Are You Paying Competitive Rates for Agency Studio Services?

5 Apr

Low RatesFlexibility, responsiveness, and competitive rates were once the hallmarks of ad agency studio services.

Over the last several years many agencies have expanded their resource offering as the demand for content development, repurposing and sizing has increased in the multi-billion-dollar production sector. Today, agency capabilities include traditional studio services, broadcast production, video, and digital editing. No one can argue the convenience of being able to tap an agency partner to assist in this important area.

The question for advertisers is “How do the rates being charged by agencies truly compare to the market?”

In our experience conducting agency contract compliance audits, advertisers that do not employ the services of a production consultant likely cannot answer this important question. The reason for this assertion is twofold. First, most agencies do not competitively bid these services on a regular basis. Secondly, the agency is typically the one overseeing the bidding process, which could potentially skew the objectivity of the process. Further, most advertisers have not taken the step of centralizing production services with one agency partner. Accessing studio services through multiple agency partners makes it difficult to truly optimize efficiencies and limits their ability to monitor agency adherence to bid protocols… assuming such guidelines have been developed and communicated.

The best place to start is for advertisers to review their client-agency agreements to make sure that certain safeguards have been incorporated. Below are some examples:

  • Requirement for the agency to competitively bid production services at pre-determined intervals (i.e., quarterly, annually, job by job).
  • Language requiring prior, written client approval for waiving any competitive bidding requirement.
  • Incorporating studio “rate sheets” containing hourly bill rates by position and or piece rates for certain outputs (e.g., color proofs) into the agreement and or annual statements of work.
  • Listing of each agency department and or related entities providing studio services.
  • Language requiring agency to secure written client pre-approval for cost over runs.
  • Requirement for the agency to separate studio fees and hard costs on both estimates and invoices.
  • Staffing plans, with estimated hours by position/ person should be required for all projects over a pre-determined spend level (e.g., $25,000).
  • Establish bid protocols and append them to the agreement and annual statements of work.
  • To avoid any doubt, require the studio to maintain support for billings accessible for review (timekeeping and actual output records) to substantiate costs/ activity.

As with any agency service, advertisers would benefit from conducting periodic compliance and financial reviews to ensure that bid guidelines and resource commitments are being followed and applied. These precautions will allow advertisers full transparency into the costs of their agency partners studio offerings.

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