Stimulus Productions Founder Syed Faisal Hashmi shed light on the stagnant business model of Traditional Advertising in the article published in Synergyzer Annual 2020.


Fairytales always start with ‘Once upon a time, there was a king’ and end with ‘They lived happily ever after’. Well not always. Or maybe this one is not a fairytale. Or perhaps it’s not the end yet.

The reality is that production houses, not only in Pakistan but across the world are under pressure. The entities that used to produce big-budget TV commercials for homegrown and multinational brands are struggling to stay relevant. The symptoms had been increasingly surfacing during the past decade, but the real deal has happened merely in the last two to three years.

To understand what happened, one cannot ignore the larger ecosystem, where these entities exist. One rung up the ladder is the advertising agencies, which have been stagnant for decades in terms of their business model. They have been passive rather than active in wake of a fast-changing world; the world that went from analog phones and television sets to smartphones, interactive content, digitization, and engagement-based consumer journey in just over ten years. When media buying houses invaded their turf 20 years ago, the agencies lost their revenues but did nothing to reinvent their businesses. Perhaps they were a little too confident that basic brand building and marketing communication practices were not going anywhere, and as long as they were there, their businesses were not going anywhere either. But the core has shaken, and to top it, the known talent crisis only worsened in the advertising business in the past decade, with clients never being satisfied with their agencies over issues ranging from account management fallacies to creative output, resulting in agencies stopping short of meeting marketing objectives as well as transparency issues, where the client was always skeptical of how expensive agencies had become. They (the clients) then would go on to cite the example of a lone predator who had done something ‘in less than half the amount’ recently. And all this while, the agencies, who should have focused on proving the reason of their existence and reinventing their business models to stay relevant in the 21st century, strived to stay profitable while living by the same primitive structures and rules of business, sometimes by hook, at other times by crook.

The crunch on agencies has given way to two things: One, it has put pressure on productions; and two, clients have started to go to the creative hot shops, digital agencies and directly to the production houses.

Then came the digital influx, and currently, advertising agencies globally are coming down to a point of existential crisis, where a significant chunk of the advertising spend is going to the digital sphere with the shelf life of the content having shrunk to weeks – if not days – and the clients increasingly pushing for quantifiable results. Amid all of this, agencies have somehow failed to convince clients of their reasons for existence. Clients are getting short-term results by treading newer routes too, sometimes greater than the past, and hence are making their previous agencies increasingly irrelevant. The biggest proof to support this argument is the fact that over USD25 billion have been wiped off from the market capitalization of the five global holding companies in the past four years.

The crunch on agencies has given way to two things: One, it has put pressure on productions, as agencies are struggling hard to stay profitable. Internationally, the agencies have now started creating a big percentage of small budget films in-house, in order to make money. Something that is not their business. But money coming in can justify all the drifts, doesn’t it? Locally, under pressure, the agencies have submitted to being on the receiving end completely, and have put the pressure on production houses to reduce costs while expecting the earlier quality, something that is impossible. So the quality slid, the client was not satisfied and started thinking that the agencies were not delivering. Some agencies also tried in-house productions, but the trust deficit between them and the client increasingly pushed clients in the other direction, which is the second thing that has happened: the clients have started to go to the creative hot shops, digital agencies, and directly to the production houses.

Some argue that this makes perfect sense as it is an efficient and faster route. Some production houses are now also getting themselves equipped with the ideation arm, trying to become a one-stop solution to their clients’ visual creation and production needs, and trying to render the agencies useless. And an increasing number of clients are actually opting for this. A number of times agencies have also resisted using directors from the new pool of talent, as they would like to work with a name that they could bank on and be safe with the results. The stagnancy created by this has also added to the frustration and has pushed clients to work directly with the production houses, who are more open to the idea of evolution.

Yet, with crushed budgets, production houses are also struggling to hold their ground, leave alone any hope for growth. Once marked by expensive cameras, custom costumes, extravagant art direction, Hollywood standard lighting, and a 100-member strong crew, the industry has fast drifted to Joey the Instagram filmmaker with a 5D in a matter of 3 years. And honestly, to the credit of the production houses, they did not see it coming either.

It’s alright if future productions are not big-budget ones. But it’s equally important to understand that the quality produced will marry the money spent – only. And if the industry settles with that, it’s a nice thing to have. But this is not the case when it’s a hit-and-run incidence where one can push the price down because he or she is on top of the food chain.

Here, don’t get me wrong when I say quality. Less money spent means lower span and scope, and lower production values. It does not necessarily mean a bad ad. The ad is often worse when the creative idea is bad. Hence brands can survive by approving better ideas and appreciating the fact that production values will be synonymous with the money that they are willing to spend. 

