Historically - and in the days of the Internet I mean in the past several years - the process of conceptualizing and producing original video content for the web was largely separated from the distribution process. Studios would come up with a concept and use their balance sheet to finance production. Distribution strategy basically involved posting content to YouTube. But over the past couple of years, studios have fled deficit financing for the relative safety of securing brand dollars up front to pay for production.
At the same time, YouTube has grown to encompass the uploading of 24 hours of video every minute. With brand sponsors demanding guaranteed minimum audience numbers for their investment, simply posting to YouTube and expecting to reach these goals is no longer a viable plan. The reality today is that when you need a video to reach a specific number of viewers, you need to buy this initial audience. This is necessary in the current environment, but it is also leading to some unintended consequences.
While the brand and the studio both want to produce a great piece of content, this is rarely how economic incentives are structured. Most of the time the brand is specifically paying for both production and distribution, but all of those costs are rolled into a single budget and this budget is calculated on a CPM basis. Brands may be paying a higher CPM than they would with other ad campaigns, but this rarely provides a lot of budget latitude for the actual creation of high-quality video content. Every dollar of production becomes one less dollar that can be used to buy audience. And here is where production budgets start to get burnt.
Fortunately or unfortunately, most studios do not know much about media buying and they outsource this process to a third party. For the studio this presents an issue. Media buyers acquire audience at different pricing tiers based primarily upon targeting criteria, not based upon the relative merit of the content they are distributing (since theoretically the audience for good content should be easier and cheaper to acquire). The studio is going to pay the same amount for the audience regardless of whether they produce the Internet equivalent of 'Ben-Hur' or the average 'Crazy-Eddie' used-car commercial. Investing in production in this model looks like a bad investment.
Already, in today's typical branded entertainment campaign, three to six dollars is spent on the media buy for every dollar spent on production. Now, some of this is healthy. Traditional television and film production budgets are often bloated and ill-equipped to deal with the brutal pricing pressure of the Internet. But budgets are being cut to the point that quality is suffering. In a world where branded entertainment is delivered in-banner like any other display unit, the game is about optimizing towards a larger media buy, not about creating viral hits. Virality is not only unlikely, it is effectively designed out of the system. If we continue down this path, branded entertainment is going to look like an extension of the rich-media market in display.
This trend is beginning to manifest itself in the rolling of small production studios into the arms of large video ad networks (as we've seen with companies like Adconion and their acquisition of Red Lever). Ad network can optimize resource allocation and pool margin across production and distribution in a way that a stand-alone studio cannot. This looks good on paper, but it creates perverse incentives to continually lower production budgets in favor of media budgets to optimize profits.
This is a dangerous trend for branded entertainment because it represents the slow evisceration of branded entertainment as a consumer engagement tool. If it is a brand's mission to earn the attention of their audience and the studio's intention of facilitating this transaction, production budgets need to be defended. Enforcing budget allocation ratios between production and distribution should become the goal of any brand looking to see better long-term results from their branded entertainment investments. This should also give great production studios the ability to work with content syndication networks in partnership rather than as budget consuming adversaries.
It's an understandable reaction for studios to look at media buying as the savior in a world where consumers have so much content competing for their attention. Media buying is rightfully becoming an important component of a successful branded entertainment campaign, but praying at that alter to the detriment of your production budget will ultimately extinguish the light of your creative department. Don't burn your production budget, the content really does matter. It's not called branded "entertainment" for nothing.