Official confirmation of the painfully obvious–that the United States is in a seriously deep recession–came last month from the National Bureau of Economic Research.
It’s a recession that this board of experts said, now with the benefit of 20/20 hindsight, began back in Dec. 2007. So indeed in reflecting back on calendar year 2008, the sad state of the economy is most prevalent.
This year we saw gasoline costs go through the roof and then plummet–the latter a perverse silver lining of a damaged economy. The Dow Jones turned into a daily roller coaster, the $700 billion bailout took shape but hasn’t seemed to result in hoped for market stability, terms like “mortgage meltdown” and “credit freeze” became part of the everyday financial vernacular, and the unemployment rate rose dramatically with the latest monthly report showing a staggering loss of some 550,000 jobs.
As a possible bailout for the automotive industry fizzled out in the U.S. Senate, questions arose as to how much advertising that vital sector will do in ’09, with signs pointing to a sharp reduction. At the very least, those ad/marketing plans need a major rethink as President Bush contemplates using federal financial bailout money to aid U.S. automakers. During this whole negotiating process with the fate of the automotive industry hanging in the balance, General Motors’ TV spots out of touch with the marketplace were in full swing, perhaps most notably those promoting the red tag Cadillac sale in which savings of many thousands of dollars were touted–one of more than $12,000 for an Escalade, a large profile SUV that even with the deep discount carried a price tag of well over $50,000.
If the bailout materializes, an automotive czar could still be named to oversee how the funds are deployed, including on the ad/marketing front.
Reassessing biz practices Meanwhile what of the ripple effect on those whose livelihoods depend on the ad biz? How can production companies be expected to get short-term loans in order to combat the perennial slow payment/cash flow problem on spot projects? For that matter how can production companies serve as bankers for multi-national advertisers and agencies on jobs when the banking industry itself is reluctant to extend credit?
Several production house executives under the condition of anonymity have voiced their concerns to SHOOT in recent months. One shop for example found itself with a significant balance on a major production having become 90 days past due at press time. The production house extended itself financially and still has no assurance of being paid in the near term as the agency involved has cited sequential liability as an explanation. (“The client hasn’t paid us so we cannot pay you.”) The production company exec said he’s in no position to operate this way on any future projects given the weight of his current commitment. And even if he could, there’s nowhere to go to get the necessary short-term line of credit to meet obligations to crew and vendors. “Still, he said, “agencies and clients somehow expect us to continue extending ourselves in this manner–and we simply can’t anymore. Business practices have to change.”
Through the industry grapevine, SHOOT obtained a copy of an Association of Independent Commercial Producers (AICP) memo issued to member production companies in October. The document contains thoughts and recommendations regarding business practices in response to the worldwide economic tumult. Front and center was the 75-25 payment guideline which the AICP memo read, “needs to be discussed with the agency or advertiser directly and up front.” (Back in late ’06, the AICP national board changed the organization’s guidelines relative to payment schedules. The board decided to replace the longstanding 50-50 and 50-40-10 plans with a recommended 75-25 arrangement whereby the first billing would be 75 percent of the contract price on a job, helping to address the agency/client slow payment and production house cash flow quandary.)
Also covered in the recent memo was the aforementioned topic of sequential liability and the fact that this was the number one reason given by agencies for late payments, according to an AICP membership survey.
In the memo, AICP president/CEO Matt Miller wrote, “I would venture to guess that we will see more agencies including in their contracts strict terms, which include sequential liability, meaning that the agency will only meet the payment terms that they have agreed to if the client has paid them; otherwise, you must look to the client for payment.”
In this scenario, the memo advised production houses to make sure that:
• The client has an “agent relationship” with the agency.
• The client has committed to the terms of the contract that you have negotiated with the agency.
• And the client is aware of the payment terms and is committed to meet them, if the agency doesn’t.
These three suggested points are best accomplished, continued the memo, by having the advertiser countersign the final contract along with the agency.
Like the 75-25 guideline, these recommendations relative to sequential liability have been espoused by the AICP for some time.
