AICE–the trade association with members spanning independent creative editorial, design, VFX, color grading and audio post houses–has issued a policy statement that raises questions and concerns about the business practices of many ad agency in-house postproduction operations.
Rachelle Madden, executive director of the AICE, said the policy statement is designed to raise client awareness of the situation which she called “patently unfair.” Madden related that “agencies with in-house facilities have essentially been transformed from being the clients of AICE companies to being their competitors. And they’re competitors who get to look through our bids and treatments, which no outside vendor should tolerate. In addition, agencies are practicing what are essentially deceptive business practices in their request for ‘check bids.’ There is a serious lack of transparency throughout this process and we felt that unless we brought this to the attention of the client community, nothing would change. We’re not expecting agencies to shutter in-house facilities; we understand why they exist and we are prepared to compete with them for the work. But we want to compete fairly.”
The AICE defines the aforementioned “check bids” as ostensibly competitive bids which agencies ask for from independent post houses to submit to clients for comparison. But the AICE contends that under these circumstances the agency often intends to keep the edit/post work in-house and has no plans to award the project to the participating independent company, merely using the “check bid” as a way to meet the client prerequisite for multiple bids.
Madden reasoned that raising awareness on the client side could help to level the competitive playing field as clients will hopefully “insist on a greater level of transparency when it comes to how the postproduction of their marketing communications materials is handled.”
Towards that end, the AICE sent its policy statement to the ANA (Association of National Advertisers). According to Madden, the AICE has been invited to get together with the ANA Production Management Committee at its next meeting scheduled for New York in November. Bill Duggan, ANA’s group executive VP, wrote about the AICE policy statement in the Marketing Maestros blog this week on the ANA website.
The AICE initially touched upon some of its concerns about in-house agency edit/post units as part of a September 2013 policy paper which provided an overview of ad industry postproduction business practices requiring attention. But that aspect of the document flew under the radar, acknowledged Madden, as industry reaction instead focused more on the extended payment issue, including sequential liability clauses which stretch out payment terms 30 to 60 days or more. The AICE thus decided to now release to its membership and the client community a more detailed policy statement specifically addressing the agency in-house edit/post situation. The creation of this latest document, Madden noted, was spurred on by the situation becoming somewhat more urgent “as an increasing number of reports have been coming in about the serious lack of transparency as well as the deceptive and potentially illegal business practices on the part of many agency in-house facilities.”
While the new AICE position paper was distributed to AICE membership, the ANA and AICP president/CEO Matt Miller, it was not sent to ad agencies. “Our reasoning,” explained Madden, “is that they’re aware of their business practices and have so far done little, if nothing, to revise them.” Instead, said Madden, the main AICE goal is to reach the client side.
SHOOT reached out to some members of the agency community and had not received feedback at press time.
Policy Statement
Here is the full text of the AICE’s recently released policy statement on agency in-house postproduction titled “A Push for Greater Transparency, Ethics and Fairness”:
"The proliferation of in-house editorial and post services offered by ad agencies is an area of growing concern for the independent postproduction community. While these capabilities have been available for some time, the business practices surrounding their current implementation and their impact on agency clients and the independent postproduction community has motivated AICE to raise questions about transparency, ethics and fair competition for advertisers, agencies and the industry at large.
"Despite being touted by agencies as efficient ways to edit and finish work faster and cheaper–a claim not always supported by facts–in-house facilities exist largely to create additional revenue streams for the agencies themselves.
"The presence of these facilities has in many cases transformed agencies from being the clients of AICE members to being competitors, and competitors who have gatekeeper access to our bids and our creative strategies for handling client work as well. This unfair advantage alters the relationship that existed between companies that served as the agents for their clients and those that functioned as vendors to those agents. As such, our concerns can be summarized as follows:
■ "Transparency: We believe some marketers are not fully aware of what they’re getting when their work is completed at agency in-house facilities, or whether the use of them represents the best option to ensure the best final product and the best talent for their money.
"Further, the bidding process is not always done in the open, with clients fully aware of the ownership status of the companies submitting the bids. (Some agencies use generic and unrelated names to brand their in-house facilities, which can mask the fact that they’re wholly owned by and housed within the agency.) We believe in-house facilities should clearly identify themselves as such when bids are submitted to help ensure that the bidding process is done in a fair and upfront manner.
■ "Ethics: This pertains to the rampant request for 'check bids,' in which agencies ask independent post houses for ostensibly competitive bids which they can submit to clients for comparison. Typically they have no plans to award the work to the independent company and are merely using the 'check bid' as a way to satisfy client requirements for multiple bids.
"AICE contends that requests for these ‘check bids’ is a corrupt and potentially illegal practice its members often feel coerced into cooperating with for fear of alienating an agency and thereby risk being blacklisted for future jobs.
"Beyond that, the in-house model allows the agency to analyze, assess and design their bid based on an unfair advantage. It would never be considered appropriate for a company to share external vendors’ bids with each other, so why should one ‘vendor’ (i.e., the in-house agency) be allowed to craft its bids knowing what its competitors are doing? Are agencies using this information to ensure their bids come in under those from independent companies?
■ "Neutrality: For agencies to steer work to in-house facilities is perceived as an overt conflict of interest and raises questions about how potential problems will be addressed should they arise. For example, are clients and consultants satisfied that there are appropriate means of resolving overages on in-house jobs? And how will the in-house facility address creative or technical problems, or deal with risks or liabilities?
"Further, is the agency incentivizing its senior staff to keep work in-house via awarding them bonuses based on jobs they ‘award’ to their in-house facility, which can corrupt the objectivity of the process and smacks of kickbacks? If the creative and production team had its choice, would they work with the in-house facility, or go to an independent editorial or post company?
■ "Competition: Honest competition promises a better product at a lower price. Are clients getting the best possible solutions, the widest array of options and the full breadth of services from in-house facilities as compared to independent companies? Can in-house facilities compete for the level of talent many independent companies offer? Are they willing to properly invest in cutting-edge technology to ensure that they stay competitive? Does the limited diversity of work often seen at in-house facilities foster in-bred creative solutions?
"AICE’s position is that transparency can be adversely impacted when it comes to dealing with in-house operations. As such, we believe clients should insist on seeing unaltered, originally-submitted bids for every project. When appropriate, they should demand to see treatments (particularly in the case of complex jobs requiring visual effects and design services) as submitted, insist on knowing who will be the lead postproduction artist or artists on their project and consistently review their work.
"AICE is determined to educate the client community on the ramifications of using agency in-house postproduction facilities, the inherent conflicts they present and the impact they have on their ability to get the best possible product at the best price. Our goal is for clients to be able to make informed decisions about where their commercial content should be finished, and by whom."