But it’s funny to see the crazy shape things take when the chips are down. To quote some examples; getting three quotations from three production houses has been a long-standing formula. It has always been about production houses submitting their bids with a proposal about how best they can produce a project at hand. This involved each pitching with different directors, different treatments and their own solution to the best possible outcome. Now, all the production houses have to pitch with the same set of directors. It throws the entire value proposition phenomenon out of the equation, and leaves the production houses fighting for money. As if money has been the only value behind the process. As if all these years, clients have not been able to see any other value from the production pool of the deal in the success of an ad; not the choice of director, who could bring a certain flavor to the party, and not the choice of the production house, who could have a certain strength in adding value to the results in varying circumstances based on their experience and expertise. I have seen directors shape up, sometimes even write concepts to a completely new level, while the agencies take the credit. This has happened in the past and continues to happen now. But making a director write a treatment note and then granting the project to another director to shoot the ad on the same treatment is a new trend in the offing.

The shrinking budgets have already to result into low quality productions, often in the name of DVC’s which has the potential to dilute brand equities and push them into the generic realm. 

While the industry goes from high budget to low budget, let’s get over with all these cheap transitory phase tactics to try to get a quality that is beyond the money spent. These jump the boundaries of ethics in most cases.

So here’s a new reality. The client’s media mix has shifted drastically from conventional to digital, with an increasing focus on the latter. The shelf life of productions has been thrashed from months, or a year in many cases to weeks. Clients want more in terms of quantity to stay vibrant and fresh and less in terms of quality while tightening their budgets. The production budgets, hence, have shrunk manifold. The agencies have lost sight of what used to be their reason to exist once upon a time, i.e. the communication that keeps a brand cohesive and closely tied to its core. The clients are increasingly ignoring the fact that ideation of tactical campaigns done by various partners, will at best be loosely tied together, and will only temporarily solve sales problems. And soon they might face a cohesion problem, where competing brands will increasingly become generic. The clients, not understanding the equilibrium between cost and quality, are resorting to short-sighted cost-cutting methods that would turn the production houses into generic production coordination shops. And to add insult to injury, we are going through a depressed economic phase, which might last for years.

The shrinking budgets have already started to result in low-quality productions, often in the name of DVC’s. This too has the potential to dilute brand equities and push them into the generic realm, where brands become interchangeably identical. There is a theory that suggests that when that happens, and once advertisers do realize their mistake, they might ensure that their respective brands return to a singular partner responsible for creating and carrying out a cohesive brand communication strategy, a.k.a. the advertising agency. Which might mean the return of the glory days for TV ad making.
Yet an alternate theory suggests otherwise.

Rather, the reality is that the current digital influx is not a temporary phenomenon. Evident by the amount of investment that is going into tech platforms globally, and by the market caps of the likes of Apple, Amazon, Google, Microsoft, Facebook, and Netflix; which are the future and at the same time, have the potential of eating up more than half of the total communication budgets of the world in the next five years. These companies have already reshaped advertising into 6-seconder pre-rolls and 15-seconder inserts. This marks the beginning of the end of thematic ad campaigns, as the ads are becoming engagement and conversion-oriented. Yet still, no one likes these ads too, as they are a nuisance for digital content consumers. So in a few years, we might see completely different ways of brand communication on these platforms, and that might mark the death of advertising itself, as we know it.

6-seconder pre-rolls and 15-seconder inserts mark of the beginning of the end of thematic ad campaigns, as the ads are becoming engagement and conversion oriented.

Whether brands return to ad agencies in quest of a holistic solutions partner or continue to work with PR companies, creative hot shops, digital hot shops and production houses; it is the ad agencies who will not survive unless they embrace the digital revolution to spearhead their businesses. In that, they – the ad agencies – may have to offer 360-degree holistic brand-building solutions as their specializations under the same roof, and that is something that brands will eventually come back to, even though they might have lost sight of it temporarily. And they will have to become the finest again at what they once used to be the best at Mad Men creating great ideas.

As for the production houses, the sooner they accept the change, the better. While many are going to close down, many others will find growth at the bottom rung of the pricing ladder. It’s time for the production industry to consolidate its strengths and change business models to accommodate the opportunities that lie ahead. Though a short-lived phenomenon, many of them might want to get the ideation arm in-house to capitalize on the current opportunities. While for others, a diversification to producing DVC’s and digital content for brands might be the way forward. The production houses of the future will be the ones who will extend their experience of bringing drawings and words to life to the growing areas whether it is original content for digital platforms, feature films, branded content or DVC’s. The times of being TVC specialists will be gone soon. For if you are waiting for clients to return to the lavish ad-making frenzy like the way it used to be, it’s like trying to live a fairytale and ending it with ‘And they lived happily ever after’.

But maybe this one is not a fairytale. Or perhaps it’s not the end yet.

Stay tuned to Synergyzer!

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