Agencies Should Get Out of the Service Business
LinkedIn Article by Tim Williams
May 27, 2015
Peruse virtually any contract between an advertising agency and its clients and you’re likely to find the language “work for hire.” Essentially this means that any work the agency produces is owned by its clients. Not only are there no contractual provisions for agencies to retain ownership of some of the intellectual property they create, there’s not even room for discussion.
Even the name many clients use for these contracts — the “Master Services Agreement” (MSA) — connotes that agencies are being hired only for services provided, presumably in the same way companies hire their cleaning service. This is now such a widely accepted practice that few agencies ever think to question it.
FIGHT FOR THE RIGHT
Curiously, this is not at all how agencies contract with the professionals theyhire. Photographers stopped selling their time decades ago. Organizations like the American Society of Media Photographers prescribe principles and practices that allow photographers to essential own the intellectual property they create and instead license the use of the IP to their clients. Same with the illustrators hired by agencies.
When an agency hires a professional actor for a television commercial, the actor doesn’t sell time on the set, but rather a “performance” over which they retain ownership, licensing the use of the performance in 13-week cycles. Likewise, musicians sell performances. Composers retain the rights to their compositions, even when hired to write a specific piece of music for a specific client. Writers own their screenplays.
In all other areas of the creative services industry, by default the creators own their work and license its use to their clients. Why not the advertising business? Particularly as agencies move beyond creating mass media advertising messages to developing mobile apps, digital platforms and other outputs that could be considered more a “product” than a service. As former Crispin Porter Bogusky executive Jeff Hicks once asserted, “Advertising is not a service business. We’re a product business, like publishing and other businesses that deal with intellectual property.”
BEYOND ADVERTISING CREATIVITY TO MARKETING INVENTION
In fact, all the major award shows in the advertising business are moving beyond just recognizing creative brilliance in messaging to now awarding what could be considered marketing invention. Adweek’s Project Isaac celebrates “inventions in media, technology, marketing and advertising.” The One Show — one of the gold standards in agency circles — recently introduced a new “intellectual property” category. Even the revered Cannes Lions now has categories for “innovation” and even “product design.”
Equally important is the subservient attitude the “service business” mentality creates inside an agency. As the saying goes, “Act like a servant and you’ll be treated like a servant.” The most persistent client criticism of agencies is that they have become too reactive. They wait for their clients to create the brief, develop the statement of work, and then wonder why they aren’t treated more as trusted advisors. The job of the advisor is to stay ahead of the client, helping to recommend what should be done, not stand by waiting to be told what to do.
UNDERSTANDING WHAT AGENCIES REALLY SELL
First and foremost, agencies will never be able to rise above the dynamics of the service business until they escape the tyranny of the billable hour. “Agencies, by and large, sell hours,” writes agency executive Mike Stopforth. “Unless they find a way to productize intellectual property or build a clever piece of proprietary technology, agency businesses scale by adding staff as they add clients. Win a client, hire people. Lose a client, fire people.” Not a very sustainable business model, and certainly not a very enjoyable one.
Agency CEO-turned-professor Brian Sheehan puts it this way: “The one industry that can completely transform business performance with an idea (just ask Aflac) gets rewarded not by the amount or value of its work product, but by the number of man-hours it can bill.” Jason DeLand of New York-based Anomaly, one of the innovators in the area of IP development and ownership, expresses the choice agencies must make in these stark terms: “As an agency, you’ll never be able to innovate as long as you think you sell hours.”