Creative Focus: Future Shock

High-Flying Propaganda Films Endures An Ownership Revolution Three years before the Berlin Wall crumbled, an L.A. music video company and its cheeky, film-school-graduate founders gave the bird to the Cold War mind-set: they named their shop Propaganda Films. With a provocative, socialist-constructivist logo picturing a night sky filled with bombers, the brash upstart debuted in 1986. It quickly became one of the most influential production shops of its time. How? By pioneering a new type of advertising: the flashy music-video-inspired commercial. So dramatic was Propaganda's influence that its style became an industry standard. Thirteen years later, however, the fabled Propaganda machine is in turmoil, a victim of its own success. Earlier this year, the company was sold off in pieces; parent PolyGram Filmed Entertainment sold its feature-film holdings to USA Network. In April, PolyGram sold the commercial, music video and talent-management units to a Wayne, Pa-based investment group called SCP Equity Partners, led by Gary Beer, the former chief of The Sundance Group. Although the new owners began negotiating contracts with the existing management, publicly expressing a desire to retain the team responsible for the company's success, the talks broke down over control and compensation issues. Critical positions, including president, remain unfilled. "When you buy any company," says Trevor Macy, CEO of Propaganda, "particularly a service company, you evaluate the people and keep the ones who best fit your objectives." A couple of prominent directors have recently dropped from the roster, and there are questions about the remaining talent--many contracts come due at the end of the year. This internal shakeout, which has transferred ownership and control of Propaganda into the hands of people with little background in the production business, is beginning to look like Ten Days that Shook the World. "It's completely falling apart," says director Michael Bay, a Propaganda spot director since 1989 and the director of Armageddon. "I told Beer, 'You just wasted $10 million.'" Ironically, Propaganda's staffing issues come on the heels of the company's most fruitful year. At the International Advertising Festival in Cannes last June, Propaganda and its profitable young-talent division, Satellite, took home its third Palme d'Or for production company excellence. And sources say Propaganda generated well over $80 million in commercial and music video billings in the past year. "They are busier than they've ever been in their history," says Frank Scherma, executive producer at Propaganda's archrival, radical.media. "They're my biggest competitors. I'm bidding against them every day. " Although sources say Propaganda is currently in production with about 34 spot and music video jobs, some observers are not optimistic about the company's future. The prosperity is a carryover from the previous administration, they argue, which had an aggressive sales staff, a history with agencies and an enviable talent pool. That's the present situation. Now the back story. The company was the brainchild of two film students: Sigurjon Sighvatsson, now chairman and CEO of Palomar Pictures, founded the company in 1986 with fellow American Film Institute student Steve Golin. With their own money, some financing from investors in New York, and a roster of four directors--Nigel Dick, Greg Gold, David Fincher and Dominic Sena--they launched Propaganda Films. The cost: $100,000. Their gamble? Create a company run by a group of directors. First they created an identity. "The idea was to put out a name that was a brand," says Gold. "We tried to minimize talking about a particular director or producer and let a client know they could come to this place and get the best creative ideas anywhere." It worked. Before 1986, MTV and the music-video industry were minors in the grown-up world of production. Most shops at the time produced clips as an afterthought. "We were the first company that wanted to apply the principals of the commercial industry to music videos," says Gold. "[And] we wanted to take the aesthetics of music videos and apply them to commercials." Propaganda found its niche. The bulk of Propaganda's early work was videos for artists such as Madonna, Sting and Paula Abdul. Its first commercial came through Ray LoFaro, a well-known commercial sales representative who owned Directing Artists in New York. One of his agents, Stephen Dickstein, landed Fincher a Colt 45 commercial with Billy Dee Williams out of W.B. Doner. The spot won three 1988 Clio awards, including Best Direction. While spot assignments grew, Sighvatsson and Golin became restless. In 1988, they sold 49 percent of the company--the portion owned by their original New York investors--to PolyGram. They wanted a partner with deep pockets that was interested in producing movies. The association would not only help the company entice young talent, but also hold on to seasoned directors eager for feature-length challenges. Sources say Propaganda was billing about $40 million in business at the time and was considered the largest producer of music videos in the country. In 1989, Propaganda hired Dickstein to head the commercial division and enlisted directors David Kellogg, Simon West and the promising Pasadena Art Center graduate Michael Bay, whose visceral style quickly became a company trademark. "Propaganda gave spots that slick, Hollywood approach that nobody had," says C. Texas East, head of production at Ogilvy & Mather in New York. "It wasn't the old way of doing things." Propaganda grew so large, it boasted a roster of 13 directors, when the average competitor had about five or six. To manage its sprawling roster and retain its independent spirit, Sighvatsson created a separate entity in '92 devoted to developing new talent, Satellite. The division was not only an experiment--creating a small orbit of boutiques revolving around a central company (the model of many production shops today)--but a tacit acknowledgment that the core business was suffering growing pains. "It turned into a factory," explains Bay. To many, the change came with PolyGram. In '92, Propaganda won its first production-company-of-the-year Palme d'Or at Cannes. The honor was based on ads for Budweiser, Bugle Boy and Nike, including Wieden & Kennedy's famous, Fincher-directed Nike spot, "Instant Karma." Soon