Production companies need to expand their role: AOI Pro president

AOI Pro [The company writes its name as "AOI Pro." but we have removed the full stop for clarity. - Ed.] recently shared a Gold Media Spike with TBWA Hakuhodo for the ‘Xtreme Delivery’ work for Nissan. But the company is probably best known for the Cannes-winning ‘3-second cooking’ videos it developed with Tokyu Agency for DoCoMo. At Spikes, that campaign won Silver in Branded Content and Entertainment and Bronze in Film Craft. AOI Pro was awarded two further Film Craft Silver Spikes for Toyota’s ‘Loving Eyes’ and ‘Life is what you see’ for Jins Co. It also came second in the Spikes Palm category as the second-most awarded production house across Film, Film Craft and Branded Content & Entertainment.

While the company’s most notable work this year was all from Japan, it is active in a number of markets in Asia including Thailand, Indonesia and China, where it has a presence in Beijing and Shanghai. Yasuhito Nakae, president and group CEO, sees plenty of opportunity to grow internationally and, unlike many of his domestic competitors, thinks of that expansion as a necessity. He admits to having made “many missteps” on the way, but has learnt to respect the individual nature of each market while introducing the high production values Japan is known for.

Each market is of course at a different stage of technological advancement. Work on TV commercials still accounts for the bulk of what AOI Pro does across the board, but Nakae is aware that it will not be possible to ride that wave forever. Looking to the future, he is keen to experiment with new formats and even sees value in getting his staff up to speed with robotics, which, along with the IOT, he believes, will become a common feature of life very soon. He recently brought a robot on as a “staff member”, shuttling between group companies and interacting with human employees. “We are now thinking of a plan to put more information into it and start using it more seriously,” he said.

New model needed

Humanoid robots might be entertaining to have around, but at this point in time there are more pressing concerns affecting the production industry. One is of course the shift in budgets from TV to online. While advertisers in Japan continue to spend heavily on TV, that is changing, albeit slowly. As an example, Dentsu's recently announced net sales for September placed TV sales at 95 per cent that of last year at 53 billion yen US$443 million), while interactive media sales were 123 per cent for the same period at 8 billion yen ($67 million).

Nakae foresees a significant change by 2023, when corporate leadership is expected to shift en masse to the 'internet generation'—"people who analyse the effectiveness of everything". While he expects TVCs to still be a major part of advertising, the handover of power will lead to "tremendous efficiencies", he said. In preparation for an eventual new reality, Nakae said he considers it important to work towards being able to segment online video content.

“This would need more technology and more understanding of consumers,” he said. “It’s about KPIs so we would like to inviest in this too. We’re trying to build this knowledge into our company.”

That might involve M&As and alliances with companies with entirely different skillsets, he said. “The challenge is how to create a business model for a new type of world.”

Less passivity, more strategy

Whatever it might be, Nakae said the model must involve production companies being more than order-takers. At the moment, it’s still a straightforward process: “For traditional TVCs, the client has a budget, we receive the idea and just do the job,” he said.

But a pay-for-performance model is looming. Once that becomes widespread, production companies will need to start thinking somewhat more like media agencies, he suggested—although video production itself must remain their core business. “We can’t just say, ‘here’s the video,’. We have to offer strategy—how you should target and reach an audience.

"If we just continue to do the jobs that fall on our plate, that's not enough. We have to proactively come up with new ideas and we have to be the ones to propose plans. Passively taking whatever comes our way ... does not lead to profit. But if we flip it around and become the protagonist for a solution, the business model becomes quite different."

Does that mean brands working directly with production companies become more widespread? From AOI Pro’s perspective, he said he does not see a pressing need to alter the current system of working for agencies. But he did not rule out the idea either, and sees potential in more short-term collaborative working models.

“If the brand has creative people in-house then it’s possible—if they can work as a brand/agency. The important thing is the people that we need to create a commercial. If a brand has everything in-house and wants to work with a YouTube star, we wouldn’t be needed. So the important thing is who we need to create the project and where they would be; it’s not so much about the company.”

Mobile thinking and "shaking hands" with marketers

A bugbear of Nakae’s is the reluctance of producers to evolve. Japanese industry professionals might be celebrated as craftsmen, he said, but they are also stubborn, especially when it comes to less familiar formats such as mobile. For instance, he would like to see more content produced with vertical viewing on a mobile device in mind from the outset, in the spirit of Snapchat.

"Great services are available for smartphones, but what about content?" he asked. "The answer is no, especially visual content. We need to make content that's appealing because it's vertical. There is very little vertical content made by us film professionals.

“It’s not that Snapchat is really special, but it’s vertical and I hate to have to flip my phone to watch a video. We’re still making the same content we watch on TV for mobile, but you can’t really watch it properly. We need something you can relate to on a small screen. We have to think and ask which platform we are planning to run a video on, We’ve never had this mindset—this way of building is completely different.

“In Japan, the mentality of production crews’ craftsmen is very strong,” he observed. “That’s great, but due to their strong belief in the aesthetics of what they create, it’s not so easy to change the format [even if marketers ask for it].”

There is hope. “Little by little, there are people [in production] who are starting to shake hands with marketers and IT people and content creators," Nakae added. "A very important person would be the producer in between marketers or UI experts and the people creating the content, because they have respect for craftsmen but also understand the need to adjust to a new business model. These people exist in the US, but not yet in Japan.”