Making the shortlist has been welcomed news over the years, whether it’s gaining finalist status in the Cannes Lions competition or being among a select few in the running for a project. However new shortlists of preferred production companies reportedly being devised by clients Procter & Gamble and Reckitt Benckiser represent cause for concern and carry decidedly negative connotations for many in the production community. Squeeze play Progress report The AICP national board meeting in N.Y. also managed to yield some positive news.
With clients looking for ways to cut costs in a tough economic climate, one means towards that end which seems to be gaining momentum is the concept of a preferred vendors list of production houses. Word is that those production companies willing to lock in prices for certain services and expenses could gain inclusion on the P&G preferred vendors list, putting them in the running for business from the advertiser’s agencies. Those production houses not willing to agree to such pricing arrangements would be off the list and thus not eligible for P&G work.
“Clients are looking for efficiencies and you can understand why,” said Matt Miller, president/CEO of the Association of Independent Commercial Producers (AICP). “The question is whether these are true efficiencies or manufactured efficiencies. To reduce production houses to a commodity misses the point. It’s not about what a light or a piece of gear costs. It’s about how you’re going to use the light, the creative vision that guides the light and the gear that represents the true value of a production house to an agency and advertiser.”
Miller sees some irony in the commoditization of production houses at a time when new forms of content are emerging, necessitating more than ever that clients, agencies and production companies be creative, collaborative partners.
From a business perspective, there’s also some question as to what benefits a production house derives from being on a preferred vendors list. The concept clearly isn’t new but in its prior iterations at least offered more tangible advantages to a production company. For instance, SHOOT chronicled years ago arrangements whereby a client guaranteed a production house a set volume of work during the course of a year in exchange for certain economies. The client gained price stability while the production house knew it could count on a certain workload from a particular client.
However, there appears to be no such guaranteed volume of work for a production house that is on a preferred vendors list as it’s being currently being constructed. Furthermore there is no assurance of timely payment or cash flow on jobs that a preferred vendor takes on.
“It makes you wonder what is really the advantage of being on such a list to begin with,” said Miller.
The preferred vendors list is among the latest developments arguably tightening the squeeze on production houses. Miller noted that this squeeze–particularly the impact of slow payment and sequential liability–was a prevalent topic during the sixth annual World Producers Summit held by the AICP and the Commercial Film Producers of Europe during the Cannes Fest last month. Miller said that executives from companies all over the world view the cash flow problem as jeopardizing the health of the production community at large.
A production company that fronts significant sums of money without being paid in a timely fashion can find itself in a precarious position, to the point where subsequent jobs could push a negative cash flow situation into even more serious difficulty.
As reported numerous times in SHOOT, sequential liability has gained in prominence as a frequent explanation given by ad agencies to production companies for late payment. Per sequential liability, the agency contends if it has not yet been paid by the client, it cannot adhere to payment terms it has agreed to with the production company.
Thus production houses can find themselves bankrolling projects for inordinate periods of time. And even a number of those companies accepting this practice as part of doing business can no longer do so given the difficulty in getting the necessary short-term loans in light of a tight economy and a barely thawing credit freeze.
Prior to Cannes, the AICP held its national board of directors meeting early last month in New York, where slow payment was also a prime topic of discussion. “It all comes down to how to you affect change,” said Miller. “We remain hopeful we can engage in dialogue with agencies. A lot could come out of that for both sides. There’s a lot of time and energy being spent on the back and forth of everyone trying to protect themselves. And the result of all this is a situation that isn’t tenable for production companies or agencies.”
Preferred vendors lists weren’t discussed in detail at the AICP national board session in that RFPs hadn’t yet gone out at that time. But the issuance of RFPs to production companies has since generated a buzz and serious concern over the matter.
For one, the board of directors unanimously approved the formation of AICP Digital, a chapter designed to address the needs and concerns of the digital production community (see separate story).
And it was also announced at the board meeting that some progressive tweaks have been made to the landmark Producers Health Benefits Plan (PHBP) that went into effect in early 2008 (SHOOT, 1/11/08). Per the plan, enrolled nonunion freelance commercial production employees who qualify can obtain health insurance coverage.
The latest alluded to tweaks include a revision potentially opening up the plan to more people. Previously a worker had to qualify based on number of days worked in a given quarter or year. Now a worker can qualify based on income, with the threshold being some $30,000 annually. So a worker could be short in days but still benefit from the health plan based on monetary earnings.
Additionally, qualifying workers can get an initial six months of coverage rather than just insurance covering a quarterly period. And the plan complies with new Cobra laws whereby Cobra coverage is subsidized for individuals who lose their regular policy coverage.
While the industry coverage provider and administrator are entirely separate from the AICP, it was this industry producers’ organization that provided the impetus for the PHBP, committing time and resources over the years to help the insurance plan clear administrative and government hurdles, as well as to connect with the proper insurance carrier.
Apple and Google Face UK Investigation Into Mobile Browser Dominance
Apple and Google aren't giving consumers a genuine choice of mobile web browsers, a British watchdog said Friday in a report that recommends they face an investigation under new U.K. digital rules taking effect next year.
The Competition and Markets Authority took aim at Apple, saying the iPhone maker's tactics hold back innovation by stopping rivals from giving users new features like faster webpage loading. Apple does this by restricting progressive web apps, which don't need to be downloaded from an app store and aren't subject to app store commissions, the report said.
"This technology is not able to fully take off on iOS devices," the watchdog said in a provisional report on its investigation into mobile browsers that it opened after an initial study concluded that Apple and Google effectively have a chokehold on "mobile ecosystems."
The CMA's report also found that Apple and Google manipulate the choices given to mobile phone users to make their own browsers "the clearest or easiest option."
And it said that the a revenue-sharing deal between the two U.S. Big Tech companies "significantly reduces their financial incentives" to compete in mobile browsers on Apple's iOS operating system for iPhones.
Both companies said they will "engage constructively" with the CMA.
Apple said it disagreed with the findings and said it was concerned that the recommendations would undermine user privacy and security.
Google said the openness of its Android mobile operating system "has helped to expand choice, reduce prices and democratize access to smartphones and apps" and that it's "committed to open platforms that empower consumers."
It's the latest move by regulators on both sides of the Atlantic to crack down on the... Read More