An obviously-logical yet seemingly-audacious opportunity for creative agencies to enhance business worth and industry stature is to integrate the Film Production business within their fold. It is the last mile in the value chain, the fulfilment of the ideation process owned zealously by the agency, historically outsourced in times quite different from ours. To be successful and sustainable, such a move must be truly win-win, protecting the interests of the client, the directorial talent and of course the creative agency itself.
There are many valuable reasons why such a marriage will be immensely worthwhile for the creative agency starting with the most staggering aspect of margins. It is public knowledge that most agencies in retainer mode work on a margin of 7%-15% rarely extending to 20% while it is equally public conjecture that most production houses work at a margin of nothing less than 50%, having successfully convinced the client network to pay such premium. In absolute value as well, in my historical experience, most clients pay more for Film Production than for agency retainers, in some years the difference can be three or four times as much. For example, a client paying a perfectly healthy monthly fee of Rs 10 lakh to an agency will usually spend more than one crore towards the development of TV and print content, for a launch year, for a busy category that figure goes up considerably. So, quite suddenly, the top-line revenue for an agency goes up from Rs 1.2 crore per year to 2.5 crore or even 3 crore with margin percentage rising from say 12 % to at least 30% or even more depending on the turnover in production. Thus from a top-line and a bottom-line perspective, this is an absolute no-brainer, the financial health of beleaguered P&L accounts receiving a valuable infusion of vitamins.
Equally importantly, such a move will add considerably to the stature and credibility of the agency as the final outcome is a truly-integrated agency product, not at the mercy of expensive outsourced directorial talent. During my tenure in the industry, I have witnessed the dependence of creative directors on the production houses increase dramatically, at times the final shape of the craft relying largely on their skills in treatment and execution. Smart clients recognise this and often forge powerful relationships with the directors, effectively diminishing the agency’s role further, what helps is the Bollywood-like perception of many such exponents usually en route to feature films rather rapidly. It is also important to note that the ‘production management’ skills of such houses are usually commoditised and not unique, depending largely on a common pool of talent and location units, so the real premium is for the director, DOP and music director. Agencies can usually develop in-house divisions to manage this function while depending on a dedicated-freelance model for fine talent, like the Healthcare industry.
Now comes the question whether clients will be comfortable with this arrangement, the answer for me is a resounding yes, subject to a few conditions. Firstly, there has to be sufficient choice in directorial skill and calibre, this logic extending to the DOP and music as well. Imagine this to be a specialty hospital where on a foundation of basic services, including diagnostics, technology and operating facilities, you actually get a choice of surgeons, with variable pay depending on experience and star-status. Then the agency management must convince the client that this will lead to greater accountability and ownership without compromising on skill, few will find sufficient reason to dispute this. Quite surprisingly, in my assessment, the key talent currently aligned to production houses will also find this irresistible, the direct association with an agency leading to a further hike in the worth of Personal Brands, the main calling card of the Entertainment industry. The reputed director will not have to share credit with two banners, the production house and the advertising agency, now it is just the latter. Production houses will be livid but do remember an important premise of this discussion that production services are not the source of value-addition, being largely outsourced, what matters most is the skill of key talent.
The final barrier is agency leadership in being able to envision and execute a move as such, the most approachable shortcut for a dynamic growth path, in an era of immense growth for ad films given the digital era especially. Outsourcing was a pattern from the 1970s and 1980s when agencies were genuinely full-service, including media, and did not have time or tenacity to invest in film production, that deemed to be suitable for specialists, who ironically for the most part were ex-agency staffers themselves. When media is segregated and the entire focus is on ‘creative’ output ‘in-sourcing’ needs to be urgently considered, for both profits and stature. In a logical sequence of first convincing clients, then enlisting key freelance talent, or in certain cases taking entire production houses onboard, in an attempt to provide truly integrated solutions, like the healthcare business it does not matter if the same hyper-talent is being deployed by multiple agencies. To me, with conviction and resolve and ideally in conglomerate mode, leading creative agencies finally uniting to implement this practice, such a practice will be truly successful. One note of caution though, at no point should the conversation veer towards under-cutting else the entire long-term purpose will be lost.
(Shivaji Dasgupta is the Founder of INEXGRO Brand Advisory and can be reached at: email@example.com)
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