitration process in respect of disputes that arise under it.
(*For the purposes of this document, the assumption is that an advertising agency is working as agent for the advertiser, in cases where an agency is not involved, or the agency is involved but working in a capacity other than “agent”, the roles may change, but the essence of “buyer” and “seller” remain constant.)
6. Production companies should be contracted on a fixed bid or cost plus basis
A fixed bid is an agreed upon price for the work produced payable by the agency (or advertiser) to the production company.
Under a fixed bid, the production company accepts all of the risk of the production (with exceptions for items/personnel the agency has elected to provide which are spelled out in the contract, weather risks and force majeure) and the fee remains the same – a fixed amount.
When there are many unknown variables that make it difficult to estimate a job, the agency or the production company may recommend using “cost plus fixed fee’ (known as cost plus). Under cost plus, the agency pays the actual cost of making the commercial (which may be more or less than the original estimate) and a pre-determined production fee (usually a percentage “mark up” on the best estimate of costs). In each of these scenarios both entities are protected from pieces that cannot accurately be estimated.
Under either system, there should be a payment schedule that is agreed to and guaranteed by all parties involved, recognizing that timely payment is a contractual term.
A note on a cost plus scenario: if an audit of costs is performed (and an audit is only appropriate to a cost plus bid), the costs of such audit, and time frame for final payment, should be reflected and factored into the cost of the production.
7. Up-front payment
Production companies should receive a significant proportion (50 percent to 75 percent) of the budget at least seven days prior to the first shoot date. This reflects the fact that most of the budget has to be paid out prior to production, or immediately thereafter in order to meet all commitments.
8. Interest on late payments
Contracts should provide that interest is payable if the agency fails to pay the production company in accordance with the contract, to reflect the fact that the production company will have to finance the production for the personnel and equipment it has paid for or committed to. Terms of the interest rate should be clearly articulated and understood by each party.
9. Cancellation provisions should be clearly spelled out.
Cancellation provisions should be agreed upon in advance so that in the event of a cancellation by the agency (which does not result from any default on the part of the production company), the production company should be paid all the costs it is committed to and fees and mark up that fairly compensate the production company with respect to work performed, time committed and other opportunities lost.
10. Choice of suppliers
Since the production company is responsible for the services the supplier provides, and ultimately the finished product, the production company should have full control of choosing its suppliers, including service and facilities companies. The production company should not be responsible for suppliers the agency provides (when certain product or brand specifications require such).
Google Opens Its Defense In Antitrust Case Alleging Monopoly Over Online Ad Technology
Google opened its defense against allegations that it holds an illegal monopoly on online advertising technology Friday with witness testimony saying the industry is vastly more complex and competitive than portrayed by the federal government.
"The industry has been exceptionally fluid over the last 18 years," said Scott Sheffer, a vice president for global partnerships at Google, the company's first witness at its antitrust trial in federal court in Alexandria.
The Justice Department and a coalition of states contend that Google built and maintained an illegal monopoly over the technology that facilitates the buying and selling of online ads seen by consumers.
Google counters that the government's case improperly focuses on a narrow type of online ads — essentially the rectangular ones that appear on the top and on the right-hand side of a webpage. In its opening statement, Google's lawyers said the Supreme Court has warned judges against taking action when dealing with rapidly emerging technology like what Sheffer described because of the risk of error or unintended consequences.
Google says defining the market so narrowly ignores the competition it faces from social media companies, Amazon, streaming TV providers and others who offer advertisers the means to reach online consumers.
Justice Department lawyers called witnesses to testify for two weeks before resting their case Friday afternoon, detailing the ways that automated ad exchanges conduct auctions in a matter of milliseconds to determine which ads are placed in front of which consumers and how much they cost.
The department contends the auctions are finessed in subtle ways that benefit Google to the exclusion of would-be competitors and in ways that prevent... Read More