Making The Deal

We’ve heard everyone talk about branded content, how it can turn products—and people—into stars. How it can be customized, and become a more interactive process for viewers, especially in a day when everyone is in love with TiVo, or at least half of U.S. households, by the end of the decade, according to Forrester Research. How branded content is more measurable than traditional advertising, and how it holds the promise of creating multiple revenue streams, whether it can be wrapped up in a DVD sale, foreign distribution rights or some other product down the line.

But what’s the magic formula for making these deals, and actually keeping the partners happy? Who owns the idea in the first place? And how do all the parties ever agree on pricing, which brand is really going to be helping the other and the value of the exposure in the first place? How can advertisers determine whether what’s being proposed is actually going to resonate with consumers and give them another reason to buy? Or turn into a ratings disappointment like The Restaurant?

These questions are even more important today as brand marketers are ready to step up and commit nearly $10 billion in the upcoming network television upfront. In a month where we’ve seen sports sponsorship take over headlines, Spider-Man called out at first base all over baseball stadiums, we have to also ask ourselves, have we gone too far? Are we really bringing elements to the table that are going to make a difference or are we just adding to the clutter?

This panel, moderated by Brandweek editor Karen Benezra as part of “The Next Big Thing” conference held May 7 in New York, addressed some of these issues.

Karen Benezra, moderator: When you think about branded content, is it programming or advertainment?

Ed Erhardt, ESPN ABC Sports: I think it’s probably both. People want to label it. And I don’t necessarily think that it needs to be programming or content. I think what it is, is just communications. And how brands are perceived in that communication at the end of the day is really where it all starts. What I do think is interesting is that most of the folks that are trying to create branded entertainment, or title sponsorship, or product placement, or, all the various buzz words that get kicked around, have very little understanding as to how important brand essence is to making that work. Everybody wants to rush to get their product in, or to create something that’s cool or neat, or to cut through the clutter, and I don’t know whether or not cutting through the clutter is a good thing, if the way your brand is perceived is negatively, or inappropriately.

The thing that I do find extraordinarily funny is it’s as if this is new, where, of course, sports has been doing it for 45 years. You know, the Gillette Play of the Day in NFL programming in 1960 was product placement. And, it is the ultimate reality series, which is sports.

Moderator: What can I actually expect these days in terms of product placement in a movie or a TV show? How will success be measured, and how can I convince the CEO it’s really worth spending the bucks?

Laura Caraccioli-Davis, SMG Entertainment: For measurement for movies, typically you look at box office. But you really have to build the right property around that movie and activate it, and through your activation build in metrics to measure. We have our own metrics in place; we have a formula that we build for our clients to judge the effectiveness of it. And we can also work off of CPMs or things to back into a number. But I think every agency has proprietary research that’s in development to figure this out for their clients.

Every deal we enter into right now we have a research metric in place so that we’re sharing the cost of that with our partners. [We also ask]: What does success mean for you? Because sometimes it’s not return on investment, it’s return on involvement and other things that you can build in triggers. And emerging media and the Internet offer so many great opportunities to collect data, very rich data, and be able to find out right away if something is working.

For our client Allstate we created “Gilmore Greats.” We went through the WB’s library for the Gilmore Girls and came up with some moments that were Allstate trigger moments. Rory goes to Yale, gets her first apartment. Rory gets her first car. Zookie has a baby. Rory’s car gets hit by a deer. And all we said was, be prepared for all life’s great moments and challenges, and then had viewers go on the Web site and vote for the greatest “Gilmore Greats.” At that point, we were able to judge the effectiveness of that. So we’re using television to drive them to the Internet to then drive them to Allstate, and to get that messaging across to a younger demo.

Moderator: If every agency has a different metric, doesn’t it mean that we’re all over the place in terms of measurement?

Erhardt: There should be some kind of standard that folks can measure against. I think every brand has a different place in the universe in terms of what they’re trying to accomplish. Somebody’s logo is seen on the screen. Did it sell anything, or is it just a logo on a screen? And as fast as we figure out how to do product placement integration and all that stuff, is as fast as consumers will figure out how to tune it out.

Caraccioli-Davis: There are some shows, like Sex and the City, where you can see the immediate value of placing product in a show. A shoe company that a lot of us didn’t know about, all of a sudden becomes top of mind, because you are able to drive pop culture, instead of chasing pop culture. That’s what we try to do for our clients: try to get them seated in properties where they can drive the pop culture instead of chasing it. And right now, a lot of us are just chasing it.

