This ad agency received millions from Netflix and abruptly closed. What happened?

Insults against Roger Schaffner, chief executive of Palisades Media Group, continued to mount in his Santa Monica office.

Laid-off workers pasted letters from an old office sign that read “Ass” to his glass office door last week. Others placed yellow, blue, and green sticky notes with messages like “Shame on you!!!”, “I hope you can’t sleep at night.”

For many of Palisades’ roughly 100 employees, the July 15 office closure came out of nowhere.

The advertising agency, founded in 1996, counted Netflix among its largest clients and placed ads in newspapers and other outlets to promote its critically acclaimed programs for awards. Suddenly, in an email, the employees learned not only that their office would be closing in a few hours, but also that they would lose all their jobs.

“The company has endured the cumulative financial impact of the pandemic/Covid, which came to a head this year,” Schaffner wrote in a July 15 employee email reviewed by The Times. “As client budgets/revenues decrease and expenses increase, we are in an untenable position and are now forced to close the office.”

But the statement did little to placate employees, who remain stunned by the abrupt shutdown of a business that has been a staple of the studio advertising business for more than two decades. They said they received no severance pay and only a third of their vacation pay, adding that the only communication they received from Schaffner came from emails.

“We were all blind,” said one of several former employees who declined to be named for fear of reprisals. “Everyone went about their business as usual. I had to do some shopping.”

The closure, first reported by Wrap, was particularly devastating for senior employees, some of whom recalled sacrificing vacation time and personal time with their families to help the company through tough times.

“It’s a profound betrayal of the dedication and investment of my time over a decade,” said another former employee, who has worked at Palisades for more than 10 years. He said he owes him around $15,000 in unpaid vacation time. “I have only been loyal to one company.”

Ron Grant, Schaffner’s attorney, said his client would not comment on the story.

So what happened?

Former employees and salespeople told The Times the company’s sudden demise was due to a series of what they saw as poor business decisions that compounded financial problems caused by the COVID-19 pandemic and other factors, including the loss of vital businesses at its most important Customers Netflix .

Palisades Media was hired by Netflix and other clients to place ads in various outlets and then pay those outlets after the ads ran.

At a meeting earlier this month, senior executives at Palisades Media’s president and chief operating officer, Laura Jean Bracken, were told the company was raising $14 million to $16 million from Netflix and other customers, but not giving the money to the providers paid off. When the group pressed for more information, Bracken offered no further details, said two people familiar with the meeting who were not authorized to comment.

Bracken did not respond to a request for comment.

In the days leading up to the shutdown, Palisades Media owed millions of dollars to various publications, including The New York Times, Los Angeles Times, KTLA and The Wrap, sources said. The agency owed the New York Times and the Los Angeles Times more than $1 million each, the sources said.

LA Times spokeswoman Hillary Manning declined to comment. A spokesman for the New York Times could not be reached.

Netflix, which works with many agencies, declined to comment.

Though Palisades Media accounted for only a small portion of Netflix’s media spend, the agency employed about 40 people to work on the account, insiders said.

Trouble arose this year when Netflix shifted its consumer title ad work from Palisades Media to its rival Mediahub, according to a December email from Schaffner seen by The Times. Palisades Media would retain its work on awards campaigns for Netflix, but the move was a financial hit.

“Of course, that means we’ll have to lay off a large number of employees, which we won’t do until after the holidays,” Schaffner said in the email.

But the expected cuts did not materialize. During the peak of the pandemic, Palisades agreed not to lay off workers as a condition of receiving a waiver of federal loan repayments through the Paycheck Protection Program in 2020 and 2021. Palisades received $3.89 million in PPP loans dollars, which the company said would go towards payroll and healthcare costs, according to ProPublica.

That year, some former employees faced layoffs even as the agency lost clients due to the health crisis. However, there were no staff cuts or pay cuts, which were widespread throughout the entertainment industry.

“Management could have stepped up and made tough decisions that were needed,” said a former employee. “They were ready to sink the whole ship.”

Meanwhile, Palisades Media continued to lease the top floor of the Santa Monica Water Garden office complex, even though many people were working from home. The company has a 25,245-square-foot lease through early 2027, according to CoStar, which follows real estate trends. In April, the company made its office available for sublease, CoStar said.

Schaffner founded Palisades Media Group in 1996 after working at media agency ICG, where he built an entertainment division representing independent film studios, according to his LinkedIn page.

Palisades handled media purchases for various Hollywood clients, including Miramax, the influential studio founded by Bob Weinstein and his brother Harvey, the former film mogul convicted of a criminal sex offense and third-degree rape in 2020.

The agency has built a reputation for having talented professionals who have worked with studios and brands such as Mercury Insurance and the Los Angeles Philharmonic. In 2000, Schaffner described Palisades to Ad Age as a $250 million deal.

“Through hard work, smart business insights and acting ethically, Roger has created his legacy in the media community,” reads his bio on Palisades Media’s website.

However, the agency’s fortunes took a turn for the worse this month when a provider threatened to stop serving ads from Palisades unless it paid the money it owed for Netflix ads, and Schaffner told employees that the financial troubles the agency were insurmountable, insiders said.

“Unfortunately, cash flow only allowed for one last paycheck,” Schaffner wrote in a second July 15 email to employees. “In California, if you miss a paycheck, the penalties are very severe. So the last minute shutdown.”

The news came as a blow to search media specialist Lea Yang, who had been working at the advertising agency on an H-1B visa for less than a year. If Yang, 24, doesn’t find a job within 60 days, she could be deported to Taiwan.

“It was definitely a shock,” Yang said when she first read an email that the company was closing. “It was quite emotional that afternoon.”

Times staffer Scott Wilson contributed to this report.

https://www.latimes.com/entertainment-arts/business/story/2022-07-27/lat-et-ct-palisades-mediagroup-netflix This ad agency received millions from Netflix and abruptly closed. What happened?

Sarah Ridley

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