Cover Story: Looking for Brand Equity
Originally published in Broadcasting & Cable
February 9, 2009
With the economy going bust, advertisers are hoping product integration will bring them some new boom for their bucks
Jay Leno smirked and shifted gears in his blue and white No. 10 sports car during a Super Bowl ad last week. The spot trumpeted Leno's coming primetime gig at 10 p.m. on NBC four nights a week.
Fans of scripted drama have lamented the move, but one group certainly welcomes it: makers of branded entertainment.
It was Leno who began working references to Garmin GPS systems into The Tonight Show in May 2007. Live commercials had been a stalwart of talk shows during the early years of the TV business—leading to some classic Johnny Carson moments—before being abandoned for decades. ABC's Jimmy Kimmel successfully followed Leno's lead a year later, and David Letterman began plugging the Mazda 6 last November. Jimmy Fallon won't debut his NBC late-night show until the spring,but he's already busy working deals.
Such moves, which had once seemed a bright idea, now appear to be almost commonplace. The economic dam now broken, the recession has already upended business models built on the once-certain prospect of ad support. With television production budgets being cut and producers seeking to soothe the financial pain with the balm of marketing money, many are coming around to the idea that branded entertainment is a viable symbiotic solution.
“Jay Leno is going to be a fresh new platform to experiment, not only with product integration but new ad techniques,” says Mike Pilot, president of sales for NBC Universal. “Look for us to be very innovative between the show and the commercials.”
Those kinds of prospects are keeping branded entertainment players busy for now. Granted, not everyone is buying into this hard-to-quantify union of art and commerce, and some are doing so cautiously. In the somewhat haphazard world of product integrations, deals are changing and the rules are becoming looser. And advertisers will only get more vigilant as the economy forces them to scrutinize every red cent.
Recent network entertainment and studio mergers at NBC and ABC indicate how tough the sledding has gotten in the broadcast TV business. Couple that scenario with advertisers' continued frustration with declining ratings—largely a result of increased DVR use—and it sets the stage for a potential branded-entertainment boom.
But wary advertisers are hitching their wagons to star power. Jean Rossi, executive VP of sales at Fox, recently nailed a deal for Hyundai to appear in the latest season of 24. Ford no longer has auto exclusivity in the show, though producers had written Ford vehicles into a handful of early episodes this season. To have two car brands in the same show is unusual, to say the least, and speaks to the network's ability to deliver high concentrations of sought-after young male viewers.
“We've had these partnerships for years, and they're not about to cut back,” says Rossi, who is currently out discussing the network's newest series, Lie to Me.
Generally speaking, broadcasters are giving their full backing to only one or two shows a year, with marketing partners expected to help haul the rest of the newcomers into the public consciousness. “They're going to advertisers for the ones they're on the fence about,” says Jared Moses, CEO of independent branded-entertainment shop United Entertainment Group. Conversations with such outside parties are happening even before pilots are produced. Moses has attached LG Electronics to an American version of Top Gear, a BBC import that is looking for a new home after NBC passed.
New comfort level
Whatever new comfort level with branded entertainment that exists can be tied to Nielsen Co.'s $225 million purchase of ad measurement firm IAG in April 2008. Marketing executives are now able to demonstrate the effectiveness of using TV content as a sales tool with a variety of engagement and awareness metrics.
“In the past two years [branded entertainment] is an increasingly important part of the mix,” says Melissa Fallon, VP of TV and emerging media at Omnicom's Davie Brown Entertainment, which signed Victoria's Secret last week. “A few years ago it might have been the first to be cut, but I don't think that's the case anymore.” The company spearheaded the integration of State Farm with The CW's 90210.
Though season-six partners are yet to be revealed for Bravo's Top Chef, the series' past partners have included Toyota, Clorox and Diet Dr. Pepper. “There are more conversations happening now than in the past eight months,” confirms Kevin McAuliffe, VP of branded entertainment at NBCU. (VIDEO: See clip below from Top Chef using Diet Dr. Pepper in a challenge.)
But the sought-after shows may not provide the best illustration of how the business is changing. Elsewhere, it's clear that marketers do not have the stomach for the kind of add-on integration fees that were the hallmark of the Mark Burnett years, when the likes of Survivor and The Apprentice could command upward of $1 million simply for the honor of being involved.
As the auto giants cut back, advertisers are looking at new opportunities while supply appears to be chasing shrinking demand. “Some [of my clients] have a back-to-basics strategy; others are seeing this as a time to be innovative,” says David Lang, president and creative director of Mindshare Entertainment, who matched NBC's Heroes with Sprint Nextel for the Web series Heroes: Destiny he created. “We have a lot of marketers who are saying this is a time to break through. Branded entertainment is not an experimental thing anymore. It's tried and true for many marketers.”
