Confessions of an Executive Producer

foxes in our hen house

Every few months I need to revisit one of my favorite topics, The Rise of the Cost Consultant.

I won't tread on past peeves such as the disconnect of creative demands from production cost realities. The focus on what they aren't getting from a production budget versus what they are. Wanting to commoditize creativity without acknowledging we create something unique each time out. Or, the fact they have no skin in the game. Did I just tread? Oops. 

In the fun loving world of procurement, there is a new trend worthy of note. In the last year we have seen many erstwhile suppliers switch teams and join the ranks of the cost consultant. They are former owners/upper management from agencies, production companies and editorial houses. From a historical standpoint this is not an uncommon practice.

When Franklin Roosevelt set up the first Securities and Exchange Commission (SEC) he tapped Joe Kennedy as the inaugural Chair. Kennedy was a major manipulator of the stock market whose business practices were considered major factors in causing the crash. When FDR was famously asked why he would appoint a criminal to this post, he replied, "Takes one to catch one". 

At first I thought I'd give this supposed transfer of allegiance the benefit of the doubt. It could be a positive. Maybe the emphasis is shifting from blind cost cutting to value articulation. In other words, analyzing budgets with a scalpel as opposed to slashing them with a cleaver. Wishful thinking. The goal remains the same. To commoditize production, reduce vendor margins and reallocate the profit from those that create to those that critique. 

Being part prognosticator/part conspiracy theorist, I believe there is a bigger agenda than getting a bunch of "Joe Kennedy's" to squeeze another percentage point or two from our margins. Like any business, especially those in their infancy, it needs to grow and expand. Cost consultant cannot place all their eggs firmly in the basket of "we can get you more bang for the buck". It's not sustainable. So, what's the future intention?

It's been reported that a few recent bid negotiations have been handled directly with the cost consultant. The agency producers stand on the sidelines acting primarily as mediator while the EP and Consultant duke it out. There has also been instances where the cost consultants attend the pre-pro and the shoot. They are no longer observers but a voice in decision making ranging from whether we have the shot to what qualifies as an overage. 

At the client level if procurement departments continue to win the battle over marketers, we are only going to see the continued increase in cost consultant power. With their influence no longer exclusive to bidding but including physical production, Consultants are beginning to usurp the role traditionally held by agency producers. This is a potentially serious evolution. 

Is it inconceivable that an aggressive and ambitious consultant company could convince a client that they are better suited to handle the production duties than an agency's integrated department?

They could claim they are better trained, more resourceful, less expensive and their loyalty lies in the appropriate place. It's the American version of decoupling where agency creative is turned over to the client who then contracts and produces the work themselves via outsourcing. It would be a cost consultants dream scenario and potentially our nightmare. It would not only further fracture an already delicate creative process but also financially increase our risk while decreasing reward. 

I'm afraid I'm starting to sound like Harold Camping, the guy who predicted the end of the world. Indulge me in one more paranoid fantasy. If successful, I imagine the logical path would be to set up in house consultant/production departments eating up a portion of the business leaving our community to fight over the remaining scraps. In what is becoming a cost and volume driven business rather than a quality driven one, these scenarios may not be as crazy and unfathomable as I sound. 

There is a silver lining in so many of our former compatriots signing up with the opposition. My back up career plan was always short order cook. I'm confident I could hone my griddle skills to land a respectful diner gig. Now, if all else fails, I can send my resume to the cost consultants. They may be in the market for a few good ex-EP's. 

selling points

In the last few years there has been lots of chatter about broken models. It runs the gamut. How agencies are structure. The production contract. The AICP bid form. I'll add another to the mix, sales rep compensation. 

Before I get myself into too much trouble I want to caveat this post with a few brief statements. I'm on the record many times on how much I value sales. They are vital to a successful production company. A potential difference maker when building talent and your company. I an NOT saying reps are overpaid. I am saying there is something fundamentally illogical to the way they are both incentivized and rewarded. 

Reps are paid on commission. It is usually a percentage of the bid mark-up. According to the latest AICP survey it is on average around 16%. This applies to both independent and staff reps. Many deals are structured differently such as a draw against a retainer or against salary. Regardless how you slice it compensation is always intrinsically linked to a job booking. 