Indeed AICP’s position on sequential liability has been chronicled over the past several years in SHOOT, perhaps most significantly with the issuance of a guideline in December ’04.
The October ’08 memo from the AICP went on to advise production houses to evaluate risk when entering into an agreement, including how to do business with those parties that you feel may have trouble meeting their obligations.
If you have doubts regarding whether or not a client can meet its financial obligations, the memo reads, “there is no reason why you can’t secure assurances that they can do so.” The document then went on to suggest that such assurances could be achieved by:
• Getting 100 percent payment for the job up front.
• Having 100 percent of the payment put into an account that is specified for your production (with proper documentation outlining the terms of disbursement of the funds).
• And/or requiring other written assurances that would put you in a strong collection position legally if a company were to go bankrupt.”
The memo noted that while these may seem like drastic measures, they will not be foreign to advertising agencies or advertisers. Similar measures are outlined, for example, in a book written for agencies and published by the American Association of Advertising Agencies (AAAA) entitled Controlling Risks When A Client Is Financially Distressed.
In the AICP memo, Miller conjectured, “In times like this, I would think that all agencies are evaluating the stability of all of their clients.”
The memo further noted that the AICP will be making these risk evaluation points in statements to the industry and to individual agencies and clients, as appropriate.
“But the only way,” cautioned the memo, “that you [production houses] will be covered and you will secure these safety measures is if you discuss them up front, and are firm about insisting on these prudent steps during the course of booking a job.”
Labor front 2008 also saw the ad industry and actors unions buy some additional time for a new commercials contract covering TV, radio, the Internet and other new media. The current pact was set to expire at the end of October ’08 but all parties agreed in August to a six-month extension through March ’09.
The fervent industry hope is that a fair agreement can be reached next year, averting any labor strife. Back in ’00 the Screen Actors Guild (SAG) and the American Federation of Television and Radio Artists (AFTRA) held a six month strike against the ad industry that drove work out of the U.S. With the current state of the economy, the conventional wisdom is that cooler heads will prevail at the negotiating table this time around.
But that contention isn’t foolproof as evidenced by SAG being at odds with the Alliance of Motion Picture & TV Producers (AMPTP) on a TV/feature contract which expired earlier this year.
At press time SAG announced that strike authorization ballots against the major television/feature studios will be mailed to union members on January 2 and then tabulated on January 23. A yes vote by 75 percent of members voting is required to pass the measure, which would authorize SAG’s national board of directors to call a strike against the AMPTP studios, if and when the board determines it is necessary.
At the same time, there is dissension within SAG’s ranks. A faction of the Guild urged the union to suspend an upcoming vote to authorize a strike. “Our members and our industry are struggling through the worst economic crisis in memory,” SAG’s New York board wrote in a released statement. “While issuing a strike authorization may have been a sensible strategy in October, we believe it is irresponsible to do so now.”
The New York board also called for SAG’s national board to hold an emergency meeting to put new negotiators in place to work with the AMPTP to reach an agreement. In its statement, SAG’s New York board contended, “With a fresh [SAG negotiating] team, the AMPTP will return to the table, and we can get a fair deal. A deal that will not cost careers, homes, lives. We want our members to understand that while strikes are sometimes unavoidable, we will do everything in our power to avoid this one.”
Word is that an emergency meeting will be held though a date and location were not known at press time. Suffice it to say that there is a major split between SAG’s Hollywood leadership and an influential core in New York.
Back on the commercials front, a key element in reaching an agreement will be a study jointly commissioned by the advertising industry, SAG and AFTRA to explore new compensation models for actors in order to best deal with the growing prominence of ads on the Internet and new media.
Bright ideas Enough talk of contracts and economic doom and gloom. The fact is that even in tough economic times, good ideas still emerge and find a way to get made–and these ideas can take a 360 ride, communicating across different distribution platforms. Furthermore, progressive agencies continue to redefine themselves, a prime example being SHOOT’s choice for both Agency of the Year and Top Interactive Shop of ’08–Goodby, Silverstein & Partners, San Francisco (GSP).
