Advertiser-Funded Programming: A Potential Paradigm for Television Advertising

SIMONE

VANGELISTA

Master of Science Thesis Stockholm, Sweden 2010

Advertiser-Funded Programming: A Potential Paradigm for Television Advertising

SIMONE

VANGELISTA

Masters Thesis in Media Technology (30 ECTS credits) at the Media Management Master Programme Royal Institute of Technology year 2010 Supervisor was Christopher Rosenqvist, SSE Examiner was Nils Enlund TRITA-CSC-E 2010:080 ISRN-KTH/CSC/E--10/080-SE ISSN-1653-5715

Royal Institute of Technology School of Computer Science and Communication KTH CSC SE-100 44 Stockholm, Sweden URL: www.kth.se/csc

Advertiser-funded Programming: A Potential Paradigm for Television Advertising

Abstract
This research seeks to analyze the dynamics behind the production of AFP-advertiser-funded programming by bringing together published literature and industry perspectives of different players in the television and advertising market.

The purpose of the research is to create an understanding of the dynamics of advertiser-funded programming as a new business and production model for television advertising, as well as for television program production. Caused by the change in the current television advertising and a fierce competition of the web, AFP can be considered as an effective way for advertisers and TV channels to engage deeply with consumers while providing high quality and relevant television contents. Using two main perspectives, the aim would be to trace suggestions and possible implementations for the production process as well as for the advertising strategy. On one hand, the analysis of the network of actors involved in advertiser-funded programming can help to understand the creation of superior value for the partners within the network as well as for the end consumers. On the other hand, the focus on the creation of engagement and loyalty, through the TV programming, would be useful to clarify the potential powerful of this type of television productions. A qualitative methodology has been chosen and semi-structured interviews have been conducted, as well as business-to-business and consumers marketing theories have been used to explain, support and criticize key characteristics and factors of advertiser-funded programming production. Though it does not deduce any theory, it adds suggestion on how the production can be shaped better. Thus, the partnerships within the network of players assumes a crucial role in order to develop a clear understanding of the goals, as well as to try to standardized the production process in order to be more cost and timing efficient. At the same time a deeper involvement of consumers, using social networks and creating off-air activities, can help to create an engaged and loyal audience, which in turn can make the overall success of the TV program.

Advertiser-funded Programming: En potentiell paradigm fr TV-reklam

Sammanfattning
Detta forskningsprojekt analyserar dynamiken bakom produktionen av annonsrfinansierade program (AFP) genom att sammanstlla publicerad litteratur och ett industriperspektiv med aktrer inom TV- och reklam- marknaden. Syftet med forskningsprojektet r att skapa en frstelse fr dynamiken i annonsrfinansierade program som en ny affr och produktionsmodell fr TV-reklam och program produktion. P grund av frndringar i nuvarande TV-reklam och tuff konkurrens frn webbaserade tjnster, AFP kan bli sett som en effektiv metod fr annonsrer och TV-kanaler att kommunicera med konsumenter och samtidigt tillhandahlla hg kvalit och relevant TV-material. Mlet var att spra frslag och mjliga implementeringar av produktionsprocessen samt av reklamstrategin genom anvndning av tv huvudperspektiv. ena sidan, analysen av ntverket av involverade aktrer i annonsrfinansierade program kan ka frstelsen fr vrdeskapande fr partners inom ntverkat samt fr slutanvndare. andra sidan, fokuset p skapandet av engagemanget och lojaliteten, genom TV program, skulle vara anvndbart fr att klarlgga den mjliga genomslagskraften fr den hr typen av TV-produktioner. En kvalitativ metodik valdes och semistrukturerade intervjuer har utfrdats. Marknadsfringsteorier mellan fretag och mot konsument har anvnts fr att frklara, stdja och kritisera nyckelegenskaper och faktorer hos annonsrfinansierad programproduktion. ven om denna studie inte hrleder ngra teorier s freslr den hur produktionen kan utformas p ett bttre stt. Samarbetet mellan aktrer inom ntverket r drfr mycket viktigt fr att utveckla an klar frstelse av mlen samt fr att standardisera produktionsprocesser och gra dem mer kostnad och tidseffektiva. Djupare konsumentinvolvering, genom anvndning av sociala ntverk och externa aktiviteter, kan hjlpa till att skapa en engagerad och lojal publik vilket ven leder till ett generellt mer lyckat TV program.

Summary
1. Introduction................................................................................................................................ 1 1.1 AFP - An Introduction ......................................................................................................... 1 1.2 Definition of AFP phenomenon........................................................................................... 1 1.3 Purposes and success factors ............................................................................................... 3 1.4 Research methodology and process..................................................................................... 4
1.4.1 Primary data............................................................................................................................... 5 1.4.2 Secondary data........................................................................................................................... 6 1.4.3 Mini Cases ................................................................................................................................. 6 1.4.4 Reliability and validity .............................................................................................................. 7 1.4.5 Source of criticism ..................................................................................................................... 7

2. Theory........................................................................................................................................ 8 2.1 Choice of theories ................................................................................................................ 8 2.2 Business-to-Business theories ............................................................................................. 8

2.2.1 Business network ....................................................................................................................... 9 2.2.2 Functions of business relationships ........................................................................................... 9 2.2.3 Value Chain and Value-creating Networks ............................................................................. 10

2.3 Business-to-Consumer theories ......................................................................................... 11

2.3.1 Choice of media and frequency ............................................................................................... 11 2.3.2 Television content as the message ........................................................................................... 11 2.3.3 Attitude .................................................................................................................................... 12 2.3.4 Customer Satisfaction, Engagement and Loyalty.................................................................... 12

3. TV Advertising ........................................................................................................................ 14 3.1 Current situation ................................................................................................................ 14

3.1.1 Types of traditional TV ads ..................................................................................................... 17 3.1.2 Product placement ................................................................................................................... 19

3.2 The traditional business model in TV ads ......................................................................... 20 4. AFP - New type of TV ad, new type of TV show ................................................................... 22 4.1 Brief history of advertiser-funded programming............................................................... 22 4.2 AFP's characteristics .......................................................................................................... 23 4.3 The main actors involved in AFP ...................................................................................... 23
4.3.1 The Advertiser .......................................................................................................................... 24

4.3.2 The TV Channel ....................................................................................................................... 25 4.3.3 The Media Agency ................................................................................................................... 26 4.3.4 The Production Company ......................................................................................................... 27

4.4 Type of productions ........................................................................................................... 28

4.4.1 Most popular TV format ........................................................................................................... 30

5. Beyond the AFP - Strategies.................................................................................................... 35 5.1 The value constellation in AFP.......................................................................................... 35

5.1.1 Partnership's characteristics ...................................................................................................... 37 5.1.2 Partnership and network's goals................................................................................................ 39

5.2 The TV show as a spin-off................................................................................................. 40

5.2.1 The off-air activities ................................................................................................................. 41

5.3 Implications and suggestions for a better network strategy............................................... 44 6. Effectiveness in AFP ............................................................................................................... 46 6.1 Content and Engagement ................................................................................................... 46
6.1.1 Content to increase customer satisfaction and retation............................................................. 47 6.1.2 The value of qualitative content ............................................................................................... 47

6.2 Engagenment and Brand Experience................................................................................. 48

6.2.1 Emotional connection ............................................................................................................... 49 6.2.2 Experience economy in AFP .................................................................................................... 50 6.2.3 From the experience to loyalty ................................................................................................. 50

6.3 Implications and suggestions to increase engagement and loyalty in AFP ....................... 52 7. Future prospects and possible drawbacks of AFP ................................................................... 54 7.1 Social and educational prospective of AFP ....................................................................... 54 7.2 Product placement; will it help AFP to grow?................................................................... 55 7.3 Problem of measurement ................................................................................................... 55 8. Conclusion ............................................................................................................................... 57 8.1 Partners' network and value constellation is at the core of AFP........................................ 57 8.2 Consumers' involvement as a way to increase engagement and loyalty ........................... 58

1.Introduction
The TV industry is facing, what is called by professionals, the the perfect storm. The storm we are now handling is the digital revolution that has totally changed the media industry, as we used to know it. But, if it is true that after every revolution there is a new beginning, this is already started. In a more fragmented and cluttered TV market the role of advertising is changing and new models of communication with consumers are emerging. Here, the narrow space between entertainment and advertising seems to be the new revolutionary idea, producing television contents and advertising at the same time.

1.1 AFP An Introduction

AFP - advertiser-funded programming is one of the most interesting phenomena in the TV and broadcasting industry as well as in the advertising industry today. Also known as branded content or branded entertainment, AFP is a method of television funding that repositions advertisers from just being buyers of advertising spaces around TV programs to instead financing the TV programs themselves, creating strong relationships between brands or companies, broadcasters and production companies in the development of editorial content. Brand entertainment is best defined as where a brand creates consumer entertainment that would not have existed without that brand and where consumers choose their involvement. It is clearly differentiated from product placement, where a brand is placed in someone elses content a film or TV programming.1 Typically programs have been funded by a broadcaster and they recouped the money through selling advertising space around the content. This has worked fine for decades, but new technological advances and consumers habits have forced broadcasters and advertisers to rethink their relationship. This was caused by a sort of decrease in traditional advertising investments, by a proliferation of niche and tailored television channels, which needs more contents to fill their daily schedule and by new requests, from the advertiser, to engage consumers and also to entertain them. Within the television and media industry the discussion about AFP has been around in the last decade, identifying it as the new interesting model for television and advertising production. Today, advertiser-funded programming seems to be entering a golden age and it is definitely becoming a hot topic in the media business. Both advertisers and broadcasters are trying to design new businesses models and strategies that can be effective in the changing media environment and that will secure future revenues and retain consumers and viewers.