So what's the problem?

In the digital age and high level of competition, the exceptional sales reps do more than just chase down leads and pull in boards. They are a marketing partner. A brand manager for your company and your directors. One they get paid for the other they do not. 

A rep works an agency hard. They screen the work. Schmooze the decision makers. They become a trusted resource. This is no guarantee of a payoff. The director isn't available or doesn't like the project. The EP can't make the money work. The competition has a better reel or a better treatment or a better relationship. Despite months of effort a strong possibility exists it will go unrewarded.

On the flip side, a job comes in through a relationship the EP, the director or production company has. Maybe it pre-dates the rep or maybe it was one nurtured outside of the reps domain. This relationship leads to a job possibly even steady repeat business. The rep reaps the benefits regardless of the degree of their contribution.

There are so many factors involved with a job booking the vast majority outside of the reps control yet it is what their pay is tied to. 

For every relationship they work may have worked hard to nurture but led to no booking, there may be a job that awards that they may have had little or no involvement in. Seems like a random system for a business deal often resulting in hundreds of thousands in individual compensation. Neither side really controls the result of compensation leading to the potential conflict of the production company feeling they overpaying or the rep feeling they are being underpaid. 

I don't have any ideas for a new model. Or, I'm not even sure if there is a need for one. I just believe compensation should always equal contribution. Sometimes it's too little. Sometimes its too much. Hard to judge. Until someone comes up with a structure that continues to incentivize selling while rewarding the other important needs, we'll just have to assume it all evens out in the end. 

trading places

A few months ago, Dana and I went to a house warning party hosted by our friend Dennis Gibbens. Dennis is the architect who did the remodel of our home five years ago. 

As Dennis gave us a tour of the building he now lives in, Dana mentioned she would love one day to build a house in a similar style. Dennis' eyes lit up. It just so happens he had recently purchased a nice size lot east of Lincoln to develop as a spec house. He asked if we'd be interested in partnering to develop the land for our own house. 

Dana was gung-ho. I was skeptical. I loved our house in Venice. It was a great location. We spent a lot of time and effort re-doing it. Also, I wasn't sure if I had the emotional energy to move, rent, build and move again. I won't even go into the expense. On the flip side, I liked the idea of a big lot especially for the kids. Maybe it would be fun to design something from scratch. Despite my reluctance we moved forward with a plan. Dana and I agreed to explore this opportunity under the condition it wouldn't cost us anything. I can be a glutton for punishment.

We negotiated a deal with Dennis. It was relatively straightforward. We'd buy the lot from him. He would customize a design he had already been working on. His contractor provided us a ballpark estimate to build. All the pieces were in place to upgrade our lifestyle at cost. 

As luck would have it, we sold our house quickly within the range we needed to make this deal happen. We bought the lot and last week we started to get the bids from three separate contractors. This is when our best laid plans started to become slightly unglued.

All the contractors numbers were way beyond the ballparks I gave to Dennis. The specs of the house hadn't changed drastically. Why was I being handed estimates that exceeded my clearly stated means? 

I asked this question to Dennis and the contractors. They told me when asked initially for rough numbers. It was based on square footage. It didn't take into account the quality of materials, degree of difficulty or specific details. Once they dug into the details the "actual" cost of construction became more apparent.

We were now faced with the dilemma of either making cuts in the designs or coming up with more money. Of course Dennis didn't want to cut back on the designs. Neither did my wife. And, I wasn't too keen on the other option. 

I took a deep breath and started to go through the contractors bid line by line. I questioned why things cost what they did. Couldn't they get deals? Lower their overhead and mark-up cost? Remove their contingencies? It all of a sudden struck me. I turned to everyone in the room and said, "This is just like my business."

I pointed to Dennis. I said you're the agency creative director pitching and protecting your creative. Dana, she's the account manager wanting to stand by the creative while simultaneously being sympathetic to the client. The contractor is the production company EP defending his costs and his desire to make something great without it costing him money. The picture started to become clear. 

