Tan Sri Vincent Lee on creative agencies' crunch and the rise of publishers

In the Malaysian advertising scene, few cut as strong a figure as Tan Sri Vincent Lee.

The list of companies Lee was or is involved in in Malaysia runs long and across many sectors. Lee started out in the creative industry in his early days, founding the agency which then went on to partner with DDB as NagaDDB and later holding company Foetus group, which NagaDDB now sits under. Foetus Group consists of a series of agencies and companies such as Naga DDB, Milk+Co, Rapp, Tribal Worldwide, Milk PR, Beyond Events, Vizeum Media Services, Interbrand Brand Consulting, StART Foundation, Vogue Point and most recently, mobile payments firm, Soft Space. He also sits over IdeaRiverRun, which holds events and digital firms, and more recently, several portals and publishers. Since then, he’s put his hand to the industries of publishing, digital, F&B and more. Lee was also involved in the leadership of media companies such as The Star, events company Cityneon holdings and more.

On top of this, he owns the largest wine distributor in Malaysia, Asiaeuro Wines, and has sole distributorship of major single malt whiskeys such as Maccallen , Yamazaki and Hibiki. He currently also partners on the Nero restaurant chain, which owns four restaurants, two outlets of Neroteca, Nerovivo and Vineria.

As the agency landscape deliberates over its future, Lee discusses his take on the tough times creative agencies are facing, which business models are catching his attention and and how he pulled off the mammoth task of implementing pitch fees.

Re-positioning creative agencies

It’s no secret that creative agencies are facing a hard time, with the spotlight now going to media agencies as clients place more focus on the latter.

“For creative agencies, their revenues have really been slashed by the media agencies,” said Lee.

The cost of hiring creative people is high, said Lee, but clients are not compensating creative agencies as well. While he no longer actively runs the agencies under him, he still sits down for monthly meetings with agency leads. Sitting across agencies such as Vizeum and Tribal, he said: “If you look at the profitability of media companies and creative agencies – it takes double or three times the effort of the creative agency to generate similar profits.”

For example, in a year, a media agency could earn about RM10 million, but a creative one may earn about RM4 million. “For creatives, if you look at the people still in it, they tend to be about the passion for the industry, it’s not about the money.”

“All of the creative agencies are not having a good time.”

“The compensation scheme from clients is unfair – all the media agencies are making the money, and right now the creative agencies in this country lack direction,” said Lee.

“Creative agencies need to move away from just selling creative services but building content.

Those days where creative is being taken over by media are here: because media agencies can do creative, content and more,” said Lee.

Does the future lie in the hands of the publishers?

Lee predicts the future will be even more interesting. “At the end of the day, building technologies and content is very important. Creative agencies need to move away from just selling creative services but building content,” he said.

This means that Lee predicts in the end, it will be the ability to build content and technologies that will win out, which means publishers may eventually have the last laugh, opines Lee.

“At the end of the day, publishers can do the job of the creative agencies and the media agencies. Because if publishers can do native ads and content themselves, they can go directly to clients,” said Lee. “So publishers are the biggest threat to creative and media agencies, he said, citing the likes of Astro, Star Media Group, Singapore Press Holdings in Singapore and Catcha Group being the biggest threat.

“Now creative agencies need to do the same, thing doing media. And they need to be far ahead from publishers themselves because these have writers and content builders,” said Lee.

Things are different in the creative landscape now, from a decade ago. Lee cites how he once visited the Buzzfeed office and saw how the publisher had a team of 50-60 creatives.

“Whoever has content will have a grasp on the market, and can directly go to the client.”

As for agencies, these will still survive as brand consultants, he opines. These will always have their place. On a more personal note for him, he says the “creative agency runs in my blood.” But as for Lee, he has been actively investing in the publishing space through IdeaRiverRun, with publications such Cilisos, Digital News Asia, Propsocial and more, with a legal one up next.

As for technologies, he started Soft Space more than three years ago, a mobile payments firm that is now partnering many of Malaysia’s banks, as well as ones in New Zealand, Thailand and more.

