TVC INDUSTRY BRACES FOR ANNUS HORRIBILIS

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Michael-Ritchie.jpgThe TVC production industry is bracing for a tough year ahead as the global economic crisis and media fragmentation impacts advertising budgets. Lower profit margins have seen companies reducing their overheads, while still trying to maintain the same level of service, sparking fears this will force some companies to close.

Already, Cutting Edge has announced it will return to its core business, tightening director salaries and leasing out some of its office space in Brisbane to reduce costs.  And Independent Films has drastically scaled back its operations (it will continue to line produce for existing international clients and select local productions, as well as representing directors Peter Cherry, Tim Kirkby and Tony Krawitz).

One top TVC production company executive producer told CB that in the past month they’ve been asked by two agencies to fund the cost of the production with the client paying them once the job has finished: “This in effect would turn us into a bank, a bank that doesn’t charge interest. I don’t know of any business that could survive like this. The only solution was for us to charge interest on the money and to ask for a letter of credit from the client’s bank stating the amount and date the money would go into our account,” she says.

Also, more directors are pitching for each job, with up to five directors asked to provide full treatments, even on low budget jobs. “Weeks are spent on pitching for jobs, doing research usually the world over, and the chances of getting it are reduced because everyone is undercutting each other to just keep their business turning over. The treatments can cost anywhere between $3,000 to $6,000. Clients now are becoming used to the reduced budgets and this is considered normal.”

Executive producer of Revolver, Michael Ritchie (pictured), says the categories of beer and sport are holding up, along with the occasional car commercial. However, with production companies working off budgets set before the downturn, there’s apprehension about what will happen after June 30 when the new budgets are drawn up.

Already, the odd job has disappeared at approval stage.

“Getting someone to sign on the dotted line actually made them think, ‘will we do this or not?’ and they’ve chosen not to, but for the most part we’ve been enjoying a pretty steady stream of work,” he says. “Maybe the word TVC is becoming a little redundant, maybe that term is too narrow a description. Most stuff that is any good has a life way beyond free-to-air.”

Ritchie says the landscape has changed, but there are opportunities, for example, fragmentation puts the focus back on creating entertaining content that people will seek out and the drop in the dollar makes Australia a more attractive place to shoot for US agencies.

While companies like Doritos, Samboy and Subway have turned to the public to generate their ads in widely-publicized competitions, he says they are ‘nice ideas’ rather than a sustainable threat.

“If they do that, then someone else won’t do that, they will do something different,” he says.

At a recent SPAA sponsored forum on TVC production, many attendees called for a closer dialogue between agencies and production companies.

Most agree this is the way forward. Said one attendee: “It would be great if we can all work together to ensure that everyone survives and there’s fairness in what’s happening. At the moment the scales are tipped against production companies.”