In a joint letter reflecting upon what 2008 has meant for GSP, co-chairmen/creative directors Jeff Goodby and Rich Silverstein wrote, “This was the year we decided we should no longer be an advertising agency. In fact, no one should be an advertising agency. They just don’t know it yet.
“Instead, it turned out we should be something that leads our clients to create and embody popular culture in the world at this point in time. Something that puts them into mainstream media well beyond advertising.”
That mainstream placement–continuing in the longstanding “Got Milk?” tradition–certainly was realized in ’08 on behalf of several GSP clients, deploying traditional and interactive media, including the Haägen-Dazs campaign on the decreasing honey bee population, This campaign included the lauded TV spot “Opera” in which a bee and a flower prove to be star-crossed lovers, offbeat viral dance videos, a website where people could learn more about the plight of the bees and print ads that grew into flowers when planted in soil. The campaign and the honey bee issue generated coverage in hundreds of newspapers and magazines, on TV and cable shows. And Haägen-Dazs execs even testified in June before the U.S. Senate about the declining honey bee population and its impact on their business and the food chain at large.
Other notable GSP creations in ’08 included the NBA playoff’s split-screen campaign (which inspired a Saturday Night Live parody, a bit on funnyordie.com and a Time Magazine cover with the concept applied to the rugged Democratic presidential primary contest between Barack Obama and Hillary Clinton); the scary Hotel626.com website to promote resurrecting old flavors from the dead for Frito-Lay’s Doritos; and the California Milk Advisory Board campaign which introduced lead rock performer White Gold (a spandex-clad star brandishing a guitar full of milk) and his Calcium Twins posse. The act was launched on a MySpace page and went on to have five songs on iTunes, three full length music videos and thousands of 12 to 17-year-old fans who thought the band was real.
Assorted work from a wide range of ad shops also made its mark in ’08. Consider the recent Nike “Fate” spot out of Wieden + Kennedy (W+K), Portland, in which two youngsters are destined to meet on the pro gridiron–running back Ladainian Tomlinson and linebacker Troy Pomalalu. Also from W+K came the ’08 Super Bowl favorite for Coca-Cola, “It’s Mine,” in which Charlie Brown (in the form of a Macy’s Thanksgiving Parade balloon) finally wins one. Another Super Bowl score came compliments of Grey New York in the form of the E*Trade “Baby” ads which also became viral favorites. Cut from the same feel-good cloth as Coke’s “It’s Mine” was Discovery Channel’s “Boom Dee Ya Da” out of 72andSunny, El Segundo, Calif.
The elegant visual effects tour de force “Living Room” for the Audi A4 out of Venables, Bell & Partners, San Francisco, also made its mark in ’08, as did the series of moving still photographs featured in Canon EOS Rebel’s “Journey” from Grey New York.
As for web fare, consider the mini-documentary The Reverse Graffiti Project for Clorox’s line of eco-friendly GreenWorks cleaning products out of DDB San Francisco. The three-and-a-half-minute piece centered on Paul “Moose” Curtis, a pioneer of the art form known as “clean tagging” whereby dirt is cleaned off surfaces in public places to create shapes, designs, collages and words (through the use of letter stencils) that convey positive messages.
On the comedy front, there was the Cannes Gold Lion-wining Axe deodorant “Chocolate Man” out of Vegaolmosponce, Buenos Aires, and the atypical Crest toothpaste campaign, including the spot “Bulldozer,” out of Saatchi & Saatchi New York. And how about the Bud Light viral spot “Swear Jar” from DDB Chicago winning the primetime commercial Emmy Award in ’08? This marked the first time that a non-broadcast spot garnered the coveted primetime Emmy.
But the highest profile campaign that sustained throughout ’08 and proved to be historical as well was that for now President-elect Barack Obama whose brand was simply “Change.” Obama became the first African-American to rise to Commander and Chief of the U.S. by staying on message, fundraising at unprecedented levels via the Internet and by going more after small individual contributions rather than big-ticket donors.
