The production business has, more often than not, been in the spotlight for all the wrong reasons and not just in Pakistan. For example, in 2016, the US Department of Justice investigated media giants such as The Interpublic Group of Companies, Omnicom and The Publicis Groupe for allegedly rigging the bidding process for TV and video commercial production contracts. Closer to home, the Association of Advertising Producers (a self-regulating body comprising independent production companies working in advertising in India) made headlines recently when they sent letters to 100 big advertisers alleging quote-price fixing and unfair assignment of advertising projects to agency-owned production houses without disclosing the ownership stakes to clients.

If production companies are able to operate in such murky waters in the US and India, where the business is highly structured and regulated, it is no surprise that as far as transparency and legislative oversight are concerned, the production business in Pakistan remains mired in controversy, even as it continues to flourish.

Before reviewing the trends shaping advertising production in Pakistan, it is important to step back and take a look at the forces influencing the global ad business. By all accounts, advertising has been in a state of flux for the last two to three years. The after-effects of the global economic downturn of 2007-08 continue to pressure advertisers into cutting discretionary costs, as a result of which traditional media spends and agency revenues have fallen steadily. In the last year alone, P&G, the world’s leading advertiser, has cut almost half a billion dollars in agency payments and giants such as Coca-Cola, Unilever and Visa, are on track to put approximately $20 billion worth of advertising expenditures under review.

The situation is not much different in Pakistan where advertising spends decreased by seven percent in FY2017-18 (source: Aurora Fact File 2017-18) compared to the previous year, leaving full-service agencies grappling with shrinking margins. Experts interviewed by Aurora for this story opined that the increasing scrutiny of questionable production practices combined with declining revenues have significantly changed the business, triggering a fundamental shift in the way production houses are operating.

Transforming the production house model

Traditionally, the workflow in advertising follows a linear structure. Brands hire agencies to come up with a Big Idea for a campaign. Agencies hire production companies with the expertise and resources to execute the concept and production companies deliver the final TVC for broadcasting. On the surface, the process seems straightforward enough. Then, however, in order to ensure that they would cash in on the big bucks involved in production, multinational agency networks established Agency-Owned Production Houses (AOPH), promising clients the full deal – from concept to the final TVC. Today, the AOPH model accounts for almost 70% of all commercial productions in the West and although there is nothing nefarious about the model itself, the lack of transparency in the selection process and conflicts of interest among agencies are raising questions about how ethical these practices are. As far as Pakistan is concerned, much like the rest of the world, the AOPH model dominated productions during the 70s and 80s. It was this trend of agencies sourcing work to production houses that they either owned or had a financial stake in that led to the inside joke among agency professionals: “Give the idea away for free; make money on the production.”

Today, the AOPH model accounts for almost 70% of all commercial productions in the West and although there is nothing nefarious about the model itself, the lack of transparency in the selection process and conflicts of interest among agencies are raising questions about how ethical these practices are. As far as Pakistan is concerned, much like the rest of the world, the AOPH model dominated productions during the 70s and 80s. It was this trend of agencies sourcing work to production houses that they either owned or had a financial stake in that led to the inside joke among agency professionals: “Give the idea away for free; make money on the production.”

Fortunately, the 90s saw a shift towards director-led production houses when big names such as Asad-ul-Haq Jamshed Mehmood (Jami), Saqib Malik and Asim Raza (the Big Four) set up their own production houses, thereby donning the twin hats of producer and director. Salman Farooqi, CEO, Bionic Films, credits the Big Four for laying the groundwork for formalised production house structures and improving the quality of commercials with a focus on concepts and storytelling. A decade and some years later, the advent of privately-owned TV channels and the subsequent allocation to TV of big budget accounts (telcos, banks and colas) led to the birth of independent production houses.

From vendors to solution providers

The view is unanimous that independent production companies have contributed significantly to streamlining production flows and upgrading quality standards. In the words of Sultan Ghani Afzal, CEO, Stimulus Productions Worldwide (an organisation credited for bringing international best practices and talent to Pakistan), “producers used to be perceived as logistics managers when in fact the role of a production house is much more than that.” In his view, apart from providing technical expertise, equipment and specialist resources, production houses are communication partners, able to provide creative input as well as concept improvements.

