edition 39 august 11 2005

is your agency agreement exposing your business?

A client recently provided P3 with a 16 page confidentiality agreement which we read and were happy to sign. However, when I asked them about their agency agreement they were unsure if they even had one.

In this P3 e-news, Clive Duncan of P3TV reveals how many advertisers are exposed to terms and conditions in production contracts that would make their legal advisers and procurement team turn white.

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the unseen contract in almost every TV production

As the marketer, every time your agency issues a purchase order on your behalf to the production company making your TVC, you are bound by the SPAA set of terms and conditions (let’s call it a contract), unless of course your contract strictly forbids your agency from entering into third party agreements without your written permission. Fairly rare.

Fixed cost up front?

Under the SPAA contract once the purchase order is issued, you have agreed (by default) to pay a fixed price for a “completed and reasonably acceptable videotape master” of your TVC. (The SPAA contract makes no mention as to whom the master is be “reasonably acceptable” to.)

You pay the worst-case scenario?

The SPAA contract goes on to explain that the contract is actually applied to an estimate based upon assumptions, by which the agreed or estimated total is calculated. Now any reasonable person would understand that the production company makes TVCs and is not in the business of gambling. Thus all the production company assumptions would have to be based upon a worst-case scenario. Then the estimate would have to be based upon financial considerations high enough to cover these worst-case scenarios whether they occur or not.

Robbing Peter to pay themselves?

The SPAA contract then goes on to explain that if not all the funds are required as estimated for one particular cost center it is the up to the discretion of the production house to re allocate the excess funds into another cost center should they see fit, or alternatively they can retain these excess funds as profit above and beyond the production house mark up / profit margin.

Make a change and we’ll bill you!

The SPAA contract also outlines the production company’s rights to charge extra should the client or agency alter the specifications of the project.
There is no allowance in the SPAA contract for the reimbursement of funds to the client should the change of specifications actually decrease the scope of work required to deliver a completed and reasonably acceptable videotape master. This is a fair indication of the spirit in which the SPAA terms & conditions were drafted.

Plus you never really own the production

The SPAA contract also states that the production house could claim payment if for instance, the client executed a cut down of a TVC that had not been mentioned in the original project specifications. Although this clause is rarely enforced by production houses it is still included in the SPAA contract, once again enforcing the production house bias of the whole contract.

In summary

The SPAA contract is a document from the 80s when the advertising business was awash with cash, when Alan Bond was winning the Americas’ Cup for Australia and Christopher Skase was planning the opening bash for his Queensland resort. Things have moved on since then, unfortunately the SPAA terms & conditions haven’t.

There is a solution

Thankfully there are alternative contracts that can be put into effect that are far more in-tune with current industry practices and expectations. For more information call Clive Duncan at P3TV on 03 9378 3223 or email clive@p3tv.com.au

marketing and advertising summit – sydney 2005



The Australian Marketing & Advertising Summit is on again on September 21 and 22 at the Sydney Convention Exhibition Centre.

Themed Partnership for Success, P3 is again involved, sponsoring this valuable industry event and chairing the session on the Use of Music in Advertising. To find out more or to register go to www.acevents.com.au/ad2005/ 

telstra backing the future of CRM today


QDC provides advertisers with a unique and cost effective way to use their digital motion picture assets (tv commercials and videos) for CRM including email, MMS and the like. They are now working with Telstra Australia to provide access to this amazing technology to all advertisers.

To find out more or get a no obligation demonstration contact QDC


benchmark your tv costs online


P3TV provides an online service that allows advertisers to see how their agency tv production estimates compare to the industry benchmarks instantly.

To find out how you can get ultimate transparency and accountability into your television production costs go to www.p3tv.com.au or contact Clive Duncan at clive@p3tv.com.au