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Reports&
surveys

Corporate 50 2010 Back to Reports & survey Listing

On the upward curve?

Unsurprisingly, it’s been a less than joyful year for corporate communications companies with the recession now firmly hitting the bottom line for most. But there is a feeling that the worst could now be over and the long climb uphill can begin in earnest. Jon Creamer reports

It won’t come as a huge bolt out of the blue for anyone in the corporate communications business to state that 2009 was a particularly tough year. It was the year that the downturn really hit home. Though recession has been a fact of life for some time, the response in last year’s Corporate 50 survey was of an industry still awaiting the axe to really fall; living on work, and on budgets, set by clients before the realities of that recession had truly set in. Budgets and turnovers remained relatively steady. This time, though, the downturn has definitely made itself known.

According to our survey, the average corporate communications company’s turnover has dropped to £3.9m from last year’s £4.3m, average profit has dropped from £277k to £251k and the average budget for a film or video project dropped from £32.6k to £28.8k.

There seems to be a general feeling within the sector though, that the base of the downward curve has been reached and that, very slowly, things will begin to improve as the year goes on. “Right now, this is the bottom of it,” says Jack Morton md Julian Pullan. “Economies are like oil tankers; they take a long time to stop and when they do they take a long time to start again. At the moment we’re in that stationary period.” There is certainly a cautiously optimistic mood with many seeing the outlook as positive. “Things seem to have improved in the last three months in terms of enquiries becoming actual projects,” says Big Button md Mark Burgess. “We are extremely positive about the coming year.”

“Things slackened off late 2008 early 2009,” adds Big Yellow Feet md Gregory Mandry. But “business seems to be picking up now.” That’s not to say that everything’s rosy. Most agree that the public sector work that has kept much of the market afloat in recent times is about to drop through the floor. In any election year, government spending slows down pre election and takes time to get back to speed after it. This time though, whichever party ends up forming the next government will look to slice government communications spending drastically. “Public spending on communications will be severely curtailed by any new government as this is seen wrongly by politicians as a victimless sector to cut,” argues Pretzel Films. Most polls are predicting a Cameron government and the Conservative’s have repeatedly made political capital of their plans to slash COI spending.

The recession has exacerbated other problems for corporate communicators. The rise of the procurement department at the expense of the commissioner has meant that competing on the basis of quality and creativity instead of purely on price has got tougher. “Our main gripe has been the increased problems associated with procurement at large companies and public sector organisations getting in between the production company and the internal client,” states Pukka Films.

“The influence has shifted from the commissioners to procurement and things like e- auctions,” says Firehouse md Mike Macleod. “They’re not putting a value on creative thinking. Hopefully the balance will shift back.” And, with procurement becoming more powerful, and some production companies getting more desperate during a recession, the problem is only exacerbated “There is a worrying trend of some companies operating a ‘get the job at whatever cost’ or (almost) ‘no profit’ basis,” says World Wide’s Chris Courtenay Taylor. “In the short term this can bolster up cashflow and hopefully ensure clients for when the recession ends, but in the long term sets a dangerous precedent; it’s unsustainable and potentially undermining of the value of our industry.”

Other changes are also driving down budgets. Cheaper and more immediate video technology and user generated content is leading many clients to believe they can get a good job done on knock down prices: “More and more people are making videos, at lower cost, than ever before,” says Crown’s md Nicky Havelaar. “So it’s not hard to understand why production budgets are increasingly called into question – why spend tens of thousands on a film when you can edit a video on an iPhone?” The job for corporate communicators then is, as Wilder Films’ md Richard Batty says, “convincing clients that cheap rarely equals value for money.”

“Being a ‘professional’ in our industry has never been about owning equipment,” adds Grosvenor TV md Des Good. “It has always been about creativity, talent, vision, and ability. And being a ‘truly successful professional’ has always been about finding clients who really appreciate what you do and are willing to agree a realistic spend.” And that’s a tough call in cash strapped times. The reality is, budgets are down. But as every corporate knows, that doesn’t mean they can offer quality to match. “Like many others we are now delivering more than ever before for the budgets set,” says Juice md Alan Poole. “And we’re not really in the business of cutting final quality.” Because long term, that would affect the viability of any production company. “It is critical we continue to ensure tighter budgets do not impinge on the effectiveness of end results,” says Robert Lipfriend of Lipfriend Rodd.

But despite individual budgets being significantly down, the sense is that the overall volume of projects is going up. The world is changing and those companies that can adapt to that will survive. “We see that as an opportunity as much as a threat,” says Jack Morton md Julian Pullan. “It might mean that in terms of the budgets coming through there’s less spend directly in video but there might be a lot more in digital or planning or strategy. The budget may still be there but where the pounds are going is different.”

Average Production Company

The average corporate communications company now has a turnover of £3.9m and a profit of £251k. It took on  118 projects overall last year and employs 33 permanent staff. The average budget it received for a film/video project was £28.8k, £32.7k for a new media project and £53.6k for a live event project.

How It Works

For a place in the top 50, companies are judged across a number of criteria. Scores are awarded for a company’s turnover as well as its reputation among its peers and also its haul of medals at the annual IVCA Awards and New York Festivals International Film & Video Awards.

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