The concept of independent production houses quickly found favour in the business as both advertisers and agencies began to see the advantages of collaborating with standalone production companies. The problem with working with director-led production houses is that the directors not only have to focus on the creative and storytelling aspects of the commercial, they also have to organise resources, manage production schedules and negotiate contract details with the client/agency. In Farooqi’s view, such an arrangement unnecessarily increases the workload of the directors, while limiting the resource pool from which production teams can be sourced. He cites the recent TVC for Telenor Microfinance Bank produced by Bionic Films as an example of how a specialised production house can widen the execution options for a project, thereby adding significant value. In this case, Bionic Films were able to rope in Neil Howland, an American director, acclaimed for his expertise in shooting videos that capture the essence of a country’s heartland. “The concept of the ad was such that it could only be shot in Pakistan. From navigating the red tape for Neil’s security clearance to shoot in Pakistan, meeting the visa requirements to handling his on-ground security while travelling through different cities, Bionic Films managed every detail. This was possible because of our dedicated focus and expertise.” The result is that today, of the 50 or so production houses that are operating, only a handful have directors at the helm (see Behold a storyteller on page 31).

In addition to broadening the business horizons through local-international collaborations, independent production houses serve as a training ground for young people graduating with degrees in media sciences and filmmaking. Because independent production houses work on multiple projects with different directors at the same time, fresh graduates have the chance to work with specialists and technicians from different countries providing them with invaluable experience. Farooqi is quick to add that this does not imply that the Big Four did not mentor people; rather, as people work their way up in an independent production house, their learning is more intensive because each project exposes them to different clients, agencies, vendors, studio staff, technologies, working styles and business practices in a very short time. In addition, while clients are sometimes hesitant to work with inexperienced directors, photographers, set designers and lighting, sound and camera technicians, production houses provide a comfort zone, all the while hiring talented young people willing to learn on-the-job and in Pakistan, where there are no skill development forums in place to train people in disciplines such as set and costume design, cinematography and art direction, this is commendable indeed.

A game of money!

Despite the massive strides made by production business, conversations invariably move to the most controversial aspect of the production business – the money and the corruption. However, the production houses that Aurora spoke to for this story made no bones about the fact that while there are a few players who engage in corrupt practices, this is not true for most of the players in the business (for more, see Box – Pirates of the ad commercials? NOT!).

In fact, Ali A. Rizvi, Founder and CEO, What’s Next Entertainment, raises a valid question that is not asked as often as it should be. “Given that the industry players are well aware of the people and organisations that cut corners and are involved in shady deals, why do they keep getting new projects? If they are so corrupt, shouldn’t they go out of business?” Rizvi says it is unfair to point the finger at production houses alone for their lack of transparency. “For a corrupt production house to thrive, agencies and advertisers have to be complicit.”

Farooqi adds that it is a fallacy to assume that the production business is flush with money, especially given the recessionary environment it is currently operating in. Earning exorbitant profits is possible either by artificially inflating costs or quoting rates below the market average. Production houses employing the latter strategy make up for the difference by compromising on quality or by delaying payments to vendors and staff. Such practices are harmful to all stakeholders; clients are given sub-standard commercials not fit for purpose, vendors run into cash flow problems and the lower rates become benchmarks for subsequent projects, further increasing cost pressures on legitimate production houses delivering high-quality work.

One suggestion to counter under and over-inflated budget estimates is to implement the international procurement practice of requesting at least three quotes for a project from different production companies. This makes the selection process more transparent and competitive because collusion between multiple parties is difficult and any estimate that is too high or too low sticks out as an anomaly. Another strategy that can help standardise production budgets is a comprehensive production brief that includes detailed storyboards specifying each shot angle, size of the talent pool, location, costumes, etc. Apart from MNCs like Unilever and P&G, it is common practice for entire production schedules to be planned without a written document stating the TVC requirements, leaving any changes discussed to be incorporated on the fly. Given how resource intensive any production project is, the more details left open to interpretation, the more room there is for disparity in budget estimates.

