Valuing branded entertainment

Branded entertainment deals in film and television shifted into high gear in 2004, with increasing amounts of money moving from traditional advertising to product integration, but one nagging question remains largely unanswered: what's it all worth? There is still no set pricing or valuation standard to guide advertisers and content providers in the deal-making process.

Sensing an opportunity in the advertisers' dilemma, at least a dozen companies are racing to find the magic measurement formula they hope will become the gold standard adopted by both Hollywood and Madison Avenue. But with so many variables at play in every placement and no agreement in the industry as to what factors need to be measured or what type of cost-per-thousand formula on which to base valuation, some question whether a standard valuation model will ever emerge.

And with confusion prevailing over whether advertisers even really want a standardized measurement tool, and brands insisting that only they can determine what an integration is worth to their companies, those that do believe a measurement standard eventually will be adopted by the industry still think it is years away.

"As time goes on, different approaches will be found to be more effective than others and out of that will emerge some kind of basic pricing structure, but it's not going to be something that happens for several years," said David Poltrack, executive vp research and planning at CBS.

Ranging from little-known startups to industry leaders in the fields of television ratings, media research, sports sponsorship, advertising and product integration, companies trying to evaluate, price or value product integration deals include iTVX in an alliance with the Deutsch Advertising Agency; Nielsen Media Research, Nielsen Entertainment, IAG Research, Brand Advisors, NextMedium, Delivery Agent, Propaganda Entertainment Marketing, Joyce Julius & Associates, Image Impact, IEG and Millward Brown. They all are hoping their measurement formulas will become as vital to the product placement pricing structure as Nielsen Media Research's local and national television ratings have become to determining the price of a 30-second spot.

While their methodologies vary tremendously, many of the companies factor into their measurement systems a cost-per-thousand, or CPM, based on the price of a 30-second spot, sports sponsorship rates or average rates across all media; TV ratings or projected audience size; the duration of the placement, and various characteristics of the integration. Some of the attributes being tracked are whether the brand plays a central role in the story line, whether the lead actors interact with the product, whether the brand is mentioned in the dialogue and whether the product appears in the foreground or background.

Read the article: www.hollywoodreporter.com

EA gets ads in the game

One of the intriguing things about video game publishers is their drive toward becoming more complete media companies. Part of that move includes CDs based on soundtracks of games such as Take-Two Interactive Software's (Nasdaq: TTWO) Grand Theft Auto series. Another facet is increasing in-game advertising placements.

Last week, Reebok (NYSE: RBK) announced a multi-title agreement to put its products in EA's games, dubbing the relationship a "sponsorship." Beginning with the arcade-style football game NFL Street 2 -- released yesterday -- Reebok endorsees will be rocking the latest Reebok athletic gear before it is even available to the consumer at retail. The agreement also extends into the next version of NBA Street.

EA's smash hit street racer, Need for Speed Underground 2, which was released last month, also carries multiple sponsorships. In addition to car parts manufacturers such as Unorthodox Racing and Toyo Tires, a cruise through the game's city will yield at least four or five Burger King restaurants and Best Buy (NYSE: BBY) stores, as well as several banners touting SBC (NYSE: SBC) and Bell South's (NYSE: BLS) jointly owned Cingular Wireless.

Read the article: www.fool.com

Warner to launch The OC website

UK fans of Channel 4's US teen drama import The OC will soon be able to keep up with all the gossip on the show and download music featured in the series on a new Warner Bros subscription website, The OC Insider. British fans of The OC will be charged $34.95 - around �18 - a year to subscribe to the website.

The OC attracts around 1 million viewers in its Channel 4 slot in the weekend T4 strand aimed at a youth audience.

However, while the show has not proved a huge ratings hit for Channel 4, it has proved something of a merchandising success.

Relatively obscure indie bands such as Death Cab for Cutie, The Killers, Interpol and Jem play an integral part in The OC's soundtrack and Warner Bros has already launched three successful spin-off CDs featuring music from the show.

The OC has already replaced Sex and the City as the leading fashion barometer on US TV, with sales of designer clothing ranging from Ugg fuzzy sheepskin boots to Original Penguin T-shirts soaring after being worn by characters from the show.

Read the article: www.media.guardian.co.uk

Better shape up

Sky+ is a hard drive set-top box linked to the Sky EPG that records at least 20 hours of television. No more fiddling with ridiculous video recorders, where you can barely set the clock, let alone record a show, no more sticky videos that play back as much snow as picture, no more of the kids taping another rerun of Friends over the next episode of Deadwood. The sense of televisual liberation in the Docherty household has been palpable since Mr Murdoch’s nice men installed the Box.

