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October 2017
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Commercials 30 2014 Back to Reports & survey Listing

There are plenty of commercials being made, but there are also plenty of production companies vying to make them. Competition is brutal and budgets are tight. But ad makers are not sitting still with most now fully embracing the age of branded content as well as creating their own IP

What’s the story?
So how has business  been for the commercials production industry over the past twelve months?
On the plus side, relatively busy, certainly compared to the bleakest moments of the recession a few years back. 62% of respondents to the survey said that they had made more commercials this year than they did in the previous twelve months.
The average turnover of a commercials production outfit has also climbed. It now stands at £12.4m and that’s up from £11.6m a year ago.
But that’s far from the complete picture. Because, as our respondents universally report, the world of commercials production is getting pretty brutal. Budgets are either dropping or flatlining at best. The average budget for a 30-second ad stays at £187k this year, the same as last time, so a drop in real terms. And 45% of respondents said they felt budgets had dropped. Added to this, competition for work, both at the high end and the low end, is now cut-throat. “It’s been busier again than previous years and now feels like we have again a steady and increasing growth across not only our company but across the industry as a whole,” reports Caviar. “Alongside this however, it does feel like there is an ever-increasing squeeze on our margins.”



The big squeeze
There’s a sense that agencies, pushed by their clients, increasingly want more for less. “We say it every year but budgets are getting squeezed while the ideas are as big as they’ve always been,” says Pulse. And there are now more “overly ambitious scripts without a budget to support the creative’s vision.” Blink similarly reports that “the squeeze continues as agencies are being asked to do more for less, and that gets passed along.”
The trouble is, there are more companies willing to take on big work at low budgets. “There continues to be a dramatic over-supply of directors competing for a pool of commercial work that is probably shrinking,” says Nice Shirt. And as more work is taken on by producers for inadequate budgets, agencies and clients are encouraged to repeat the pattern.
Alongside that, it’s not just fellow production companies that our respondents now find themselves battling against. “Clients and agencies are all competing with production companies to create content in-house,” says Mustard Films. Passion Raw also points to “pitching against agency in-house production companies” as a big challenge. “The boundaries are becoming further blurred and we’ve found that agencies are trying to produce more and more commercials via in-house production companies,” is Moxie’s take on the matter.


Pitch imperfect
It’s not a new problem, but judging by the comments from so many respondents, it seems to be getting worse. Pitch and treatment inflation, so long a bugbear of the production community, is now reaching breaking point. “Commercial animation production companies are expected to go to extraordinary lengths to win a job and as such the price of pitching is enough to stop production companies from engaging on scripts,” says Passion. “Often the price to pitch is greater than the projected margin on the job.” The convention of a limited number of directors being asked to pitch for any one particular job is now rare.
Production companies now more regularly finding themselves pitching for “ghost jobs” that never actually come to fruition. “A ‘buyers market’ is not an excuse for agencies to take advantage of production company goodwill by engaging us on scripts that are often far from being viable projects,” says Rogue. And often now, the pitch process is being used as a way for agencies to get a production company’s creative input for free before the client is sold into. “There’s the concerning trend for a director’s vision to be used (often unbeknownst to us) to help sell an idea to a client which often doesn’t succeed,” says Rattling Stick.

Content is king
Clients are increasingly flexing their muscles, even over the choice of production company. “It’s clear to see how the balance of power has shifted towards the client,” says The Sweet Shop. “More often than we’ve previously experienced we might find ourselves the agency recommend with a competitive budget, only to find that the client has over ruled. Being the agency recommend holds less weight than ever before.”
Agencies are under pressure from cost conscious clients determined to drive down prices. And it’s often now the client that decides what a reasonable budget is. Sonny says that “keeping procurement out of creativity,” is a major challenge. “Cost controllers who are good, sensible and know their jobs make sure a client is getting good value,” says Outsider. “But then there’s procurement which has nothing to do with value, it’s all to do with numbers, so the product ends up shit and the agency gets the blame. This is now affecting brands at the top of the tree creatively.”

Longer and cheaper
But this brave new world has its own pressures. Agencies and clients are no more likely to offer generous budgets for content than they are for TVCs. “’Content’ seems to be a euphemism for ‘same quality as an ad but longer, but it’s on the Internet so its cheaper,’” says Th1ng. “There is a misconception that content or online work is much cheaper than a broadcast spot.” Production companies are reacting by finding new ways to produce this content. “It’s become very clear that we have to find a new and far more nimble approach to produce the content that brands demand,” says Blink. “We’ll have to overhaul our budget templates and come at it with a fresh view. Smaller teams shooting for longer periods. We will be having to scale to fit.”
There’s also a sense that production companies, along with clients and agencies have a long way to go to understand the new worlds of branded content. ‘Content’ is the buzzword, but is quality control being lost in the rush? asks Rattling Stick. “Although the past year has been exciting and seen the idea and potential of ‘content’ come of (teen)age, the notion of speed has often undermined the truly important stuff – asking why, reflecting on an idea, being fastidious about great nuanced, powerful writing and truly concentrating on the nub of its effectiveness – will it connect emotionally to its audience? what will it make them feel? will they care? will they remember it in the morning? will they talk about it? Am I taking my audience seriously? Rather than simply asking, if I throw enough of this stuff at them will some of it stick?” Biscuit also argues that everyone still has a lot to learn. “I think it’s important for those of us in advertising to get better at creating media with intrinsic value; entertainment value.  Entertainment has value that content does not.  It’s only through figuring out how to entertain with our media and develop films and TV, that we will ever be able to make the next step to Branded Entertainment which, as TV advertising gets further and further pushed to the periphery, will become the next great horizon for our industry.”


Own it
And it’s developing films and TV that many are now doing. Nexus, alongside its work for brands, is “developing tech toys,” a “digital interactive storybook called Radio Jones: Roboteer,” and “five animated short films that have been commissioned by a major US studio.” It’s also founded “a new partnership with Oscar-winning animation producer Claire Jennings (Wallace & Gromit, Coraline) to make films for the family market. We have also received BFI slate funding for the next two years via the BFI Vision Awards. This is now underway.” Passion has its feature docs division, Pulse Films are the past masters at combining work for brands with a thriving feature film and TV production business. Many others are also reporting a drive into features, TV, and other tentative steps into creating their own IP. With ad budgets under such pressure, it makes sense to strike out on your own sometimes.


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