Advertising's backroom boys take the battle to the marketing front

Madhu Lal (not his real name) is a worried man. Over the years, this producer of advertising films has had to deal with multiple issues from kickbacks, to getting reimbursements without delay from the same ad agencies, who entrust producers like him with the job of executing advertising films.

 

But over the last couple of years, production houses have had to contend with the, relatively newer, elephant in the room – Agency-Owned Production Houses (AOPH). 

 

AOPH, as the name suggests, are in-house production houses owned by the large agency networks. WPP has Hogarth, Small Fry, while IPG in India has in-house production houses with both Mullen Lowe Lintas Group and FCB India having their own offerings. The Publicis Groupe has Prodigious.

 

In recent times, as ad agencies find the creative services pie shrinking, the problem has only got worse for the independent film producers. The West has already tilted in favour of AOPH. In countries like the US and France, it's estimated that more than 70 percent of film production is done by the AOPH. In India, it's exactly the opposite. ASAP executives claim that their members are responsible for more than 90 percent of the films made by the ad industry.

 

While the launch of the AOPH is not a recent development, why are the ad film producers, especially the smaller ones, now crying foul?  

 

Over the last ten days, the Association of Advertising Producers (ASAP) with more than 80 production houses as its members, has shot off letters to more than 100 clients alleging unfair trade practices by the AOPH. The list of CMOs who have received letters from ASAP is literally a roll-call of leading marketers from Amazon and Bajaj Auto to Coca-Cola among others. The letter accuses the AOPH of having a "clear and dangerous advantage" in the way they go about doing their business.

 

The genesis of the problem is the dwindling ad agency revenues from traditional creative services. Ayesha D’Silva, a producer who is unwilling to disclose her real name, says, “Two years ago, agencies were facing the headwinds as their creative business was going down. They decided that the weakest link is the production houses and decided to start production houses as clients are sitting ducks…,” she says

 

However, this is where the game started getting murkier. In the past, while agencies required a film to be made, they would outsource the production to a film maker after receiving three competitive bids. Then, agencies would take a call on behalf of the client and choose the production house best suited for the task on hand. “But the referee decided to be a player while continuing to be the referee,” says D’Silva.

 

This has resulted in agencies trying to manipulate bids. The letter addressed to CMOs states, “Most Advertisers require for every project to have at least three bids/quotes. Unfortunately, all quotes are submitted to the Agencies before the shortlisted ones are shared with the Advertiser.

 

This confidential information also gets passed on to the AOPH, which then has access to all these competitive quotes, directors’ treatment notes, location pictures, design elements and everything else that helps them manipulate their own bids and treatment notes to cheat advertisers and manipulate their preferences." 

 

The letter further states: "It is also not unheard off that some very high-ranking bosses in some Network agencies have mandated creative directors from their teams to ensure increased billing via AOPH, thereby sacrificing any scope of them seeking fair deals for Advertisers and/or best talent in the industry. Further, to keep reputed Independent Production Houses away from the bids, some Network Agencies are suspected of misinforming their clients about the director’s interest and availability to promote their Inhouse Production Companies. There have been cases where some of the Network Production Companies have misguided Independent Production Companies about the budget, which then portrays the Independent Production Companies in bad light thereby diverting projects to some of their Network AOPH. There are numerous cases of Network agencies insisting on doing co-productions, demanding a percentage of profits, kick-backs in the garb of agency commission.”

 

However, the battle for the film production houses is a long and uphill one. First, unlike ad agencies, most of the smaller film producers do not have a direct line of access to the CMOs. “There is a misnomer that film producers and the business of ad film making is flush with cash,” says an office bearer of ASAP. But the reality is different, he says adding that the threat from AOPH is a global one, that’s now rearing its ugly head in India. But the early signs have been heartening. Some CMOs have reportedly asked their agencies to explain. There is support pouring in for ASAP from its counterparts in the UK, France, South Africa and the USA.

 

Campaign India has reached out to agencies that own production houses for their comments.