Just a year ago, the commercials production industry was facing dire warnings to adapt or die, slash margins and rationalise wherever possible. Now, commercials producers could be forgiven for sitting back with a degree of smug satisfaction. For, while they're not quite out of the woods, business is looking up.
There are more scripts around, commercials producers report. This is partly due to the run-up to a big summer of sport, but also a direct result of the return of growth to the advertising market.
The easing of the recession means that the standard of scripts is going up too.
"The quality of scripts was low a year ago, but it has improved," Daniel Bergman, the managing director of the production company Stink, says.
"I think the market's bouncing back with more bold, experimental ideas - I see agencies being able to sell interesting concepts to clients now."
This sentiment is echoed in television departments. Petrina Kilby, McCann-Erickson's head of TV, says that clients have been - understandably - reluctant to give the green light to more creative, challenging ideas.
"They've been dwelling more on research and have been less willing to take risks," she says. "Before production money is committed, a lot more questions are being asked, and that does make it trickier to get braver work through. But these are the areas where we're starting to see changes."
This change in scripts is backed up by a quick glance at who's won what during the past year. In 2003, honours were fairly evenly split between Partizan and Spectre. The former, Campaign's Production Company of the Year last year, won handsomely with Tango, 118 118 and "cog" for Honda. John Smith's brought in the awards for Spectre.
Academy and Gorgeous weren't far behind with gongs for Barclay's "tale," "sold" and "evil" (Academy) and NSPCC "cartoon" (Gorgeous).
While none of these ads could be classed as timid, the strong vein of humour in the award-winning ads points to a more traditional outlook.
So far this year, there's only been the British Television Advertising Awards to judge things on. The humour's still there, but advertisers seem to be pushing the boundaries. Tango, 118 118 and some audacious viral work for Ford's SportKa and Trojan Condoms took a hefty portion of the spoils. "Cog" was named the best TV spot of the year, while being hailed as redefining the car ad. It's impossible to argue that ads such as this, or "mountain" for PlayStation, couldn't or wouldn't have been made last year, but it's fair to say they're bigger and braver than might have been expected in the preceding 12 months.
But although business has improved for commercials producers over the past six months, the present economic conditions are unlikely to change dramatically in the short term. As any industry comes out of recession, volumes tend to ramp up, but prices are usually slow to follow.
"There seems to be a level of confidence back in the market," Stephen Gash, a joint managing director of the newly formed production company Large Corp, says. "But if it is back to business, then we're going to be operating at this level for some time. Things aren't going to get any bigger because we don't have a 'bubble' of new work being created by an artificial influence in the market such as the dotcom and telecom booms."
Large Corp was formed from a direct merger between Stark Films and Spectre.
It was a big story in an industry that accepts change so long as the status quo prevails. Here were two successful companies of similar size and turnover combining their management teams and rosters of directors without any obvious financial need to do so. Motivated more by a sense of "what next?", the joint managing directors of Gash, Bertie Miller and Cathy Green have created a company with a deeper roster of directors. This takes the pressure off the Daniel Kleinman-focused Spectre and lends Stark Films some of the kudos associated with Kleinman's ability to sweep the boards at awards ceremonies with everything from played-for-laughs John Smith's spots to cutting-edge Audi ads.
Whether or not Large Corp is the shape and size of things to come across the industry remains to be seen. Stephen Davies, the chairman of the Advertising Producers Association, argues that the structure of the two companies made them well suited to merge. The three managing directors knew each other well and the rosters complemented rather than conflicted with each other. But he doesn't see any signs of merger-mania consuming his membership.
"That's not to say there won't be other mergers - I think there will, but people have built these companies up themselves and they're used to being in control," he says.
Caveats aside, there are those in the industry who think consolidation will continue in the coming months as mark-ups stay tight. Joy Films' sublimation into the RSA roster in October 2003 - more a merger along the Granada-Carlton line than the Stark-Spectre model - is a continuation of a trend. According to the former Publicis head of TV, Judy Ross, this trend shows no sign of stopping. Ross, alongside the ex-McCann head of TV, Sarah Martin, formed the Ross Martin Consultancy in early 2004, to match homeless and footloose directors with producers.
She has already been approached by production companies looking to form alliances with their peers. "The industry will definitely see more mergers," she predicts.
Ross' business was primarily set up as a "dating agency" for directors and production companies. She's quick to scotch any idea that the consultancy reflects a shift in the balance of power between directors and production companies, although she does predict a marked increase in demand for freelance directors. "There's a big market for them at a certain level," she adds. "You'll never get the top people doing that, but we never realised how big the demand was."
Mergers haven't been the only force shaping the landscape. The past 12 months have seen two big names leave the industry, albeit for different reasons. James Garrett retired aged 75, after more than 40 years in advertising.
His eponymous production company went with him. But the string of satellite companies that he launched will see his ethos, if not his name, continue - as Garretts wound down, the staff moved into The Annex, the production company he launched in 1986.