1.2 Definition of AFP phenomenon

In the last few years the TV landscape has experienced a surge in the number of TV channels, digital and satellite. Broadcasters started to create what are called family channels, each one tailored to a specific target audience, and niche channels for different subjects and topics. In
1

N. Dawson, M. Hall, Thats brand entertainment for World Advertising Research Center February 2007

doing so, TV networks are now desperately searching for good content to fill the schedules of thousands of new channels, in order to successfully compete in the market and also to contain the threats from the web and online entertainment. Audience fragmentation makes the competition greater and the quality and success of content is a crucial issue in order to maintain or gain the competitive advantage in the TV market. At the same time, it is well known that, to produce good television content, broadcasters need to invest substantial resources to finance and support the production efforts, funding that can be raised both from subscription fees and from advertisers. Nevertheless, that may not be enough.

Figure 01 example of family channels, TV 4, Sweden

On the other hand, advertisers and TV networks these days are facing a shift of power in favor of the viewers who have more and more control, as well as choice, in terms of television consumption. There are now multiple distribution ways by which consumers can access content. This gives the consumer much greater freedom and choice. Rather than be told by the media industry what to consume and when, they now have the freedom to access individual products at flexible and tailored prices rather than fixed average prices. Media consumers will increasingly have access to content when they want it, rather than having to wait for the release schedule of the TV channels.2 Thus, the television schedule is more customizable, liquid and fragmented, and viewers, using personal video recorders (PVR's), such as the famous TiVo, can record and watch TV contents on their own time. In doing so, the classical idea of primetime has been skewed, and the power of the traditional 30-second TV advertising spot has declined. These technologies make it easy to understand how the traditional model of television advertising has become less and less effective in reaching consumers and why advertisers are trying to occupy new positions in the TV schedule.

Figure. 02 TiVos Digital Video Recorder

A. Aris, J. Bughin, Managing Media Companies, Wiley, 2009

The impact of spot advertising is declining as commercial channels lose audience share, meaning that AFP is increasingly seen as a particular type of sponsorship which can re-engage viewers with brands.3 To avoid the marginal position that could affect the power of TV advertising campaigns, companies need to locate their brands as close as possible to the attractive editorial content in order not to be skipped over by the viewers. Programs thus acquire a central role for advertisers and so companies need to be more than willing to finance production of programs that support their brands. Douglas Scott, President of Ogilvy Entertainment (USA), one of the most important media-creative agencies specializing in branded content, explained well the current situation during the last Mip TV conference in Cannes with an evocative metaphor: There is really this changing of roles that is taking place in the media business right now which we refer to as the perfect storm: there are three ships in the water that are the consumer, the producer and distributor of the content and there are the brands. Some days the water seems to be more tumultuous then others but really there are pros and cons that are playing into the overall model which is driven by technology. The consumers are becoming more powerful, they can create contents, they can share contents, they can view contents, when, where and how they want. Brands really have a great opportunity to get into the creative side but also into the targeting side, really identifying who they are and what they want to communicate with. For a producer/distributor prospective costs are going up, the audience is going down for the fragmentation of the TV market and the need to continue with the old model of production is very much a process that needs to be innovated. [..]4

1.3 Purpose and success factors

With this thesis report the author tries to investigate the whole phenomenon of advertiserfunded programming, considering the different actors involved and using examples from existing and past productions. The most attention will be given to media companies such as broadcasters, media agency and production companies but, at the same time, the crucial and essential role of advertisers will be analyzed in depth in terms of branding and communication strategies. The analysis will follow two main paths. On one hand, a more business-to-business approach will be used, with the purpose to investigate how the network of players, involved in the production of AFP projects, can generate greater value for the actors and for the consumers. The understanding of the ways to manage the network will be helpful to shape a better strategy that will lead hopefully to a more qualitative production. On the other hand, a business-to-consumer focus will be chosen, investigating the effect of loyalty, engagement and commitment that AFP can convey to consumers. Thus, branding and communication strategies effects, especially useful for the advertiser, will be given to media and television professionals in order to provide them with the right framework of knowledge in AFP. Those would be hopefully be suggestions especially important for the whole media industry in order to attract investments and, at the same time, to show advertisers how much value can be delivered to consumers using AFP productions. Having explained the two main goals of this thesis report, the two research questions that have been chosen are:

3 4

L. Rouse Will branded content work for your brand? in Media Week June 2007 MiP TV International Conference, Cannes, France, April 2010

1- How can the network and the constellation increase value for the actors involved in AFP? 2- How can engagement and loyalty be created through AFP projects in order to increase its effectiveness?

1.4 Research methodology and process

The aim of this research is to investigate which factors are the most important in creating effective and successful advertiser-funded programming, identifying points of difference in the various productions and different strategies of AFP productions. To carry out the intentions of the author and his supervisor, the research on this topic has been done in a span of four months as a journey around and within the main aspects of the topic, exploring the current situation, collecting and analyzing primary and secondary data and suggesting potentially applicable frameworks. Phase 1: In the period from the 1st of February 2010 to the 15th of March 2010, the argument of the thesis was developed and general data was collected. In this phase, the literature review was consolidated and contacts with industry respondents established. Phase 2: In the period from the 16th of March 2010 to the 17th of April 2010, primary data was collected across the market, professionals were interviewed to determine the perspectives of the various actors to find out what they consider to be the opportunities and the threats in the production of this television products. Phase 3: In the period from the18th of April 2010 to the 19th of May 2010, the data collected, through interviews and market analysis, was analyzed and concluded. The research report was written. Phase 4: In the period from the 20th of May 2010 to the 1st of June 2010, the report was finalized and was written in all its parts and sections. A presentation has been prepared for discussion.

Having traced the main phases of what has been the thesis journey, it is important to outline the main methodology characteristics that I used in order to accomplish the research in a relevant and scientific way. As stated above, qualitative research has been used in order to explore different views within the TV and advertising industries, using interviews with professionals in order to get a deeper understanding of the phenomenon. According to Bryman and Bell (2007)5 qualitative research must have an epistemological position described as interpretive, meaning that, in contrast to the adoption of a natural scientific model in quantitative research, the stress is on the understanding of the social world through an explanation of the interpretation of that world by its participants. Based on this, my research tried to understand and interpret words and actions of companies, consultants and authors in relation to the theme, as well as use interviews to understand professional perspectives.

A. Bryman, E. Bell, Business Research Methods, Oxford University Press, 2007

Moreover, based on Bryman and Bell (2007), I utilized a constructivist approach, which states that social phenomena and trends are continually shaped by social actors who are not statistical entities, but are in a constant state of change. As a matter of fact, the concept of AFP cannot be considered a science but more as a market trend in the television and advertising industries, and so it will not present precise theories and methods. At the same time, my wish has been to formalize the current trends within the market and to try to build a reasonable and, in some way, an applicable framework of business implications and suggestions that appeared to be relevant during the investigation of the phenomenon. As regarding my intention of using interviews for the qualitative research, according to Corbetta (2003)6, a qualitative interview can be defined as a conversation that has the following characteristics: it is elicited by the interviewer, interviewees are selected on the basis of the data-gathering plan, [] it is based on a flexible, non-standardized pattern of questioning. Based on this idea, the selection of the respondents has been as broad as possible in order to gain a deeper understanding of the industrys processes and dynamics. The qualitative research strategy helped me to explore, and then understand, different views and approaches in the television and advertising industries to use as a basis for a later interpretation of the entire phenomenon. Finally, based on Corbetta (2003), the qualitative interviews have been semi-structured or unstructured interviews. The interviews had a set of questions but they didnt have any rigid or pre-determined sequences. Any additional and complementary information and issues that were raised during the interviews have been used as findings if relevant to the investigation.

1.4.1 Primary data

Primary data consisted of interviews with professionals conducted in different ways. Based on the time that every interviewee was able to give me, different methods were used in order to be as collaborative as possible with usually very busy professionals. As long as their other commitments permitted it, I conducted face-to-face interviews, phone interviews and even questionnaire-based interviews. The different advantages and disadvantages in those types of interviews were clear; face-to-face interviews allowed me to have a deeper understanding of the arguments touched, observing also body language and facial expression in order to help me gain a better interpretation. Using phone interviews made it more difficult to interact with respondents and thus a less deep understanding was possible. With questionnaire interviews, though, on the one hand the respondents were quite clear and straightforward, explaining concisely the subjects touched in the questions, on the other hand, the lack of debate between interviewer and respondents affected the opportunity to develop more topics and discussions. Regardless of form, after every interview the data gathered was immediately formalized in text, so as to increase the reliability of data and to ensure the inclusion of everything touched upon and discussed during the interviews. The persons interviewed were: Andreas Erenius, Vice President at OTW Media AB production company Lars Bilk, Creative Director at Bond Street Film AB production company Andreas Stenberg, Responsible for Content-related Business at TV4 AB TV network Sebastian Ljung, Head of Commercial Content Program at Kanal5 AB TV network Hkan Gustafsson, Managing Director Carat Nordic AB media agency Mikael Ekelf, Broadcast Director at Starcomm AB media agency