Obama put a grass-roots organization in place that campaigned in neighborhoods throughout the nation and that helped to drum up the vote, getting the young adult demographic and those who previously felt disenfranchised to turn out to the polls on his behalf. Obama’s strategic team built an email/web social community of supporters that made them feel even more a part of the political process. This forward-thinking inclusion proved pivotal in what proved to be a successful push for the White House.
Digital transition
Campaigns designed to increase public awareness of the DTV transition set to take hold in February ’09 made their mark this year. Indeed the country is on the cusp of a new era in broadcasting, home entertainment and information access.
Meanwhile in the commercialmaking community, technological workflows and models were experimented with extensively in ’08. All-digital workflows emerged as more projects were shot with file-based, tapeless cameras, then edited, finished and distributed digitally.
Stay tuned!
Survey SHOOT informally surveyed a cross-section of industry folk in the production and post communities to get their varied takes on ’08. Two questions were posed to them:
1. What do you think was the most important industry lesson learned this past year?
2. What trends or developments were most significant in 2008?
Here’s a sampling of respondents’ feedback:
Pola Brown,
founder/executive producer,
Workhorse Media
2. There was an increase in jobs for new media, branded entertainment, and digital and interactive projects, which required creative involvement from beginning to end. I’m sure this trend will continue into next year, but these projects are often budget-challenged, despite the fact that client expectations are generally unchanged. In some cases, expectations are even higher than before because of advancements in technology. But that’s part of what makes this moment in the industry so exciting. We have the opportunity to find new, cost-effective solutions that satisfy the creative demands of the work. We need flexible and knowledgeable directors and producers who can find creative and efficient methods for working with smaller budgets and compressed deadlines, and do all of that in a collaborative atmosphere. Although we all are aware of our roles in the industry, the line between agency and production company is not as rigidly drawn as in the past. But we still need to satisfy the agencies’ needs and in order to do that, directors and producers also need to understand how to deliver in different forms of media. This means knowing about alternative ways of using media, which in turn means teaming up with different multimedia talent for various projects. The digital world is huge; it’s grabbing larger chunks of advertising budgets. We’re in the middle of a cultural phenomenon with a never ending and growing number of social networks that continue to play an enormous part in the distribution and seeding of the final product. Production companies are viewed as the in-the-know entities here, and we’re expected to share our insight and provide strategy and solutions with agencies on every job.
Alex Frisch,
co-founder/managing director,
Method Studios
2. Achieving greater efficiencies and flexibility have been recurrent themes of 2008. We’re seeing more Red Camera in production and about 90% of our commercials are now finished in HD. We can now create dailies from those files with our DCC division and are moving towards a file based system throughout the entire postproduction chain from transfer to edit to VFX and final color. VFX have also been used more extensively than ever before. Most commercials, even those that are not VFX intensive, are using VFX methods to cut costs and achieve greater flexibility.
Shrinking budgets have increased the pressure to deliver more with greater efficiency. Method’s recent collaboration with CO3 enables us to offer attractive workflow packages to agencies and production companies. For greater seamless collaboration, agencies now rely more heavily on the directors to follow through their helming all the way through VFX to the end of the post. Clients are finding our ability to offer up 3D capabilities that are 100% photo realistic increasingly attractive as productions are relying more heavily on CG created elements that cannot be shot for practical or budgetary reasons.
It is no longer enough to simply be a good creative house. We have to provide solutions. The ability to remain flexible and solve problems has become a huge factor for our clients. We need to be there for them, no matter what it takes. Our newly opened offices in New York and Paris and a new partnership in Tokyo, all increase our ability to provide global solutions to our clients no matter where they sit.