Dennis turned to me and said, "Then, who are you?"

"I'm the f-ing client!". 

It was at that moment I found personal peace in this process. The contractor gave estimates based on square footage like I give estimates based on price per shoot day. The architect wants to protect his creative vision figuring the contractor will come down and the client will go up if they all want it bad enough. We'll meet somewhere in the middle and get it done. 

Nothing like being in the other guys shoes. I think I prefer my usual day job. 

the end of the season

In the early 80's Peter O'Toole starred in a movie callled "My Favorite Year". Growing up my sister Susan and I watched it 100 times. We taped it off HBO onto our betamax. How's that for dating myself. It's an underrated film. If you haven't seen it, rent it or stream it or however people watch movies these days. 

The movie is the story of a washed up Errol Flynn-esque movie star looking to make a comeback and earn some money by guest starting in a sketch comedy TV program based on Sid Caesar's "Show of Shows". In one scene in the movie Alan Swann, Peter O'Toole's character, quotes a famous English actor who on his deathbed proclaimed dying was easy but comedy is hard. As a producer I feel that way about episodic TV. 

Commercials are all about speed. Bid, prep, shoot, edit, and on air all within a matter of weeks. This is what makes them hard to produce and harder to make good. Yet again, you only need a good 30 seconds. Features are a huge time commitment. Getting all the pieces in place (talent, money, distribution) may be harder than actually making one. And then there is TV. 

Take an hour long network show like "Glee". They have to produce on average of 22 episodes from September thru May. This is approximately 17 hours of programming. In other words its the equivalent of producing 8 features...IN 9 MONTHS. Hard on production. Harder on the actors. Near impossible on the writers. 

You want to know why TV shows like "Hung" or "Mad Men" or "The Sopranos" are so good compared to network shows. They have 10 episode seasons with often 9 months or longer between the season ender and new season premiere. It is the perfect number to maintain a high creative standard. This works for cable or premium channels. Not for networks. 10 shows isn't enough product to generate the required revenue.

As my wife tunes into the season finales of her favorite shows, I started to think about TV from a producer standpoint. TV has the speed of spots, the longevity of features and the mind numbing repetition of shooting the same characters, sets and plot lines over and over. Even knowing the hardships, I mercilessly rag on her shows. I get on my intellectual high horse mourning the downfall of American culture with an unread New Yorker on my lap and one eye on "Gossip Girl". I begin to realize maybe the glut of bad TV it's not entirely the producers fault after all. 

without guidance

Decades ago the AICP wrote guidelines to govern our industry. It wasn't overly controversial or contentious. The guidelines were simply a unification of clauses from existing agency contracts. The guidelines included policies related to everything from payment schedule and weather days to cancellation and postponement. It became the accepted standard. These ground rules were adopted by production companies, agencies and clients alike. This is no longer the case.

Over the last several years we have seen the deterioration of the guidelines. The rise of the power of procurement has led to clients creating their own policies in place of the past ones defined by the AICP. As you can imagine their policies are often to the disadvantage of the production community. 

On every bid letter and in the comments section of every estimate, we note that Epoch adheres to AICP Guidelines on all our productions. It has become a common occurrence for an agency to request removal of any language referring to these guidelines. This saddens me but we have to deal with this reality. We'll sometimes choose to push back and other times not. Our decision varies on the size of the job, the client policies, the level of the creative and the relationship we have with the agency. I'll go out a limb and assume I'm not alone. 

Don't get me wrong. We aren't total pushovers. We negotiate points we find incredibly lopsided but often drop the blanket language of AICP Guidelines. One of our biggest points of contention is cancellation and postponement. A common specific is partial payment on directors fees and paying production company mark-up only on out of pocket expenses. This is requested regardless of the time frame the client opts out of continuing the production even if they cancel two days before the first shoot day.

Here's my problem with this policy.

A client forwards guidelines stating payment of 50% of director fees and a production fee of 20% on all out of pocket expenses if client cancels within 10 days prior to shooting. By agreeing to this stipulation we are accepting a financial loss if the worse case occurs. I understand the client wants to minimize their exposure but they are doing so at our expense. In fact, it arguably creates an incentive for a client to book a project ensuring their choice directors/production company time with comparatively little financial risk.