P. Corbetta, Social research: theory, methods and techniques, SAGE Publications Ltd, 2003

1.4.2 Secondary data

Secondary data are information other researchers have collected, usually also called meta-data. Secondary data are usually, and often, previously gathered together for other purposes, thus it is important to take into account when the data are processed. The majority of the secondary data presented in this report are qualitative, although some quantitative data, such as statistics, records and surveys, are present to a lesser extent. The data collected have been, as much as possible, examined critically because sometimes the authors of the information are several stages behind the original source. The main secondary sources used in this report come from media, such newspapers and trade journals, published literature and various web sites. However, in relation to the subject of the thesis, many sources and information have been collected watching documentaries about the subject and videos in general to understand the characteristics of advertiser-funded programming in depth. Using video sharing web sites (such YouTube) helped the investigation of the whole phenomenon, having the opportunity to watch television formats and programming from all around the world. For this reason a specific session in the bibliography is related to video material used in this report. Moreover, I had the unique chance to follow and watch in streaming mode two interesting and very useful conventions about television, advertising and media in general. Those conferences gave me important insights about the state-of-the-art of the media field and also the opportunity to listen to very interesting speeches from the most relevant and cutting-edge professionals in the industry from all around the world. Conferences: -MipTV, April 12-16 April 2010, Cannes -Festival of Media, April 18-20 April 2010, Valencia Contributions from: Charlie Crowe CEO, C Squared (UK), business publishing and information company Douglas Scott President, Ogilvy Entertainment (USA), media-creative agency Robert Friedman President, @radical media (USA), media-creative agency Catherine Krokos-Leroy, Head of Branded Entertainment, Banijay Entertainment (FR), media and production company Guy Duncan, Head of Creative Excellence Europe, Coca Cola Company (EU), manufacture company

1.4.3 Mini Cases

In order to have a clearer and as complete as possible picture of the phenomenon, Ive also conducted research based on AFP productions around the world and I summarized it in different mini-cases. It was the starting point of the thesis, having used those examples as a basis of analysis of the entire production and business model. The mini-cases helped me to have a first hand look at how the programming was designed and to understand the different levels of

involvement of advertisers within the editorial content, which came up as a crucial aspect of the overall phenomenon. The mini-cases have been successively used as examples to show how dynamics between actors were handled and how the message was differently designed in relation to the target audience and the format of the TV show. Moreover, I had the chance to investigate the different off-air activities, how each AFP project was organized and how communications and business strategies were conducted for each program finding similarities and differences between them.

1.4.4 Reliability and validity

As Kirk and Millet (1986)7 state, a successful data collection should meet two requirements: it shall be (1) valid and (2) reliable. Validity can be divided into internal and external validity. On one hand, the internal validity means that relationships and conclusions should be based on cause-effect relationships. However in this kind of research, identifying success factors of AFP, it is virtually impossible to state that success has cause and effect relationships. It is possible to say with certainty that some general rules will help the final result of the product but, for example, with products that are influenced by trends and emotional implications, it is hard to be totally sure about relationships between input and output. On the other hand, external validity relates to the general results. However, even if it were possible and desirable, the suggestions that will be given as results of this thesis might not be applicable generally to every AFP production.

Regarding the reliability of the data collected, this potentially can be affected by what is called the interview effect, that the respondents answers may be influenced by the interview situation. Moreover, the personal situation of the interviewer can also be affected by the particular situation, presumably new to him, even if the interviewer personally tries to act as professional as possible, staying focused on the discussion as well as taking detailed notes about the responses.

1.4.5 Source of criticism

Since AFP is still an unexplored phenomenon and many debates are still going on around it, it has been difficult to exactly understand where the truth starts and ends when processing the data collected. Many times opinions within the industry differed from person to person, from observer to observer, from player to player and to discern which side maybe the most relevant was not easy. However, having used an inductive method of approach, which uses observations to develop general principles about a specific subject, Ive tried to balance the different positions related to the subject in order to propose the most common perspective.

J. Kirk, M. L. Miller, Reliability and Validity in Qualitative Research, SAGE Publications, 1986

2. THEORY
This chapter will present the theories that will be used in the analysis of the advertiserfunded programming phenomenon in order to give the reader the theoretical framework necessary to understand which characteristics have been analyzed and how. It will touch on both business-to-business and business-to-consumer marketing theories, which have been the two main perspectives of analysis used.

2.1 Choice of theories

In order to study the phenomenon of AFP, different marketing theories have been chosen to be able to provide a framework for the analysis as well as to help the investigation to dig deeper into the dynamics behind advertiser-funded programming. It has been decided to investigate the overall AFP phenomenon considering two different perspectives and at the same time, two approaches of marketing theories. On one side, the roles and dynamics between the actors usually involved in advertiser-funded programming will be presented. In order to analyze these relationships between the players business-to-business theories were used to allow a deeper investigation of the characteristics of the relationships. On the other side, in order to investigate the results and to see how to maximize the effectiveness of advertiser funded programming, a range of theories were selected more focused on business-toconsumer marketing, which can be relevant in order to identify which properties an AFP should have to better and more easily meet the consumers requests. However, first of all, it is useful to clarify the concept of marketing in order to have the same frame of reference regarding the subject. According to Armstrong & Kotler (2006)8 the aim of marketing is to identify and establish, maintain and expand, and if necessary, terminate, relationships with customers and other parties to meet financial and other goals of all parties. This is done by mutual exchange and to meet stated commitments.

2.2 Business-to-Business theories

Business-to-business marketing theories are crucial in the investigation of advertiser-funded programming for its essence as an articulated production with many actors involved. Thus, it seems necessary to use an approach that can take into account all the different dynamics and that can provide an efficient framework for the analysis.

G. Armstrong, P. Kotler, Marketing an introduction, Pearson Prentice Hall, 2006

2.2.1 Business network

According to Anderson and Narus (2004)9, business networks are sets of two or more connected business relationships. Alliance networks go even further and are described as a clique of interrelated and coordinated business relationships formed in order to create new markets and to bring together resources that go beyond the abilities of the single firms.

Anderson and Narus (2004) suggest that in order to analyze business networks one uses the ARA model, which takes into account three components: Actors, Resource and Activities. Actors are firms that perform activities and control resources. Activities include transactions and create value through transforming resources. Resources refer to anything that actors explicitly value, such as know-how, personnel, equipment or capital. At the same time, Anderson and Narus (2004) formalize three concepts, helping to analyze the business network. The network horizon refers to how extended an actors view of the network is. This depends on the actors experience but also on the structure of the network. The part of the network within the horizon is the actors network context. The network context is structured in terms of actors, activities, and resources. Contexts are partially shared by network actors, but every actor has its own network context, depending on other characteristics, such as experience. At the same time, within networks the actors develop network identities. The identity refers to how the firms see themselves in the network and how they are seen by other networks actors. Network identity captures the uniqueness of each firm in its set of relationships. It conveys a certain competence in terms of an actors perceived capability to perform certain activities.

Thus, the knowledge about networks and how the actors interact between them will be crucial for the overall investigation and especially for the understanding of how those relationships can help each player and the production, for a more organized and structured procedure.

2.2.2 Functions of business relationships

In order to create a more stable and successful network it is also very important to take into account especially the relationships within the network. According to Hkansson & Johanson (1993)10 networks are created based on those relationships that then have to be managed. They define business relationships as as exchange relationships between autonomous business units. Based on the analysis of Hkansson & Johansson (1993) it is possible to take under consideration some aspects of those relationships which are relevant to this report.

First of all, it is important to consider the function of business relationships in linking the activities of the parties involved to each other. Adaptations of these activities are made for different reasons; for the relationship to even take place, to make rationalizations such as reducing costs, and to create innovations. There are, however some problems with linking activities, such as finding counterparts and activities to adapt to, how to handle these adaptations and not to influence the counterparts in making the right adaptations. Second, it should be remembered that every firm contains a unique set of resources. There are different types of these resources, such as man-power, financial resources etc. The resource, however, can have specific characteristics that can influence the overall relationships. In fact, a
9

J.C. Anderson, J.A. Narus, Business Market Management, Pearson Education, 2008 H. Hkansson, J. Johanson, Industrial Functions of Business Relationships, JAI Press, 1993

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relationship is in itself a resource which takes time and effort to build and it has a value just as long as the two counterparts keep it alive. At the same time, relationships can be seen as a way to control resources. In fact, in developing a relationship, a company gives up some of the control over its own resources in exchange for some control over the counterparts resources. Finally, relationships are means to developing resources because, related to the learning process, relationships not only facilitate learning, they can be the means to use knowledge without acquiring the knowledge oneself; i.e. the utilization of relationships by employing the knowledge of others without acquiring it. At the end, the Hkansson & Johansson (1993) model of analysis of relationships is a way of summarizing the reasons for and efforts of the parties being directly involved in a relationship as well as the effort required by each to make the relationship succeed.

2.2.3 Value Chain and Value-creating Networks

This report has also analyzed the traditional advertising business model and its flow of production, taking into consideration Porters value chain model and its successive developments so as to be able to formally describe the process and to highlight how creative production moved from advertiser to consumers/viewers. Porter (1985)11 designed the value chain in order to describe a chain of activities where the product, passing through different stages, gains some value from the overall process. In our case the product would be the content of the advertising message that, moving through all the stages of advertisement production, increases its value in order to be ready to be shown to consumers. The Porter value chain categorizes broad activities that can occur in any organization. There are the primary activities which include inbound logistics, production operations, outbound logistics, marketing and sales and services. There are support activities which are firm infrastructure, human resource management, technology and procurement. Specifically in this thesis, the theories of value-creating networks, developed by Kothandaram and Wilson (2001)12, have been used. They have been useful to highlight the different stages in the production of advertising, taking into consideration not just one firm, but the entire network of firms in order to understand where and how the value-adding stages are taking part in the production. Moreover, the concept of value constellation developed by Normann and Ramirez (2001)13 has been considered in order to allow me to be able to shape the analysis of AFP projects in terms of knowledge and relationships. The idea of value constellation helped me to understand the new strategy of a value-creating system, where different actors work together to co-produce value, integrating knowledge and relationships to gain superior results. In fact as Norman and Ramirez state: the secret of value creation is building a better and better fit between relationships and knowledge.