And we are not alone. The Box is now in around half a million homes in the country. They are being ordered as fast they can be made and there is a waiting list to install.

A few things mark out we, Sky Plusers. One, we time-shift most of our drama and entertainment, reserving our live viewing for news, sport and event shows like I’m a Celebrity...! Second, we don’t watch ads on recorded content. Or, more precisely, we zip through the ads as fast as the technology allows us to. After all, that’s what the fast-forward button is for.

All of which poses a serious problem for the television business. Not just the advertising business - the whole shooting match. The industry is already under enormous pressure from audience fragmentation, as a result of the rise in multichannel take-up, which is forcing advertisers to rethink what they are up to.

So what’s a poor brand manager to do? The answer is both strategic and tactical. At a strategic level, the question is - what is television for? Most of us still watch it for more than 20 hours a week, so it is obviously still the mass market to end all mass markets. But it is morphing, and those who successfully exploit its power to engage and entertain must shape-shift, or they’ll up shapeless.

Television will still retain its power to drive a brand into public consciousness, but the advertising premium may flow to shows that can prove they have a reasonable chance of keeping buttocks on sofas either side of the break. That would work for the few minutes before and after a major sporting event, or during major live “event” shows such as Celebrity, but not necessarily for built drama. But the big issue is not just the effectiveness of live versus recorded advertising, it is that brands have to become interactive and community-focused if they are to maintain their presence.

In the Sky+ era, brands will have to engage with the tribal nature of what is happening online to establish long-term relationships with the new media consumer. The idea that the internet and interactive consumer is the ultimate in isolated individualism is just plain wrong. The web was built as a communication device, and through blogs, peer-to-peer services and self-organising communities which shift content to one another, it is showing how effective advertising content needs to develop community tools such as chat and simple syndication tools to maintain reach and share.

Ads will become opt-in, for consumers, rather than opt-out. If I have the ability to fast-forward a brand out of my consciousness, the brand must persuade me to identify myself with the kind of person who watches a piece of entertainment paid for by the people selling my particular products and services. Product placement and sponsorship will not be enough.

Brand managers are going to have to work hard to give us stuff - games, prizes, content - to stop us zipping right on past their precious and expensively assembled 30-second slots. Our viewing time is precious. You want us? You pay us or entertain us or interact with us. The couch potato fights back.

Read the article: www.ft.com

Making television news pay

The (UK) media regulator, Ofcom, has just finished a consultation on the rules governing programme sponsorship. Next year its new broadcasting code comes into operation. Many of the news networks are clamouring for the regulations to be eased. "Clearly you need to put in safeguards to make sure that commercial considerations do not override news considerations," says Crossley-Holland. "I am not suggesting that television news itself becomes sponsored - 'this Iraq report was brought to you in association with Smith & Wesson' - but the rules that govern news channels are prehistoric."

The regulations are arcane and strict. Direct sponsorship of news or current affairs programmes is banned. But non-news slots within programmes are allowed to carry a sponsor's name - just so long as there is no "promotional reference" to a sponsor during any slot it has paid for. Thus a sports report can be brought to you by 02, but not if the presenter happened to mention that the company's logo is present on the Arsenal team's shirts.

Last year, the Independent Television Commission, Ofcom's predecessor, banned the business channel CNBC from broadcasting again a series about the positive and negative effects of the euro, which was funded by a £190,000 grant from the European Union.

CNN, in particular, is pushing the boundaries as far as they will go, moving beyond the mere sponsorship of market reports or weather forecasts. It has been regularly broadcasting six "mini-documentaries" entitled World Sports: A Nation's Passion. The short segments have been paid for by HSBC. Yet they were made not by an advertising agency but by journalists and crew working for CNN. Viewers are not told this explicitly, though they are informed at the beginning and end that the slot was "brought to you in association with HSBC, the world's local bank". Other reports in the HSBC-funded series cover boxing in Cuba, long-distance running in Kenya and fencing in France.

CNN, perhaps aware of the sensitivities of the genre, calls this "advertiser collaborative programming" (ACP). Everyone else in the industry calls it "advertiser funded programming".

