AICP Research Helps Chart a Course for Profitable Production

Production is at a crossroads. Production companies, agencies and marketers alike are finding the old linear workflows are no longer enough…  and traditional business models are under increasing pressure too.

It’s a difficult thing to navigate blindly, especially when parties on different sides can feel squeezed and defensive.

With that in mind, the Association of Independent Commercial Producers (AICP) recently engaged The Nucleus Group, a strategic research company, to conduct deep research into the emerging opportunities within commercial production, and ascertain where the industry stands amidst technological advancements and changes to the business.

The title of the subsequent report, ‘Craft & Commerce: Opportunities for Marketing in the Motion Image’, grew out of its conclusion that commerce and craft must coexist for advertising to be effective. Through extensive research, in-depth interviews with industry leaders and a confidential survey of AICP members, the report charts potential, actionable pathways forward for production companies.

“I think a lot of people would love this paper to point fingers at the ‘bad guy’ or what's to blame for their problems. That's the easy way out of anything, especially in a time of change. That's not what this was meant to be,” says Matt Miller, president and CEO of the AICP. “I think people will go, ‘Wait a second, why isn't this slamming [anything], saying technology is evil, or saying in-house production is criminal?’, or whatever it happens to be… Because none of those things are true! They could be true, if used or implemented incorrectly, but they aren't necessarily true.”

He adds, “We asked Nucleus to tell us a story, tell us where things are and where things are going, in a way that can be sensible to people, so they can process it. There are probably many people who wanted an answer, and there isn’t an answer.”

To explore some of the study’s insights and what they mean for production companies across the US and beyond, LBB sat down with both Matt Miller and Elizabeth Talerman, CEO and managing partner at The Nucleus Group.

Above: Matt Miller and Elizabeth Talerman

LBB> Why was now the right time to turn to the future and partner with The Nucleus Group on this study?

Matt> It really grew out of us listening to our membership. Over the last year-plus, depending on who you spoke with, there was certainly angst in the industry about various things all at play - but not really understood. We felt like the best thing we could do for our membership at this moment was deliver information so that they could discern for themselves what is happening within all the various parts that influence the business. 

While we normally get into ‘advocacy mode’ on many things, this was more just an investment in the truth… It's an opinion paper, a wide array of opinions brought together to make sense and tell us a story about where we were, where we are, and where we are likely going. So we felt like it was a good investment for people to then take it, internalise it, and see what it means for their own company, with their makeup, focus and talents, and ultimately [see] where the application could be.

This was meant to be for our members only. But as we started getting the results back, we realised this shouldn’t only be for the benefit of our members, but actually for the education of everybody. Everyone should read this paper, whether you're a marketer or an agency, a consultant, a vendor, a media person, an influencer, whoever you are, it's going to give perspective on how things are laying out. 

I give a lot of credit to our board for doing a piece like this, which would normally be a member's benefit, and saying, ‘No, this has to be bigger than that’.

LBB> The study distinguishes a difference between content that connects with an audience, and content that translates to performance, in terms of the metrics that brands are tracking. Are there difficult conversations to be had with producers about how craft relates to performance today?

Elizabeth> Craft and how it's defined isn't static. One of the most thrilling things about being in a craft-based field is that craft is informed by culture, and culture helps to inform craft. That means craft is evolving. The production values of 20 years ago aren't the same as they might be today. When ‘The Blair Witch Project’ came out, we didn't say it was terrible, we said, ‘There's a new way to shoot and capture a story, and it's visceral and it's exciting’. The idea that craft evolves with culture is a very exciting conversation to be having inside of production right now. 

Having grown up in advertising, there is nothing more frustrating than putting what you think might be incredible storytelling and great craft out into the world, and not understanding what it did or how it performed. The linkage of these things is not easy, and I think there's an evolution afoot in bringing all that closer together, but I think every craftsperson wants to understand: How does this resonate? How relevant has it been? How is it doing for my client? Because that's the way you keep clients for the long term, and that's the way you get to tell a story over time.