11 12 13

M.E. Porter, Competitive Advantage: Creating and Sustaining Superior Performance, Free Press Edition, 1985 P. Kothandaraman, D.T. Wilson, The Future of Competition: Value-Creating Networks, Industrial Marketing, 2001

R. Normann, R. Ramirez, From Value Chain to Value Constellation: Designing Interactive Strategy Harvard Business Review, 1996

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2.3 Business-to-Consumer theories

The other prospective I had to consider in order to analyze the entire AFP phenomenon is the focus on the consumer point of view. The goal is to understand which factors make viewers and customers satisfied and engaged and therefore loyal to any advertiser funded programming. To be able to analyze those factors I had to consider marketing communication theories and branding theories as well.

2.3.1 Choice of media and frequency

Based on most marketing theories, when one is talking about advertising, the choice of media is one of the first things to take into account. There are different factors that influence that choice. First of all, the company or advertiser needs to decide how many persons they want to reach and what percentage of their audience must be exposed to be effective. It is also important to evaluate how many times the message should be repeated and when. According to Best (2009)14, media selection and message frequency are two ways to design effectively a marketing campaign. In fact, to reach the target customer effectively, the advertiser needs to have a good understanding of the media habits of its customers. Once the right combination of media is found, the question has to move on to how often the company should expose the message to the target audience in order to achieve a certain level of awareness. A balance must be reached. Sometimes, using only a few messages will probably result in a low level of awareness while too many could irritate. According to Best (2009), there are two ways to design a frequency strategy for the message: concentrated frequency, which schedules consecutive messages in a short period of time, and the distributed frequency, which plans long-run exposure of the message. The frequency choice however, depends also on the type of product because if the concentrated frequency would be appropriate for building awareness and comprehension for seasonal product, the same would not be appropriate for an everyday product. The third aspect that Best (2009) recognizes as crucial for building awareness in a marketing strategy is the ad copy. Copy plays a key role in creating awareness, comprehension and intentions, thus advertisers need to understand if the message is received and interpreted by the target customers. In the case of AFP the ad copy is actually the content of the TV programming, which, as we will see, plays an extremely important role.

2.3.2 Television content as the message

First of all, we want to highlight how Best (2009) considers the media industry as a very competitive field with many choices and low switching costs for consumers. That is why consumer retention should be the main goal for the actors in advertiser-funded programming. In order to achieve this goal, AFPs need to satisfy the consumers as much as possible. The first element that will be analyzed to increase satisfaction, is the TV content of AFP as a TV show. What in marketing and advertising is usually called ad copy, for advertiser funded programming, it can be called TV content. Aris and Bughin (2009)15 describe the content produced for entertainment as a perishable commodity. This is at the heart of every media business, it is something intangible and depends
14 15

R.J. Best, Market-Based Management, Eastern Economy Edition, 2005 A. Annet, J. Bughin, Managing Media Companie, Wiley, 2009

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on fashion, trend and inspiration. However, if it is a commodity, the TV content is extremely important, especially related to its quality. In relation to the integrity of the content in advertiser-funded programming, Duncan and Moriaty (1997)16 talk about the goal of marketing to deliver a credible message because this will sell more in terms of consumer appeal. Duncan and Moriarty (1997) also describe how a message can be communicated from difference sources and those sources determine the level of credibility of the message. They point out that the most credible message is the one conveyed by other people, like word-of-mouth, which is extremely powerful in terms of influencing decisions. This is also confirmed by Gronroos (2002)17 in his communication cycle model that states that the verbal references have a powerful effect on the expectations and the purchases that consumers make. At the same time, in both Duncan and Moriaty (1997) and Calder & Malthouse (2008)18, it appears clear that talented and famous people promoting a brand or a product, also have an important impact on consumer decision making and increase effectiveness of the message. Thus, in determining the characteristics the content should have, the engagement of the viewers can be increased by what Curry (2004)19 calls emotional connection.

2.3.3 Attitude
In marketing, attitude is a persons perception in term of whether he likes or dislikes the particular object, product, person, etc. The more positive attitude a person has, the more likely that person is going to buy the product. However attitudes change over time and advertising has to influence attitudes as much and as long as possible. Rossiter & Percy (1997)20 formalized a grid to analyze the brand attitude for consumers based on the level of involvement with the product which could be high or low, and, based on the motivations towards the specific brand or product, which can be informational consumers want exhaustive information about it, or can be transformational consumers want to have an emotional experience. By studying this combination of factors, advertisers can try to predict or influence future behavior. In advertiser-funded programming and branded entertainment in general this is important in order to design a TV show with the right appeal for the viewers, touching the right emotions.

2.3.4 Customer Satisfaction, Engagement and Loyalty

In order to formalize what characteristics drive emotional connections between consumers and the television message, theories and articles about experience economy will be used. As Pine II & Gilmore (1998)21 state, experience occurs when a company intentionally uses services as the stage to engage individual customers in a way that creates memorable events. Experiences have emerged as the next step on what is called the progression of economic value. Pine II &
16

T. Duncan, S. Moriarity, Driving Brand Value: Using integrated marketing to manage profitable stakeholder relatioships, McGraw-Hill, 1997 C. Gronroos, Service Management and Marketing, Wiley, 2002

17 18

B.J. Calder, E. Malthouse, Media Engagement and Advertising Effectiveness in Kellogg on Advertising and Media, Wiley, 2008 A. Curry, The Branding Bubble in The New Medium Television, Interactive Digital Sales, 2004 J.R. Rossiter, L. Percy, Advertising, communications and promotion management McGraw-Hill, 1997 B.J. Pine II, J.H. Gilmore, Welcome to the Experience Economy, Harvard Business Review, 1998

19 20 21

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Gilmore (1998) defined what they called the four realms of an experience, where they categorized the four dimensions that create experiences: active participation, passive participation, absorption and immersion. The Calder and Malthouse (2008)22 analysis about the effect of engagement and experience on an advertising message illustrates the characteristics that advertiser funded programming should have in order to increase consumer loyalty. Consumer loyalty, as Best (2009)23 states, is the maximum ambition than any company or brand should hope for if they want to retain and increase their consumer base. Best (2009), in fact, assumes that consumer loyalty is already present in customers minds and it is just a matter of how to activate it. One of the ways to activate loyalty is by using involvement, that Best (2009) defines as the level of perceived personal importance and/or interest evoked by stimulus within a situation. The other way indicated by Best is activating commitment defined as the belief that a relationship is worth working on to ensure that it endures.

22

B.J. Calder, E. Malthouse, Media Engagement and Advertising Effectiveness in Kellogg on Advertising and Media, Wiley, 2008 R.J. Best, Market-Based Management, Eastern Economy Edition, 2005

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3. TV Advertising
It is essential to analyze TV advertising in general, touching on the different type of TV ads presented in the market and in the television landscape now, in order to have a starting point from where to analyze why AFP could represent, for the entire industry, a new way to interpret both entertaining and television advertising. An overview of traditional television commercial production is relevant to understand the state-of-the-art in the advertising market.

3.1 Current situation

Television advertising has always been an important and crucial tool for commercial advertisers and for their marketing efforts. Television has been historically one of the most important media, combining both sight and sound impression that with the right tone and message can be an extremely powerful combination an effective advertising tool. Television has always also been an important part of every marketing mix and the context, where the advertising message is placed, always played a crucial role. In order to put the consumers in the right frame of mind which makes the communication more effective, the decision regarding placement of the advertising message before or after a specific programming is essential in order to influence the viewer perception of the product or brand. This is what Malthouse and Calder (2008)24 call the effect of the context, considered a crucial fact in designing any advertising campaign in TV. According to Malthouse and Calder (2008) the entertainment content of the television product itself provides experiences for the viewer that may affect the advertising as well as the entire television context where the advertising is placed.

Figure. 05 Cost for TV ads slot related to TV show USA 2006 - chart compiled by Brian Steinberg and Kimberly D. Williams.

Having traced briefly some of the background characteristics and effects of TV ads, it is also important to identify and analyze todays TV advertising market. In fact, TV advertising has
24

B.J. Calder, E. Malthouse, Media Engagement and Advertising Effectiveness in Kellogg on Advertising and Media, Wiley, 2008

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experienced in the last few years some modification related to changes within the media landscape and technologies. As said before, the multiplication of TV channels, the presence of multiplatform markets and the integration of new technologies have all influenced TV advertising in general. On one hand, the advertisers seem to look for more focused target group, characterized by niche needs and hobbies in order to plan a more effective message.25 On the other hand, TV channels have generally experienced in the last year a decrease of advertising revenues caused by the general beliefs that a mass marketing message wouldnt be as effective anymore. In fact the ANA Association of National Advertisers (USA)- in the last year (2009) surveyed 104 US advertisers representing nearly $14 billion in measured media budgets. More than half of them 62% told them that TV advertising is less effective than it used to be two years ago26. Where else in the world can you be convinced to pay more for a commodity that is experiencing diminishing returns. said John Hayes, Chief Marketing Officer at American Express, as early as 2004 at the convention Madison+Vine Commerce Meets Content in Hollywood. In fact, giant advertisers in USA like American Express were already losing faith in the traditional 30 second ads We, as advertisers, are paying more to reach less, the definition of insanity is to continuing to do the same over and over and expect different results.27 From those facts and statement, one can see that advertisers clearly recognize the that the traditional advertising television market, at least, has changed. In this changing situation, the more and more central position of the web as an important medium for the most interesting segments of consumers, has made the media landscape even more complex for the traditional TV advertising market. Moreover, it is also possible to see an increased competition between commercial networks that are all trying as much as possible to secure advertisers and resulting revenues to maintain decent income. In doing so, TV networks are now willing to cut down the price of the advertising slots starting a fierce competition to attract advertiser with lower prices. As Andreas Stenberg, Head of Marketing and Advertisement at TV4, stated: for sure we are now facing increased competition within the advertising market having more competitors [TV channels] and having a decrease in advertisers investments caused also by the international financial crisis

