Production: Dabbling with digital

The latter two are an affiliation between Stephen Gash, the co-founder
of Qi Commercials, and Ewan MacLeod, the co-founder of the
post-production company Golden Square. Together, they can offer both
production and post- services to clients, they insist.

Gash and MacLeod's ventures and Sexy Briefs were all formed to
capitalise on the growing number of projects from agencies requesting
digital solutions.

To date, this has primarily translated as virals or branded content for
mobile phones.

Andy Morahan, the co-founder of Bikini Films, which set up Sexy Briefs
in partnership with the branding agency Cunning, describes the latter as
"an aside rather than a core business-build". He adds: "It gives us a
bit more room to break in new directors and do more interesting
stuff.

But I think it's dangerous to think it's going to be a
money-spinner."

Over the past year, Sexy Briefs has produced a dozen virals for clients
including Bizarre and Greenpeace. It is also working in branded content
with outfits such as Juice TV, which creates downloads for mobile
phones.

Morahan reflects: "The work is low-budget, but of no less benefit."

Over at Baggy Shorts, there is caution in the air. "This is an
exploratory exercise," Gash explains. "It's not a gold rush because
budgets are small."

Gash and MacLeod believe digital agencies will form the backbone of the
client base of their new ventures. Logic dictates that with digital
agencies growing owing to increasing demand for their expertise and, at
the same time, technology becoming more sophisticated, there will be an
enhanced desire for a slicker-looking end product.

This is where the expertise of outfits such as Baggy Shorts and Disqo
comes in. Gash says: "Digital agencies have the facility to develop
websites, but things tend to run out of steam when they start moving
into rich-media content because they don't necessarily have that
expertise."

The duo have been touring London's digital agencies and have received a
"terrific reception", Gash claims. MacLeod adds: "When I talk to
creative directors at Profero, Dare and AKQA, they're as excited about
us working with them as we are about working with them."

Amid all the excitement, though, there could be a few teething problems
with getting such ventures up and running. Matt Smith, the co-founder of
The Viral Factory, whose clients have included News International,
Microsoft and Lever Faberge, says: "Digital presents production
companies with some challenges. When you are shooting for a digital
audience, you're filling different space and the delivery mechanism is
different. They should not think they can just wade in; they've got to
change the way they do things. Having said that, they'd be foolish not
to get into this space because it's going to grow and grow."

Despite his reservations, Smith welcomes production companies enhancing
their digital offering. "I wouldn't be surprised if we started hiving
off more work once they understand the language. At the moment, we do
our own production because we don't trust production companies; there's
a big difference between digital and traditional advertising," he
says.

Steve Davies, the chief executive of the Advertising Producers
Association, thinks this knowledge gap can be closed and he advises
production companies to chalk up invaluable experience by adapting
made-for-TV content for digital platforms. "The best way to do something
new is to dive in and do it," he says. "A production company can say to
an agency 'we'll adapt that ad for a phone' and learn from the
experience. This is a new market, so if they do a lot of projects, they
can easily acquire a reputation for being experts."

To sustain momentum, Gash thinks that establishing long-term
partnerships with digital agencies is the way forward. This is
preferable to working with them on a project-by-project basis and could
present a viable business model for Baggy Shorts because budgets are too
small to pitch on a per-project basis. Indeed, Patrick Egerton, the
co-director and producer at the production company Chief, makes a rough
approximation that the average budget for a viral ad is about half that
of a TV ad budget - and many might think that estimate a tad
generous.

On the plus side, the volume of work is increasing. Chief, which won a
gold at the Creative Circle Awards for its "routine stop" viral for
Sony's "Pursuit Force" PlayStation2 game by TBWA\London, is taking on
more digital work than ever. Egerton says: "Production companies are
definitely responding to the changing demands that accompany ad
agencies' changing strategies for their clients."

And this is good preparation for Soho's new world order, as predicted by
Damiano Vukotic, RSA Films' head of sales. "I'm convinced digital
agencies will take over," he says. "They are already huge and the young
creatives there will be the commercial directors of the future, leading
and directing content and understanding every form of media."

Whether or not you agree with this vision of the future, there is
clearly a growing demand for digital content. But the real question
still remains to be answered: can production companies make money from
producing it?

"Funnily enough, I get asked this quite a lot by my boss," Matt Tucker,
the head of digital media at Partizan, jokes. "It will certainly take
time to rival production companies' current turnover, but moving images
are still the primary medium for communicating an advertiser's message -
even if the distribution method is different. Our skills and experience
feed into that."

