Opinion: Perspective - Agencies will have to do without retainer security

For an ad industry already crouched, buttocks clenched, against recession, Omnicom's recent attempt to cosh the production industry was brutal, but comprehensible.

The manner of Omnicom's global dictat might have shocked, but the whiff of desperation it carried drew much empathy.

Just to recap: a few weeks back, Omnicom told its agencies (BBDO, TBWA, DDB among them) that contracts with production companies should be redrawn. Production companies were to be paid for the work they did on agencies' behalf only once the agency in question had itself received payment from the client.

And Omnicom hadn't just got the remuneration bit between its teeth. With so many clients now struggling to stay in business and the insurance sector increasingly wary of offering cover for even some very blue- chip advertisers, Omnicom is looking to spread its exposure by sharing liability with its sub contractors.

This idea of delayed payment and sequential liability could be just the blow that would bring the fragile production industry to its knees but is clearly borne out of similar fears for the future on behalf of the agency sector.

Once the Omnicom plot was exposed by Campaign, however, the group hastily withdrew its plans here, though not necessarily forever. In fact, "withdrew" is probably not the right word to use at all. "Suspended" is perhaps a better reflection of the current state of play. Because be in no doubt, this is not an issue that will slink off, never to bare its teeth again. Sequential payment terms and sequential liability are simply facets of the wider remuneration issues hurtling towards the ad industry.

Agencies can no longer rely on their clients being able to pay their bills. And even if they are paying, agencies can no longer rely on clients paying them in the ways they've built their businesses upon. Take agency retainers. Or rather, take them away. Since that's what clients themselves are now increasingly considering. Anheuser-Busch InBev last month redrew its advertising model to strip away retainers and introduce a system of paying agencies based on a pre-agreed scope of work. Not just that, the world's largest brewer this week axed Goodby, Silverstein & Partners after 15 years (and some damn fine advertising) as it trimmed its agency roster.

The brewer is pursuing a cost-cutting programme designed to lose $1.5 billion in costs, so you can imagine that an unwieldy roster of retained agencies is an obvious starting point. If you pull these threads together, some serious structural consequences start to emerge, and I reckon integration is going to become top of the agenda. Any agency faced with losing its retainer might logically look at finding ways to work with the client to help them find other cost savings. Like pooling digital, direct and above-the-line creative duties under a single agency (or group) roof, with volume discount cost savings, a unified and streamlined planning and account management structure and obvious time efficiencies to match the cost efficiencies.

Early evidence suggests that cost-cutting is forcing through similar structural integration in many client companies, with the old silos of DM, PR and, more recently, digital being eroded and a single communications budget controlled by a unified (and leaner) marketing team.

The consequences for agencies are clear: the integration that agencies have talked about but have mostly, on any practical and permanent level failed to deliver, will be forced through by the eradication of internal marcoms fiefdoms at client companies.

Fast-forward a few years and it's likely you'll find more full-service agencies working on projects rather than retainers. That's easy enough to predict. Where the vulnerable production sector will end up is less clear, but Omnicom has certainly shown that as it struggles with the prospect of a new way of working, all of its partners will have to do the same.

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