Fig. 06 Nielsen Media 2007 report on US Television market

25 26 27

L. Rouse Will branded content work for your brand? in Media Week, June 2007 D. Cooperstein, TV Advertising Budgets Are Under Siege, Forrester Research, February 2010 Frontline PBS, episode: The Persuaders Nov, 9th, 2004

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Some observers believe that the traditional advertiser-funded, free-to-air model for TV is broken and some figures seem to prove this point. As the above figures (fig. 06)28 represent the decrease in advertising spending in 2007 in the USA market. As well in Europe, the 2007 annual ad revenue for the biggest commercial channel in the UK, ITV, went down about 20%, and the network lost $3.76 billion in 2008, along with studio closures and a 13% reduction in its work force. At the same time, ITVs biggest rival, Channel 4, announced it will have an annual shortfall of $207 million by 2012 after a collapse in advertising revenue29. Though these figures in the TV advertising market are disconcerting, the future of traditional television advertising as weve known up till now, cannot yet be considered completely obsolete, even in the next few years. However, for sure, more obstacles are on the way. What is certain is that TV networks can no longer hope for the same flow of revenues they experienced in the past. Thus, they need to re-invent new ways to get advertising investments if they want to win in the new highly competitive and fragmented media market. Complicating this are debates about viewers behaviors today. They no longer seem interested in the classic 30 second TV advertising spot and they usually skip it, surfing around the channels during the commercial interruptions. This kind of behavior, combined with the personal video recording or TiVo-like devices, makes the traditional TV advertisement often ineffective and sometimes useless, losing the impact that advertisers are looking for. According to a study conducted in 2007 by Google and DISH Network about ad consumption using DVRs, it appeared that viewers are much more selective in their consumption of advertising and more than 70% skipped entirely the ad breaks30. However, the debate seems to be just starting about the future of the 30 second spot and, even within the professionals in the media industry, there is no single position about the situation. For example, Charlie Crowe, CEO at C Squared, a research body for television and advertising in UK, has no doubt about the current situation and what it will be. Crowe during a conference at MiP 2010 in Cannes stated: What brands are beginning to realize is that the old 30 spot, on a TV network, is no longer really the way forward in communicating with the customers. The old model of creating a brilliant 30 second ad and then phoning up the distributor and getting the best price possible through a media buyer is clearly a thing of the past. So, whats going to be the future when it comes to integration of a great brand idea, a great narrative, into TV and into a multiple platforms?31 At the same time, Andreas Stenberg at TV4 has a different point of view: We cannot say that the traditional 30 second spot is dead. Our figures, based on the switching surveys, showed that viewers are still watching the ads between shows. Moreover, we have figures that say that the DVR, even if they are popular, they are not use by viewers to skip the advertising breaks but however they are used to record other shows while watching another. Thus, now it seems that people are watching more TV than before.

28 29 30

2007 report on US Television market, Nielsen, 3rd Quarter 2007 E. Hall, Still No Product Placement Allowed on U.K. TV, in Advertising Age, March 2009

Various Authors When viewers control the schedule: measuring the impact of digital recording on TV viewership, Google, Inc. and yDISH Network L.L.C, 2009 MiP TV International Conference, Cannes, France, April 2010

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3.1.1 Types of traditional TV ads

When we talk about television advertising it necessary to make some distinctions based on which type of format the television commercials appear. In fact, there are different types of what is commonly called a TV ad. Definitively the most famous, common and established type of television advertisement is the 30 or 60 second commercial. This is the classical type of advertisement that consists of an audio-visual commercial where the advertiser promotes its brand or product during breaks in the shows or between shows. TV networks are the ones who set and organize the advertising slots around the daily schedule of the channel programming. The ads can be placed at different times during the day and the slots, called also avails, can be purchased by the advertisers based on the TV channels scheduling. This is what is called linear insertion that refers to the process of inserting and replacing ads in normal broadcast-style TV delivering the same content to all viewers at the same time. The ads are inserted into a broadcast stream at the broadcast station or by a TV operator, guided by digital or analog markers that indicate where ads should appear32. Of course the price per each advertising slot changes based on the hour (where primetime is usually the most expensive slot) and per type of program the commercial precedes or follows, as shown on fig. 05. The rate for advertising is also typically based on the number of TV viewers per show, called ratings. However, this kind of advertising can have a very important drawback that has to be considered a critical issue. As I noted above, in its essence, the 30/60 second television commercials are placed during breaks in TV shows and, if we consider the TV show as an experience for the consumer, the commercial breaks can be seen as an interruption of the television experience. Calder and Mathouse (2008)33, in fact, state: this intrusion may produce a negative response from consumers because the advertising harms the experience of the television content. This negative effect can, of course, compromise the effectiveness of the advertising leading to unexpected reactions of consumers towards the brand.

fig. 07 some examples of famous 30 seconds spots

Another type of television commercial is what is called sponsorship which has been in the last few years a very successful type of ad; another way for advertisers to market themselves audio-visually through the television. Sponsorship since the mid-1990s has gained as an alternative means of advertising to viewers, but we will see that this kind of advertising format has different characteristics. Sponsorship means that a company or organization will present a program by appearing with sponsorship signs or sponsorship billboards before and/or after the program. It is possible to say that, for example in the UK market, since the mid-1990s and the establishment of
32 33

Alcatel-Lucent report, 2008 B.J. Calder, E. Malthouse, Media Engagement and Advertising Effectiveness in Kellogg on Advertising and Media, Wiley, 2008

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BSkyB, which exploded the number of TV channels available, sponsorship has gained credibility with the market and to viewers as well34. A successful sponsorship is of course related to the success of the program and though sponsorship can be applied to any type of TV format, it appears to be more effective as a long-term relationship between advertiser and TV program rather then an occasional presence as sponsor of the show. Thus, there could be also, as Brierley (2002)35 says, a more positive link between the advertiser and the TV show as long as the program itself conveys a feeling or a message that the advertiser wants to be associated with. The precondition seems that the TV show is popular and followed by a precise target group, the same target audience that the advertiser wants to reach with the television advertising. The well-established and quite effective model of sponsorship is also confirmed by the figures from the UK market where in 2008 broadcast sponsorship revenues declined 2.3%, a significantly less steep fall than the 4.2% fall in overall advertising revenues. The broadcast sponsorship market is also expected to be more resilient, bouncing back with 5% growth in 2009 and breaking through the 300 million barrier during 201036. If the influence of the advertiser over the editorial content of the TV shows is right now usually quite limited or almost not-existent for the traditional television commercial, as stated above, the right sponsorship is the one that can also visually relate to the TV show content in order to communicate with the same tone and taste of the TV content itself. According to Calder and Malthouse (2008)37 [..] ads appearing in vehicles that are experimentally congruent with the ads will be more effective. So it may be that advertisers should consider media experiences even in creating the ad itself. Moreover, it is clear that sponsorship can be more effective compared to 30/60 second commercial because the sponsors are more closely identified with the interesting editorial content. These are what can be considered the two main types of TV advertisements which TV channels and advertisers have utilized till now. However both types of television commercials seem to have quite a hard time these days (especially 30/60 seconds commercials) to fully satisfy advertisers need to reach the right audience.

fig.08 frames from the Swedish reality show Bonde soker freu

34 35 36 37

L. Rouse, Will branded content work for your brand? in Media Week June 2007 S. Brierley, The Advertising Handbook, Routledge, 2002

Broadcast Sponsorship - UK - October 2009, Mintel International Group Ltd, 2009

B.J. Calder, E. Malthouse, Media Engagement and Advertising Effectiveness in Kellogg on Advertising and Media, Wiley, 2008

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3.1.2 Product placement

Other types of TV advertisement, such as product placement, is quite often used as a marketing tool for advertisers as well as a way of financing for production companies and TV networks. This type of advertisement is more common in USA, where regulations allow it more extensively. There are agencies, for instance in Hollywood, who used to go to every script before it is produced and find specific opportunities for automobiles, for beer, for virtually any product, says Mitch Kanner, partner at Integrated Entertainment Partners Agency in Los Angeles38. Talking about product placement there are still debates about its effectiveness. It seems that is not possible to talk explicitly about brand, not because regulations forbid it, but because it seems to have negative effect on the consumer perceptions. In fact the drawbacks of a violent product placement strategy can be seen in one of the worst box office disaster movies, The Last Ride, a 2hour movie about muscle cars created by GM to promote the new Pontiac GTO that didnt work at all. On the contrary, product placement is all about how the writer and the brand engage in using that very interesting narrow space so it feels natural. It is here where the difficulties lie. According to Kristin Blond and Irene Roozens research39, the overall value of the global product placement market, including the barter/exposure value of non-paid placements, grew 27.9% to $5.99 billion in 2005 (PQ Media, 2006). The forecast for 2010 is that global paid product placement spending will grow at a compound annual rate of 27.9% to $7.55 billion, as product placement growth continues to significantly outpace that of traditional advertising and marketing. The overall value of the worldwide product placement market, including the barter/exposure value of non-paid placements, will increase 18.4% compounded annually to $13.96 billion in 2010 (PQ Media, August 2006). Product placement in Europe where the rules about it are stricter, is not used much at all, but at the same time it is allowed if it is already present on foreign productions. According to research done by PQ Media (2006) in Europe, The European Commission is working on the legislation addressing the use of product placements for movies or TV-programs and has set out its plans in order to update 1989's Television Without Frontiers Directive, extending the rules to all TV-like services and relaxing the rules of advertising to allow product placements40. Also Mikael Ekelf, Broadcast Director at the media agency Starcomm AB, confirmed this future evolving of the European legislation, hoping that there will be a simplification of the process regarding the brand placement regulations after the new directive will be approved during the summer in the European union, which will make the situation easier and more open all around European states, creating for sure new opportunities.

fig. 09 frames from American movies and TV series were brands have been shows as product placement

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39

Frontline PBS, episode: The Persuaders Nov, 9th, 2004

K. Blonde, I. Roozen An Explorative Study of Testing the Effectiveness of Product Placement Compared to 30-Second Commercials K. Blonde, I. Roozen An Explorative Study of Testing the Effectiveness of Product Placement Compared to 30-Second Commercials

40

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On the other hand, some advertisers have gone forward into programming. For example BMW took the first step back in 2001 developing a new form: a perfect hybrid of ad and movie where BMW was not only the sponsor but also the creator. They produced 8 minute web movies shot by directors like Guy Richie, starring people like James Brown and Madonna. BMWs had starring roles, playing an integrated part in the plot line. This advertising, as a piece of entertainment, is based on the assumption that not only will be tolerated by consumers but they will actually go in search of the BMW ads. BMW sales went dramatically through the roof in the years these films were shown on the internet, said Scott Donaton, Editor at Advertising Age41. Thus, the boundaries between contents and advertising are definitely blurring in every popular media, such as the music video clip, where rock stars like Sting teamed up with Jaguar or even Bob Dylan with Victorias Secret.