But the veteran producer's departure was overshadowed by the closure of the production company Harry Nash, which went into receivership in the same month, owing £2.5 million.
Much was made of the dramatic decline of the former BTAA Production Company of the Year. But Harry Nash's liquidation doesn't necessarily point to an industry teetering on the brink of collapse under the strains of dwindling budgets and rising competition.
The problems that brought the company down were peculiar to Harry Nash, Davies believes, and not indicative of the health of the industry as a whole.
There has certainly been enough investment in UK production companies - especially of money from the US - to quash any rumour of imminent decline.
The US-based Hungry Man is now a salient feature in the UK market after launching offices in London in January 2003. HSI, also from the US, and Gerard de Thame Films have launched Exposure Films, which goes from strength to strength thanks to a string of signings, mainly at the expense of Godman.
Unlike previous US production set-ups, neither Hungry Man nor Exposure exists merely as a lily pad for the American names on their rosters - both operate on UK-generated turnover and are keen to be seen as independent from their US owners. Although, the Exposure head, Natasha Wellesley, concedes: "It's reassuring for agencies to know that we do have backing if we ever need it. So the commercial will always be delivered."
Exposure Films has expanded its operation to boast dedicated music promo and animation arms and has worked on a number of viral campaigns. It's not alone in exploring new revenue streams in a market that remains woefully over-supplied. And as the definition of TV expands, and the lines between editorial and advertisement blur, production companies have to be ready to seize opportunities where they arise.
"Our work is largely commissioned by advertising agencies, and it's largely there to advertise products and brands," Gash says. "But who knows where it's going to go. Whether it's going to appear on a 3G phone or a full-sized cinema screen, it's not our choice - what we're doing is making the work. We've got the talent here and I think that we need to be flexible enough to take advantage of that." He points to the nascent advertiser-funded programme industry in the UK which, although hamstrung by current legislation, is making inroads.
But are commercials producers best-placed to take advantage of these new markets? "They should certainly be competing for it with the broadcast production companies," Davies says. He sees a niche for commercials production companies, not in long-form programming, but in high-impact visual campaigns in "stations, supermarkets ... virals on your computer and interactive commercials. We want to make sure that's an opportunity for APA members. The creativity of some of the content of those things at the moment is pretty low-grade. Better creativity gives better results - you've got to grab people's attention and our members can make that kind of thing."
COMMERCIALS MAKE A COMEBACK
"Cautious optimism" would describe the overall mood of UK producers, but until the Advertising Producers Association completes its research into the size and value of the production market, it's difficult to get a full picture of an industry dominated by small, privately owned companies.
Producers talk about a moribund start to 2003 and a marked pick-up in the second two quarters. 2004 started with a whimper and a dearth of brave (and more lucrative) scripts, but the twin fillips of the Olympics and football's European Championships should see a wave of bigger, bolder ads this summer.
The general perception is that the commercials production industry is over-supplied. In its tenth annual survey of commercials producers in November 2003, Televisual magazine found 442 directors working in the top 30 companies, which produced an average of 64 ads a year each. As this translates to fewer than seven commercials per director, it seems likely that big companies with extensive rosters are occupying an increasingly marginal and dangerous position - the scripts aren't there to justify that size of company unless all the directors are fully employed, household names.
The same survey showed an increase in turnover (up by an average of £250,000 to £7.8 million) but, whatever the cause, it's not an increase in budgets.
Mark-ups, which once never dipped below 30 per cent, have fallen to around 25 per cent, with many companies routinely opting to go below this figure - or being forced to come in under it - in order to get a script made to budget and on time. Producers are sceptical that any increase in adspend will translate into bigger budgets and higher margins.
That said, better times for TV advertising are round the corner.
PricewaterhouseCoopers, in its analysis of projected adspend in six European countries, predicts sustained increasing adspend growth for the next three years (3.6 per cent in 2004, 4.1 per cent in 2005, 4.6 per cent in 2006, rising to 4.8 per cent in 2007). Based on previous years, the UK should see around 20 per cent more of this spend than its nearest rival, Germany. These figures are backed up by the IPA's Bellwether Report, which reveals marketing spend among 250 advertisers at its highest since 2000 (40 per cent of respondents predicting an increase in marketing budgets over the next year), and ZenithOptimedia's forecasted 4 per cent growth for this year. Again, though, this is likely to be translated into volume, not value for production companies.
The long-feared drop in television viewing, heralded by the fragmentation of media into interactive, online and entertainment formats such as gaming consoles and DVD, has failed to materialise. Indeed, the data shows that, despite the proliferation of media over the past decade, average TV viewing figures have fallen only slightly. In 1992, average TV viewing per person per day was 3.81 hours.
In 2003, it was 3.73 hours. "It shows that despite the advances in interactive media, TV is still as popular as ever with viewers," Stephen Davies, the chairman of the APA, says.