By Invitation Only: Downsides of in-house production
by Bobby Amm. Using an ad agency’s in-house production company (IHPC) may be an appealing option. With the apparent cost-savings and the convenience of a one-stop shop, what business person wouldn’t want to try it, especially when the costs of producing low-end work are often too high? But, looking deeper into the matter, any advantage to using an IHPC on mid-to-high-end projects may be a short-lived one.
1. It kills quality and competition
When using a specialist commercial production company, clients have access to the best creative professionals in the industry, with over 100 directors locally available.
When using an IHPC, clients’ choices are limited, especially since an in-house director is already on the payroll. This also creates a tricky situation for clients, because the IHPC is likely to propose its in-house director, not the best one for the job.
Competition-wise, the most-controversial dilemma is that agencies with IHPCs often fill the role of both player and referee: sending out calls to production houses for pitches, and sending in their own pitches for the same job. Because of the conflict of interest in these cases, many commercial production houses refuse to pitch to these agencies for these jobs. This doesn’t only reduce the competition but, with fewer companies pitching, it also affects quality.
The relationship between agencies and commercial production companies is a driver of quality for the client. By continually pushing production houses to deliver more, agencies may deliver a better commercial at no extra expense. But, with the cost of that production pressure on its IHPC, would the agency push with the same force?
2. It costs more in the long run
In the short term and on paper, an IHPC may look cost-effective. But once it’s operating at the same level as a commercial production company, its business expenses are likely to rise. This is because a production company benefits from less downtime and greater efficiencies of scale, as it works with many different clients and agencies at once. An IHPC, however, only produces for one agency: itself.
The IHPC model has put immense pressure on production companies, forcing some to downscale or go out of business. With fewer production houses comes less competition and, in the long run, a lower commercial production standard across the board; however, this isn’t just a quality issue. Less competition also means higher costs for the client.
As Steve Davies, CEO of London’s Advertising Producers Association, said at 2017’s Advertising Week, “In any over-competitive market you cannot put your prices up. You have to bid as low as you can to win the work. That’s what clients should take confidence from.”
3. It’s eating away at the industry
We’re living in tough economic times, so it makes sense that agencies would broaden their scope for financial reasons. Yet, if you look closely, this approach is short-sighted as the upper hand only lasts as long as competition exists. If production companies disappear, the costs level out (or become higher) and the standard is lower, crippling the entire industry.
Furthermore, production houses also play a critical role in developing new talent by investing in young directors and other production specialists, mentoring them, and building their careers. With only profits in mind rather than the industry as a whole, the IHPC model doesn’t offer the same nurturing depth and ‘the common good’ falls away entirely.
Keeping up in a changing market
The commercial production industry is constantly working to stay relevant and profitable in an evolving market. We’ve seen some companies close down because of an unwillingness to rethink their business models, which means that keeping up in a changing market should be top priority. In a world of large businesses saving costs by outsourcing services to specialists, it seems backward, and even dangerous, for the commercial production industry to be dragged in the ‘wrong’ direction by agencies looking to make a quick buck.
Bobby Amm is chief executive of the Commercial Producers Association of South Africa (CPA), the trade association of production companies that produce television, cinema and internet commercials for the local and international market. After a brief stint in journalism, she began her career in the industry at the Consultative Committee for the Entertainment Industry in the early ’90s. Bobby first joined the CPA in 1997 but left three years later to join a production company. After finding that she missed the big-picture perspective of the CPA and the interesting issues which continuously perplex the production industry, she made the decision to return to the CPA in 2003.
“Motive” is a by-invitation-only column on MarkLives.com. Contributors are picked by the editors but generally don’t form part of our regular columnist lineup, unless the topic is off-column.