The digital factor

A discussion on the evolution of advertising productions is not complete without factoring in the impact of digital. For a long time, the digital boom taking over the global ad industry did not translate into increased spends in Pakistan and digital largely remained a buzzword. In the last two years however, digital ad revenues have grown significantly year-on-year; a 22% increase between FY2015-16 and 2016-17 and a staggering 46% increase between FY2016-17 and Fy2017-18 (source: Aurora Fact File 2016-17 and 2017-18). What makes this sustained growth even more remarkable is the fact that in the corresponding period, TV ad revenues increased by a mere 11%, followed by a decrease of 2% last year.

In Pakistan, due to the absence of regulations and SOPs, production houses find themselves footing the entire production bill, because despite written contracts specifying advance payments, delays are inevitable. Further complicating the situation is the absence of an association for advertising production companies like the Association of Advertising Producers in India. As a result, if one production house turns down a project on the basis that an advance has not been paid, there will be another one willing to work on 100% receivables.

These statistics make it evident that even at a time when the size of the marketing revenue pie is decreasing, digital is still managing to increase its share. Faisal Durrani, Managing Partner, Digital Invasion Films (a recently established digital-only production house) explains the reasons behind this trend. “A lot of smaller brands that never had the financial muscle to afford TV are advertising on digital. They see the value of targeted reach and audience engagement with minimal budgets. This is why, while the business volumes of conventional production houses have been hit by the recession, there are more digital video productions than ever before.”

The strategy of reallocating budgets in favour of digital is not restricted to smaller advertisers. There is a realisation on the part of established brands as well that with changing audience content consumption habits, there is no option but to focus on digital videos to stay relevant with a young audience. Durrani believes that digital video content will be driving the future growth of the business. However, while the number of briefs and digital productions are increasing, he is quick to raise a red flag – the notion that producing a DVC (Digital Video Commercial) is and should be cheaper than a TVC, especially when client expectations from both are the same. The appeal of digital videos lies in the fact that they require less planning, are less scripted and more personalised and therefore, come across as more authentic and believable. Typically, the technology, equipment and the storyboards used for digital videos are different and more cost-effective than those required for TV productions, making it possible to work with smaller budgets (see Prepare for failure on page 10).

However, the problem in Pakistan, according to Rizvi, is that “there is little understanding of how digital content can make a difference. Instead of developing engaging content that keeps audiences hooked beyond the 10-second mark, clients are dissatisfied if they don’t see the large-scale setups and sweeping shots they have come to expect from TVCs.”

While the increasing volume of business and spends on digital is promising, experts caution that growth from digital will only be possible when digital is no longer seen as “the poor man’s TV”.

The final take

Despite the challenges, a general sense of optimism pervades among heads of production houses that the business will soon climb out of the financial hole it is in today. However, for this to happen, fundamental operational changes need to take place. For one, the issue of deferred payments has to be solved. Elsewhere in the world, production houses do not start shoots unless they receive advance payment from the client/agency (depending on the contract). In Pakistan, due to the absence of regulations and SOPs, production houses find themselves footing the entire production bill, because despite written contracts specifying advance payments, delays are inevitable. Further complicating the situation is the absence of an association for advertising production companies like the Association of Advertising Producers in India. As a result, if one production house turns down a project on the basis that an advance has not been paid, there will be another one willing to work on 100% receivables. Here, the onus is on clients and agencies to not myopically focus on cost estimates alone when selecting a production house to work with. Other variables such as reputation, credibility, client portfolio, project experience and expertise should also be factored in the selection decision. Secondly, as the global trend among clients (big and small) to directly hire production houses (particularly for digital projects) instead of involving an ad agency gains traction in Pakistan, production houses will need to develop their capabilities beyond bankrolling productions. Agencies are cut out of the loop either because smaller brands are unwilling to pay hefty retainers or a digital production does not require extensive strategy and ideation, but rather a quick turnaround and people with their finger on what is hot online. Although none of the production houses interviewed for this story see themselves as substitutes to agencies, they do admit that this is a new reality that all stakeholders will have to deal with going forward. Durrani sums it up best. “The production company of the future, in addition to working for agencies, will be competing with them for clients who want less service, more non-traditional media direction and execution innovation. The greatest challenge for production companies will be their ability to hire creative talent, directors and technology experts who can conceptualise and execute Big Ideas.”