An in-house production company is provided by the venue, meaning one of two things: either the event production companies are the venue, or the event production companies are in cahoots with the venue in some form or another.
This can be a situation where an event production company is contracted by the venue to provide AV/event production services for larger venues such as a convention center, hotel, stadium, or other like venues, but can be a result of prior work history between the two, establishing the expectation of exclusivity, a higher level of comfort in the fact that they have prior work history, or they are perceived as a reliable and professional source for services. Other times, however, there is a contract between the event production company and the venue where they pay a percentage of their revenue to the venue.
How does this affect you as an event planner? One reason to avoid “preferred vendors” is the simple fact that if the in-house AV company has to split revenue between them and the venue, generally increasing cost of services, endangering your event with threats of breaking the budget.
You may think that an outside vendor would be more expensive, however, that may not be the case. Some venues do charge a fee for using an outside vendor so be sure you read your contract thoroughly before deciding which to choose. However, by getting bids from outside vendors you may see that you get more value for your money by using an outside AV team.