Production companies are many things. One of them is time brokers. When we accept an award our talent is taken off the market. We turn down or turn away other paying work to produce a project. This makes accepting anything less than full fees when cancelled or postponed within 10 days prior to the shoot a bad business decision. We all know the process. We all know the competitiveness of the industry. We cannot possibly replace the time booked with another paying job within that time frame. It is the same logic to why we sign pay or play contracts with our key crew. 

Clients pay for our talent, our production expertise and equally so for our time. When we commit to a clients project we accept all the risk that accompanies it. We should rightfully expect the same level of commitment in return.

i have seen the future

In the last few weeks I've witnessed the future of filmmaking. It is the D5 Cannon camera and it is only scratched the surface.

I'll admit I am not a tech geek. I won't even attempt to go into the specifics of the technology. I will try to put it in the simplest of terms so even I could understand it.

The D5 Camera is an SLR camera that can use film lenses to shoot HD video. It is lightweight. It is flexible. It can go to places a standard camera cannot. It is broadcast quality. And, the images look awesome. Did I mention it also takes stills. There is more.

The drives are easily compatible with Final Cut pro. You can load in your footage natively within seconds. This allows you to almost instantaneously digitize your images, review the shots on HD monitor and begin cutting. In other words, you can edit in high resolution on set while shooting. 

Full disclosure, there are problems and limitations. I'll spare the details. All the kinks are yet to be worked out but it's safe to say, they will and soon. So, what are the implications on the future of production?

There will obviously be plusses and minuses. At this point it is pure conjecture. I'll venture some guesses. 

• An already compressed production schedule will become more compressed
• The cost of production will go down somewhat as processing and film costs disappear yet not as much as clients think they should
• Shooting multi-camera will become the norm (this is not always a good thing)
• We will see a lot more test shooting before committing to the cost of a full scale production be it TV, Features or Advertising. 
• There will be more re-shoots

I'm sure there are countless others. 

As with all technological revolutions, there becomes a major shift in cultural and process. It will change everything from the work flow at the base production level up to the highest areas of the approval process. As amazing as the technology is there are certain things it does not provide. 

The Canon D5 comes with an instruction manual but it does not provide the ability to understand light and composition. It doesn't cast or art direct or design or style or rig or piece together films. It can't tell stories. It can't make things beautiful by pressing a button. It is a tool. A tool that makes film creation more accessible. I believe that is a good thing. 

However, I believe filmmaking is an art form and a craft. To become masterful it requires both talent and expertise. And until they invent a tool that can provide those traits, I like to think our jobs are safe. 

capitalist liberal tug of war

I was on a low budget shoot last weekend. I was watching two grips do the work of six men. With a break in the action, we started to casually chat about the state of the industry. They told me about the deals production companies are demanding of them regardless of the budget or scale of the project. Flatting out for 12 hours. Lowering their base pay by $25/day. No kit fees. I suggested they turn down the work with those companies they feel treat them unfairly. They gave me the "easy for you to say" look. 

The conversation stayed with me. It made me think of how the money in the business flows especially these days.

A client meets with their agency. They tell them their budgets are being slashed. It starts with a request to cut fees. Despite these circumstance, they still expect more service only for less money. The agency complains bitterly. Their margins are already slim. They insist their contribution is being undervalued. After pleading their case, they acquiesce to keep the business. So...

The agency inquires about bidding a production company. They tell them their client is slashing their budgets. It starts with a request to cut fees. Despite these circumstance, they still expect more service only for less money. The production company complains bitterly. Their margins are already slim. They insist their contribution is being undervalued. After pleading their case, they acquiesce to award the project. So...

A production company calls to book crews. They tell them the agency is slashing their budgets. It starts with a request to cut fees. Despite these circumstance, they still expect more service only for less money. The crew complains bitterly. Their work days are already slim. They insist their contribution is being undervalued. After pleading their case, they acquiesce to secure the work.

