Last week we got to hear Sir Martin Sorrell speak to members of the Advertising Producers Association about video production companies. There was a detailed focus on his company S4 Capital, its strategy and how it sees the future of advertising in general but also how this affects production companies.
Since his exit from WPP he’s set up S4 Capital and the driving force behind their strategy is faster, better, cheaper. It was a fascinating hour listening to him talk about the failings of the advertising industry. In particular his thoughts on how S4 is exploiting the way in which an industry that prides itself on looking forward is so firmly rooted in the past.
content creation - disruptive innovation
We were there because we’ve recently re-joined the APA, the organisation that represents advertising production companies but with a strong focus on the larger companies doing the $1M Nike commercials. It’s an industry that’s caught the same cold as the advertising industry. To a certain extent it has struggled to move on from the huge margins and absolute control of the 1980s. The fact that smaller, content creators and video production companies are eating their lunch is the sixpence these huge ships are trying to turn on now. A closer look at this phenomenon can be found in Clayton Christensen’s disruptive innovation book. The case study on US steel mills and how Intel leveraged it for huge profits is fascinating. The book is great but the case study is here.
silicon valley surprises
The clearest example of the need to think in a new way was on an APA led, UKTI trade mission to Silicon Valley in 2013. The group visited a bunch of tech companies. Big ones like YouTube, Netflix and AT&T Labs but also relatively smaller ones like Blinkx (now Rhythm One) and Radium One (ironically now also Rhythm One!) It was genuinely startling to see how little knowledge most production companies had about what happens to their content after it’s signed off. Very few had any awareness of, or interest in, some fairly standard concepts; analytics, big data, dwell times, A/B testing etc. Tellingly most of the group were unfazed by Silicon Valley’s lack of interest. Seven years on and in light of Sir Martin’s comments it’s definitely interesting to see how the video production industry has changed. Or not, in some cases.
Video Production - Direct to client
It was on this trip that we started to shift our focus towards direct to client relationships. Having this direct relationship has allowed us to build stronger bonds with the client. More control over the creative process sits with us. Finally, these direct clients tend to defend suppliers that give a good service when a relationship comes under cost scrutiny. Although we still do agency work but it’s only about 5% of turnover now.
Production companies are waking up to this slowly now. We saw a training course recently on how to do direct to client work. We didn’t go because it’s already our core business but it also looked a lot like a course on how to become an agency. The focus was on how to replicate agency roles. Who does the copywriting? What about Account Handling? Where does Creative responsibility lie? This was fascinating for us because Sir Martin was not asking how to fulfil these functions. He was asking why would you try.
He seemed to think that there are answers for production companies that want to innovate their business model. But it is definitely not to innovate into an advertising agency.
This makes a lot of sense to us, as demonstrated by our business model.