The coronavirus/COVID-19 crisis has put the global economy in jeopardy–and key in any recovery on the other side of this pandemic will be a fully engaged, viable creative community to help bring the consumer marketplace back to life. But any chance of such a recovery is being seriously compromised as many marketers and agencies are not paying production and post companies for services already rendered. This poses an existential threat to the health and survival of the production and post community at a pivotal crossroads juncture, according to information provided by AICP members.
AICP has put a handle on the amount of outstanding receivables owed by brands and agencies, documenting the immediate and potentially grave risk to production and post houses.
In a live poll of over 500 AICP member participants during a Zoom Town Hall late last week, the issue of outstanding receivables was the most immediate concern, of the many issues discussed. It was found that 28% of companies reported that they are owed in excess of $1 million, while 23% are owed between $500,000-$1 million and 34% are owed between $100,000-$500,000. The members were also polled on how late these payments are: 29% reported that payments are 45 or more days late (per their contracted terms), and one-third are 30-45 days late. Extrapolating across the industry, conservatively, this is well in excess of $200 million.
“Marketers and their agencies need to ensure that production and post partners are paid immediately for work already completed,” noted Matt Miller, president and CEO of AICP. “Cash flow for most live action production companies is, like work, drying up, with postproduction slowing as they finish recently produced work (which is mostly being done with great ingenuity remotely) so it’s more urgent than ever that these payments are made.”
During the meeting, AICP members relayed concerns for their employees; the ability to keep staff on payroll; and to keep their largely freelance employees (as well as staff) covered by health insurance. These issues are a huge challenge in general, and in particular when companies are entering a period of uncertain bookings, with so much money owed to them from marketers. Even the most resourceful creative problem solvers feel it could be insurmountable.
“Bad behavior is now highlighted, as rolling cash flow is not covering up for scofflaw clients or agencies that have used small business creative resources to bankroll their projects,” said Miller. “When we come out on the other end of this global crisis, marketers and their agencies will need the ingenuity of the production and post community more than ever to create communications to reach customers and stimulate the economy. Corporations must step up and fulfill their contractual obligations, so that this industry can stay afloat planning for work to serve their needs and get back into full swing when it is safe and practical to do so.”
The ANA recently released a study entitled Payment Terms: Current Practices for Marketing Services which noted that 21% of marketers have unilaterally extended their payment practices for production (and presumably postproduction services, although not specifically separated out) in the past year.
In another poll during the AICP Town Hall, 39% of the respondents said that they had “no jobs” in the works at all, with 25% saying they had three or more jobs in the works. This could mean bidding (some saying for scripts to be carried out as soon as practicable and months in the future); post work being completed; digital production companies (animation, visual effects, and design) in full production; or working on contingency plans for previously planned productions. To continue workflow in all of these areas, staff is required, so it’s crucial that any cash that is owed makes it to the member companies so they may continue operations.
“To keep these receivables outstanding is nothing less than irresponsible and shortsighted for marketers who want to maintain a healthy first-rate creative community and their infrastructure of resources, employees and vendors,” Miller added.