Chris Jones,
co-founder,
Zoic Studios
1. Diversification was, with out a doubt, the most important industry lesson learned in 2008. The television industry in general, and visual effects in particular, has under gone some remarkable challenges in the past year. We weathered a WGA strike that impacted episodic television across the board. The strike in turn slowed commercial production, with clients reluctant to embark on large-scale campaigns, which would ultimately be relegated to air during “rerun” primetime. Digital interactive was a struggle too, as we had great creative but with tiny budgets…. after all, it’s the web and not broadcast, right? Then just when everything starts to “look-up”– Boom. The economy takes off on its own wild ride and throws the best-laid plans into a tailspin. Oh yeah, and what’s that looming on the horizon — could it be a SAG strike? With this wild ride, survival depends on diversification, establishing an environment that allows clients to get the maximum return on their investment. Let’s face it, budgets are dropping across the board. The only way to truly service our clients is to analyze a project in its entirety and leverage the many different facets of our company (production, post, visual-effect creation, interactive) to create a unified project pipeline. This allows the client to seamlessly execute a consolidated campaign across a wide array of media, and enables each dollar spent to further the creative and quality of the campaign. Maximum creative for minimum dollars, one of the many reasons diversification is key to good health.
Ralph Laucella,
partner/executive producer,
O Positive
1. The most important industry lesson is that, even in tough economic times, good ideas still find a way to get made.
2. One thing we noticed–and we’re grateful for–is that the people who’ve always sent us good scripts continued to do so, despite the bleak economic news. Good agencies and good creatives continue to do good work.
Matt Miller,
president/CEO,
Association of Independent Commercial Producers (AICP)
1. One of the most important lessons the industry should take away from 2008 is that in difficult economic times, it’s more important than ever to adhere to sound business practices, including carefully evaluating risk, and protecting your business. We have always grappled with slanted contracts, and the industry still operates with a “handshake” mentality in many cases. Some may see this as an honorable — and even genteel — sensibility, but when dealing with instability in the marketplace it can spell R-I-S-K.
As the economy will most likely be in a state of flux for much of the coming year, production is certain to be affected, though we will not really know to what extent until we look in our rearview mirror in 2010. Advertisers will, as always, need fresh content for all media, especially to create appropriate messaging for their brands in these trying times. Experimentation with non-traditional media could be a boon for some, as dollars not spent on broadcast time could be channeled to develop interesting projects for digital media. That being said, corporate America is certainly tightening its belt, generally, and most will approach marketing plans conservatively. Don’t undervalue what you bring to the party!
Burke Moody,
executive director,
Association of Independent Creative Editors (AICE)
2. The gradual emergence of tapeless, all-digital workflows in television commercial production from the very well-established and reliable film-originated model has been a significant trend in 2008. File-based cameras like the RED and Phantom are proving to be efficient and cost effective tools for the television commercial production industry. The technology is stunning.
For the editorial house, the demands of file-based off-line and on-line prep have become technically challenging and time consuming processes and often change from one job to the next. Add to that, multiple camera shoots, more ‘footage’ in general, data integrity, backup, and archiving responsibilities, and the process looks a whole lot different than it did just a year ago. Some call it digital anarchy.
File-based work flows are challenging, largely experimental and likely to remain that way for awhile as the non-linear editor manufacturers, third party software developers and savvy editorial assistants and technicians play catch-up with the camera manufacturers’ development cycles. (The RED camera is still officially in beta and Avid signed its SDK licensing agreement with RED at the end of September, 2008.)
Editorial companies have the technology, software, infrastructure and expertise which they can apply to just about anything in the content creation space: film, tape and file-based media for the cinema, television, the web and mobile platforms. Most importantly their depth of advertising and marketing experience coupled with the creative process at the heart of the editorial profession means that editorial companies are likely to wield a broader influence over advertising and marketing content creation in 2009.
Stephen Orent,
managing partner,
Station Film
1. For me the most important lesson learned last year is there is no such thing as business as usual. And that has always been exciting, a fresh new canvas for everyone!
It’s a buyers market and you better be prepared to work your tail off to compete. You can’t reinvent what we do as production companies, but you can present yourself in a redefined way that shows the capabilities of your company’s talents and willingness not to conform. There are always 10 solutions to every production issue. Knowing which is the most intelligent and efficient way to achieve success is the most exciting and irresistible challenge we face! Shit man, if it was easy everyone would be doing it!