LBB> The study suggests a significant opportunity for this craft and storytelling resides in a ‘content chasm’ between specialised brand marketing and hardworking performance marketing - described as a near ‘commercial wasteland’. Will production companies be receptive to the idea that this could be their way to a profitable future - where human connection and authenticity is prioritised over perfectly polished craft?

Elizabeth> In that content chasm, creativity is what's desired most. We saw that at the bottom, where things are incredibly transactional; AI can do wonderful heavy lifting - feeding and understanding the algorithm, moving much more into performance [marketing] because you're selling based on product features and benefits. This is the kind of commercial work where people are aware of what you've got, but you've got to get it sold. 

In the ‘content chasm’, you're dealing with brands that aren't making tentpole productions, that aren't spending millions on the Oscars, the Super Bowl, or live sports and events, but need to make a connection. This is where creativity has to happen. A lot of that work is now either on streaming platforms that have opened up to television commercials, or on YouTube. It creates a storytelling mechanism for brands that may not be able to do the bigger budget productions, but still want to consistently create stories and connections. 

What happens when you're not a multi billion dollar company, but you're worth a few million? You still need to get out there, and people who have storytelling and craft skills, and traditional production and post production skills, are really serving that market, which is growing faster than any other.

LBB> The research also highlights a disconnect between the old production landscape and the new. New talent, especially post-covid, provide new skills but there’s a sense that they lack mentorship and expertise. This is even reflected client-side, where younger brand leaders are reportedly detached from what makes ‘good craft’ - and what that should cost. With time and financial pressures making mentorship ever more difficult, how can production companies bring these generations together?

Elizabeth> You hit on something that's super important here. The financial pressures - the speed and change in the business - are real. And one of the most important ways to tackle that, especially as technology is changing, is through mentorship. But it's not traditional [mentorship], it's two-way. When you're bringing in young talent that really understands AI and are masters of influence and performance, but may not understand the craft of storytelling or connection as much, you're mentoring from the bottom-up as you mentor from the top-down. 

Frankly, when you bring in young talent, it can be more affordable in the beginning too. So it was our call to say that there is fresh flowing water coming into these rivers, and as they meet, momentum will pick up. All boats rise with the tide when mentorship goes two ways.

Matt> The study is certainly a reminder that it's not only a responsibility to mentor the next generation, but it's also just good business… It’s one of the things that is just needed for survival. We're at this crossroads where if people aren't constantly reminded of mentorship’s responsibility and value, we could end up with a large void in where we're going and where the next generations are coming from. That is going to be a very important piece of our psyche as we move into the next stages of business.

LBB> The study lays out a new business model for the industry, with brands at the centre, working directly with each vendor - agencies, production and post companies alike. How do you see the industry aligning on this?

Matt> When you look at how Nucleus illustrated the way things are, with the marketer as the hub and everyone working for them, it brings to light this notion that the marketer actually needs to work to take control and not rely on third parties to control things for them, as agencies or consultants might have done in the past. They need to actually build a management of all the people that work for them and be trusting enough to share information and data in order to get the most out of the investment - whether it be research, media dollars or production dollars - and manage that whole process. 

That's a big shift. People might talk about the fact that brands manage this whole thing, but they often push it off to their agencies and other vendors to manage it for them, and they just want to hear how things are going. This is why you see so much churn with agencies and everything else, because ultimately they don't get what they need. This actually turns things on its head, because [marketers] now have got to take some responsibility here and truly organise things and clearly articulate what they need for marketing. 

You're the marketer. You have to talk to people about what it is you're looking for within your marketing ecosystem, from each vendor in each area. Big shift! That in and of itself could be very illuminating for brands.

LBB> Of course, there are more production vendors than ever - including agencies and in-house capabilities at brands. How has that impacted both the bidding process and profitability for production companies? 

Matt> It's about the marketer managing this. The more agencies want to be involved as a competitor in certain areas and take some of that work internally, the more the marketer is going to need to manage that process to make sure they're getting the right value and [ensure] a fair level playing field for the talent.

