Variety – Binge-Viewers Hate Commercials, So Big Advertisers Start Shows of Their Own

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This article quoting Sequent Partners’ Jim Spaeth was originally published by Variety on February 25, 2021.

By Brian Steinberg

Television commercials have long been one of the media industry’s surest bets — so much so that advertisers around the world dumped a whopping $149 billion on them in 2020, according to estimates from Magna, the large media-buying firm. But Pepsi recently decided to take a gamble on something else.

On Valentine’s Day, the soda giant unveiled a three-story replica of a Las Vegas jackpot machine, the centerpiece of a new game show it’s running with the Fox broadcast network. “Cherries Wild” features Jason Biggs as host, lots of trivia and a Pepsi Wild Moment that lets people at home play along for prizes. The whole show is done in Pepsi colors, says Todd Kaplan, vice president of marketing, and aims to play up Pepsi Wild Cherry, a line extension the company believes has room to grow. No other soda will be allowed to advertise during the show.

Sure, Pepsi still runs commercials for its beverages, and will continue to do so. And yet, as more consumers figure out how to circumvent those ads with new technology, executives are looking for something — anything — that will stop viewers in their tracks. Consumers “have skip buttons. They can DVR fast-forward. They can pay to eliminate ads with a subscription,” says Kaplan. “This concept of interrupting content with your message has serious limitations.”

Hollywood’s streaming wars are causing collateral damage to what was once one of the steadiest economic parts of its business. Many of the new broadband video outlets run fewer ads than their linear TV counterparts, and some of the most popular streamers —Netflix and Disney Plus among them — don’t allow commercials at all. A new generation of couch potatoes has grown accustomed to that model, which not only crimps the flow of much-needed advertising revenue to media titans like Walt Disney, NBCUniversal and ViacomCBS, but makes the task of pitching soda, sneakers and smartphones much thornier for decades-long sponsors like Coca-Cola, Nike and Apple.

The new dynamics are forcing some of the biggest backers of traditional TV commercials to put money behind the very thing those ads were designed to interrupt: content.

The Lifetime cable network has become famous over the years for soapy, high-drama original movies with titles such as “The Wrong Real Estate Agent” and “Mother, May I Sleep With Danger?” In December, the A+E Networks outlet aired something even more outlandish — a miniature version of those kinds of made-for-TV potboilers that told of the rise of Colonel Harland Sanders, the popular ad mascot of fried chicken chain KFC (actor Mario Lopez plays the young magnate). The short film was essentially a pitch to go buy a bucket. A few weeks later, on New Year’s Eve, Anheuser-Busch InBev, the brewing giant, livestreamed its own “Bud Light Seltzer Session” featuring Post Malone, who did a cover of Black Sabbath’s “War Pigs” with Slash and Red Hot Chili Peppers drummer Chad Smith. “It was a beast of a project,” says Ronnie Yoked, head of experiential marketing at Anheuser-Busch. “We had to break through,” even though viewers had plenty of other viewing options that night, including “what was happening on broadcast and what was happening on streaming.”

Even some of the smaller advertisers are getting in on the game. King’s Hawaiian, a maker of breads and rolls, spent $10.6 million on TV advertising in 2019, according to Kantar, a tracker of ad spending. In the world of TV, that’s a paltry sum. But the company has enlisted Food Network celebrity Guy Fieri to take part in digital shorts that show how the company’s yeasty delights can be used in various recipes. The popular roadhouse chef is also showing up in television ads. “TV might get some awareness for our brand, but we want consumers to get awareness of how you can use our products,” says Chad Donvito, the company’s chief marketing officer. “It’s hard to communicate what you can do in 30 seconds.”

Ad giants are ramping up their use of the strategy too. Procter & Gamble, one of the nation’s biggest and most influential advertisers, last year helped launch the Seneca Women Podcast Network, aimed at giving new female voices a wider platform. “We didn’t even think about podcasting a few years ago,” says Marc Pritchard, chief brand officer of the consumer products giant, which spends millions to promote products such as Tide, Pampers and Gillette. P&G is also in the midst of working with Imagine Entertainment on “Mars 2080,” a film that aims to depict what life on a Mars colony might look like 60 years from now. The results could have P&G staples showing up in the movie with new formats, containers and designs.

“We are still doubling down on our bread-and-butter of advertising that focuses on the superiority of our products, and we are doubling down on focusing our attention on these types of new content and creative partnerships, because the world is shifting,” says Pritchard. “We like to think about it as merging the advertising world with other creative worlds: film, music, comedy, sports, journalism — and technology, for that matter.”

Madison Avenue hasn’t suddenly latched onto the concept of making movies and episodes. At the dawn of the medium, big advertisers took radio shows they sponsored to the TV screen and had immense authority to dictate what viewers saw, such as a group of singing oil-company employees on “Texaco Star Theater.” Procter & Gamble for decades had its own production unit, and owned soap operas like “Guiding Light,” “Search for Tomorrow” and “As the World Turns.” P&G and Walmart teamed up last decade to produce a series of family-focused movies, like “Secrets of the Mountain” and “The Jensen Project,” that aired on networks like NBC and Fox. And Coca-Cola acquired Columbia Pictures in 1982 as part of a bid to expand beyond soft drinks. The soda giant backed everything from “Ghostbusters” and “The Karate Kid” to the notorious box office bomb “Ishtar” before exiting Hollywood near the end of that decade.