3.2 The traditional business model in TV ads

The business model behind traditional television ads is quite well known: the advertiser, assisted by the advertising agency or media agency, produces a 30 to 60 second film commercial that will be aired on the TV channels commercial breaks. Once the commercial is ready to be on air the advertiser or the advertising agency, through the media buyer, deals with the TV network in order to buy the slots needed for the television advertising campaign (fig. 10). The selection of the slots, as said before, would be related to a precise advertisers strategy in order to intercept the most relevant target audience or the vastest audience as possible. Moreover, communication strategies such as media frequency and seasonal selection are taken into account in order to design the most effective campaign for optimum brand and product awareness. All television ads need to be refreshed, which in itself gives rise to increased costs for the advertiser. Thus the advertiser, with the collaboration of the advertising agency, has to decide whether to use a concentrated frequency or a distributed frequency. According to Best (2008)42, the concentrated frequency uses consecutive messages in a short period of time making this marketing communication strategy appropriate for building awareness and comprehension for seasonal products. To the contrary, the distributed strategy focuses on a long run exposure of the message. The essence of TV as a medium is that the message is delivered to large audience usually in a short time: the message is sent by the TV in an unequivocal way that flows from the TV channel to the audience without any possibility of customization. This type of fixed roles between senders and receivers makes the traditional TV commercial less effective these days when the essence of the communication needs to be as close as possible to the customers particular needs. At the same time, it is important to include the cost of producing TV advertising in order to have a clearer picture of the entire business model. Usually the cost of producing TV commercials is relatively high compared to other type of media. It is especially high if we compare the cost of production with the length of the production itself demonstrating that production of standard length TV commercials is quite expensive compared to the cost of producing a TV show or TV series.43 Finally, it is possible to say that the TV channels set the amount of programming investment and

41 42 43

Frontline PBS, episode: The Persuaders Nov, 9th, 2004 R.J. Best, Market-Based Management, Eastern Economy Edition, 2005 Alcatel-Lucent report, 2008

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the prices (or quantities) of advertising, while the producers determine their demand for advertising and the product price. The two factors (programming investment and prices of advertising) are quite correlated because at this time, for any TV channel to be able to produce TV content, it must have enough financial resources which are only raised by selling advertising spots44. It is quite clear how important it is for any TV network to be able to sell as many advertising slots as possible at as high a price as possible in order to invest part of the advertising revenues into the production of TV content, creating a circular and cyclical selling-investment situation.

fig. 10 traditional TV advertising value chain and production process

44

T. Nilssen, L. Sorgard TV Advertising, Program Quality, and Product-Market Oligopoly, 2000

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4. AFP - NEW TYPE OF TV AD, NEW TYPE OF TV SHOW

The AFP can be considered a new way for advertisers to promote their products and brand but, at the same time, it is essentially a new type of TV show. I will analyze the characteristics and type of production of this new format of television content, from the first Procter & Gamble soap operas to the newest interactive TV series. I will be also discuss the Aurelian road of quality for the television contents production, which is the main goal of entertainment in general.

4.1Brief history of advertiser-funded programming

Advertiser-funded programming is not a totally new marketing tool because branded entertainment has been around the media field since the 1950s, especially in the USA, where much TV programming was sponsored by different companies. The most famous examples are what are called soap operas, dramatic fiction episodes broadcasted on television and radio and entirely produced by the consumer goods manufacturer Procter & Gamble. Guiding Light has been the longest show on TV ever and for Procter & Gamble has been an extraordinary marketing tool to speak directly with the target audience of housewives without having to show their products but instead by entertaining them under the wording of a Procter & Gamble product.

fig. 11 Guidning Light 1957

fig. 12 Guiding Light 2009 last season

It has to be said that AFP is still a small business these days, as states David Brennan, research and strategies manager for the TV marketing body Thinkbox in the UK: Total sponsorship is estimated at 200m, and AFP is a small subsection of that at the moment, but it will surely grow as brands see the power of association.45 In fact, AFP and branded content in general, has always been quite marginal in total advertising spending in TV and in the past there's been a lot of talk about it but not much of it happened. One of the main questions has been whether viewers will reject ad-funded programming. This has long been debated but, as will be seen later on in the report, this is no longer the main and most important concern surrounding use of AFP.

45

V. Frost Could advertiser-funded programming solve TV financial problems?, The Guardian, Monday 27 July 2009

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In the view of the majority within the business, the future of AFP seems positive, with talk about an increased focus around branded entertainment and branded contents. However, it is also well known that we are still far away from a general understanding of and belief in the actual potential impact of this new type of television advertising and entertainment content production.

4.2 AFPs characteristics

As noted above, in the last few years the television industry has experienced a surge in the number of TV channels, digital and satellite. Family channels, tailored to a specific target audience, and niche channels, has had TV networks desperately searching for good content to fill their schedules on tens of new channels. The audience fragmentation appears clear and the competition for those audiences makes quality and success of the contents a crucial issue in order to maintain or gain the competitive advantage in the TV market. At the same time, to be able to produce good television content, broadcasters need to invest substantial resources to finance and support the production efforts. The standard method of raising funds, that is by selling advertising slots is, as we have already seen, no longer effective enough and that has caused a lack of confidence in the traditional television advertising business model. The AFP model falls perfectly into this situation where TV networks are looking for new TV shows and TV contents and, on the other hand, advertisers are willing to find a new type of advertising that is able to give them a closer and more entertaining relationship with consumers. Thus, the AFP model represents a great opportunity for all the actors in the market to start a new era of closer collaboration between players to create good and high quality content that can better fit within the new media landscape and meet the demands of advertising awareness and effectiveness. The main idea around AFP is that editorial content is influenced by an outside interest, that is, the advertiser, in conveying a message to reach the underlying audience. The intention may be to increase interest in an industry, product category or phenomenon, creating a need or driving a trend. In sum, the AFP is another television production in the sense of any television program wholly or largely funded by one or more advertisers, which in turn has a different level of impact on program content and/or form.

4.3 The main actors involved in AFP

AFP productions are naturally an multifaceted, complex type of production that involves many actors with specific capabilities and roles all of which can ensure the advertising campaigns desired goal of a high quality, efficient message and complete brand communication of the advertising campaign matching at the same time the editorial strategy of the TV channel. In its essence as a large project with many aspects, every AFP production requires a high degree of involvement and engagement of each player starting at the beginning: the development and production of the TV content. The TV show, which is the first stage of a broader 360 degree advertising campaign, is the crucial starting point in the communication strategy for both the TV network and the advertiser involved. AFP is also one of the more challenging products, requiring attention and a clear statement of the goals. Being the touch point with the consumers, the TV content has to be, first of all, well constructed in all of its parts in order to communicate effectively the advertisers message and to maintain the editorial quality of TV channel. It is, on the TV show, where each actor needs to put as much effort as possible in order to deliver the best product possible, which in turn will help to launch a bigger campaign.

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Thus, it is essential to analyze carefully and critically each actor involved in the AFP production, identifying characteristics, tasks and roles but also the driving forces that affect the decision to start an AFP project. This is a starting point for a deeper analysis of the entire business model and strategies around this kind of project.

4.3.1 The Advertiser

The advertiser or commercial advertiser is a company, brand or any association that decides to advertise its product or brand using the TV as a medium. The advertiser searches for the best way to communicate with consumers and deliver to them the best message possible. The purpose of every advertiser is to increase consumption of products or services through branding strategies that in turn can increase revenues and brand awareness. It seems that these days companies are looking more and more intensively to connect and engage with the right audience rather than the biggest. As Russell Place, Chief Strategy Officer at the American media agency Universal McCann, says we are currently in a transitional communications environment and many categories of advertiser - from food and travel to property - are moving from a model of exposure to one of engagement with people.46 Thus, advertisers want more targeted ads. At the same time, they are reluctant to pay for big events or big audience shows that contain different and imprecise target groups. In its role as financer and funder of the AFP project, the advertiser is the player with the clearest and most understandable goals. The driving forces that are moving companies and brands to invest in the production of television content (fig.14) are quite straightforward in view of the current market situation and the media landscape today.

fig. 14 Advertisers driving forces

First of all, advertisers are working hard to achieve the goal of being perceived by customers as entertainment producers; as Calder and Malthouse (2008)47 state, the brand needs to convey fun
46 47

L. Rouse, Will branded content work for your brand? in Media Week June 2007 B.J. Calder, E. Malthouse, Media Engagement and Advertising Effectiveness in Kellogg on Advertising and Media, Wiley, 2008

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and enjoyment, it has to entertain. Companies want to engage their customers as deeply as possible in order to provide them with a brand experience rather than make them believe that they want just to sell the product. The need to create brand experience is one of the main driving forces for advertisers working with AFP because it allows them to convey a broader brand value message rather than just push the product. This is confirmed also by the experience economy theories from Pine II and Gilmore (1998)48. If the investments in TV advertisement are still an important part of every advertisers marketing efforts, companies also want to be able to cover different platforms and get in touch with consumers in multiple moments of the day. It is clear that TV is no longer the only mass-medium and there are different and multiple platforms where the product should be present. So, advertisers are also looking desperately to own good quality content they can use on different occasions and mediums. For example, these days almost every company has its own web site, Facebook profile or YouTube channel that needs to be filled with good, appealing content in order to engage and communicate qualitatively through every channel available.