We've seen and heard it recently where agencies are struggling with the new model of not being an agency of record, not having a constant flow of cash - so they're looking at new outlets. WPP stated it publicly, I think they’re all stating it somewhere, somehow - or at least displaying it - that they see production as being a revenue source for the agency, as opposed to something they manage on behalf of the client. 

If that's going to be the case, then OK, that's going to be competition that production companies and post production companies are going to face. But it's going to be another level that marketers are going to have to manage, to make sure they're truly getting the best value and don’t have the student grading their own homework. It's not a problem to have them in competition, it's a problem to have them involved in the decision making of who the brand ends up going with, if they're in that competition. 

That’s the angst element in that corner, and I think that has to play out. But again, it goes back to that element of marketers having to truly be a little bit more involved with some of this decision making, that oftentimes they'd hand off to their agencies.

"It's about the marketer managing this. The more agencies want to be involved as a competitor in certain areas and take some of that work internally, the more the marketer is going to need to manage that process to make sure they're getting the right value and [ensure] a fair level playing field for the talent."

LBB> The study also mentions how production companies need to make demands of their own to bring about this change - can you elaborate on that?

Elizabeth> There's a great opportunity in production to come closer to performance. As marketers disintegrate the walls between silos and move from a hierarchical model to more of that circle [model], part of what will happen is the understanding of what accountability means, what performance is, and then how to use tools and technologies to ensure the craft has the flexibility and mutability to perform. If you silo those things and just have a group working on the data analytics, a group working on the creative, and a group working on bringing that creative to life and distributing it, you lose the ability for that craft to perform. 

There's no question that as production comes to the table - a round table - and doesn't sit in a silo or underneath a bunch of layers, there's an opportunity to make demands that actually pay for themselves with the client. 

LBB> A cynic might ask what the motivation is for marketers to actually take control and the added responsibility, when it seems the increasing competition and in-house production at agencies and brands just drives the cost down for them.

Matt> Well, it's a value system. If the ultimate goal for the marketer is to just drive costs down, they can get things cheap. But you lose that element of effectiveness and everything that they actually need… The quality goes down! So yeah, they can drive costs down, we've seen it over and over again, and you're right, some people get blinded by that - that becomes the motivation bogey. But ultimately, the motivation is [in] the conclusion of this paper… those three words in the title: craft and commerce together, which is really the important thing. 

If it's only about the commerce and driving down costs, that's fine, but how effective is that ultimately going to be when you have a lot of noise out there? Therein lies the real prize for a marketer to really harness.

Elizabeth> Craft without commerce fails to perform, but commerce without craft fails to connect. And when you fail to connect over time, your performance will degrade. Connecting requires a different kind of skill that happens through sight, sound, emotion, a story arc, and all of the things that a director, a lighting crew, and sound people know so well. 

We see it over and over again, when a client keeps running something and it runs itself out. We get bored with it. It fails to be about us as human beings, and it's just about selling something. So this human centeredness goes all the way through the person receiving this piece of information, who then has to do something with it.

LBB> So our readers understand how you reached your conclusions and solutions, what was the methodology of the study?

Elizabeth> First and foremost, the work really follows our principles of being human-centred. This wasn't about looking solely, or even first, at the economic trends or how businesses were positioning themselves. It was about human beings - craftspeople, decision makers, people that would be using and mastering technology and people that had [mastered technology] - and understanding, from their point of view, where they've been, where they are, where they hope to go, and what they're worried about. It's our bias, if you will, that the future is predictable when you understand human ambition.

Methodologically, it started with desk research to really understand the history, not only of production and post production, but of commercial communication writ large. Really looking at the context in which production sits and how it's evolved from literally the first commercial through to where folks are using AI today.

Then with the help of Matt and Kristin [Wilcha, AICP’s SVP of operations and chief of staff], we identified around 26 people or so that we spoke to. Some were in the production community and members of AICP, some weren't. Some worked at ad agencies, consultancies or were brand owners. 

Then we worked with Kristin to do a quantitative survey of the [AICP] membership, to ask some similar questions, and some slightly divergent questions to pull in even more information. And then we started writing!