Production: Dabbling with digital

As more and more clients turn to digital advertising, production companies are adapting to meet the demand.

Place your bets now. The next specialist digital production hotshop will be called ... Frilly Knickers. Last year saw the arrival of Sexy Briefs, while May 2006 saw the arrival of Baggy Shorts, launched alongside Disqo.

The latter two are an affiliation between Stephen Gash, the co-founder of Qi Commercials, and Ewan MacLeod, the co-founder of the post-production company Golden Square. Together, they can offer both production and post- services to clients, they insist.

Gash and MacLeod's ventures and Sexy Briefs were all formed to capitalise on the growing number of projects from agencies requesting digital solutions.

To date, this has primarily translated as virals or branded content for mobile phones.

Andy Morahan, the co-founder of Bikini Films, which set up Sexy Briefs in partnership with the branding agency Cunning, describes the latter as "an aside rather than a core business-build". He adds: "It gives us a bit more room to break in new directors and do more interesting stuff.

But I think it's dangerous to think it's going to be a money-spinner."

Over the past year, Sexy Briefs has produced a dozen virals for clients including Bizarre and Greenpeace. It is also working in branded content with outfits such as Juice TV, which creates downloads for mobile phones.

Morahan reflects: "The work is low-budget, but of no less benefit."

Over at Baggy Shorts, there is caution in the air. "This is an exploratory exercise," Gash explains. "It's not a gold rush because budgets are small."

Gash and MacLeod believe digital agencies will form the backbone of the client base of their new ventures. Logic dictates that with digital agencies growing owing to increasing demand for their expertise and, at the same time, technology becoming more sophisticated, there will be an enhanced desire for a slicker-looking end product.

This is where the expertise of outfits such as Baggy Shorts and Disqo comes in. Gash says: "Digital agencies have the facility to develop websites, but things tend to run out of steam when they start moving into rich-media content because they don't necessarily have that expertise."

The duo have been touring London's digital agencies and have received a "terrific reception", Gash claims. MacLeod adds: "When I talk to creative directors at Profero, Dare and AKQA, they're as excited about us working with them as we are about working with them."

Amid all the excitement, though, there could be a few teething problems with getting such ventures up and running. Matt Smith, the co-founder of The Viral Factory, whose clients have included News International, Microsoft and Lever Faberge, says: "Digital presents production companies with some challenges. When you are shooting for a digital audience, you're filling different space and the delivery mechanism is different. They should not think they can just wade in; they've got to change the way they do things. Having said that, they'd be foolish not to get into this space because it's going to grow and grow."

Despite his reservations, Smith welcomes production companies enhancing their digital offering. "I wouldn't be surprised if we started hiving off more work once they understand the language. At the moment, we do our own production because we don't trust production companies; there's a big difference between digital and traditional advertising," he says.

Steve Davies, the chief executive of the Advertising Producers Association, thinks this knowledge gap can be closed and he advises production companies to chalk up invaluable experience by adapting made-for-TV content for digital platforms. "The best way to do something new is to dive in and do it," he says. "A production company can say to an agency 'we'll adapt that ad for a phone' and learn from the experience. This is a new market, so if they do a lot of projects, they can easily acquire a reputation for being experts."

To sustain momentum, Gash thinks that establishing long-term partnerships with digital agencies is the way forward. This is preferable to working with them on a project-by-project basis and could present a viable business model for Baggy Shorts because budgets are too small to pitch on a per-project basis. Indeed, Patrick Egerton, the co-director and producer at the production company Chief, makes a rough approximation that the average budget for a viral ad is about half that of a TV ad budget - and many might think that estimate a tad generous.

On the plus side, the volume of work is increasing. Chief, which won a gold at the Creative Circle Awards for its "routine stop" viral for Sony's "Pursuit Force" PlayStation2 game by TBWA\London, is taking on more digital work than ever. Egerton says: "Production companies are definitely responding to the changing demands that accompany ad agencies' changing strategies for their clients."

And this is good preparation for Soho's new world order, as predicted by Damiano Vukotic, RSA Films' head of sales. "I'm convinced digital agencies will take over," he says. "They are already huge and the young creatives there will be the commercial directors of the future, leading and directing content and understanding every form of media."

Whether or not you agree with this vision of the future, there is clearly a growing demand for digital content. But the real question still remains to be answered: can production companies make money from producing it?