Moderator: How about when you get into merchandise and ancillary goods that come off of those programs? Earlier this year we saw in The Apprentice where Donald Trump had a lot of merchandise that he wanted to get trademarked, and, lo and behold, one of the castoffs actually came up with some ideas of her own. What can you do to protect a property, to make sure that the folks that actually own the name can use it down the line?

Linda Goldstein, attorney: One of the things that troubled me in hearing the direction that was being taken on monetizing the value of the placements, is that it seems to be looking at the transaction from the standpoint of the content-owner only, without regard to the value that the brand brings to the equation. For some properties, having the power of the brand behind it brings a value and credibility as well. In our experience, the transactions that are most successful are ones where there’s a shared value among the brands—there’s something that the entertainment brand and the marketer brand can take from each other to help make the experience for the consumer greater.

One of the things that does have to happen is a recognition by the studios and by the networks that the brand itself can bring a certain value. The dollars they’re bringing are not just hard dollars, but they’re dollars that they’re bringing in terms of the promotional activities and merchandising activities that they can conduct with the raw content or the intellectual property that the studio or the network is providing. To get to the next level, some of the possibilities for merchandising and ancillary rights have to be thought of at the very early stages, when the program is being developed, when contracts with talent and with music are being executed, so that the studio or the network has the rights to give to a brand marketer, to allow them to exploit the property to its fullest extent.

Moderator: Any misconceptions you think clients have right now in terms of what they’re expecting out of deals?

Bill Abbott, Hallmark Channel: It is so important for a marketer to make sure that they’re staying true to their brand, and not trying to be off brand and attract an audience that might not necessarily play to their strengths.

Moderator: Brett, you’ve obviously been in the placement and sponsorship game for a number of years at Nascar. How do you make the space ownable in a sea of logos?

Brett Yormark, Nascar: It’s ownable in how you activate it. Nascar grew up with a lot of sponsors. The sponsors are the sport. Without it, we don’t exist. We’ve done a lot of research that shows that our fans embrace commercialism. They understand the connection between going faster and supporting a sponsor’s product and/or service. So it’s not necessarily what’s happening at the venue, it’s how you take those assets, integrate yourself in the sport, and how you activate with those assets away from the track that gives you that ownable position, or that gives you that point of difference.

Moderator: In light of what we’ve heard about Spider-Man getting called out in baseball, how far is too far when we come to these things? Spider-Man probably got $50 million worth of publicity, given all the media attention, so who knows if this was a bad deal for Columbia.

Erhardt: It wasn’t a good deal for baseball.

Moderator: Why was baseball so touchy about this?

Erhardt: Nascar is a sport that grew up with sponsors. Baseball is a traditional sport. You really have to put yourself in your fans’ shoes. How is the fan going to react to any of this stuff that we’re putting out there? Fans and consumers are going to give brands credit for being smart, for being clever, for doing it the right way. You want that fan to say, “That was good.”

The more that we can collaborate—advertiser, agency, client, media or content provider—the better off we are. It requires a lot of trust. Partnerships have to be very, very robust, have a lot of bandwidth that allows everybody to get in the same place, and then push each other a little bit without blowing up the relationship. So the more that you can get collaboration into the mix early on, get everybody talking the same language, rather than saying, “We’re going to create something, trust us,” the better the network is going to feel.

Yormark: We had a great opportunity to go out there and market, with Nextel, what we think is the broadest rights package ever assembled in the history of sports or entertainment. It was something that we were able to consummate in about six weeks, but we had quite a few challenges. We had a lot of your core fans that we didn’t want to alienate, but we wanted to take the sport to a whole new level in order to attract the casual fan and the new fan. Nextel was looking for a game changer. And Nascar came along with what they thought was a very compelling opportunity. So far, the transition into the sport has been flawless. They’re growing the sport. Our ratings continue to climb. Our attendance is at an all-time high. And much of it is due to the activation that Nextel is providing the sport.

Caraccioli-Davis: There are three keys. It’s finding the right partner. When you look at most agencies, they’re dealing with the very end of that process, which is usually distribution. You have no influence with the distribution. So you really need to be on the front end of the process. But as you move up in the creative process, the risk gets higher. And that’s when you need the right partner to help you and your clients figure out how much risk you’re willing to take, and how far you want to move away from the distribution end of the partnership.

