Suits Sock Branding Deals

Mar 14, 2005  •  Post A Comment

Mark Burnett Productions’ recent high-profile legal problems with entertainment marketing company Madison Road Entertainment could throw cold water on the still-young business of branded entertainment, especially for prospective medium-size advertisers, marketing executives said.

Madison Road was sued March 3 by Mark Burnett Productions, which accused Madison Road of unfairly profiting from deals it made for Burnett’s show “The Apprentice.” Six days later, Madison Road countersued Mr. Burnett for $20 million, claiming defamation and trade libel.

Such legal actions could scare off smaller advertisers from doing major product integration deals, marketing analysts said.

“In the short term, it’ll make people more conservative,” said Van Vandegrift, executive producer of Matrixx, a TV producer that has sold product integration packages (advertising and product placement) for NBC’s “The Biggest Loser,” among others. “For bigger companies, spending $1 million [on product integration] isn’t such as big deal. But it is for smaller companies. This is a big roadblock for smaller brands.”

Smaller companies might be timid because advertisers already have been asking questions central to the Burnett-Madison Road branded entertainment issue: That is, who really controls the product integrations in TV shows?

For instance, Mark Burnett Productions has a number of entities selling traditional advertising time as well as product integration opportunities. They include Madison Road, Mark Burnett Productions and NBC’s advertising sales division. NBC airs Mr. Burnett’s shows “The Apprentice” and “The Contender.”

Other networks deal differently. At ABC, for example, all product integration deals go through the advertising sales department. Fox and CBS have different arrangements depending on the show.

Beyond this, there can be outright fraud, according to media agency executives.

One executive said he gets many pitches from dubious companies claiming to offer product integration opportunities: “We get calls where people claimed to be selling certain shows. Recently we got one from a company saying it represented Discovery Network shows. It turned out not to be the case.”

But Madison Road was different for Mark Burnett. It inked multimillion-dollar deals for “tasks” in “The Apprentice” for Procter & Gamble’s Crest brand, Levi Strauss & Co. and Masterfoods USA. Tasks often involved “Apprentice” teams competing to create the best TV commercials, marketing campaigns or product packaging.

Executives close to Madison Road said the company would buy specific tasks from Mark Burnett at a fixed dollar amount, say, $2 million an episode. Madison Road would then sell them to advertisers on a variable commitment based on a cost-per-thousand-viewer basis. Typically, advertisers buy TV commercial time this way-on a CPM basis with ratings guarantees.

Madison Road would also do deals with minimum and maximum dollar amounts. For instance, an advertiser might pay as little as $2 million or up to $3.5 million, depending on the episode’s ratings.

Things were going so well between the companies that Mark Burnett executives wanted Madison Road to supply it with more marketing partners.

In an e-mail sent June 21, 2004, from Kevin Harris, “The Apprentice’s” co-executive producer, to Jak Severson, CEO of Madison Road, and Patti Ganguzza, president of then Madison Road partner AIM Productions, Mr. Harris said: “Thanks to both of you for securing … tons of … product placement, a finale sponsor. … You two are the best and proven yourselves as VALUE to me.”

One month later, in a July 22, 2004, e-mail, Mr. Harris asked Madison Road to work more deals for a special program segment called “Madison Ave Pitch”: “Please send me a list of companies showing interest [for] any Madison Ave Pitch partners interested in playing with the big boys.”

Months later, conditions changed. According to executives close to the companies, Mark Burnett wanted to deal with Madison Road’s clients directly. Then on Feb. 15, 2005, a letter was sent to a number of Madison Road’s clients and other major advertisers and media agencies, accusing Madison Road of fraud.

Neither Madison Road executives nor Steve Marenberg, attorney for Mark Burnett, would comment for this story.

Madison Road in its countersuit called Mark Burnett Productions the “800-pound gorilla” who worked on “greed and arrogance.” Madison Road said it was Mr. Burnett who actually drove up the price of product integration on “The Apprentice” from $2 million to as much as $5 million.

With early program deals with advertisers, Mark Burnett Productions didn’t have the expertise to deal with media buying minutiae, marketing executives said. The company looked to outside companies like Madison Road to help. But after it had experience, the company wanted to eliminate any “middlemen.” In the same week Burnett sued Madison Road, it hired a number of in-house branded entertainment executives.

Many advertising and media agency executives view companies like Madison Road as competition, and have set up their own in-house branded entertainment divisions. Supporters of Madison Road say the job of product integration is so labor-intensive, many agencies don’t want to devote manpower to monitor and baby-sit branded entertainment projects-especially when working with producers to make sure brands are shown in the proper light.

Unilever’s Dove brand may be one of those products that were not displayed in a good light during an “Apprentice” episode this season. Brand managers were upset, according to published reports and Web sites, when “Apprentice” teams created commercials featuring a Dove product. The ads, which aired during the show, included sexual references to cucumbers and homosexuality.