ACP is an enormous wealth creator for the international news network. CNN is also showing Siemens' Mobility Workforce - about how technology is changing the way we work - and Rediscover Lebanon, a series of travelogues. Any firm looking to purchase a handful of ACPs is likely to have to spend a minimum of about £515,000. This year, an extraordinary 30% of CNN's European advertising revenue will come from ACP and programme sponsorship. So what does CNN mean by "collaborative"? Kevin Razvi, executive vice president of advertising sales, is clear about one thing: "We have 100% editorial control. But what we will do on a collaborative front is be open with a client, show them what we are doing and explain why we are doing it."

Read the article: www.media.guardian.co.uk

Microsoft plan lets subscribers download away

LOS ANGELES — Chris Gorog is convinced people won't continue to pay $1 a song for online music.

That is despite Apple's record string of recent achievements, including 200 million songs sold at its iTunes Music Store, and nearly 4 million iPod digital music players moved into consumers' homes this year.

Gorog runs Apple rival Napster, which offers digital downloads and a music subscription deal. Consumers get unlimited access to listen to 700,000 songs for $9.95 monthly.

The hitch is that to move songs onto a portable digital device or to a CD costs extra: $1 a song. That's one of the reasons digital music fans have not taken to the subscription model — also offered by Real Networks' Rhapsody — in a big way.

But Gorog thinks that will change next year. And he has other heavyweights such as Yahoo (YHOO) and Microsoft in his corner.

Microsoft earlier this year developed a new copyright protection plan that allows for the transfer of subscription songs to portable players. For $5 more a month, consumers can transfer Napster's entire catalog to their device — and listen as often as they'd like — as long as they subscribe.

With the top-of-the-line iPod, "You can fit 10,000 songs on it," Gorog says. But "to do that would cost you $10,000 if you bought the songs from Apple. With our plan, customers can get 10,000 songs on their device for $180 a year. It's an enormous value."

Read the article: www.usatoday.com

Nielsen To Measure Game Ads

Nielsen Interactive, a unit of VNU's Nielsen Entertainment division, yesterday announced it will provide third-party measurement and accountability for advertising on the in-game ad serving network Massive Incorporated. Financial terms of the deal were not disclosed.

Michael Dowling, general manager of Nielsen Interactive, told reporters in a conference call that the deal with Massive will let advertisers plan video game campaigns as they do with television and other media. By auditing consumer interaction with video game ads, Dowling said Nielsen will be able to provide data on the aggregate reach of in-game ads, and create a general profile on game audiences in the Massive network. Nielsen expects the first set of standards to be ready by the second quarter of 2005.

The audience measurement firm also has a video game measurement relationship with Activision, a prominent video game publisher. Dowling said the deal with Massive is an extension of its deal with Activision.

Executives in the video game advertising community applauded the move, saying it will help establish video games as a valid advertising medium more quickly.

"Everyone knows this industry is going to happen," said Darren Herman, founder and CEO of inGamePartners, a video game ad serving network and Massive rival. "The major issue is timing," he said, adding that bringing in a major player like Nielsen will bring the market credibility, and facilitate the growth process.

Herman said he expects it will take "one or two quarters" for the major brands to locate the budget for in-game advertising. He emphasized the importance of keeping the metrics as similar as possible to other media. "A common language is the easiest thing to adopt," he said. "One thing they can't get caught up in is interactive--this is not about click-through rates."

Read the article: www.mediapost.com

How Much Is Product Placement Worth?

In late October, Peter Gardiner, the media chief of Madison Avenue's Deutsch agency, found himself gambling millions of a Bank America ad budget on an unusual TV deal. The project—a 17-day-long product- placement and ad package involving four TV networks—NBC, Telemundo, MSNBC and CNBC—and NBC's affiliated stations.

Because the stakes were so high, without any explicit guarantee of how many times the bank would be plugged, Gardiner ordered a special study that analyzed every hundredth of a second of coverage. It included every detail of how, when and in what context Bank of America was mentioned or shown by the TV outlets.

Ultimately, Bank of America made a killing, netting millions in traditional ad value. But the white-knuckle experience left Gardiner wondering if there wasn't a better way to craft such deals.

By “brand mentions,” Nielsen means any time a brand is seen or heard on TV, including all forms of advertising, promotion and product placements. Nielsen estimates 15% of those mentions are some form of product placement, meaning a brand or product was integrated into the content of a show, such as someone on Seinfeld offering a Snapple. Currently, this 15% of product placements is not explicitly paid for by advertisers. But if that 15% were converted into current ad values, it would equal a $9 billion marketplace.

And that's before Madison Avenue really gears up for the business, which many insiders believe will grow as conventional forms of TV advertising—mainly the 30-second commercial—suffer fallout from DVRs and VOD.