"Funnily enough, I get asked this quite a lot by my boss," Matt Tucker, the head of digital media at Partizan, jokes. "It will certainly take time to rival production companies' current turnover, but moving images are still the primary medium for communicating an advertiser's message - even if the distribution method is different. Our skills and experience feed into that."

Jon Hamm is a director at Greenroom Digital, whose digital production company The Grid teamed up with the production house Pagan to create digital content. When asked whether the venture has been commercially successful so far, he says drily: "There are no Lamborghinis parked outside our building." Rather more buoyantly, however, he adds: "Revenues have significantly exceeded initial expectations, and the budgets for digital work have been inching up."

Davies believes digital work can become profitable, but only if the industry develops new business models that put greater emphasis on the importance of intellectual property. He singles out Bartle Bogle Hegarty's recent launch of its "brand invention company", Zag, as one example of an agency doing this. Zag sells or licenses brands to third parties in exchange for a share of sales revenues. Certainly, if production companies were working on a royalties basis rather than on a per-project basis, this could be one viable way around the thorny issue of how to make digital work pay.

Adam Saward, the managing director at Pagan, agrees this route is the most feasible: "Establishing the ownership of intellectual property and content is pivotal in the relationship between the brand owner and the production company."

Until the financial aspect is sorted out, however, many remain unconvinced digital can generate significant revenues for production companies. Five years ago, James Studholme set up Sleeper with Deepend, a venture that eventually went bust. He recalls: "We ended up being treated like a consultancy, but no-one wanted to pay for it." Today, he reflects that there is not enough cash around for production companies to justify setting up a standalone company. "There must be a model devised to ensure that people get paid properly," he insists.

Part of the problem is that clients often seem to equate "digital" with "cheap", a perception that could potentially damage its long-term business potential. Smith observes: "Clients just don't expect to pay as much: if it's going online, people think that it should cost one-tenth of the price (of TV). TV is still the big brother, while viral is its poor 50th cousin twice removed."

Certainly, jobs can work on a cheaper basis, Davies says, but only if clients and agencies are willing to accept that fewer people will be allocated to the job and there will be a minimal number of pre-production meetings. And you can be pretty sure that the shoot will not serve as a jolly day out either for the client or the agency.

As Gash puts it: "This isn't about £27-per- head catering."

Gash adds that the directors at Baggy Shorts will not be as expensive as those employed for TV ads, so the costs are immediately much lower: "If you're an established director who's used to being paid £8,000 a day for a job, you might not want to go backwards. Instead, I have a collection of directors who haven't worked in commercials before and who haven't been exposed to the traditional remuneration structure within the commercials business. It's just like pop promos; the minute you say 'we're aping the commercials production market', you are dead in the water."

Hamm believes there is another comparison between digital content and promos. "When music videos appeared, a lot of production companies thought 'they sound cool and would make us appear a bit more of the minute'. But, in fact, a lot of them were never going to succeed in that medium. There's a little of that element with digital because companies want to appear up to the minute," he says.

Never mind appearances, Danny Fleet says - making sure you are up to the minute is a prerequisite of the job. Fleet is the managing partner at Contentment, a division of the production company Hotspur & Argyle.

Contentment, which employs ten people, launched 18 months ago and produces work for 2.5G and 3G-enabled handsets, such as a weekly football programme distributed to O2 users. He says: "I'm into new technologies. I'm a video blogger and having that enthusiasm for the technology helps. Mobile telephony in particular is only going to get faster and cheaper, so people are starting to take notice of it."

Some mobile handsets will soon be wireless-enabled, too, offering further creative scope. The Nokia 6136, for one, will allow consumers to browse the internet and send files. This means that, even though the revenues are currently small beer, the investment is in the potential rather than in anything more tangible.

As far as potential goes, however, it is a pretty safe bet, according to most predictions. The Internet Advertising Bureau is confident online adspend will crash through the £2 billion mark this year, while Informa Telecoms & Media estimates that mobile TV will have 124.8 million broadcast users worldwide by 2010.

MacLeod says: "At the moment, there's not a lot of money to be made. In particular, when you compare it with TV commercials, there's none at all. But 3G phones are here and 4G is coming soon, so in the long term, there will be money."

More than likely, staff at a production company near you in Soho are having a good rummage through their underwear drawer right now in search of inspiration for the perfect name for their new digital offering. Silky Long-Johns, anyone?

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