From its perspective, the most optimistic interpretation of what is happening is that the drinks giant is cutting its cloth according to the latest fashion and what seems to make economic sense now might not do so in future.
Others, though, are not so sure. "I see lots of other clients following suit," a production company boss says. "Many production houses are in a flimsy state. They’re not well-placed to do content, their budgets are falling, agencies and clients are delaying payment and competition is enormous. It’s all moving in one direction – and I don’t see it changing."
"What PepsiCo is doing is just symptomatic of the way big companies are finding their way in a complex world and learning how to do things faster in a data-driven market that’s evolving so quickly," Debbie Morrison, ISBA’s director of consultancy and best practice, says.
Moreover, the economic climate is conducive. Mark Andrews, who launched Propaganda Films in the UK, says, "Equipment such as digital cameras are now cheaper than they ever were and talent has become highly portable. Only the biggest production companies have the resources to represent one director in dozens of markets."
It may be a sign of the times that, as marcoms groups try to pull more production work in-house, the Advertising Producers Association is in discussions with creative agency 101 about how best to promote the value of production companies to marketers.
Some onlookers suggest PepsiCo’s initiative may, in part, have been inspired by what has been happening in the agency world, where holding companies have been attempting to counter the threat of decoupling clients. Ogilvy & Mather has come together with Hogarth under the WPP umbrella while Publicis Group has streamlined its global production operations under the Prodigious banner.
Whether or not production companies are right to believe what PepsiCo is doing is part of a cyclical pattern remains to be seen.
Trade House
Steve Davies, chief executive, Advertising Producers Association
"Agencies have been getting production in-house for a while so it doesn’t surprise me that clients should be doing it too. In any service business there will always be questions about whether it’s more efficient to bring work in-house.
"That makes it hard for production companies facing so much competition in a buyers’ market that advertisers are bound to exploit.
"That said, production houses have been very adaptable. They’ve kept costs down and survived recession through their ingenuity and through adapting to meet client needs. But it’s important we continue convincing clients about the craft and skill production companies bring them."
Production
Jani Guest, managing director, Independent Films
"I don’t see a world where brands are producing all their own content. It just isn’t realistic. There will always be a place for production houses, which can spot and nurture talent in a way that agencies and clients cannot.
"Perhaps what PepsiCo is doing will result in more clients working directly with production companies. Nike and Red Bull already do it and fashion houses have worked that way for a long time.
"Also, nobody knows what content PepsiCo is going to need. It could well be that some productions will be too much for an in-house operation."
Marketer
Rod McLeod, head of marketing, Volkswagen UK
"If PepsiCo is starting a trend, it’s certainly not one I’m conscious of. I assume it is taking production content in-house because of cost issues and it may be OK if what you need is not advertising but ‘how to’ content, which is cheaper to produce and easier for a client to manage.
"For us, the most important thing is to get consistency and quality in everything we do. That’s why we use Adam & Eve/DDB because the agency understands our brand.
"If you want high quality, you need a good agency to create it and a good production company to deliver it."
Production
Orlando Wood Executive director UK, Biscuit Filmworks
"The big question is whether PepsiCo can actually pull this off by making what it’s doing both financially viable and creatively interesting.
"If it does – and others follow suit – it will be difficult for production companies and agencies to compete. It could be the tipping point.
"It’s possible that a lot of production companies won’t survive. We might well see a consolidation of talent within those at the high end of the market and that they’ll be seen more as agents of their directors. They will become our clients.
"It’s not the end for production companies. In fact, it can be an exciting time for them – as long as they are changing."