Hilton Reignites Debate Over The Value Of Ideas

Hilton Hotels’ insistence that agencies sign away ownership of their pitch materials in order to participate in its review has reignited the longtime industry debate about the value that clients place on creative ideas and the lengths agencies will go to win a piece of new business.

Hilton, which last week launched a review of creative and media duties on its $45 million account, said in a non-disclosure agreement obtained by Adweek that it wants to own “all tangible expressions” of ad concepts developed by the contenders.

The NDA makes no reference to paying shops for their work, nor does it stipulate that Hilton’s ownership is limited to work produced by the winning agency. While the latter is not unusual, clients often offer at least a nominal stipend—typically around $25,000—to defray the cost of producing speculative creative. That’s a fraction of what a pitch can cost, which generally runs well into six figures.

When pressed about the compensation issue, Jeffrey Diskin, svp of Hilton brand management, said, “Companies that want to be compensated will be compensated,” adding that they “have to take the initiative to ask.”

With or without remuneration, at least two agencies deemed Hilton’s demands unreasonable and refused to sign. Omnicom Group’s BBDO and Goodby, Silverstein & Partners said they were guided by a larger principal of getting paid fair value for ideas—a hot-button issue within the industry that resurfaced this month at the American Association of Advertising Agencies’ annual conference.

Jeff Goodby, co-chairman of Goodby concurred: “It’s bad enough to give away your ideas when you win, but these guys are asking that you give them away when you lose. In many cases you do get a token reimbursement, but even then, you don’t have to give the ideas away.”

“This is not about getting a stipend to cover our out-of-pocket costs and expenses,” said David Lubars, BBDO’s chairman and chief creative officer for North America. “Ideas are the currency of our business. They’re worth millions of dollars. I’m not going to hand over ideas that could be huge in exchange for out-of-pocket costs. It’s incumbent on us to take a stand or we’re doomed to be a commodity. What they asked is unreasonable.”

4A’s CEO Burtch Drake applauded that hardline stance, saying, “It’s about time somebody had the balls to put a real stake in this issue.” And while he acknowledged that “it’s up to each agency to make their own decisions,” Drake said handing over ideas without compensation is “bad business practice. Architects don’t do it. Accountants don’t do it.”

Still, many shops signed the NDA, if only to get a peek at the RFP; some may not return it when it’s due this week. Among those who signed: independents Wieden + Kennedy in Portland, M&C Saatchi and Colby & Partners, both in Santa Monica, Calif.; Interpublic Group’s McCann Erickson in New York and Foote Cone & Belding in Irvine (the incumbent); WPP Group’s Young & Rubicam in Irvine, Calif., and JWT, Chicago; and Omnicom’s GSD&M, Austin, Texas, and TBWA\Chiat\Day, Playa del Rey, Calif. (TBWA’s New York office handles Hilton-owned Embassy Suites.) The agencies declined comment.

A client’s insistence on owning the expression of an agency’s idea is driven largely by liability concerns, said Rick Kurnit of Frankfurt Kurnit Klein & Selz in New York. Clients don’t want to be sued for stealing an agency’s execution, such as when multiple agencies present similar concepts.

On the flip side, an agency that relinquishes ownership of its creative materials and fails to win the business could be sued by Hilton, if the agency presents similar materials to another client at a later date, Kurnit said. “Agencies are in the ideas business. They really cannot agree contract- ually that they can’t use an idea,” he said. Instead, Kurnit suggested a shop negotiate something less than blanket ownership, such as the client only owns it if it uses the creative content and pays the agency a reasonable fee.

These type of client demands grew out of the old agency-client model, where agencies spent lots of money to pitch business with the understanding that if they won, they would recoup the investment via a 15 percent commission over a long relationship, Kurnit said. Today’s fee-based arrangements, coupled with shorter client-agency marriages, underscores the need for a new approach. “We did this to ourselves when we lived off the commission system,” said DDB’S Ken Kaess, whose agency handles a competing hotel brand. “It’s 20-20 hindsight, but basically we said we were a commodity business. That says all ideas are equal, and we say that’s not the case.”