It’s also the right deal, and making sure you’ve asked for all of the pieces of the pie that are going to make this deal sing for your client. And then the right time, which is key, because so many of us get involved, and we take such a long time to get through the right partner, the right deal, that sometimes we’ve missed the timing. Hollywood is in real time. And sometimes we’re in this agency world where we plan a year ahead. Technology-emerging media is changing all of that. We need to be able to do something and have it on the air tomorrow. That’s what’s wonderful about where we are right now: Emerging media offers us so many benefits and so many great opportunities, especially when it comes to the entertainment space.

Moderator: One of the issues though, is bringing those ideas out into the marketplace to see what fits. What happens to the dynamic when the advertisers, who are the buyers, actually become the sellers? What are we doing, and how does this fit with all the holding company mess that we have and everybody owning a piece of everybody else?

Caraccioli-Davis: We’ve been in interesting situations where, you’re being pitched something, and then you start asking who’s the production company, and it’s a production company that might be owned by OMD. And it puts you in a very conflicted area in the sense that I don’t know if [my boss]would appreciate me helping keep Omnicom’s production company afloat, so we get into these very interesting situations.

Sometimes we’re the seller, and we put our network partners in this very interesting place. They know that at the end of the day they’re going to sit across the table from one of my clients and need to talk about upfronts and budgets, and here I am sitting here two days before trying to sell them a show, and they have to be very sensitive; they can’t call my baby ugly. They can call my baby ugly to me. But when my client is sitting there, they have to be very careful how they do that.

Erhardt: The clients rule the day. And if the client says I want to work with Starcom or whatever it is, then generally the agencies and the media—if that’s where the money is generating from—figure out how to get that done. The other thing that’s interesting now is, as all of these branded entertainment ideas start to percolate, the media agencies, in many cases, are becoming more engaged in the process earlier than the creative agencies are, who are still pretty much stuck in creating :30s.

Caraccioli-Davis: Right.

Erhardt: And it’s been our experience with Starcom and with many other shops that they are the ones that we are either bringing ideas to, or, in some cases, bringing ideas to us early on in the process, and that the agency creative types are the ones that are the guys that break off from [an agency], and they’re now a production company that’s pitching us on how they can bring this brand to content, and it’s the media that are looking at it. So it’s kind of interesting how that’s changed.

Caraccioli-Davis: Cable offers that advantage across the board because they usually own and control all of their production. So you hear a lot in the press about advertisers shifting dollars from broadcast to cable, and what’s going on there.

Moderator: When you think about what’s really creating the buzz in brand entertainment these days, it’s reality programming. Seventeen out of the top 20 shows are reality. Does branded entertainment have a future that is going to be on network that’s not all based in reality?

Caraccioli-Davis: When we look at anything, whether it’s reality, scripted, live events, I come from the perspective of let’s just say that nobody’s seeing your 30-second spot. So how do I get my brand message across? Is there an opportunity in the show? Is there an opportunity to surround that? So as long as there’s opportunity to surround any entertainment property, there will always be an opportunity, I think, for branded messaging.

Erhardt: We just started something called ESPN Shorts that we worked on with both Starcom and Mindshare, which is six-minute films that have been cut into four 90-second segments that will run over a period of six weeks. It was very collaborative with Starcom, Mindshare, Miller and Sears, who are the first two customers that are utilizing it. We’re thinking of ourselves as if we’re a movie production house. And we ask people to come in and pitch us on the brand idea, meaning the production companies. We have an idea we want to take a Sears Craftsman mower and the ESPN brand and we want to marry them. Bring us an idea that makes product hero and feeds off of both of those brands’ essence. And we’ve been able to come up with some good stuff that’s working very early on in the process.

It could happen in music programming, it could happen in any kind of programming, if smart people get together and figure out great ways to put their brands together. There are a lot of ways that the reality rage will or won’t ultimately carry on.

Moderator: How far in advance do you really want to get a client involved in a property?

Abbott: As far in advance as possible. Some of these deals are very hard to construct because it has to pass multiple levels with the client. Internally within the network we have a lot of work to do to set deals up like this to develop the product and the programming, and get them integrated, either in the script, or within the actual movie. So the lead time is very, very important. I would say six months is pushing it, and optimally you’d have a significantly longer period to construct a deal like that and get it done.