The economy has changed the equation on both sides of the deals. When asked if advertisers have to stump for a media buy—once a requirement to do a branded-entertainment deal—at NBCU, Pilot responds, “A major part of our deals come with a media buy, but it's not a hard-and-fast rule.”
Product integrations have much greater value now, he argues. “Years ago, a product placement would show up in the first episode and then we'd see it five years later in syndication.” Now, Hulu offers advertisers instant exposure to an endless audience of Web viewers.
The flip side of all this exposure is the risk of overexposure, with shows becoming overrun with sales pitches. As TV sales executives struggle to maintain prices, ad agencies could ask for product placements as “value-adds” to keep deals in place. That could add up to more on-screen clutter.
There's already been a big year-to-year jump in the number of brands on screen. Nielsen IAG, which tracks product placement appearances on screen, reports that in the fourth quarter of 2008, 745 brands showed up in primetime programs on broadcast networks—73 more than the year-ago period. In cable, always a much broader playground for branded-entertainment executives, 839 brands with in-program placement appeared in primetime, a rise of 265 over the same period last year.
Measured another way, TNS Media Intelligence reports a 9% uptick in the time products spent on-air. In the third quarter of 2008, an average hour of primetime network programming contained nine minutes of in-show brand appearances, in addition to 13.41 minutes of network commercial messages. TNS reports on the extent of the ad clutter, “The combined total of 22.41 minutes of marketing content represents 38% of a primetime hour.” That's a worry for advertisers, too.
“Everybody is acknowledging that advertising and marketing have been impacted by this economic tsunami and the TV industry is revising all their data downward,” says Leo Kivijarv, VP research at measurement firm PQ Media. Even so, he doesn't think the branded-entertainment category will move into negative territory: “We won't see a dramatic deceleration as we're seeing in other media.”
Financials in the branded-entertainment sector are much more difficult to quantify than traditional ad sales. The deals are often more amorphous, involving co-marketing dollars, trades for talent to appear at trade shows and other factors that aren't simply about dollars in the bank.
Kivijarv forecasts mid- to high single-digit growth for the sector. PQ Media, in February 2008, said branded entertainment would reach around $25 billion for the year. Product placement and integration business, it said, would account for 15% of the total, with sponsorships and events making up the remainder.
Madison Road Entertainment managing partner Jak Severson says that the business is still growing, but at a less rapid clip. “Until this year, brands that spent less than $20-$30 million were ineligible [to get product placement on a show],” he says. “That's the biggest change.”
Network and cable branded-entertainment wranglers on the sales side may be busy, but the price/value equation has likely changed—and if not, then the rules of the game certainly have. “Every area of marketing spend is being scrutinized to a higher degree because there's less money or the brand manager is under more pressure,” says Mindshare's Lang. “But that doesn't mean they're not pulling the trigger.”
United Entertainment Group's Moses says in some instances, money isn't a factor at all. In recent months, he's been organizing a new way of doing business that might become more popular.
“You have talent providers and brands and agencies all sitting at a table with no money saying, 'What can we accomplish without paying each other?'” he says. “We are leading that with our clients. Everyone places on the table what they need, and we figure out the architecture so they'll receive more revenue from their businesses but won't pay fees.”
Proceed with caution
Managers and clients are continuing to proceed with caution. In some cases, there have been signs of marketer pullback. IMG Entertainment recently shuttered its overarching branded content development group, devolving such deals to its units; advertising holding company Interpublic Group also folded its own venture, Magna Global Entertainment. Interpublic client projects are now conducted at the agency level.
Meanwhile, content purveyors are becoming more ad-friendly. “There's a greater sense of openness because of the need to work with people, because the dollars aren't going to be there,” observes Chris Neel, senior VP and director of national broadcast at Initiative. “We're seeing across the board that everybody has relaxed the rules.”
And there's no place more relaxed than late-night television. Even before it gets on-air, ad executives report that NBC's Late Night With Jimmy Fallon, which is replacing Late Night With Conan O'Brien, has been chasing deals. “Fallon has been aggressive around product integration,” says Jason Meil, Initiative's executive VP and director of innovations. “There are a lot of things they're willing to entertain, a lot of man-in-the-street interviews where they'll integrate brands.” The plan also includes looking for green-room sponsors.
Even branded entertainment's biggest stalwarts, however, recognize that the recession is casting a blight on everyone's business. “I think it's hard to measure the impact of the recession on this business, because it's only become resurgent in the last few years,” says Madison Road's Severson. “It was on such a growth trajectory, but the level of growth has certainly fallen off with budgets in general.”
But if branded entertainment does continue to add to the bottom line, it'll be because its creators and innovators have succeeded in making the links less about product and more about integration.
“People are saying they're comforted by television,” says Davie Brown's Fallon. “That's a great opportunity.”