Time for creatives to build their own businesses

Moving back to the conversation about creatives, I asked Lee when was the point he decided to move on from his beginnings as a creative.

“It was when I started feeling like when you are building the brand for the client alone, it was a tedious job - like a train ride with no end. You keep building and building and there is no end. And you don’t own anything. The client will look at you and think, “you are as good as your last job"."

“You may be passionate about creativity, but it may not make much money,” said Lee.

“I always equate creative agency guys to car repairmen. They are so busy building others’ cars that they don’t have time to build their own. And you look at their own 'cars', these are in shambles. Creatives don’t know how to market themselves. They only market the client’s products. In this market there are not many people who move forward in the creative scene,” he said.

What made him different? “When I was young, I was a sportsman. I was very competitive - I never want to lose,” laughed Lee, now 61.

On implementing pitch fees in Malaysia: "It takes a 'gangster'"

One thing Lee is well known for is being able to enforce mandatory pitch fees for clients in Malaysia, a thing many markets such as Singapore and Hong Kong have sought to do, without much success. This was a landmark move made in 2005.

The issue of idea-stealing, errant clients taking agencies for a ride by calling huge pitches and shopping for ideas have pushed agencies to demand for pitch fees for their efforts. But this is a move close to impossible to enforce in many markets, industry players have said.

This has made Malaysia’s ad scene a case study for many markets, with others trying to move in the same direction.

Lee said that it took a speedy six to eight months to put in force.

“Back in those days they would have pitches for projects worth RM100,000 and they even called the MNC agencies.The MNC agencies were so desperate they would put in a pitch. But in the end the client couldn’t work with an MNC either. It wasn’t fair. And some big clients they would call small agencies to pitch. Why? So they could shop for ideas.”

“When I wanted to start this mandatory pitch fees, everyone told me, no you can’t do it, none of the agencies are united.  But I got everyone in, the large agencies, small agencies, I talked to all of them, and told them the importance of being united,” said Lee.

“This was also not good for the client, they were giving out information about their companies to many different companies,” said Lee.

Lee said this was how he put it.

“When I took over the 4As, there were three things I said. This is firstly about the industry. Second, comes your agency. Your personal wants should come last.”

“Before that, people went to the 4As for personal glory, wanting to be president etc - It  wasn’t about the industry. The industry must be about sacrifice. When the industry prospers the agency gets the money. Then the individual can profit as well. It’s not the other way around. That was my explanation.”

“Once you have a pitch fee the client couldn’t pull us around like a bullock cart,” said Lee.

Lee said he had a big meeting with all the agencies and they all supported the idea. “We had to be firm about it as well.  Any agencies that breached the rule, we would send them a letter and next, kick them off 4As membership if they did not comply.”

Next were the clients. Lee said he personally called up clients who refused to pay pitch fees and convinced them why it is important to do so.

In those days, the 4As was a well-stocked team of 120-130 members as well, and Lee gives credit to the strong council team under him to pull it off, with the likes of McCann’s Tony Savarimuthu, and a united team. Savarimuthu led the 4As for two years as president and six years as vice-president, before Dato Johnny Mun took over as president in 2013.

In the early days, this was not all smooth running. Several clients tried to buck the move. For example, in 2008,  the Iskandar Region Development Authority (IRDA) ran into a dispute where the former refused to pay the fees and eventually the 4As had to waive its fees.

Lee said that however, for the most part, after a year it was smooth running, after a challenging first year of policing this new development.

“You needed someone like me in those days, a gangster to pull everyone together,” said Lee, joking about how he personally called both agencies and clients to fall in line.

What kind of advice would you give to other markets looking to do this, I ask.

“The most important thing is you need to have a gangster to do it. If you play nice and are afraid to step on people’s toes this is impossible to implement,” said Lee.

I ask Lee what was the biggest pushback he got in trying to implement this.

“I think in front of me no one dared to argue, but behind my back what some said was that since I had a group of ad companies I was trying to benefit myself. This was the biggest challenge. They thought I did it for my own gain. But after awhile they bought into the vision,” he concluded.