Dive Brief:
- Publicis Groupe’s Bartle Bogle Hegarty (BBH) has ended its agreement with SAG-AFTRA to only use union actors in campaigns in an attempt to cut production costs for its clients, The Wall Street Journal reported.
- Ad agencies have complained about the SAG-AFTRA’s strict rules, which require the use of union talent and following of payment and pricing terms linked to how long an ad runs on air or online. The increased use of social media means that ads can exist for extended time periods, and online personalities are often cheaper to work with than celebrities. Using union actors in commercials can more than double a marketer’s production budget, and more marketers are asking agencies during the pitch phase if they are affiliated with the union, according to the WSJ report.
- SAG-AFTRA denies that union talent can increase the cost of production and disputes BBH’s claims that the contract terms are “outdated.” SAG-AFTRA has updated its terms over the past few years to include a “Low Budget Digital Waiver” to remove union requirements on productions with costs at $50,000 or less.
Dive Insight:
BBH cutting ties with the union is the latest shift in how traditional ad agencies are operating, and analysts speculate that other agencies could follow. The Publicis shop says the move is an effort to help its clients save money and better compete with smaller shops, two areas where traditional agencies have struggled. Agencies are under increasing pressure from brands to cut costs, and many have responded by creating spinoff agencies that aren’t required to follow the union or setting up production outside of the U.S., sources told the WSJ. Many smaller agencies are not SAG-AFTRA signatories and don’t have to follow the union’s rules.
High production costs is just one area where brands and ad agencies have sparred. Brands have also expressed frustration with lack of transparency for fees, slow adoption of technology by agencies and challenges with measuring campaign ROI. Some brands have responded by cutting the number of agencies that they work with or bringing more marketing functions in-house. Seventy-four percent of major multinational brands are currently reviewing their agency arrangements, according to recent research by the World Federation of Advertisers and The Observatory International.
In July, Publicis Groupe’s Publicis Communications hub confirmed plans to restructure the production units of three agencies, including Saatchi & Saatchi, Publicis New York and PG One, following the decision by Procter & Gamble, one of Publicis’ major clients, to eliminate or reduce production work for its ad campaigns. The restructuring included layoffs. P&G had previously said it was reducing its agency roster and bringing more functions in-house.
