CLOSE-UP: LIVE ISSUE/DIRECTORS' PAY - Is it time to shout 'cut' on directors taking a cut? Producers deny that they are massively marking up costs to cover director pay

A recent Campaign feature on the Advertising Producers' Association has got quite a few backs up (Campaign, 9 February). And it is hardly surprising.

A recent Campaign feature on the Advertising Producers' Association has got quite a few backs up (Campaign, 9 February). And it is hardly surprising.

The article posed the fundamental question of how directors get paid and how production companies make their money. One source - a leading London producer - claims the methods are 'fraudulent'.

The producer claims that intense competition means production companies are reliant on their shop window directors. Keeping them is the key to survival and in order to do this, he claims, production companies not only pay top directors huge fees (between pounds 8,000 and pounds 10,000 per day's shooting) but they also give them a profit share of the job. This, apparently, can range from 25 per cent to 50 per cent of the net profit.

These costs are covered, he adds, by production companies not being entirely honest when it comes to budgets.

The whole issue is not new. We have simply reopened a can of worms first touched on by Tim Delaney and Mike Cozens during Delaney's presidency of the Creative Directors' Forum four years ago.

In a presentation to creative directors, Delaney lambasted mark-ups and the fact that there is a rate-card that the client sees, and one with lower prices that production companies work from.

'Their jaws dropped, but they did nothing,' he claims now. He adds: 'It's a cottage industry that works in a certain way - the figures they quote are not the figures they pay. Production companies are walking away with thousands of pounds of client money.

'Clients have cost controllers but they can only measure against what the norm is. But that 'norm' includes jiggery pokery,' he adds.

'That's bollocks,' responds one exasperated production company source to the assumption that they give directors a share of net profits while also building an inflated figure into the budget. He scoffs at the idea that a cost controller would sign off a budget containing an undeclared amount covertly stashed aside for the director.

And while Delaney claims that he wouldn't mind paying someone like David Lynch pounds 250,000, he is not prepared to pander to any hidden agenda: 'I don't want to pay money I'm not asked to pay.'

But such is the nepotism in the industry that Delaney points to the fact that creative directors bury their heads in the sand with no-one wanting to stuff up their mates. He also says agencies are partly to blame because of inexperienced or unskilled people in TV departments. 'We deserve everything we get,' Delaney states.

Not surprisingly, the APA, which represents the interests of production companies, is at the centre of the fray, and has hit back at the claims.

Steve Davies, its chief executive, denies claims that production companies expand their budgets in order to convince directors to stay. 'It's not happening. You can't hike up a budget. It's a highly competitive market and budgets are already cut to the bone.'

However, in the same way that Delaney points to creatives being unwilling to rock the boat, observers point to the fact that if APA council members come from production companies, they are similarly unlikely to want to shoot themselves in the foot by upsetting the status quo.

'What you're talking about would mean a root and branch restructure of the business. But if you scrutinised any business, there'd always be some practices that people would disagree with,' another insider says.

Still, Davies recognises that top directors are well paid. 'But that's because there's a big demand for them. Production companies have to invest to keep them - but by doing that, they're making sure the top talent is available to everyone,' he says.

Paul Gay, a director at Outsider, claims it's simply a case of market forces. 'Like football, this is a talent-driven business and the best people bring in the biggest crowds. There's nothing wrong with mark-ups, as long as the client isn't being duped in any way. It's the way the business operates and this profit is shared according to the directors' arrangement with the managing director.'

Mark Denton, a director at Blink, also argues it's straightforward business practice.

'A managing director may decide that it's worth paying a shop window director more based on the fact that it raises the company's profile and attracts scripts which can be passed on within the company. But if it gets to the point where that director is a drain on the company's resources, then he can stop this practice. People are stupid if they let it continue,' Denton says.

Instead of worrying about a shop window director, Denton adds, a good managing director will seek out hot new talent for the future.

Stephen Gash, joint managing director of Stark Films, agrees: 'If the directors didn't get paid profit here in the UK, they'd go somewhere else. It's a world market. Do agencies and their clients really want that?'

Nevertheless, far from suggesting that the production companies are being held to ransom by directors, many strongly believe that the plethora of directors in the marketplace means that no-one can be too precious about work.

And calls for greater transparency from production companies will only continue to serve to ruffle a few feathers, with charges of hypocrisy levied at agency people. After all, your top creative director will earn between pounds 250,000 and pounds 500,000 a year.

'Agencies pay their staff salaries and bonuses. And everybody knows clients ultimately pay for that,' says an angry production company insider, who also points to the fact that his own staff don't get the usual perks of the agencies such as a company car, healthcare or pension schemes.

There are few people willing to stick their necks out to resolve the issue. Mark Hanrahan, head of television at Saatchi & Saatchi is someone who frequently raises it at the IPA and argues for more transparency.

'I sympathise with production companies because they're not making excessive profits, but some of their directors are,' he says.

'The budget shows mark-up on everything except the director's and producer's salary but it should be clearly spelled out how much the director is being paid.

'If they are taking a 50 per cent profit share, it could mean they are earning pounds 60,000 to pounds 70,000 for 15 to 20 days work and clients and agencies should be able to decide if they're worth that.'

How a company chooses to remunerate its staff is its own business, with production company observers pointing to the fact that agency personnel are often on a profit-related bonus themselves. But it seems that until remuneration procedures are more thoroughly scrutinised and evidence of 'fraud' proved or disproved, the situation will continue unchanged.



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