Prasad Sangameshwaran
Apr 17, 2019

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

Conflict of interest and insider trading are just some of the charges that independent production houses are leveling against in-house production houses owned by ad agencies

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.  
 

Letter by ASAP to CMOs 

This is probably the first time ASAP (Association of advertising Producers of India) is reaching out to you. A self-regulating body, ASAP has 82 independent production companies as members handling more than 90% of the work in the advertising industry.

It is with great concern we inform you of the emergence of certain Agency-Owned Production Houses (“AOPH”) and the damage they are causing to the advertising industry as a whole. It is a normal practice in the industry that Advertisers engage Advertising Agencies to creatively develop the concept and engage an efficient production house/production team to produce the advertising film and execute the project. The Advertisers invest their faith in the Advertising Agencies to hire a production house that would justice to the creative idea and the cost. A simple and efficient process that has worked well for all.
 
But the emergence of AOPH changes all that. An AOPH has access to every information, including the competitive bids from independent production companies. They have a clear and dangerous advantage. If reports from around the world are to be believed, AOPHs are breaking rules to solicit business.
 
It is important to highlight certain unethical & mal-practices, which are being implemented by some of the Network & Marketing Agencies so as to promote the Production House owned/controlled by them.
 
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.
 
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 Avertisers 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.
 
The list of malpractice is long and quite murky. This has been a worldwide issue for quite some time now. One of the world’s leading Advertising Networks have been closely watched and, in certain instances, suspected of unethical practices.
 
As you may be aware, a scandal, which erupted in December 2016, on the possible existence of misconduct in quote-price fixing for the production and post-production of commercials in the USA, caught the attention of the Department of Justice. Similar cases have been uncovered in the UK, France, South Africa and quite a few other countries where in-house production is becoming a menace for the advertising and marketing industry.
 
The Independent Commercial Production Houses in India have played a huge role for close to 50 years in shaping the advertising and marketing industry by infusing immense craftsmen/women and creative talent thereby playing a key role in creating some of the finest brands in India.
 
As an industry body we believe in fair trade and vehemently oppose unethical practices. We hereby urge the advertisers to look deeper into these issues and support and adopt transparent process thereby benefitting immensely from the same.
 
We further propose Advertisers ask their network Agencies to invite tenders on an arm’s length basis without any unfair trade discrimination, and are not permitted to submit or invite bids from their AOPH. Incase such bids are unavoidable by advertisers we suggest implementing a closed tender process to offer a level playing field which will be in the larger interest of the Advertising Industry.
 
AOPH practices work against the Advertisers’ interests, as they stand to gain more from an open, transparent competitive system.
 
We strongly believe that an AOPH is incapable of operating fairly. 
 
And that’s why as a responsible industry body, ASAP calls upon all Advertisers to strongly insist on the practice whereby Agencies undertake not to propose, either directly or indirectly, their In-House Production (AOPH) when the Advertiser initiates a call for tender.
 
ASAP members legitimately deem such procedures, to be unethically and unfairly beneficial only to AOPH and hence tendering for them would be against the interests of the industry.
 
Warmest Regards,
ASAP Executive Committee

Source:
Campaign India

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