The Association of Independent Creative Editors (AICE), a trade association representing U.S. and Canadian commercial editors, released a policy statement earlier this week that addresses a list of current business practices that, when taken together, threatens the health and vitality of its members’ businesses.
The move is an effort to confront a number of trends emanating from advertisers and agencies that AICE members view as generally devaluing the contribution of postproduction to the success of marketing communications campaigns.
The document, “It’s Time to Re-think Current Ad Industry Post Production Business Practices,” summarizes the prevailing marketplace conditions that most postproduction companies that primarily handle advertising assignments for agencies and brands are laboring under.
The report points out that most of the editorial and postproduction shops in the commercial area are small, privately-held companies that require reasonable profit margins and predictable cash flow to stay in business. “For the past five years, the post production industry has been under serious financial pressure to deliver the same quality work and level of service agencies and clients have been accustomed to, with significantly reduced budgets and shortened schedules.”
Among the challenges the industry faces:
- Constant downward pressure on prices
- Routine requests for services beyond the scope of the initial engagement, without compensation
- Sole focus on cost while viewing creative work as a commodity
- The existence of agency in-house postproduction facilities which capture revenue that previously went to independent editorial shops
- Requests for “dummy” bids against agency in-house editorial companies to satisfy client procurement policy guidelines with no intention of awarding the work to independent companies
- Preferred vendor lists designed to extract additional price concessions in exchange for the possibility of a certain, but not guaranteed, volume of work
- Sequential Liability clauses which extend payment terms an additional 30 to 60 days or more
- Requests for confidential business information about postproduction suppliers, presented as the need to “understand their service providers better” yet seen as a way to replicate those business practices in-house.
The AICE called these trends a “significant and of grave concern to AICE members and their colleagues.”
“In addition, large advertisers like Procter & Gamble, Mondelez, AB Inbev and Johnson & Johnson have either instituted or are considering plans to extend payment terms to their vendors from standard 30 and 60-day periods to as much as 120 days or more.”
According to the AICE, such extended payment terms could cripple many postproduction companies, ranging from creative editorial houses to audio studios, color grading facilities, design shops, visual effects companies and finishing houses.
AICE’s policy statement recommends that its members consider taking the following actions:
- Hold completed deliverables and elements until full payment for services has been made
- Charge clients more rigorously for work that is requested and performed beyond the scope of the original budget agreement
- Demand a greater portion of the total payment up front
- Decline to bid on work for advertisers who have been identified by AICE and other industry organizations as employing excessively long payment terms.
AICE is an international organization containing 130 editorial companies representing more than 600 editors throughout the United States and Canada.