2. Hey, do you think you can shoot these two spots for $50? And do you think we can squeeze in the third? Well maybe the fifty dollars is an exaggeration, but you can’t make this stuff up. Come on, it’s fun! Bring it on baby–we’ll raise you one and add a fourth just for the David Blaine factor!
Frank Scherma,
president,
@radical.media
1. It is still about the idea. Start with a smart idea and then figure out the distribution platform. No longer is the assumption that it is for TV only. It is more likely to be distributed in as many different platforms as possible. Flexibility is key.
2. Everyone is talking 360 degree campaigns. Web, TV, Mobile phones, etc.
It is all about a great idea that can disseminate into many different distribution platforms.
Jerry Solomon,
partner/executive producer,
Epoch Films
1. Cheap, non-strategic ads don’t work, so stop making low budget, afterthought webisodes and viral videos as an “add-on internet component” to a broadcast shoot. It’s a waste of clients’ money. Instead of focusing on being on trend with new media, focus on the creative, strategic idea and give each execution, whether a TV spot or a viral film, the respect and attention it deserves. The let’s-make-something-for-YouTube and pray-for-a-winning-lottery-ticket tactic is not effective.
The lesson is to quit deluding ourselves (clients, agencies and production companies alike) that by virtue of seeding a film in cyberspace we are participating in the world of new media. Cheap add-ons not only devalue us as commercial filmmakers but, more importantly, they also are ineffective. Whatever money is being spent on these projects should be allocated to innovating creative strategies that speak directly to the continually evolving consumer.
2. The ways in which consumers receive messaging, interact with brands and tolerate advertising has evolved at a much accelerated pace. And the industry is losing the race to catch up. On a positive note, though, there are a number of really innovative thinkers and companies out there cracking the code.
Stefan Sonnenfeld,
co-founder/colorist,
Company 3
2. In 2008, the advertising and media space underwent rapid change.
Advertising in traditional media continued shrinking – but not as fast as people expected – and new media advertising continued to grow.
The media and entertainment business is now more global than ever whether in production, post, technology or distribution. In 2008, remote collaboration continued to become the standard way of doing business. The current economic climate is making it difficult for most businesses to invest in product development. Through CO3’s unique partnership with Method Studios, we’ve developed technology to support global connectivity and collaboration and also to enable fulfillment in a scalable and cost effective process for our clients. We believe the ability to offer the most technologically advanced solutions combined with a roster of the best talent in the business are the best defense in these tough times. In addition, 3D is now becoming the new differentiator for theatres and home video.
In 2008, we also saw new media channels emerge and become practical platforms for watching video, for example–richer DVD’s with interactive and add-on content, high quality downloads, new technologies for TV that require higher quality video, and cell phones and mobile devices are taking advantage of 3G and DMB technologies that allow people to watch video anywhere and offer opportunities for new forms of content suitable to the small screen.
As new business models continue to emerge, there is a growing need for flexible and integrated solutions across all postproductions services which offer fresh, out-of-the-box thinking, greater efficiencies and cost savings.
Sila Soyer,
executive producer,
Outside Editorial
2. This year found more and more of our clients shooting on RED, which meant having to adapt our current workflows, and at times, create new ones, in order to work with the media from offline to finish. In fact, the established workflow evolved with each project because RED was so great about rolling out regular updates, making things easier and easier for us on the post end. I think clients were initially nervous about working with RED, but once they saw the footage and knew we could work with it without any additional hassle for them in post, they seemed to feel more comfortable making the leap, especially with projects that it really made sense for.
Aside from production budget implications, what this new technology has meant for editorial and post is having the ability to start work immediately, without having to wait for dailies to be transferred. At times, it can mean having more footage for the editor to work with, sometimes leading to additions of versions or supplemental web content to be edited; as well as having more flexibility in terms of color/look, blow ups, repos, etc. You can change the ISO on a shot after the fact, or easily tweak color right there in the offline even just for a rough cut going to the client.
