Like a casino resort that cuts rates to juice business in hard times, makers of the ubiquitous “what happens here, stays here” ads for Las Vegas will lower their price.
R&R Partners, the private company that makes the ads on behalf of the publicly run Las Vegas Convention and Visitors Authority, says it will reduce commission charges from 15 percent to 12.5 percent in an upcoming three-year agreement.
The proposed deal, which was approved in principle in April with details to be hammered out later, is scheduled to go before the authority board today for final approval. In addition to commissions on media buys and production, the deal includes a $400,000 monthly agency fee.
“We were asked to suck it up,” R&R CEO Billy Vassiliadis said about the agreement, which he says reduces hourly rates to the authority to 2002 levels.
“Things like cost of living, etc., were not given any consideration,” he said.
The deal, which was reached without competitive bidding, is one of the largest private contract engagements the authority offers and would be a continuation of more than 30 years of doing business with R&R by the time it expires in 2012.
In the previous five-year agreement with R&R, the authority spent nearly $400 million under the terms — most of it to buy air time for ads.
Lower commissions are in response to reductions in the authority’s budget, which is fed mostly by taxes on Las Vegas hotels.
The authority’s current annual budget of $231 million was 17.3 percent less than the budget it drew up for the previous fiscal year. In the current budget, about $86 million is expected to be spent on the R&R contract, with the agency booking commissions on roughly $60 million in media spending.
Previous contracts with R&R have yielded lots of attention for Las Vegas, much of it free publicity R&R helped to generate in addition to paid ads.
Since launching “what happens here, stays here” ads in 2002 the slogan has gained prominence in everything from unlicensed knockoffs to authorized big-budget movies. In 2007, Las Vegas was identified as the second-most recognizable brand in America, behind only Google.
And although the authority is one of the biggest public agencies of its kind in the country, hard times in Las Vegas and scrutiny from conservative critics have intensified the spotlight on the deal with R&R.
Most notably, the nonprofit Nevada Policy Research Institute generated an expansive investigative report late last year detailing millions of dollars of what it alleged were advance payments from the authority to R&R for services, which the group characterized as loans that are illegal under Nevada law.
The group also outlined what it said is a pattern of loose accounting standards related to the contract.
The group counts at least one longtime political opponent of the authority, former Las Vegas Sands executive Bill Weidner, among its board members.
“We simply don’t know what kind of bang for our buck we are getting with our current public approach,” said Andy Matthews, spokesman for Nevada Policy Research Institute.
An independent observer said advance payments from the authority to R&R probably wouldn’t fit the legal definition of a loan.
“You could interpret loan literally, I don’t think that would be wise,” said Jeff Stemple, a professor at Boyd Law School at University of Nevada, Las Vegas. “You want to give them enough freedom to be as nimble as any other business would be purchasing advertising and other services.”
But Stemple also said using an escrow account with any interest accrued being tracked and retained by the authority could be a more transparent way to move money to R&R for the purpose of paying up-front production costs.
Vassiliadis and R&R CFO James King dispute outright the suggestion the authority advances money to R&R.
They pointed to internal documents that weren’t part of the Nevada Policy Research Institute’s public records research that showed in many, if not most, cases R&R was paying upfront costs to production companies and not receiving payments from the authority until after a production was on the air.
Vassiliadis and King said in most cases R&R bills production costs according to guidelines set by the Association of Independent Producers.
Contact reporter Benjamin Spillman at email@example.com or 702-477-3861.