CLOSE-UP: LIVE ISSUE - STARK FILMS AND SPECTRE. How will the formation of Large affect production?

Four industry figures give their views on the merger of Stark Films and Spectre.

The merger of Stark Films and Spectre fails to elicit a nasty word from anyone. Broadly there have been two responses: "that's great" or "so what?".

The "so what?" camp is made up of creatives who say that it won't affect the way they work. They go to a particular production company because it works with a particular director and that the merger is merely a way of making life easier/wealthier for the people who run Stark and Spectre.

Not surprisingly, Stark's joint managing director Stephen Gash and Spectre's managing director, Bertie Miller, muster more passion on the subject. Both were motivated by the sense of "what next?".

Miller says: "They were both profitable companies with roughly the same turnover and profit, but it's difficult for production companies to grow beyond a particular point. They tend to have one person at the top who is the entire management team."

He adds: "There was a personal desire from me and from Danny Kleinman to keep the company fresh and moving in the right direction ... We decided we wanted to go larger and take on more of the American model."

Gash explains: "Stark was 11 years old. This business thrives on what's new and I knew that heritage can hold you back. I wanted an injection of edge and energy."

Large, as the merged entity has been named, houses an impressive range of directors. There's Kleinman, Geoff Stark, Jon Greenhalgh, Colin Gregg, John Lloyd and Anthony Easton, while new comers include Simon Cracknell and Tash and Tanya.

Miller thinks to a certain extent this will help it become a kind of "one-stop shop" for agencies in search of directors. Although creatives like to shop around a much wider range, Large's merged management is a definite asset. The combined experience of Miller, Gash and Cathy Green (Stark's other joint managing director) will be an effective tool for the smooth running of any production.

LAURA GREGORY - managing director, Great Guns

The Spectre/Stark merger is a sound business move for the present market and sets a precedent other production companies will follow. Also the personalities within both companies make a powerful unit because of their combined strengths.

Production companies are dogged by a twin problem of the downward trend in budgets coupled with an inflexible cost structure driven by the traditional fee and profit share arrangements enjoyed by directors.

As has been the case in the financial markets, it is timely for staff/directors to become more like corporate animals to enjoy further rewards only when the company has achieved a reasonable return on its capital. This approach in the world of banking has not only strengthened the abilities of banks to build their brand but also created increasing medium term opportunity and reward for star performers.

Costs must be driven down and breadth of work must be maintained or expanded if production companies are to respond to the dramatic changes taking place in the agency world.

The formation of Large follows a successful formula borrowed from other industries such as investment banking and, nearer to home, advertising agencies. The merger of companies with a similar business style but with no economy of scale can make initial cost savings particularly in areas of non-productive infrastructure, allowing a reinvestment into the business in either new or existing talent.

It will be interesting to see whether Large chooses to concentrate on the careers of the main directors and reduce its roster size to allow the management team to focus on its most profitable directors and support emerging talent.

DANIEL KLEINMAN - director, Spectre

There are good business reasons for our merger but the important advantages for me are more abstract. I love being part of a buzzing company with a good atmosphere, it's conducive to the creative process in several ways.

At Spectre, the directors talk to each other, help with references and use each other as sounding boards with impartial creative opinion. So a broad base of talent and knowledge is essential and I dislike the idea of improving that base by trying to poach directors from other companies.

Merging with the considerable talent at Stark will be great. The strength of a larger company will make it easier to fund and develop new talent - something which is very difficult in the current climate. I believe in the future production must be strong, lean and reliable with an eclectic roster. Smaller companies fail in times when profits are low and quality is all-important. I want high production values, which for many reasons small outfits can find difficult to deliver. I believe good management is essential not only for business but also for creating the personality and culture of a company; our new set-up covers both.

STEPHEN DAVIES - chief executive, APA

In this very competitive market, commercials production companies are constantly analysing their structure and personnel.

They have seen advertising agencies, law firms and accountancy practices driven to merge by the need to provide a full service and international networks to big corporations.

A big production company will have advantages over smaller companies in terms of profile and the ability to cross-sell directors, but the advantages of size are not as compelling as they are in those other sectors; the right producer and director can produce the film the agency wants, whatever the size of the production company.

Furthermore, there are several factors that give Large such potential for success. Two already successful companies that can demonstrate they will contribute profit rather than adding to overhead.

Two sets of directors who complement rather than replicate each other's strengths.

Managing directors with an experience of the benefits of shared control (in the case of Stark, the joint managing directors Green and Gash) and who will know each other sufficiently well (not least from the APA Council of which Green and Miller are members) to be confident they will benefit from working together.

For those reasons, I think we are likely to see a trickle of further mergers rather than a flood but if Large really takes the market by storm, a greater merger momentum might build up.

MALCOLM POYNTON - creative director, Ogilvy & Mather

I think this merger is fantastic because of the line up of directors. The two companies complement each other really well: the merged entity is greater than the sum of its parts.

It's the same story as with start-up advertising agencies. There can be difficult growing pains when you hit the middle ground. This merger leapfrogs that.

It makes for a more established and stable production company. It combines some of the industry's business brains. Bertie, Stephen and Cathy is a mighty line-up, which gives confidence and reassurance when using its directors. There's a real depth of experience. I don't fear that such moves lead to a lack of competition in the market.

Something will come along and take their place. In London we are saturated with great directors: the more the better because it creates competition.

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