Striking a Fair Balance for Advertisers

Oct 3, 2005  •  Post A Comment

By Wayne Friedman

Special to TelevisionWeek

Broadcast networks are increasingly turning to their sibling cable networks to find new homes for their underperforming reality series.

But such moves are not without complications. Unlike advertisers who buy traditional commercial spots in scripted shows, reality show advertisers who pay for product integration have no choice but to go along when the program moves to cable.

“It’s a new wrinkle in negotiations,” said Doug Seay, senior VP and director of national broadcast for Publicis & Hal Riney. “But not all advertisers can adjust to it.”

The problem for advertisers is this: Cable advertising rates are typically much lower than those for broadcast TV. Network advertising executives won’t go into specifics about how these deals are adjusted for advertisers, but many TV buyers figure broadcast networks deal with ratings underdelivery on these shows as they would with any other show.

Giving Make-Goods

The first choice is giving advertisers the option of getting commercial avails in the new show occupying the time period the reality show vacated. If that’s not an option, networks typically offer advertisers other programming that reaches the desired demographics.

This make-good activity is likely in addition to giving advertisers a freebie in the new cable run of the show.

“I would think that they would just bonus the cable show for advertisers,” said Rino Scanzoni, chief investment officer for Mediaedge:cia.

When CBS decided the weaker-than-expected ratings for “Rock Star: INXS” meant one of the three episodes needed to go to cable, it moved the Monday night edition to sister cable network VH1 on Sunday nights.

A CBS spokesman said “Rock Star’s” regular advertisers had a choice whether or not to move advertising to VH1. But the same wasn’t true for Honda and Verizon, the show’s major sponsors, whose products were integrated into the story line of shows that were already filmed and produced.

Verizon’s involvement with the show included an arrangement in which viewers at home were able to vote on their favorite singers using their Verizon phone service. In Honda’s case, contestants told viewers that they were “loading up the Ridgeline” and driving over to the studio. In another episode, the final three singers were given new 2006 Honda Civics to drive to meetings with INXS band members.

Over the summer other reality shows made similar moves. Fox moved “The Princes of Malibu” to Fox Reality Channel. At the beginning of last season Fox’s “Next Great Champ” moved to Fox Sports Net. Also this summer, NBC transferred “The Law Firm” to Bravo.

When “The Princes of Malibu” moved to Fox Reality Channel and its 24 million subscribers, all the advertisers moved with the show, according to Bruce Lefkowitz, executive VP of advertising sales for Fox Cable Entertainment.

While he won’t go into specifics about that deal, Mr. Lefkowitz reckoned most such deals give advertisers cable runs as bonus weight and make-goods in the broadcast network programming.

But what if advertisers such as Honda or Verizon, which have branded entertainment deals, want out? If the entire series is already shot there is no way to reshoot an episode and take out the product.

“We don’t want advertisers to be surprised by anything,” said Jak Severson, CEO of Madison Road Entertainment, which has arranged many branded entertainment and product integration deals for shows such as “The Apprentice.”

Mr. Severson said when an advertiser signs up for product integration, it typically knows it is giving up the right to decide when and where a show might end up.

Tricky Situation

But the situation becomes trickier when TV producers themselves make deals with advertisers.

For instance, Mark Burnett made a product placement deal with Toyota Motors Sales for “The Contender,” then underdelivered in ratings points for Toyota and other sponsors. How did Mr. Burnett make those advertisers whole? Maybe he didn’t, said executives. Mark Burnett executives did not return phone calls for comment.

In theory, Mark Burnett’s is one of the few companies that could offer advertisers other reality show product placement opportunities or tasks should a particular show not meet ratings expectations. That’s because at any given time Mr. Burnett has a handful of shows on the air.

“What you are hoping for is the good will and gentlemanly nature of the business. You hope Mark Burnett comes to you with his next thing and says, ‘I owe you something,'” Mr. Lefkowitz said.

But Mr. Burnett is an exception. Right now some advertisers might be getting short-changed when doing deals directly with reality show producers, especially those who don’t have alternative programs into which advertisers can place products.

“There will be models in the future where a broadcasting run will have cable offshoots and are sold together,” Mr. Lefkowitz said. “You can make damn sure that in the future if anyone pays an Endemol, for example, an upfront [product integration fee], they’ll say, ‘If this goes out of a broadcast window, this is what you need to do for me.'”

TV producers don’t currently have any mechanism built in to their financial models for giving back money to advertisers. For broadcast networks, giving back cash is a rare occurrence. Even before branded entertainment became the rage, networks long loathed the idea of handing back cash to advertisers.

Virtually all media companies that own both a broadcast network and a cable network have done a broadcast-to-cable programming move. But Viacom, for one, won’t be repeating the “Rock Star” scenario anytime soon.

According to a Viacom spokesman, the situation with “Rock Star” was a rare one for the company, and chances are it won’t happen again because Viacom is splitting into two companies: Viacom Inc., which will carry responsibility for the cable channels, and CBS Corp., which will oversee the broadcast networks.

Stacey Lynn Koerner, executive VP and director of global research integration for Initiative Media, said the shift of reality shows to cable should be viewed as a positive for advertisers and producers.

Impact on Integration

Big advertisers who spent time and money working on product integration can see their efforts continue on cable, thus getting somewhat more than they would have with just a short-lived broadcast run. For TV producers, it means they can see their creative work and story lines come to a conclusion.

Because it’s the producer who typically makes the deal for branded entertainment, such advertisers won’t see traditional rating guarantees. Networks are the only ones with plenty of fluid program inventory-but how can a network make up for lower ratings of a product placement deal?

“How can they?” asked Steve Grubbs, CEO of PHD North America. “Where are they going to run the make-goods?”

Mr. Grubbs said even Mark Burnett can’t really offer make-goods in other reality shows. The brands may not fit that show’s needs. For example, a young-skewing car placement deal in “Rock Star” might not fit in with, say, an older-skewing ballroom dance show.

Since traditional make-goods aren’t possible, Madison Road’s Mr. Severson said, deals should be structured in which advertisers just pay on delivery of the actual ratings points that the show scores. He believes that practice will become the industry standard.