The new content moves have nothing to do with adding disparate business units. As consumers spend more time with streaming video — with services like WarnerMedia’s HBO Max, NBCU’s Peacock and ViacomCBS’ Paramount Plus crowding the marketplace — big ad spenders are worried the pitches they use to generate millions in sales at supermarkets, fast-food counters and car dealerships will be pushed out of the conversation.

“This moment was almost predictable,” says Jim Spaeth, a partner at Sequent Partners, a consultant that works with advertisers. “We have been diluting the impact of advertising for many, many years, moving from 60-second ads to 15 seconds to six seconds,” he notes, resulting in a growing pile of segments and pieces in each standard commercial break. “We have diluted the power of the media to deliver a strong story and a good, strong message.”

Big advertisers hope their content plays can reverse the trend. There’s some concern the marketers may take money they plow into traditional ad campaigns and put more of it instead into these glitzier efforts. “There are some instances where we bundle the media investment with the ask for content development,” says Claudia Cahill, chief content officer of Omnicom Media Group, a large media-buying firm that helped Pepsi devise the “Cherries Wild” pact with Fox. But in the end, she says, “it’s just a shell game right now. You are moving money around.”

TV commercials are likely to stick around. Creating the new content pieces can be onerous — and expensive. “Not everybody has got deep enough pockets” to produce a game show, even in limited fashion, says Suzanne Sullivan, executive vice president of ad sales for Fox Entertainment. “Clients want to focus on creating their products.”

Big advertisers also want to sell those goods and services. To do so, they are willing to turn somersaults to get their content pieces out to the viewing public. KFC’s Lifetime mini movie, for example, was two years in the making. Executives at A+E Networks thought up the original concept of spoofing the Lifetime dramas, says Valerie Albanese, senior vice president of brand creative at Lifetime, and decided KFC could be a great candidate for the idea. After all, the company has snared a lot of attention over the years by enlisting a range of celebrities — Reba McEntire, Norm Macdonald and Darrell Hammond among them — to play the Colonel in ads.

KFC also has developed a reputation for experimentation, unveiling footwear with a fried chicken print design during last year’s New York Fashion Week and launching a dating simulator via mobile app the year before. “They wanted to take things a little further,” says Albanese, and that would prove an important quality. “The script was a Lifetime movie. We were going to follow the plot of one; I think it was ‘Deadly and Pregnant’ — I can’t remember exactly. We knew what our movie fans love about our brand. If it wasn’t going to feel like a Lifetime movie and have all the tropes of a Lifetime movie — playing it straight but with a wink — it wasn’t going to work.”

Even the advertiser didn’t want to fill the short film with a hard sell. A scene of Lopez as Sanders biting into a piece of chicken was deemed too obvious, and KFC executives asked that it be removed. A commercial can hit a sales message hard, but if advertisers want to entertain, they need to be conscious of what viewers demand, says Andrea Zahumensky, chief marketing officer of KFC. Too much talk of frying chicken and KFC herbs and spices would have annoyed viewers, she suggests. “Many times I have had to give up control, not to the detriment of my brand but enough to say, ‘If we are going to do this, we have to do it the right way,’” she says.

The growing desire for content means advertisers are studying all kinds of new skills. Suddenly, sponsors are hiring actors and musicians for projects that have different expectations from those of a commercial, and they need to consider how best to promote it all. Zahumensky found herself trying to figure out which trailer to use to promote the company’s collaboration with Lifetime, and decided on a cut she felt would work. Others on the project liked a different version that put more focus on the plot and storyline. “I didn’t even know how to ask for this, because I don’t have the experience in approving movie trailers,” she says.

When Verizon decided to buy a commercial on this year’s broadcast of Super Bowl LV, the telecommunications giant wanted to back it up with a postgame concert aimed at helping small businesses affected by the pandemic. The show, hosted by Tiffany Haddish, featured Alicia Keys, Brandi Carlile and Brittany Howard, among others. “Some of these programs require a skill set that maybe our team may not be as familiar with, but it’s all about having the courage to say that we are going to reinvent how we engage with our customers,” says Diego Scotti, chief marketing officer at Verizon.

Madison Avenue is likely to develop another kind of acumen as content opportunities proliferate: seeking new lines of profit that grow from the programming. Media outlets are under pressure to measure how their programs reach viewers, and that pressure will only grow. KFC monitored the ratings of its Lifetime movie and also built an alliance with Uber Eats to deliver its food to viewers who placed orders during the show, then measured the response via deliveries as a way of gauging success.

“In a world where it’s just ads, you engage with the media providers and you buy ads,” says P&G’s Pritchard. “In this business model, you are looking at in many cases investing in the content itself, as well as figuring out what is the appropriate ad that goes along with that. What we then have to figure out in some cases: Will there be recoupment for the investment in that content?”

Look for more advertisers to launch shows of their own. Pritchard believes P&G can use virtual reality techniques to create brand experiences for customers. Showtime recently announced it would air a 90-minute documentary on the making of Pepsi’s Super Bowl halftime show, produced by Pepsi’s “in-house content studio.” The soft drink company also recently launched a music competition via the mobile app Triller that enlists rapper Fat Joe and other music industry insiders as advisers and judges. That doesn’t sound too far from the central premise of TV hits like “American Idol” or “The Voice.”

In the not-too-distant future, advertisers will still sponsor TV shows with commercials. But they may compete more intensely with those series by launching programs all their own.