By Rick Webb, The Barbarian Group co-founder and COO.

In my capacity as an operations guy at a digital shop, the last eight months have been, to put it mildly, intense. As the financial markets imploded last fall, every company in the world stopped paying their bills. I have a background in economics, so I understand the reasons behind this. The credit crunch in the banking world caused a panic in the banks and a severe reduction in the credit lines they extended to businesses. Simultaneously, the publicly traded companies of this world were under intense pressure to shore up their balance sheets since investors were looking for any excuse to sell, downgrade or short a stock. Hoarding cash was one tactic for this. This wasn’t confined to the advertising world - stories in the Wall Street Journal and other business publications chronicled the destructive impact this had in factories, small businesses and home businesses across the country - but we were certainly hit. Hard.

There’s been a noted shift in our industry not just to longer payment terms, but also toward expecting the production companies to actually front the expenses for their clients. In the past, organizations like the AICP have done a good job mitigating this. But as the relentless march towards digital continues, the lines are blurred, cracks are showing, and agencies are able to exploit those cracks. That’s to say nothing of the highly competitive nature among production community. Large and small players are chasing more of the same gigs and big-budget, high-margin video production gigs are giving way to viral videos and lower margin work.

I’d be lying in saying our company wasn’t immune. As many of our clients unilaterally changed their payment terms from 30 days to 120 days, we experienced a significant cash crunch. I find it scary but cathartic to admit that since I recognize rationally there is no shame in it. But it’s still a bit humiliating to call all your vendors and tell them you’re going to pay them late. The words “this is happening everywhere, all over the world, to all businesses” are cold comfort when it’s someone’s livelihood. I humbly apologize and thank our vendors for their patience and litigious restraint.

Larger clients are exploiting all of this with longer payment terms, more strict liability requirements, no up-front payment and more. This is, in short, all sorts of frustrating. We all know it. We see it as evidence of what we’ve all heard before: Shit rolls downhill.
“What’s new?” you ask. And rightfully so.

Well, there’s another trend going on now with production shops, one about which I should probably not even open my mouth. And that is the issue of credit.

This is changing too. The old way - agencies took credit for the work to marketers, and production companies claimed their share of the credit to market themselves to agencies - is crumbling. The differences between digital production companies and digital agencies (and let’s face it - we’re all becoming digital) are fading away.
I get it. If I, the agency, give my digital production company full credit, they can market that credit directly to marketers. We’re now in competition for the same clients, the same dollars. Not in every instance, but with the economy the way it is (remember, everyone big and small is pitching everything big and small) it’s happening more and more.

If I were an agency, I’d want to protect my turf too. We got you the gig. It was “our idea” (absolute bunk of a concept but we’ll save that for another time). It’s our client. We sold it. Why should you get the credit? Maybe that’s right, maybe it’s wrong, and most probably the truth is somewhere in the middle. That’s not my fascination today.

Today, an interesting thing occurred to me. There seems to be a new credit market arising: economic liability, debt, indemnification, liability, E&O insurance, work for hire and - let’s summarize - shit. They all roll downhill. We’re acting as financiers, as creditors, to our clients.

And yet, there’s one type of credit that seems to be rolling uphill: creative credit.

T’was always thus. Every one of us that’s ever been a lowly agency hack knows this. But at least back then the check came on time.

So what can we do? One thing I’ve noticed is that you should be diligent in your negotiations with your agencies. Be fearless. Be insistent. The old adage that the squeaky wheel gets the grease still stands. Another thing I’ve noticed - if you’re the owner of a production company, keep the price and payment negotiations in your hands. You have a much better handle on when it’s the right thing to do to walk away. An employee of yours doesn’t. They’re concerned with getting the work and they will err in that direction: what employee wants to go to tell their boss they passed on a good gig because some contract point was slightly off? That’s your job, not theirs.

And, finally, perhaps we should be looking at the credit market as a whole. What is creative credit worth to a digital production shop? Is it worth taking on a job with more onerous payment terms, but with explicit guarantees of attribution and acting as a true creative partner? After all, production companies are extending agencies financial credit these days. Some balance seems only fair.

www.barbariangroup.com