The art of the bid: the dance between post houses and ad agencies gets more complicated as competition increases and budgets go down - Agency World

Post, August, 2003 by Matthew Armstrong

The advertising business is a strange mix of creativity and finance that often pulls agencies, production and post companies in opposite directions. Over the years, standards have been created concerning budgets, rates, the bidding process, contracts, negotiations and expectations. But even with standards of practice, budgets for the similar jobs can vary widely and vendors will sometimes lower their rates for an alluring creative concept. Not exactly lessons taught in business school.

"You're always surprised with the budgets," says Michael Feder, executive producer at Hornet (www.hornetinc.com), a bicoastal design and character animation house. "A simple retail job can be over $200,000 and a major brand only has $150,000."

The bidding process all starts at the agency with an overall budget and reels. While this business is firmly rooted in relationships, agencies still scour stacks of reels to find new talent and determine who is best for a particular job. "You want to have as much diversity as possible, but you also want to have a family that you can depend on," says Janice Pietrangelo, VP/director of broadcast services at BBDO, Atlanta. "When you test out a new vendor, it's scary. [The person at] the agency who picks that new vendor has a lot of responsibility if it fails. We have in recent past failed with some vendors where we had to pull out and pay full price [somewhere else] because they just weren't delivering. It wasn't their fault. They were doing the best they could but it just wasn't something our head creative was satisfied with, and BBDO ended up eating the cost. And this was an animation house that is very well known and that we'd worked with successfully before. That's why it's crucial to match up the right agency creatives with the right production people."

Despite the fact that agency producers say they award jobs based on talent with money being a secondary consideration, post companies in today's highly competitive marketplace are still more apt to submit lower bids to win the job. Furthermore, if intrigued by the creative, they will lower their prices to the point where they may lose money.

"There are jobs we'll take on knowing that we'll only break even or even invest in it," says Rick Hassen, managing director of visual effects house A52 (www.a52.com) in LA. "The [production] business is not a great example of financial management per se. You're not going to find too many other businesses that consciously go into a project knowing they won't make money. If you sat down with investment bankers who don't understand this business, they'd probably scratch they're heads."

THE PHONE CALL

The bidding process for post houses begins with the agency notifying them that they'd like them to bid the job, which is no small accomplishment considering the agency has poured over hundreds of reels and selected about three from that group. "They don't give you the boards unless they like your work," says Hornet's Feder. "For us as a young company, just getting the boards and being asked to bid a job is a big step."

After the boards are received there is the all-important conference call between the post house and the agency creatives, a call that can win or lose the job. "A lot of times the creatives will talk to an editor or owner of a post house and say, 'This isn't going to work, there's no connection,'" says Pietrangelo. "The best thing I've seen is when creatives walk away from one of these calls enthusiastic because someone just added something to their work. It's exciting for the creatives to see their ideas grow and evolve."

For the suppliers, this phone call is where the dance begins. "Creatively, you don't know whether they really want you to go in there and change it and add new ideas or whether they're happy with what they have. So you want to be very careful that you don't jump in there and say something that creatively is not what they are looking for. It's a communications game. The call is all about energy, and the thing you want to hear on the other end of the phone is, 'That's what I was thinking.' The reel is what really sells your company, and you can have a great reel but if your director can't talk effectively with the agency you're in trouble.

Feder explains that after a successful call with the agency, you have a few days to get the agency a budget and schedule. "Over those days it's good to call the agency just to make sure nothing has changed. You can find out if some other company's giving them a free test and you can decide whether you want to compete with that. Free tests have become a big part of the business," he says.

EDITORIAL

With editorial and many other aspects of post, it is not too difficult for experienced post producers to determine how much studio time a project should take. "Every edit house bids slightly different," explains Linda Rafoss, executive producer at Version 2 Editing (www.version2.net) in NYC. "A project's footage and the type of edit are big factors as you determine the number of Avid days. The price also depends on the editor--whether it's an up-and-coming editor or one that's been doing it for 30 years--and some of it depends on the creative. If we find that an editor is very interested in cutting a spot, we have incentive to wave part of the creative fee. Plus, there seems to be less and less of these desirable boards, so on a hot board the bidding between editorial companies is very competitive."