Read the article: www.broadcastingcable.com

2004 TV shows fail to generate mass audiences

New research shows that the era when television was the cultural glue that held the nation together appears to be at an end, with just six programmes (in the UK) attracting an audience of more than 15 million people this year.

This is in stark contrast to 2003, when as many as 50 programmes pulled in between 17 million and 20 million viewers.

The six shows that enthralled the nation over the past year were three Euro 2004 football matches and three episodes of Coronation Street. The fall in ratings will not come as a surprise to those in digital TV homes, where promiscuity in viewing is the norm.

The change in viewing patterns over five years is even more dramatic. In 1999, 177 programmes had more than 15 million viewers. These included episodes of shows such as Casualty, Heartbeat, The Antiques Roadshow and The Bill, which would find such a feat impossible today.

"It does seem extraordinary that there has been such a significant drop from 2003 to 2004," said Doreen Dignan, the head of consumer insight at media buying agency MindShare.

Read the article: www.media.guardian.co.uk

The end of TV as we know it

We live in the age of the digital packet. Documents, images, music, phone calls - all get chopped up, propelled through networks, and reassembled at the other end according to Internet protocol. So why not TV?

That's the question cable giants like Comcast and Time Warner and Baby Bells like SBC and Verizon have been asking. The concept has profound implications for television and the Internet. TV over Internet protocol - IPTV - will transform couch-cruising into an on-demand experience. For the Internet, it will mean broadband at speeds 10, 100, or even 1,000 times faster than today's DSL or cable. Online games would be startlingly realistic; the idea of channels would seem hopelessly archaic. Why not indeed?

So far, the answer has been inertia. But competition is a powerful stimulus. For years, DirecTV and EchoStar have been adding subscribers far faster than cable, so cable companies want something satellite can't match. At the same time, voice over IP is enabling cable operators to poach phone customers from telcos. Combine VoIP, truly high-speed broadband, and totally on-demand TV - and you've got such a compelling proposition that the Bell companies figure the only way to survive is to do likewise.

IPTV is not to be confused with television over the Internet. On the public Net, packets get delayed or lost entirely - that's why Web video is so jerky and lo-res. But private networks like Comcast's are engineered, obviously, for reliable video delivery - which means IPTV will look at least as good as TV coming from digital cable or satellite.

It will be accompanied by another, equally critical change. Instead of broadcasting every channel continuously, service providers plan to transmit them only to subscribers who request them. In effect, every channel will be streamed on demand. This will free up huge amounts of bandwidth for hi-def TV and high-speed broadband. Add IP and you get interactive services like caller ID on your TV. And the system will be able to track viewing habits as effectively as Amazon tracks its customers, so ads will be targeted with scary precision. Put it all together and you've got television that's as intensely personalized as 20th-century broadcasting was generic.

But that scenario is a good five years out. First there's a lot of upgrading to do. The Bells have the worst of it: Their copper lines max out on current-generation DSL, never mind TV. SBC is testing an advanced form of DSL that promises 7 times the bandwidth it delivers now. Verizon plans to spend billions to provide its 30 million customers with direct fiber connections offering nearly limitless bandwidth. Cable companies have already upgraded their networks, at a cost of some $85 billion, but it will be 2007 before they complete the transition from analog to digital and some time after that before all their customers get IP-addressable set-top boxes.

Read the article: www.wired.com

Product placement emerges as fastest growing part of '04 ad market

Wrapping up a week in which some of Madison Avenue's leading forecasters upgraded their final outlooks for 2004 - and issued concerns about 2005 - one of the industry's top ad trackers Thursday released a report indicating the pace of ad momentum quickened through the first three quarters of the year. Ad spending rose 8.3 percent across the media tracked by Nielsen Monitor-Plus, a significant increase in the rate of ad expansion from the first half of the year, which was up only 6.0 percent. The third quarter, which experienced incremental ad spending related to the 2004 Summer Olympics, as well as some political campaign advertising, soared 11 percent.

Surprisingly, spot TV was one of the weakest links, rising only 3.4 percent despite the incremental effects of Olympic spending on NBC's affiliates and on the mostly local TV investments of political candidates.

But one of the fastest forms of TV-related marketing wasn't advertising at all. It was the burgeoning practices of program product placement. While Nielsen's new product placement tracking service does not provide explicit dollar values to such deals, Nielsen said the top 10 brands more than doubled the number of product plugs compared with the first nine months of 2003.

