How Agency Pay Needs to Change in the AI Era
A major holding company’s creative agency recently asked for an evaluation of the Scopes of Work (SOW) in one of its big-city offices. The results, based on current operations and conservative AI impact projections, reveal a significant shift in staffing and fees.
Traditional Agency Model
- Current income: $61.7 million from 12 major clients.
- Staffing: 218 full-time equivalents (FTEs) including 84 creatives, 67 client service, 17 strategic planners, and 50 production staff.
- Average billing rate: $157.50 per hour, generating $283,500 in fees per FTE annually.
- Deliverables: 13,578 total, measured as 420 ScopeMetric® Units (SMUs)—a unit roughly the size of a typical TV origination spot.
- Original deliverables: 2,601 originations handled by 47 creatives (about 1.1 per week per creative).
- Adaptation deliverables: 10,977 adaptations handled by 37 creatives (about 5.7 adaptations per week per creative).
- Price per SMU: $146,990.
- Creative productivity: 5 SMUs per year per creative.
Impact of AI on Agency Workloads and Staffing
The same SOW was modeled assuming AI handles all adaptations and originations with increased creative productivity:
- Adaptations: AI takes over 10,977 adaptations (185 SMUs), boosting creative productivity from 5 SMUs to 25 SMUs per year—a 5x improvement. This reduces the required creatives from 37 to about 7.4, saving nearly 30 creatives.
- Originations: AI doubles productivity from 5 SMUs to 10 SMUs per year, reducing creatives needed from 47 to 23.5, saving 23.5 creatives.
Fee and Staffing Reduction
Conservatively, AI could reduce creative staffing by 53.1 FTEs, cutting fees by approximately $15 million if billing continues on a man-hour basis. This represents a 24% reduction in total fees from the current $61.7 million.
It’s likely AI will also reduce the need for client service, strategic planning, and production staff, but those reductions weren’t modeled due to uncertainty. Even without those adjustments, a 24% fee drop is significant—far beyond recent forecasts like WPP’s 5% fee reduction.
Recommendations for Agency Pricing
Agencies need to move away from traditional man-hour billing toward remuneration based on actual workloads. Pricing should be calculated per ScopeMetric® Unit (SMU), which accurately measures and values work scopes.
This approach allows agencies to document, measure, and negotiate SOWs with clarity, reflecting real work delivered rather than hours spent. Agencies implementing the ScopeMetric® system will be better positioned to adapt pricing to the AI-driven future.
Learn more about ScopeMetric® and how it can help agencies adapt at the ScopeMetric® page.
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