While General Motors has been the beneficiary of federal relief in the form of tens of billions of dollars, the Association of Independent Commercial Producers (AICP) is asking the Obama Administration for another form of federal relief–from the business practices of GM.
For the AICP, the prime objectionable practice is the automaker’s requirement that production companies on its commercials agree to a net 60-day payment schedule. This in effect puts small entrepreneurial spotmaking houses in the position of having to bankroll GM projects in order to get the business. Fronting money in this manner–particularly for a production company involved in jobs for not only GM but also other clients–would be tantamount to financial suicide, according to the AICP.
In that taxpayer dollars have made the U.S. government a 60 percent owner in GM, Matt Miller, president/CEO of the AICP, wrote earlier this week to U.S. Treasury Secretary Timothy Geithner, informing him of GM’s payment policy and its profoundly negative implications for the commercial production community, which consists of small businesses that don’t benefit from the oft-cited “too big to fail” rationale that has rescued GM.
Accepting deferred payment terms as a condition of working for a client, wrote Miller, is unacceptable in a business where the norm calls for 70 to 75 percent of a production budget to be spent either prior to the project commencing and/or no later than 10 days after the completion of the film shoot. On average, pointed out Miller, 55 percent of all costs of a production are paid directly to labor.
Miller explained in his correspondence to Geithner, “Production companies secure locations, make commitments to a myriad of vendors, and hire many freelance employees (most of whom are members of various unions, working under collective bargaining agreements) to ensure that a client’s marketing vision is brought to life. Under the payment terms that GM is requiring, production companies will be unable to meet their obligations for individual jobs, not the least of which is to pay labor within the time frames prescribed by state labor codes.”
Miller went on to write that “while AICP member companies have credit lines, they are not meant to fund corporate advertisers’ production needs. Rather, they are there to help the normal needs of a small business. GM’s new terms would require third party funding in order for the commercial work to be successfully completed. Additionally, maximum economic value is realized when clients fund their own advertising production. Turning to third party financing–presuming it can be secured–would likely come from speculative sources at high interest rates. Under the GM payment terms, production companies would be acting as interest-free banks, as there seems to be no willingness on GM’s part to pay any sort of finance charge.”
According to the AICP, GM can–and should–be operating as a model turnaround company, respecting small and large businesses alike. “Conveying the new vision of GM,” wrote Miller, “will require skill and ingenuity in the creation of its marketing communications. To achieve this, they cannot approach it with a heavy handed, belligerent attitude towards vendors that provide vital and unique services.”
Miller contended that “it seemed disingenuous that the government [as the majority owner of GM] would condone or take part in the exploitation of small businesses. This is counterproductive to a successful GM, harmful to the tens of thousands employed in this industry, and sends a very poor message to business.”
The AICP president/CEO concluded by urging Geithner and Ron Bloom, senior advisor of the Automotive Task Force, “to seriously examine this and other payment practices by GM, so that the American people are assured that their government’s foray into corporate ownership remains responsible and beneficial to all.”
R/GA Goes Independent In Management and Private Equity Partnership
Interpublic Group (NYSE: IPG) has sold R/GA, the creative innovation company, to Truelink Capital, a private equity firm with a track record of investing in tech-enabled services. Financial terms of the deal were not disclosed.
The move thus marks R/GA’s return to independence as a privately owned company after 23 years as part of IPG. R/GA’s global management team and Truelink Capital have formed an indie partnership. R/GA’s global CEO Robin Forbes and chair & global chief creative officer Tiffany Rolfe are two of the global leaders, together with others, who are investing in the company as part of the deal. R/GA’s next chapter will be fueled out of the gate by a $50M Innovation Fund, enabling the company to invest in new skillsets and talent, and acquire new capabilities, emerging tools and platforms. Additionally, R/GA has established a Strategic Advisory Council of senior marketing and technology executives to support emerging AI client transformation opportunities across multiple sectors.
As an independent company, R/GA is activating an AI-enabled model to better serve clients, unburdened by the restrictions and overheads of traditional corporate structures. New remuneration models based on outcomes, agile new team structures, and scaling up its flexible talent model “R/GA Associates,” are among the initial changes being implemented.
“Today is a landmark moment for R/GA, as we enter an exciting new chapter as a private company supported by our new partners at Truelink Capital. This announcement also signals a stark contrast to a wider trend towards consolidation in the agency business. Most agencies will struggle to make the pivot in this new age, especially at a time when they’re operating within complex agency... Read More