4.3.2 The TV Channel

TV channels have experienced in the last few decades different technological and market revolutions. However, big TV networks have always underestimated the impact of those modifications in the media landscape. Thats why within the media industry, broadcasters have been seen in the last few years as the dinosaurs quoting Nick Ryle, President of Rylewoolcombe Agency during his speech at the Screen Yorkshire conference in 2008. TV networks used to succeed by taking advantage of their historical power in the media landscape and they have never been willing to change business model and strategies. They have also been skeptical of adopting new business models especially related to advertisement because they were worried about losing their power as catalysts of advertisers and, in turn, losing their continuous revenue streams. Some networks simply havent seen the opportunity to engage with brands as an opportunity to drive new revenues and new ways to do business. These days, the situation is changed and is changing so quickly that Nick Ryle thinks some of those broadcasters maybe have already lost the chance to change their strategies and future prospects49. However some TV networks have started heavily using AFP, employing experts who work solely on this kind of television programming such as Discovery Channel, foretelling its importance.

The driving forces that move the TV channel (fig. 15) towards AFP are especially related to the changing media environment and the threat of digital media, especially the web, to its traditional advertising revenues. As mentioned above, TV channels are experiencing a crunch in advertising revenues and investments and thus the AFP is seen as the best way to deal with the problem of decreasing financial resources to invest in productions. At the same time, another important driving factor is the need to fill the daily schedule for those networks that have experienced the creation of what are called family channels. Thus, the proliferation of channels and niche channels require more content and TV shows and AFP products are seeing TV channels as a great opportunity to have more content totally financed by advertisers. Moreover, the broadcasters are seeing as positive the opportunity to avoid the risk in buying sometimes insecure and expensive TV formats by utilizing AFP projects which can provide free, quality television content. Finally, in interviews of people in the advertising and sponsorship department of television channels, revealed that TV

48 49

B.J. Pine II, J.H. Gilmore, Welcome to the Experience Economy, Harvard Business Review, 1998 Nick Ryle, President of Rylewoolcombe Agency, Screen Yorkshire conference, 2008

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networks are also using AFP as a pure offering strategy. As Andreas Stenberg, at TV4 stated We want to give to our advertisers as many options as possible and AFP represents right now another service we can offer to our highly demanding advertisers.

fig. 15 TV Channels driving forces

4.3.3 The Media Agency

The media agency is the actor that historically has been called an advertising agency, or in the case of a singular person, a media buyer. These days the denomination of media agency seems to fit better with the broader range of activities that these actors are playing in the media market. The media agency used to be in charge of the planning of the entire TV advertising campaign for its client. From the definition of the target and the tone of the TV ad to the negotiation with the TV channels for the purchase of specific slots during the daily schedule, the media agency played the role of coordinator and link between advertiser and the other actors. These days the situation has not changed very much and media agencies might even become more involved by designing more multifaceted campaigns because they now have more platforms to use and more activities to set. Media agencies are often at the cutting edge as they are in the middle of a fast-moving market. They must always have new suggestions and ideas for the clients, giving them innovative solutions and a well-prepared bundle of offerings involving different activities and platforms where advertisers can market their products and brands. From the creation of the slogan to casting and the choice of locations, the media agency is still a crucial actor. Within the AFP business, media agencies (fig.16) are looking to establish a more essential and effective role between advertisers and TV channels, capitalizing on their knowledge of the market and expertise in designing multiplatform and multifaceted campaigns.

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fig. 18 Media Agencys driving forces

4.3.4 The Production Company

The production company has always been an essential actor for the production of TV advertising and also TV content in general, even if it doesnt hold a very critical position in the market in terms of bargaining power. Essentially the production company is in charge of production of the film, from the shooting to the editing of the ready to play out audiovisual product for the TV channels. Production companies are also used more and more by the TV channels when they have to outsource productions of any kind of content, from TV shows to live events, and this situation makes the relationship between production companies and TV networks more established and stable. Having interviewed Lars Bilk, Creative Director at the production company Bond Street, it was quite clear that there is close collaboration with the TV channels, which helps to maintain their working relationships. In the case of Bond Street Film many times their production work comes directly from the TV channels who recommended Larss company to the advertiser or the media agency. According to Lars Bilk, one of the main goals for production companies is to match the quality standards that TV channels require to be on air, particularly regarding format and quality of the image, which are of course crucial and essential factors for any audiovisual product. At the same time, the production company has to follow the direction of the media agency that, together with the advertiser, designed the ad campaign, the tone and the visual appeal. It is clear that presently production companies have more opportunities to produce more TV content based on the proliferation of niche TV channels. Besides the gap between big production and niche production, that will be more and more marked, AFP will provide opportunities (fig.19) for production companies to produce more TV content, possibly a cheaper type of production, as well as establish long term relationships with advertisers who will need entertaining content for their multimedia platforms.

fig. 19 Production companys driving forces

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Having explained for each actor the capabilities, driving forces and needs that are moving them more towards AFP productions, it is now possible to have a clear overview of what the players are looking for in these types of projects. The decrease of traditional advertising investments, the evolution of the digital landscape and the need to entertain and engage more and more customers are definitely the main driving forces and needs within the television market. That is why AFP is suited to become one of the most effective tools for advertising, as well as for creating content, in todays market for both advertisers and TV channels. Media planners say that, while the major commercial broadcasters are backing advertiser-funded programming, the demand is even greater among multichannel stations where budgets are tighter50. According to Thinkbox, the cooperative body in TV advertising for the largest commercial channels in the UK, AFP is becoming an increasingly important part of television-related marketing in the UK and the same scenario might apply to the rest of Europe, with certain cultural and media habit differences and taking into consideration advertisement regulations. What seems the bigger advantage for AFP is the ability of advertisers and brands to take advantage of the TV medium, using the whole communication potential to redefine themselves also as entertainment producer and to take advantage of, and exploit the potential gains that a successful television program can generate, which also includes activities and synergies outside the television box. On the other hand, TV channels have the opportunity to produce TV contents and TV formats financed by the advertisers, cutting down the risk margin in directly financing the production or buying new format. As a Viacoms report states AFPs contain contents that can target specific demographics and that can create a bond between the topic, the brand and its audience. This is a fresh new way of advertising as it reaches beyond the normal 30 second spot and combines entertainment, content, media and branding51. Even if a clear list of benefits is quite easy to analyze and describe, what makes an AFP project a successful TV program is quite hard to clearly define. There are some characteristics that can be seen as central for the success of this kind of production. For example, branded content counts as "experiential" marketing, allowing viewers to spend longer periods of time with advertisers' brand values52, while the sole criterion for advertiser-funded programming is editorial quality53. This direction in the production will secure the quality of the program that in turn means a better response from viewers and consumers.

4.4 Type of productions

Based on my research, AFP productions seem to be quite flexible and multi platform types of projects. Based on what has been already on the air on different TV channels and in different TV markets around the world, AFP projects can vary widely in the range of type of formats and audiovisual content. It is important to say that AFP experience exists in television and cinema, game shows and drama, reality shows and documentaries, showing a quite unique way to adapt to all these different formats
50 51 52 53

C. Fitzsimmons, Advertiser-funded masterstroke proves hard to beat, The Guardian, Monday 3 March 2008 Advertiser Funded Programming Marketplace Summary, Viacom Brand Solution, 2010 L. Rouse, Will branded content work for your brand? in Media Week June 2007 C. Fitzsimmons, Advertiser-funded masterstroke proves hard to beat, The Guardian, Monday 3 March 2008

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and media. It is possible to try to formalize a quite standardized production process to create it, besides the format and the platform where it is going to be shown. AFP can be created in different ways and negotiations are present in different and multiple stages of the production process. Here, based also on the interviews I conducted with actors within the market, it would be useful to present visually how the production proceeds in its most important steps:

fig. 20 version of AFPs production process

1. Advertisers marketing department in collaboration with the media agency creates a brief, which includes the brand's core values and the nature of programming the advertiser wishes to fund. 2. A commissioning editor then works with the client and tries to get a production partner. 3. A programming concept is offered to a production company and the format is then worked up with the advertiser before it is submitted to a broadcaster. 4. Programming is made and funded and then given to a broadcaster who will then have to find a suitable slot for it to air54. Additionally the process can proceed in others ways. For example, with regard to the level of involvement of the broadcaster, the TV networks can participate actively, and usually they prefer it, in the development of the production at an earlier stage, especially if the programming aspires to have important position in the TV channel daily schedules.

fig. 21 version of AFPs production process

1.Advertiser and TV network start to have preliminary meetings about the possibility of producing a new TV show and its placement in the daily schedule. 2. Advertiser, in collaboration with its media agency prepares a first brief of the TV show that needs to have approval and feedback from the TV channel. 3. Media agency or TV channel starts the scouting for the production company that can fit better with the project. 4. Once the production company is found, the final brief of the TV show concept is submitted to all the actors and they start the production of the final product for the play out.

