What cost creativity?

An agency managing director was bemoaning the demise of the media commission system, because under this system there were no discussions about FTEs, overhead and profit multiples, retainer resource levels, or the like. Simply, the agency was free to get on with what they did, which was create advertising ideas knowing that they would be generously rewarded for their efforts through a commission on the media spend and a service fee on their total spend.

A decade on and still the industry struggles with developing a remuneration approach that is equitable, sustainable, transparent and easy to manage. We still have some media commissions, retainers, project fees, head hour charges in almost every possible combination. Yet advertising is not the only area of commerce where creativity is remunerated. Perhaps if we look at the other creative commercial categories, there will be lessons and insights into a new and better way forward.

Music Industry

– largely performers, composers and musicians are paid a cut of the revenue generate or a pre-agreed fix fee for service. Be that a cut of the door at a live performance, or a cut of the fee for each time their song is broadcast or played, or sales and downloads, or a licence fee for using their intellectual property in other formats. The formula is worked out that the realised revenue of the creative intellectual property created is split between all of the stakeholders including the creators for up to 50 years after their demise.

Film / Movie Industry

– The movie industry, like music is based on pre-negotiated fees for service for the performers and crews, but for the intellectual property rights holders the fee is based on the revenue generated and the value created. But increasingly the movie industry is seeing big name actors and even directors and screen-writers opting for a percentage of the profits and revenue rather than taking a fixed fee up front.

Art

– The artist struggles in their studio painting and then the dealer sells the work passing on the fee to the artist while retaining their commission. Or if the artist is commissioned to create a work of art such as a sculpture or portrait, then a fee is negotiated up front and paid. But with the value of art being a significant investment opportunity, there is a move to introduce a trailing commission on works so that each time they are sold at an increased price and therefore increased value realised, a fee is to be paid to the artist or even their estate.

Literature

– First time authors, like artists, struggle away over the keyboard writing their manuscript hoping a publisher will pick them up and if they are published the author usually receives a split of the profits based on the number of books sold. If successful, the next time they may receive an advance that is reconciled against the sales. And should they sell the option or rights to their novel to be made into a film they receive the fee minus the agent commission.

Actually, it seems that creators only share in the value they create when they take the risk of creating for no guaranteed reward. In every case, when the artist, musician, author or actor is commissioned to create a work, there is a fee agreed up front for that service. Then the next issue is one of who owns the copyright, because where the creator maintains ownership of the copyright they can then negotiate upfront a fee, usually based on the perceived value the work will create.

It seems to me that if advertising was a market place where agencies proactively created for clients to pick and choose then they could negotiate fees based on the value they created. In recent times there are examples where this has happed with several major brands. But as the agency is commissioned by the client to create to their specific needs and requirements, agencies should be focusing on negotiating a pre-agreed upfront.

The fact that this fee is based on head hour fees and resource retainers, the same way lawyers and accountants charge, is a reflection of the lack of creativity. Could you imaging Michelangelo negotiating with the Pope Julius II on painting the Sistine Chapel – “Well Father, 40 metres by 13 metres, that will take 4 years and need….” I don’t think so.

Related Posts Plugin for WordPress, Blogger...

About Darren Woolley

Darren is considered a thought leader on all aspects of marketing management. A Problem Solver, Negotiator, Founder & Global CEO of TrinityP3 - Marketing Management Consultants, founding member of the Marketing FIRST Forum and Author. He is also a Past-Chair of the Australian Marketing Institute, Ex-Medical Scientist and Ex-Creative Director. And in his spare time he sleeps. Darren's Bio Here Email: darren@trinityp3.com
This entry was posted in agency remuneration / compensation and tagged , , , , , , , . Bookmark the permalink.