Yormark: Typically, a fully integrated deal right now takes about 12 months to do. We are going after companies that have never been predisposed to Nascar, so there’s that education process you need to take them through. Our goal right now is to do fewer deals, but more meaningful deals. Deals that will take a little longer, but, ultimately, will help grow the sport and help drive that customer’s business.

Goldstein: The sooner we can get a marketer into the picture, the easier it generally will be to make the deal, because you’re still at the point where you have the flexibility to acquire rights that may be important to the advertiser. Obviously, the exclusivity aspect of it is always going to be key to the advertiser, so the marketer that gets in there first will likely be able to maximize their opportunity, and likely get more of what they feel justifies whatever the financial investment is that they’re making in the project.

Moderator: Now that we have the upfront ahead of us, are there new people that are coming on the block?

Caraccioli-Davis: More clients are asking us for more entertainment opportunities, because they see the effect of what happens with a show like The Newlyweds, when the next day everybody is talking about it, and saying, ‘I want to be involved in that. How do I get involved in that?’ Or, ‘How do I create the next one? How do I get involved in talent in that way?’ So, our clients are actively asking, and I don’t think there’s any client that’s not asking. And I don’t think there’s any category that’s not asking.

Erhardt: I don’t know if they move in the upfront, if that’s what you’re saying.

Caraccioli-Davis: They don’t move in the upfront. We all have to get away from kind of leveraging our media dollars to get some of this stuff. It’s not really speaking and resonating with the brand essence and what you’re really trying to communicate. For branded entertainment, we really need to take it a step beyond and go beyond that. And those are deals that take longer to craft, as you guys have said. And those are partnerships, and they don’t happen during the upfront.

Abbott: And they’re certainly sold in and formed in January through April and May. It’s across the board—everybody is very interested.

Erhardt: You know, the fastest growing category right now in advertising clearly is entertainment. It’s because the movie guys are also creating a separate product on a DVD that they can sell after they’ve launched the movie, and then there’s international rights. Think about branded entertainment the same way, which is to say you’re creating this piece of content that’s going to find its way into all of these different mediums, that’s going to have a life that starts at the launch, has the behind-the-scenes stuff, has the ability to be digital on the Web, to be on the radio. And think about digital content in the same way that you think about the way a movie launches. All the rights that the legal folks want to make sure you don’t give away come into play. But the key there is that you’re creating a piece of content that you then figure out how many ways you can leverage. With original entertainment on ESPN we think there’s a great marketplace to create DVDs, and then have those DVDs be distributed in-store, in-mail, as part of something that’s also a movie or a series that we then put on our air and sell advertising against, then use a marketer to help distribute that DVD, draft off of our brand, and their brand off of ours, to create something bigger. The reason that works is because you’ve got a piece of digital content that finds its way to work in a lot of environments.

Abbott: For the most part, most clients are pretty strategic and understand that the business is certainly changing, and then they have to adapt with it.

Caraccioli-Davis: Everybody’s done a good job of getting our clients prepared for the future. I feel like it’s already 2007, because we’re operating in that mind set that TiVo has penetrated. You have to live like that right now to prepare yourself.

Erhardt: I wonder when we’re going to reach a point where there’s so much branded entertainment, that we’ve turned the consumer off.

Goldstein: You can always count on the lawyer to dim all the excitement, but I had the chilling experience of sitting next to one of the bureau directors of the Federal Trade Commission at a luncheon a few weeks ago, and it’s no secret that this is an area that the FTC is beginning to look at very closely.

When I see a presentation that begins to attach a very finite monetization to the value of the placement or the integration, and, obviously, there are very compelling reasons why the industry needs those measurement tools, we need to be careful about how that then plays into the regulatory framework. And the last thing I think any of us would want to see is an agency like the Federal Trade Commission beginning to exercise its jurisdiction over our entertainment content.

The comment that was made to me by this bureau director was, we’re watching it very closely, and if it starts to get to the point where there are subliminal claims being made about the product, by virtue of how it is performing in the program or in the movie, we’re going to treat it as advertising and not as entertainment. And when you have that monetary value so directly connected to it, it really fuels that type of an argument. It’s something we all need to be sensitive to as we move forward.

Moderator: Tread carefully because Washington is watching. It’s something to keep in mind.