It made me realized how within a few short moments I evolve from the persecuted vendor being exploited by corporate greed into a captain of industry protecting profits from the ungrateful hordes. Okay, it's not that dramatic. But it is ironic. 

For me it becomes an internal tug of war between the capitalist and the liberal. I run a company. I have a responsibility to our employees, our talent, the partners and our ambitions. We need to grow and maximize profits otherwise there is no debate. We are out of business.

The liberal in me thinks what about the crew who do the thankless work of filmmaking. Their unions rarely act with the memberships best interest in mind. Productions are going overseas, or in the case of California to other states. Opportunities are less while benefits are being cut. In an industry in transition crews are the last ones to be considered. 

Bidding and holding the line on the extra $25 per day for 12 hours amounts to less than 2k per day. It seems inconsequential but if you're shooting 100 days plus per year it adds up to a significant profit margin. Herein lies the dilemma. I wonder if there is potentially a greater benefit to foregoing that extra 2k. The crew busts their ass for being acknowledged saving valuable time on set creating greater margins than the cutting rates. Also, you may get those extra shots to possibly tip the creative scales for your director. Is beating up on crews not only detrimental to society but also bad business?

I really don't have the answer. Many times it depends on the crew and the circumstances of the job. These inconsistencies mirrors my own emotions. When it works I enjoy the liberal largess believing I gave something back to the community and society. When it does not, I feel unappreciated for sharing the wealth determined in the future to hold the line to maximize profit. 

In the end I try to do what I believe what is right for our company and fair to the crew. Often times it's difficult to do them simultaneously. 

international man of mystery

I received an email a couple weeks back from Roopak Saluja. Roopak is the 34 year old Managing Director of Bang Bang Films located in Mumbai, India. Roopak was coming to LA to produce a spot for Pepsi International and wanted to meet.  

Roopak saw me speak at a panel discussion at the Boards October '09 Summit. After the summit he started to follow me on Twitter. From Twitter he started to read my blog. From my blog he inquired about a meeting. I love social media. 

Yesterday, Roopak came to the Epoch office. We talked for a while. I questioned him endlessly about production and advertising in India. You won't believe what I found out. 

Cost consultants are on the rise. They don't offer solutions or are held accountable for reducing the bid. All they demand is more for less. And they expect it. 

Here's another shocker. Content is becoming increasingly prevalent. In particular mobile phone content. There are 540 million cell phone users in India. Marketing to them is where the growth of the industry lies.

Another discovery. Agencies power is waning. Clients are looking for lesser expensive alternatives. They want more project based options where more money goes to the screen than to the holding the companies pockets. India is trending toward direct to client. 

This all feels vaguely familiar. My Lord, it sounds like...US. Of course there are differences between the US and Indian markets such as process and sales. But, from a business perspective they are encountering uncertainty and transformative issues directly reflecting our own. 

Intrigued by Rookpak and his experiences as a production company owner in India, I decided to dig into my analytics. I found out that in the last 30 days I had close to 6,000 visitors in 43 countries. If this is the reach of my humble blog, it tells us the issues facing advertising are not exclusive to the good old U.S. of A. The challenges are similar across all borders. Or, maybe the analytics tell me a good recipe for Chicken in a Pot is an international necessity. 

This meeting also made me think about the AICP. I've post about the organization restructuring to create a stronger national foundation. I'll write more specifically about this again in the very near future. Overall the goal is greater inclusion amongst members, create stronger value and voices for our causes and help shape the future of the industry. I believe this goal knows no boundaries. Once establishing a national presence, the natural progression is to grow into an international association. 

Even from this small encounter, it is further proof, as Thomas Friedman has said, the world has become flat. It's an open playing field where everyone competes and communicates. 

Build locally. Act nationally. Grow globally. 

Roopak Saluja. Reason # 137 how social media brings the industry closer. 

moneyball

I'm going to do something I've never done (and probably against my better judgement I'm going to do it now)...blog about the competition.

The other day Creativity posted their "best of the year" awards. For the 5th time this decade they named MJZ production company of the year. Love them or hate them. Admire them or disapprove of them. Whatever feelings they conjure up, and it's never ambivalence, it is hard to dispute they are undeserving. 