after, Golin and Sighvatsson sold the rest of the company to PolyGram. Although the feature division had produced Ruby, Candyman and David Lynch's Wild at Heart, and was involved in Lynch's groundbreaking TV series Twin Peaks, Golin and Sighvatsson wanted to do more. "It was very difficult for us to get feature films financed," says Tim Clawson, former head of production at Propaganda. "The deal with PolyGram really helped us expand. It was the opportunity to make bigger and better films. "It also made a stable foundation, so that we didn't live job to job," Clawson adds. "We became a well-financed company. Not to mention, the relationship brought us cachet." The catch? The company became a feature production vehicle for PolyGram, not Propaganda. "It was all about what PolyGram wanted to do," says one Propaganda producer. Dick was the first founder to jump ship. "We wanted to do good work and spend a little of the budget, the markup, on a better director of photography or shooting five more rolls of film," says Dick, who left in 1994. "When the PolyGram bean counters came in, we didn't get that. 'Where's the markup gone?' That's what we got." Sighvatsson also left in '94, citing creative differences. He later joined feature company Lakeshore Entertainment. Golin stayed on, concentrating on features. Dickstein remained in charge of commercial production. Propaganda continued to grow and diversify into other media, such as CD-ROM production and talent management. Everything seemed fine until May 1998, when Propaganda was dealt out to a group of anonymous corporate players. Phillips Electronics, the Dutch parent company of Polygram, sold 75 percent of the company for $10.4 billion to Seagram, which folded Polygram's music group into Universal. Seagram, in turn, sold Propaganda's feature-film holdings. SCP Equity Partners, venture capitalists with money tied up in technology companies, bought the rest for $10 million: the commercial, music video and talent management divisions. "Once PolyGram was sold," says Dickstein, "it became a prophetic situation. The people in charge were no longer in command of its destiny." The irony? SCP had the same eclectic vision as Propaganda's founders, they just trafficked in a different medium. Macy says SCP purchased Propaganda because they were interested in it as a content provider for the Internet: commercials, videos and films that can be delivered via broadband. "[SCP] has a strong point of view about content," he says. "[They want to] take a service production company and turn it into more of a content company." Macy, former vp of The Sundance Group, was handed the job by Beer, who after orchestrating Propaganda's purchase, abandoned the post to become CEO of Smithsonian Business Ventures. Macy is joined by executive producer and vp, Colin Hickson, former head of TV at London agency WCRS. Macy says he and Beer became interested in Propaganda for feature-film opportunities. "Gary and I saw something akin to our Sundance experience in that there's a development opportunity for young filmmakers." The talent management division, which currently represents about 30 clients, mostly actors, including Matthew McConaughy and Nicole Kidman, is an added priority. Macy says it will expand into director representation. Another plan is to expand into television programming. While Propaganda will continue to produce commercials and videos, the emphasis will change. Losing most of its core team, Macy and Hickson say, reflects a fundamental shift in orientation for the company. "The nature of sales has changed to a more information-based selling technique," says Hickson. "Agencies are much more in the marketplace for buying than being sold to." Gary Delemeester, an executive producer at BBDO who has worked with Propaganda directors over the years, agrees. "The director is 99 percent of what you are after," he says. Yet the people most closely tied to that talent base--about 40 directors--are no longer involved. Dickstein, a 10-year veteran of the company and president of commercials, was fired. Tim Clawson, head of production for 11 years, left to join The Shooting Gallery in New York. Dave Morrison, vp of commercials, joined Golin in a new production venture, 8Media. Susanne Preissler, who ran Propaganda Independent, a unit dedicated to indie film talent, left in August. George Bermann, president of Partizan Midi Minuet, an international house partnered with Propaganda, started a new outfit with Dickstein, called Partizan Entertainment. Jeff Armstrong, head of Satellite Films, was fired. However, some feel the new regime is lacking the advertising, sales and management experience to achieve its goals. "The place was always run by a dynamic sales marketing force," says former Propaganda head of sales Chuck Ryant, now executive producer of Bob Industries. "It can't survive with executive producers at the helm." Will they succeed? It depends on whether Propaganda can hold on to its directors. This summer, the company signed a highly-courted young team, Tom Kuntz and Mike McGuire, former MTV on-air promo department directors, but lost Pam Thomas, one of Satellite's busiest directors and Alex Proyas, a prominent spot and feature director. The danger is that it will lose more. "You offer [directors] as many possibilities as you can," says Hickson, "whether it be 'interflicks,' feature development, TV work, commercials or videos. Allowing us to have that available, probably for the first time in Propaganda's history, will allow us to attract the best talent." The company's primary objective, providing broadband Internet content, appears to be the buzz phrase. Wasn't lofty aspirations the downfall of Propaganda's founders? Is "providing content" an attractive prospect for a director? "I'm a director! I don't want to do computer spots," bristles Bay, whose contract is up in January. "The greatest joy of a filmmaker is the shared experience. You don't want your audience to be an individual at a computer." Yet despite Propaganda's uncertain future, the company is very much alive. Even Morrison, co-head of the commercial division of 8Media and former head of commercial development of Propaganda/Satellite Films, sees a bright side. "It takes a lot to kill a well-branded company," he says.

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Creative Focus: Future Shock

Richard Linnett

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