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As Pandemic Threatens Economy, Production and Post Production Companies Are Owed Hundreds of Millions By Brands
- Monday, Mar. 23, 2020
Their cashflow drying up, companies put immediate emphasis on outstanding receivables to save industry, employment and health benefits
Matt Miller, President and CEO of AICP, today reported that one of the most immediate and gravest risks to production and post companies during the Coronavirus/COVID-19 crisis is the amount of outstanding receivables owed by brands and their agencies for already completed work.
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 Miller. “Cash flow for most live action production companies is, like work, drying up, with post production 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 cashflow 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 post production services, although not specifically separated out) in the past year.
In another poll during the 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 heathy first-rate creative community and their infrastructure of resources, employees and vendors,” Miller added.
AICP represents, exclusively, the interests of independent companies that specialize in the production and post production of commercials in various media—film, video, digital—for advertisers and agencies. The association, with national offices in New York and Los Angeles as well as regional chapters across the country, serves as a strong collective voice for this $5 billion-plus industry. Founded in 1972, AICP assists its members by: disseminating information; representing production and post production companies within the advertising community in business circles, in labor negotiations and dealing with employment issues; and before governmental officials; developing industry standards and tools; providing professional development; and marketing American production and post production via events and awards shows.