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Placement Bonanza Remains Elusive

Oct 11, 2004  •  Post A Comment

With the rise of reality TV and the need for real-world products, the nascent product placement and branded entertainment business looks like El Dorado to some TV executives.

In a rush to grab business, a number of media agencies, talent agencies and independent operators have opened new companies since the year 2000. But four years later, striking gold has been a tough goal to accomplish.

Now executives are wondering aloud about the bigger picture for this budding industry and whether-beyond reality shows-any real money can be made in TV product placement and branded entertainment deals.

“These appear to be one-shot deals,” said Norm Marshall, CEO of Norm Marshall & Associates, a Los Angeles-based product placement company. “This is just surface fishing-no one is deep-sea fishing.”

Historically, product placement hasn’t existed much in TV. Producers tended to use generic products on the set-they didn’t want real products to appear in scripted network shows to avoid advertising conflicts that would continue when shows moved into syndication, cable and other outlets.

Reality Brings Change

With the growth of reality shows during the past few years, things have changed. With limited rerun value for reality shows, TV producers are more than happy to take on real consumer products. Additionally, they are seeking payment for placement to offset production costs.

Network license fees can be reduced as well. Modest product placement deals currently can range from $20,000 to $100,000 a shot. With four placement deals at $50,000 apiece per episode, a TV reality show producer-with an average per-episode production budget of $1.2 million for a one-hour show-can cut $200,000, or 17 percent, of his costs. He can then lower his license fee to the networks.

But only a few shows-such top-rated, in-demand programs as “Survivor,” “American Idol,” “The Apprentice,” “Amazing Race” and “The Simple Life”-are charging big product placement or product integration fees.

In turn, fewer branded entertainment agencies are able to gain. Their advertising clients-while willing to give product to a show-would rather not pay fees. Advertisers will pay a fee when a product or service is integrated into the story line of a show, but those deals are few and far between.

Traditional product placement agencies such as West Coast-based Davie-Brown Entertainment and Norm Marshall try to get products from their dozens of clients onto TV shows and in films without any product fees. Most traditional product placement agencies get paid monthly retainers by their clients.

TV producers and networks have a different ambition. They don’t just want free product for background in their shows, they want big fees from advertisers by making a product a bigger part of the show-putting it into the story line where characters can discuss it. Internet, retailing and other components could be included. These bigger deals are the so-called branded entertainment agreements.

“It’s not product placement deals that are a problem,” said Richard Ellis, president of 12to20, a Los Angeles- and New Jersey-based teen marketing agency. “It’s the bigger branded entertainment deals. It is so difficult to get deals done. There are many hands involved-the TV producers, advertisers and network media sales.”

Though this end of the business is slow going, few branded entertainment groups have actually failed and gone out of business. Many are still in the start-up phase and hoping more programs become available.

Michael Kassan, a former senior executive with Initiative Media who now runs his own entertainment marketing firm, Media Link, insisted there is consistent money to be made in branded entertainment because clients such as Procter & Gamble and Pfizer devote specific parts of their annual budgets to branded entertainment.

But even Mr. Kassan admitted the business may be overwhelming for new agents.

“It’s not a business where you are in and out quickly, like in the dot-com world,” Mr. Kassan said. “It’s a business for people who understand the various constituencies. Producers have their needs, advertisers have their needs, and media sales groups [at the networks] have their needs. That’s why, speaking selfishly, I’m different in this space-I’ve been on all sides.”

One-Shot Deals

New branded entertainment agencies hope to work on a more consistent monthly retainer basis. But executives say many new branded entertainment businesses are striking less valuable one-shot deals.

“If you are doing 10 product placement deals a month at $20,000 for each deal, then it’s a business,” Mr. Ellis said.

But that’s not happening. Television alone won’t bring in any appreciable business for new branded entertainment agencies. Instead, many agencies also use theatrical films, music, publishing, Internet, theme parks, concert tours, ringtones and other entertainment areas to arrange for product integration deals.

“In the scheme of things, product placement represents the zenith of sexiness, a cool place where everyone wants to be,” said Mark Workman, president and CEO of FirstFireworks Group, a West Coast entertainment marketing agency whose clients include Visa USA and eBay.

“Occasionally, a few of these [TV] placements work surprisingly well to increase sales,” he added. “But the bigger picture is, how should you use entertainment [overall]?”

Mr. Workman said product placement shouldn’t be viewed in a vacuum but should be evaluated with other entertainment media, such as the effectiveness of a Super Bowl commercial or a brand’s jingle. “It’s who has the best overall [entertainment] strategy,” he said.

A Matter of Time

TV remains one of the highest-demand places for branded entertainment because of its immediate access to consumers. Proponents of television branded entertainment say it’s only a matter of time before marketers come to TV producers looking for more product integration. Advertisers need supplemental media to display their brands due to declining network ratings.

They point to NBC’s “The Apprentice,” which this year put product placement and branded entertainment deals into a new orbit. Marketers now pay nosebleed fees of $1 million or more to Mark Burnett Productions, the show’s producer, for products to appear and be discussed in the show.

And it doesn’t stop there.

For the third edition of “The Apprentice”-to start early in 2005-Mr. Burnett’s company is now demanding a whopping $2 million to $3 million for a product integration, said one executive who is in the middle of negotiating an “Apprentice” deal. Mark Burnett executives didn’t return phone calls requesting comment.

Madison Road Entertainment, founded by three former television executives, is an independent brand entertainment company that has made big deals for “The Apprentice” on behalf of Levi Strauss & Co., Procter & Gamble’s Crest toothpaste and Masterfoods’ Mars brand.

Instead of a short mention or a brief visual in a show for a traditional product placement, the young business Turks in “The Apprentice” spend many on-air minutes during a single episode discussing the marketing for a new line of Levi Strauss jeans or developing a new Mattel toy with lots of visuals of, say, toy retailer Toys R Us.

“We see ourselves as a new model of a production company,” said Tom Mazza, president of Madison Road Entertainment. “We are about bringing financing to the production itself.”

Jak Severson, CEO of Madison Road, said the business isn’t coming from just one area-its clients are advertisers, networks and TV producers. Mr. Severson said Madison Road is looking to produce its own TV shows.

Executives estimate branded entertainment agencies such as Madison Road could be charging a 5 percent fee to marketers, comparable to the product placement fee that theatrical placement agencies have traditionally received. For product placement deals of $1 million, that would mean $50,000 per transaction. Mr. Mazza declined to discuss financial details for Madison Road, including the “Apprentice” deals.

Traditional product placement agencies such as Norm Marshall are also moving more int
o TV. A major advantage is that these agencies have longtime clients, such as Heineken USA, General Motors, Blimpie, Sears Roebuck and Samsung. In groundbreaking product deals, Mr. Marshall helped put BMW cars into James Bond theatrical movies in the late ’90s.

Mr. Marshall said 25 to 30 TV producers now ask for product placement deals from his agency each week. Many TV producers ask for, but don’t always get, product placement fees as well.

Talent agencies, such as Creative Artists Agency, are also in the game and have different kinds of leverage-actors, writers, producers, entertainment companies and more recently consumer products clients.

One of CAA’s big clients is Coca-Cola. CAA put Coke together with 19 Productions, another CAA entertainment client, in a marketing deal for Fox’s prime-time hit “American Idol.”

CAA is one of the few places where TV branded entertainment can be viewed as a viable, ongoing business, marketing executives said. Media executives estimated Coke pays an annual $1 million fee to CAA. A CAA spokesman declined to comment about this or other deals the agency has done for clients.