Study Outlines Ways to Avoid Talent Trouble

May 9, 2005  •  Post A Comment

By Sheree R. Curry

Special to TelevisionWeek

A big-spending advertiser tends to shell out upwards of $10 million annually on talent for its television commercials and the industry as a whole spends about $800 million on such talent a year. But most advertisers still delegate the authority for managing their budgets for talent payments to advertising agencies and production consultants without understanding the impact on their bottom line.

That’s the conclusion of a white paper titled “Best Practices for Managing TV Talent Payments,” released May 3 at the Association of National Advertisers’ annual Advertising Financial Management conference in Miami.

Advertisers should be more proactive in managing talent payments, ANA Executive VP Bill Duggan said. “It is a best practice that you see to it that your money is being spent as efficiently as possible, and although you want to trust your agency and production company, be as familiar as you can with talent contracts.”

It is that unfamiliarity that can cost an advertiser thousands in fines or simply a larger-than-expected bill. Some advertisers fail to budget properly for talent expenses such as residuals, holding fees, reuse costs, SAG pension and health monies or taxes. And some don’t realize how talent pay can be affected by slight changes in media-such as in which markets the commercials run, how frequently they run and for how long, whether the commercial is streamed on the Internet, or even a change in the schedule. Some ad agency representatives said clients have had last-minute changes occur with their media buy, and then they get the bill for the talent and say, “Oh, we had no idea.”

For example, a company in the East showed on the Jumbotron at a local sporting event a spot ad that was no longer running on the air. It just so happened that one of the actors from the commercial was at the stadium that day and knew the advertiser was no longer under contract to show that ad-at least not without making further payment. “The advertiser was fined by the talent,” said Jon Harcharek, creative director and executive VP of Winning Strategies Advertising, Princeton, N.J., which was not the agency of record for that advertiser.

Avoid Trouble

If the advertiser had simply been aware of what was in its contract with the talent, or even consulted its agency, the incident could have been avoided, Mr. Harcharek said. “Your ad agency is your representative, your go-between with any third-party vendor, whether it is talent or a music house. Let your agency handle the details for you so that you can stay focused on running your business.”

But understanding a talent contract as it relates to pay is part of running a business, according to the ANA. “Of course, agencies can be tremendously good partners, but, bottom line, it is the client’s money,” Mr. Duggan said in a telephone interview. A company may simply want to appoint an in-house representative who can learn the ins and outs of talent contracts, according to the 12-page ANA white paper. This is an especially good idea for companies that work with multiple agencies.

Mega-advertiser Procter & Gamble has eight people on staff in Cincinnati who review talent contracts after its agencies have made the deal. There are 37 of these staffers worldwide, said Jerry Price, who as senior advertising production manager is one of them. “Anything the agency does on our behalf as it pertains to television commercial product is reviewed by our advertising production managers here,” he said.

Jenny Craig, which currently uses actress Kirstie Alley in its commercials, handles talent selection and contracts in-house, said Scott Parker, VP of marketing. “We have market research capabilities and methodologies. We measure the amount of media dollars we put on-air and the leads we get, and we generate a cost-per-lead number. Once we take our campaign into the marketplace we can adjust our media spending quickly upward or downward. We are constantly doing this return-on-investment analysis on a month-to-month basis,” he said, adding that the weight-loss company sees double-digit differences when it pays for celebrity talent versus real-life users.

The white paper recommends considering periodic payments, perhaps quarterly, throughout the term of the agreement, as opposed to an upfront lump sum, when negotiating celebrity contracts. That way, in the case of a strike or other disaster that interferes with production, one can suspend the payments and even have a clause that adds the length of the suspension to the term of the agreement.

Another tip: Analyze fees paid to third-party negotiators and determine whether a fixed fee, percentage or other alternative is best. Be aware that with fees based upon a percentage of the celebrity contract, the negotiator would benefit from a more expensive contract.

Broadcast casting agent Sharon Howell of The Campbell Agency in Dallas said she has noticed that for some advertisers, “What they pay the talent is the last thing they put in the budget [after they] have already spent the bulk of their money on the production company and on the media buy. What is left isn’t enough to cover the performer they want.”

One of the most common mistakes she has seen smaller advertisers make is asking for is a forever buyout, which allows them to run the ad forever. Most professional actors wouldn’t agree to that. “If I had a guy do a Chevy commercial [under that agreement], for the rest of his career he could never do another automobile commercial, even if he becomes the next Brad Pitt,” Ms. Howell said.

Many issues are spelled out in a standard contract available through the Screen Actors Guild, and advertisers benefit from being familiar with its clauses, some agency reps said.

“We are not suggesting the client become an expert in the SAG contract, but we want to raise the level of awareness [advertisers have about talent pay] because there is a lot of money spent on talent, and there are some best practices to help them maximize their spending,” ANA’s Mr. Duggan said.