Read the article: www.mediapost.com

Channel 4 threatens to pull plug on racing

TV horse racing has been plunged into a major crisis today after Channel 4 threatened to pull the plug on its loss-making coverage at the end of next year, unless the sport helps to fund the broadcaster's TV rights and production costs.

Channel 4 head of sport David Kerr said its coverage of the sport was no longer sustainable because viewers were too old to attract enough advertising.

He said there was an additional financial restraint because TV coverage of the sport could not be sponsored by bookmakers under Ofcom rules.

A Channel 4 spokesman today confirmed it was considering ending its coverage, pointing out that in most other countries the horse racing industry pays broadcasters to televise the sport.

"When a race is on terrestrial TV, betting goes up 250%. The people who really benefit from terrestrial coverage are the bookmakers. So why should we be making a loss on this to fund other people's profits?" he said.

Read the article: www.media.guardian.co.uk

Pirates of the high street

Sales of pirate DVDs have reached "epidemic proportions" while law enforcers struggle. As the UK's anti-piracy taskforce prepares to publish an extensive report on the problem, why are people buying them and what's the quality like?

According to Federation Against Copyright Theft (Fact) investigator Jim Angell, everyone is buying them - not just those on a tight budget. And the problem has reached "epidemic proportions" in the UK.

"It's the 'want value' of getting something before it's on general release," he says. "It's a cross section of people, I suppose younger kids are more likely than people in their 20s and 30s. But if you go into the markets you get grans buying them and mums and dads for their kids."

Fact estimates three million pirate DVDs will have been confiscated by the end of 2004, representing perhaps just 5% of the total in the UK. The forged DVD industry is thought to have made more than £400m last year.

Read the article: www.news.bbc.co.uk

Massive game advertising start up to the aid of desperate brands

Advertisers are desperate, says Katherine Hays, Chief Operating Officer of Massive, the US company that has just come out of stealth mode to lay claim to the world’s first advertising network for multiple games on multiple gaming platforms (Faultline October 25).  
 
The fundamental reason for this desperation is that the 30 second TV ad spot is no longer delivering the undivided attention of many sectors of the US buying public.  
 
In particular advertising is missing out on the 18 to 34 year old male, and if you listen to Hays, she believes that 70% of them are spending at least 5 hours a week on games. In early studies the really aggressive gamers play around 2 hours per night.  
 
“Despite the desirability of this audience the market for in-game advertising was only $10 million last year versus the $12 billion that was spent on US broadcast TV,” says Hays.  
 
These figures don’t quite tally with recent reports, with one from Yankee Group putting in-game advertising at around $79 million, but it is still a drop in the ocean compared to TV.  
 
“Advertisers are desperate because they the lack of ability to advertise in large enough numbers to people that are playing a diverse range of games. What they want is to aggregate 1 million or 2 million people on any given night in the right demographic, at the right time, just like TV,” said Hays.  
 
So far Massive has signed up exclusive deals with Vivendi Universal Games, UbiSoft, Konami and Legacy Interactive, and US coverage from Atari.  
 
“In the past, games only offered long term, permanent product placement. They offered no ‘quick reach’ needs,” said Hays.  
 
But now Hays says that the Massive network changes all that and reckons that she already has the advertisers on board. “We are targeting the top 100 advertisers in the US. Recently we employed a VP of advertising sales, and he found that he was being called by prospective advertisers. He said to me ‘In advertising you do not get proactive calls from businesses like General Motors, Coke, McDonalds and Citibank.”  
 
“Advertising agencies are being given a mandate to move budget out of TV advertising and being asked, ‘How do you plan to get us into video games?’”  

Read the article: www.rethinkresearch.biz

Chinese TV ad battle raises £330m

It doesn't seem to hold the appeal of The X Factor or Who Wants to be a Millionaire? but a live, three-day Chinese gameshow in which companies vie to win TV advertising slots has made a fortune for its network.

Business executives rubbed shoulders with athletes and popstars on the Economic Olympics, which commenced with the firing of a starter pistol and ended after 13 hours of bidding with £330m flowing into the coffers of state-run China Central Television, highlighting the country's advertising boom.

The event raised 27% more revenue this year than in 2003.

This is the 11th year that such an auction has been held - advertising was previously sold at fixed rates - and western companies that traditionally avoided the event were drawn in to the bidding.

Household goods giant Procter & Gamble was crowned "bid king" after spending £24.2m on advertising space for brands such as Head & Shoulders and Pampers.

Read the article: www.media.guardian.co.uk