The unseen supplier contract in TV production that exposes marketers to legal disputes

As “the marketer”, every time your agency issues a purchase order on your behalf to the production company making your TVC, you are bound by the SPAA (Screen Producers Association of Australia) set of terms and conditions (let’s call it a contract), unless of course your contract with the agency strictly forbids your agency from entering into third party agreements without your written permission. (Increasingly common and cause for concern for agencies approving the SPAA without your written approval).

Fixed cost up front?

Under the SPAA contract once the purchase order is issued, you have agreed (by default) to pay a fixed price for a “completed and reasonably acceptable videotape master” of your TVC. (The SPAA contract makes no mention as to whom the master is be “reasonably acceptable” to)

You pay the worst-case scenario?

The SPAA contract goes on to explain that the contract is actually applied to an estimate based upon assumptions, by which the agreed or estimated total is calculated. Now any reasonable person would understand that the production company makes TVCs and is not in the business of gambling. Thus all the production company assumptions would have to be based upon a worst-case scenario. Then the estimate would have to be based upon financial considerations high enough to cover these worst-case scenarios whether they occur or not.

Robbing Peter to pay themselves?

The SPAA contract then goes on to explain that if not all the funds are required as estimated for one particular cost center it is the up to the discretion of the production house to re allocate the excess funds into another cost center should they see fit, or alternatively they can retain these excess funds as profit above and beyond the production house mark up / profit margin.

Make a change and we’ll bill you!

The SPAA contract also outlines the production company’s rights to charge extra should the client or agency alter the specifications of the project.
 There is no allowance in the SPAA contract for the reimbursement of funds to the client should the change of specifications actually decrease the scope of work required to deliver a completed and reasonably acceptable videotape master. This is a fair indication of the spirit in which the SPAA terms & conditions were drafted.

Plus you never really own the production

The SPAA contract also states that the production house could claim payment if for instance, the client executed a cut down of a TVC that had not been mentioned in the original project specifications. Although this clause is rarely enforced by production houses it is still included in the SPAA contract, once again enforcing the production house bias of the whole contract.

In summary

The SPAA contract is a document from the 80s when the advertising business was awash with cash, when Alan Bond was winning the Americas’ Cup for Australia and Christopher Skase was planning the opening bash for his Queensland resort. Things have moved on since then, unfortunately the SPAA terms & conditions haven’t.

There is a solution

Thankfully there are alternative contracts that can be put into effect that are far more in tune with current industry practices and expectations. But it seems that few agencies are challenging the production companies on the terms of their agreement and binding their clients to these terms by accepting them on their behalf, even when they may have no legal right to do so.

See where the potential legal dispute may arise?

Have you checked what production contracts you or your agency approve?