New ANA report finds 'transparency concerns' in production process

Fourteen months after delivering a scathing indictment of the lack of transparency in the media buying process, the Association of National Advertisers has turned its attention to production. While not as damning as last year’s account, the ANA report called the process of producing creative work "sometimes dysfunctional and conflicted." 

Many advertisers are unaware of the true cost of the production services involved in producing ads for their brands. They may not know of financial ties between their ad agency and a production house, or if they are entitled to government rebates. At the same time, production companies are at risk of losing contracts in rigged bidding processes.

"We relied on the perspective of twelve subject matter experts, supplemented by an ANA member survey to better understand how advertisers manage production," ANA Group Executive Vice President Bill Duggan, who authored the report, told Campaign US. "Our conclusion was that ‘production transparency concerns exist at multiple agencies and holding companies.’" 

Fewer than half of advertisers that responded to the ANA survey require the agencies they work with to disclose conflicts of interest in the bidding for production contracts, according to the report, "Production Transparency in the U.S. Advertising Industry." Agencies often oversee the process, comparing bids from multiple production houses. But there’s little oversight of agencies that include bids from their own in-house production units or companies they or their holding company control, known as self-dealing.

Affiliated production companies may have access to insider knowledge about the project that competitors don’t. "The agency is able to analyze what competitors are proposing, while simultaneously laying out the specs upon which those competitors base their estimates," the report said. "This raises concerns that agencies are using their positions to ensure that their bids have the potential to appear superior to those from independent companies." Agencies in control of the production process may also mark up the cost of vendor services, passing on the extra cost to advertisers and pocketing the difference.

Agencies have gone as far as soliciting fake bids from competitors to make their own bids seem reasonable, a practice mentioned in last year’s media transparency report by K2 Intelligence. "The post-production companies were urged to inflate the price they would otherwise quote on a bid. Ostensibly, this enabled the agency producer to create a paper trail that justified to the advertiser its decision to award the project to an in-house facility, which provided a rival bid at a lower price," the report noted. 

Whether this new report will have as big an impact on the industry as last year’s remains to be seen. "Media spend is much higher than production spend—between 5 and 10 times more dollars are spent on media than production for most advertisers," Duggan said. "That alone would suggest that the media issue is more serious."

But, he noted, the US Department of Justice is looking into bid rigging practices in production, not media, and has subpoenaed five holding companies: Interpublic Group, MDC, Omnicom, Publicis, and WPP, as well as the findings regarding the practice uncovered by K2 Intelligence. "No action has been undertaken yet by the DOJ, to the best of our knowledge, in media," Duggan added.

Sixty percent of ANA members have made steps toward improving media transparency in the last year, he said—most commonly making adjustments to the client/agency contract. That may bode well for future progress in the productions process, too. 

"We’re encouraged by the actions already taken by members on media transparency," Duggan said, "and we expect that our members will give increasing attention to both media transparency and production transparency going forward."

Read the full report below.