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.



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 £8,000 and £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 £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 £250,000 and £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 £60,000 to £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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