MJZ has assembled the best roster of talent from top to bottom in the entire industry. They have also maintained it for years. It has been accomplished almost primarily through acquisition. In other words, they have wooed directors from the companies where their careers became established. Some in the industry may substitute woo for poached. Personally, I don't believe a human being can be stolen but they can be seduced. And, MJZ is the ultimate seductress. 

It is easy to rationalize it as simply a financial proposition. Of course money is a factor but it can't be the only enticement. If it were why the hell aren't the rest of us doing it? David Zander didn't invent this practice but he has raised it to an art form. 

The transition of MJZ from solid production entity to perennial company of the year is forever linked to the fall of Propaganda. While the rest of the production community watched in awe as the biggest of us fell, Zander siezed this opportunity to make a major play. He made incredibly lucrative offers to three directors, Kuntz & Maguire who were emerging as stars but not quite there, Dante Ariola who was entering his prime as A-List. And, Spike Jonze who rarely works in spots but the association alone was the key to the strategy. It was a risk. And, it paid off.  

It is unquestionably a successful model but is not without its detractors. There are arguments to be made that MJZ's model has thrown off the director pay scale so drastically that the liability companies now incur outweighs the compensation they dole out in profit participation. Without MJZ's looming presence, director deals may have been held better in check. I have heard many of my peers list several reasons why they don't care much for the company. Some probably have legitimacy while others are probably sour grapes. 

I know I will get lots of shit, privately I'm sure, for saying this but I like having MJZ around. It's as if were playing in the same division as the Yankees. They have deeper pockets, want to win at all costs and hold themselves to high creative standards. Their presence raises the bar for the entire industry. Like Billy Beane, Oakland A's General Manager and subject of the Michael Lewis book "Moneyball", we are forced to compete by developing different models that are reflective of our own strengths and assets. Lord knows we can't compete by coping theirs. This is healthy for our industry. They also are the strongest example to clients and agencies that what we do has value. 

I for one don't worry about what MJZ does. I only worry about what Epoch does. Their culture, their philosophy and their tactics are not for everyone. This is why Baskin Robbins makes 31 flavors. I don't want to replicate their model nor would I care to or even begin to know how to. It is not my sensibility but that does not make it wrong. If anything it's something to learn from (good and bad) and utilize that insight to help make Epoch stronger. And, I don't feel that way solely about MJZ, I feel that way towards all our competitors.

As the business evolves quickly and with much uncertainty, it will interesting to see whether the MJZ model can adapt with it. It may not be as dominant. Or maybe more so. Who knows. My guess is it will remain a power player as long as David maintains his interest. Recognizing and landing talent never goes out of style. 

what happened to the director's cut?

There was a time when every spott on our reels were a director's cut. Well, not every one but the majority. The client got their cut. The agency got their cut. And, the director got their cut. Everyone was happy. 

Rarely did anyone make a big stink about it. On occasion we'd have the discussion whether it would be insulting to the agency. They loved their edit and doing our own indicated we didn't. We rationalized it by saying we had the luxury of creating a :43 or they had to make compromises for the client or were forced to lose great moments or shots. It is no longer so simple.

Have the agencies become more sensitive? Are the clients more proprietary? It has nothing to do with ego or procedures and everything to do with distribution.

Back in the day when we edited a directors cut it was only for our reel. No one ever saw it except for the generous agency person who screened our work. It was solely for marketing. Today, if the guy in the machine room decides to download it onto Youtube or the company tape librarian unknowingly places it on the website, it's out there for the world to see. 

The brands are no longer in control of their images, the marketing tools they own and paid for. It was one thing when it was for industry use. It's another thing altogether when it's for anyone with wi-fi and a computer. I can understand the client's refusal to allow director's cut now that the films are available for the world to see with the click of a button.

Whether the death of director's cuts are a good thing or a bad thing is clearly debatable. Some say we should see the director's original intent. Others say its a collaborative endeavor and should remain within the marketing parameters. Regardless what side of the argument you stand on, there is little question director's cut are becoming yet another casualty in the digital revolution.