Jon Hamm is a director at Greenroom Digital, whose digital production
company The Grid teamed up with the production house Pagan to create
digital content. When asked whether the venture has been commercially
successful so far, he says drily: "There are no Lamborghinis parked
outside our building." Rather more buoyantly, however, he adds:
"Revenues have significantly exceeded initial expectations, and the
budgets for digital work have been inching up."

Davies believes digital work can become profitable, but only if the
industry develops new business models that put greater emphasis on the
importance of intellectual property. He singles out Bartle Bogle
Hegarty's recent launch of its "brand invention company", Zag, as one
example of an agency doing this. Zag sells or licenses brands to third
parties in exchange for a share of sales revenues. Certainly, if
production companies were working on a royalties basis rather than on a
per-project basis, this could be one viable way around the thorny issue
of how to make digital work pay.

Adam Saward, the managing director at Pagan, agrees this route is the
most feasible: "Establishing the ownership of intellectual property and
content is pivotal in the relationship between the brand owner and the
production company."

Until the financial aspect is sorted out, however, many remain
unconvinced digital can generate significant revenues for production
companies. Five years ago, James Studholme set up Sleeper with Deepend,
a venture that eventually went bust. He recalls: "We ended up being
treated like a consultancy, but no-one wanted to pay for it." Today, he
reflects that there is not enough cash around for production companies
to justify setting up a standalone company. "There must be a model
devised to ensure that people get paid properly," he insists.

Part of the problem is that clients often seem to equate "digital" with
"cheap", a perception that could potentially damage its long-term
business potential. Smith observes: "Clients just don't expect to pay as
much: if it's going online, people think that it should cost one-tenth
of the price (of TV). TV is still the big brother, while viral is its
poor 50th cousin twice removed."

Certainly, jobs can work on a cheaper basis, Davies says, but only if
clients and agencies are willing to accept that fewer people will be
allocated to the job and there will be a minimal number of
pre-production meetings. And you can be pretty sure that the shoot will
not serve as a jolly day out either for the client or the agency.

As Gash puts it: "This isn't about £27-per- head catering."

Gash adds that the directors at Baggy Shorts will not be as expensive as
those employed for TV ads, so the costs are immediately much lower: "If
you're an established director who's used to being paid £8,000 a
day for a job, you might not want to go backwards. Instead, I have a
collection of directors who haven't worked in commercials before and who
haven't been exposed to the traditional remuneration structure within
the commercials business. It's just like pop promos; the minute you say
'we're aping the commercials production market', you are dead in the
water."

Hamm believes there is another comparison between digital content and
promos. "When music videos appeared, a lot of production companies
thought 'they sound cool and would make us appear a bit more of the
minute'. But, in fact, a lot of them were never going to succeed in that
medium. There's a little of that element with digital because companies
want to appear up to the minute," he says.

Never mind appearances, Danny Fleet says - making sure you are up to the
minute is a prerequisite of the job. Fleet is the managing partner at
Contentment, a division of the production company Hotspur & Argyle.

Contentment, which employs ten people, launched 18 months ago and
produces work for 2.5G and 3G-enabled handsets, such as a weekly
football programme distributed to O2 users. He says: "I'm into new
technologies. I'm a video blogger and having that enthusiasm for the
technology helps. Mobile telephony in particular is only going to get
faster and cheaper, so people are starting to take notice of it."

Some mobile handsets will soon be wireless-enabled, too, offering
further creative scope. The Nokia 6136, for one, will allow consumers to
browse the internet and send files. This means that, even though the
revenues are currently small beer, the investment is in the potential
rather than in anything more tangible.

As far as potential goes, however, it is a pretty safe bet, according to
most predictions. The Internet Advertising Bureau is confident online
adspend will crash through the £2 billion mark this year, while
Informa Telecoms & Media estimates that mobile TV will have 124.8
million broadcast users worldwide by 2010.

MacLeod says: "At the moment, there's not a lot of money to be made. In
particular, when you compare it with TV commercials, there's none at
all. But 3G phones are here and 4G is coming soon, so in the long term,
there will be money."

More than likely, staff at a production company near you in Soho are
having a good rummage through their underwear drawer right now in search
of inspiration for the perfect name for their new digital offering.
Silky Long-Johns, anyone?