54

Advertiser Funded Programming Marketplace Summary, Viacom Brand Solution, 2010

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At the same time, especially for formats that require a high level of editorial independence such as documentaries, the model used to finance an AFP project can be quite different in terms of the relationship between producers, broadcaster or distributors and advertisers. It is possible to outline three different processes for production and financing of these types of AFPs: 1. The advertiser follows the creation of the editorial content from the beginning, and so has more control over the message but a lower degree of certainty of the success or successful realization of the final product. 2. The advertiser finances the production when the product, the documentary for example, is ready to play out and to be distributed. In this case the advertiser will have less control over the message and the editorial content but more ability to evaluate whether the final product is good enough for marketing purposes and whether it is an effective investment. 3. A third way could be a hybrid between those two processes, creating a mixed investment from the advertiser in order to not risk too much on the production process, foregoing editorial independence as well as a sort of control over the message it needs to convey.

4.4.1 Most popular TV format

We have experienced in recent years, and in different television markets, many different types of AFP productions, from game show and reality to TV series and documentaries. No one of those types of format seems not to fit with the idea of branded content but it is possible to underline different integration approaches for each one. So, I will try to categorize the most well known advertiser-funded programming based on the TV format and the genre of the content.

Game shows
Game shows seem to be one of the easier and common types of AFP for its rather easy integration between advertisers and TV shows contents. A game show, such as Britain's Best Brain financed by Nintendo and broadcasted on Channel Five (UK), appears to have an easy integration process between actors and there are no risks at all of having interference of the brand in the creative development. At the same time, using game shows, it is possible to have a quite deep integration between advertiser and TV content without affecting and overstepping into the TV show. Another game show like The Kripton Factor, broadcasted by ITV in UK and financed by The Sage Group, is a great example. The game is a famous TV quiz about mental attributes and brain games (such as mental agility, observation, intelligence, general knowledge). The theme of the game perfectly fits with the core business of the advertiser; in fact Sage is a software company that produces business management software to help managers, sales forces etc. to perform difficult tasks more quickly and easily that, in the end gives to its clients high standard services. Thus, at the same time, some of the contestants could be seen as possible Sage customers: there is the investment banker, the customer service manager, the manager consultant etc, which are indeed all possible users of Sages software. This means that there is a deep connection between the TV show and the advertisers core business, which helps of course the brand stick in the minds of the audience, creating product integration between the TV show and the advertisers brand, even without having to show the companys brand.

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fig. 22 frame shots from The Kripton Factors opening titles

Sport shows
These days, sport content is quite common and easily formatted to integrate with this type of project. Sports and related brands seem to have the ability to build TV content easily. Some recent examples are: Wayne Rooneys Street Striker financed by Coca Cola and broadcasted by Sky 1 in UK. It is a kind of talent show where the Manchester United and England National Teams striker searches for the best street soccer player. Another great example is how Red Bull used the sponsorships of different types of sports and contests that, in the end, had been shown also on TV, such as the Red Bull Flug-tag on ITV4. MTV, partnered with X Box, Samsung and Adidas, produced during the 2006 Soccer World Cup a documentary-behind the scenes about some famous soccer players called MTV Goal Germany 2006 that has been broadcasted in 11different countries. Another successful sport show was the Gillette World of Sport, a show that the target audience wants - but it is not about razors or shaving gel. This series offers a topical mix of the best sporting highlights and specially shot features from around the world, and there are many more examples out there. An even better example of sport show is The McCain Track & Field. It is sponsored by the chips manufacturer McCain and aired in UK on Channel 4. The 30-minute-shows are aimed at a young audience, who are encouraged to take their enthusiasm for athletics beyond an interest in watching GBs professional athletes race and into active participation. The series highlights some of the most promising young athletes in the country, but it is focused just as much on those with no previous experience. The focus of the TV show, as well as for the TV sponsorship before and after each episode, is around the grass roots philosophy that moves both the UK Athletics and the advertiser. Here, the link between the content and the advertisers purpose is activated without in anyway compromising the independence of the TV content and integrates well with it.

fig. 23 frame shots from The McCain Track&Fields opening titles

Music shows
As well as sport content, music is one of the most used genres in the AFP productions. It works well in the integration between companies and TV channels in both types of formats: the one-shoot concert and the long-run talent/music reality. Of course, MTV is one of the most well known TV channels using this type of synergy with brands. In early 2005 fast food giant McDonald's linked up with MTV in a global partnership based around new music talent, the MTV Advance Warning, a 12-part series which was focused on emerging artists (it helped to launch artists such

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as Joss Stone and Franz Ferdinand), on air before in US and then across Europe. Talking about one-shoot concerts, the famous MTV Music Awards is always sponsored by big brands (LG Electronics for example etc.). But MTV looks also to niche and creative content such as the Campari Red Passion Parties With the MTV Soundsystem targeting clubbers around Europe during the summer. MTV also created also a micro website to have a more integrated campaign. Besides MTV other TV shows based on music content have had good success. One of those is the Orange RockCorps concert in partnership with Orange, Sony Ericsson and Channel 4 in UK. The volunteer association RockCorps produced the music show in association with those main telecommunication companies as a final stage of a more articulated campaign to engage teens and young people as volunteers for community works with the slogan Give 4 Hours, Get 1 Ticket. For the broadcaster, the TV concert from The Royal Albert Hall is a great piece of show, having artists such as Busta Rhymes, Ludacris, Feeder, Guillemots, Lethal Bizzle, John Legend, The Automatic etc. who can attract many TV viewers and high ratings. At the same time, for the advertisers it is a unique way to connect even more with their main customers and target groups. Another example is the F1 Rocks, promoted by the Formula One brand, in order to promote the F1 races. The concert took place after one of the season legs in Singapore in September 2009 and it has seen many international stars in its line up with a wide distribution over 172 countries and a global audience of 26 million people. The next concert will take place next September 2010 with a very unique line up of artists as well. The Sweden market, for example, experienced the TV show Summer Krysset, which was financed by the amusement park Grona Lund and broadcasted on TV4 and earlier on SVT. The show combined music performances with international artists with a crossword puzzle game. It took place in the Stockholm amusement park during the entire summer season with a TV show per week.

fig. 24 frame shots from Orange RockCorps TV show

Factual and reality shows

Factual and reality is another extensively used format for advertiser-funded programming because, as Andreas Erenius, Vice President at the production company OTW stated, it is possible to mix easily different components like learning, reality and competition in order to help people to get involved in the program. In fact, it is possible to see different examples from all over the world that fall into this category, making this format one of the most successful example of branded entertainment. One good example is The Gamekillers, a one-hour television series/realty show/candid camera that was aired on MTV in the United States in 2006. The series was developed by Axe, along with the ad agency Bartle Bogle Hegarty. The consumer-products company approached MTV with the concept, thinking it was the most relevant network for the show to air on. Axes ad campaigns target young men aged 14-35, a target demo that fits neatly with MTVs viewership. The "Gamekillers" are a collection of stereotyped characters that represent certain annoying personalities who teens and 20-somethings often encounter throughout the course of their social life. In particular, each Gamekiller is said to be particularly skilled at inadvertently (or sometimes

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purposely) ruining a date and breaking up a couple and they are all generally understood from a male perspective. They used the slogan keep your cool, which works perfectly as a rule for the show where guys have to maintain control when they are attacked by the different types of gamekillers but, at the same time, keep your cool is what Axe promises to give to the customers with its new roll-on. It is easy to understand the power of this message and how it was embedded in the whole plot of the show without appearing forced or showing the product. The TV show has been running on MTV US and it has had incredible success with big ratings (3 million viewers and the 4th highest rated show on cable TV), so that MTV decided to rerun the show 11 more times giving Axe 11 hours of free media for the brand! Moreover, the show has been sold and watched in Canada leading to extra airtime for free and revenues from the rights of the show. One more example is the reality show financed by the water producer Aqua dOr in Denmark and aired on Viasat 3 in May 2008. The show had the goal to find the right person, for the advertisers next advertising campaign, among common women with natural beauty. So they launched a contest and scouting session to find the right testimonial for the campaign the natural beauty that worked as any other reality show, following the candidates during their ordinary daytime activities, with a finale where a jury decided which one was the best. The idea of natural beauty and simply water worked great for the advertiser who got a good in response in term of revenues almost immediately, according with Allan Feldt, CEO at Aqua Dor, who said that the sales grew up by 40% that year, and the web site created for the project became one of the most visited websites in Denmark. Also from Denmark another example of a factual format for AFP is the creation of the TV show BOOST for the launch of the new model of Ford Fiesta. In collaboration with Mindshare and Nordinska Film (DK), they created a weekly lifestyle show in which the three hosts presented international fashion trends, haircuts and makeup and every show finished with the three girls applying the tips and new styles to themselves during public events such as movie premieres, concerts or fashion shows. The TV content, plus an internet magazine and a traditional ad campaign, had the aim of reaching the selected target group of women between 25 and 35 years old, a shift in the traditionally targeted group for Ford according to Catherine Krokos-Leroy, Head of Branded Entertainment department at Banijay Entertainment, who worked on that project55. In Sweden it is possible to find two examples quite similar to this kind of TV format: Room Service and Off Set. The first was a painting and interior design program, first aired in 2001 on Channel 5 and financed during the first season by the Painters Union, where specialists were called by families to remodel their houses. The program succeeded in attracting such a large audience that Channel 5 decided to produce it without asking for funding by the advertiser in the following seasons, giving great exposure for free to the Painters Union. The latter case in Sweden, Off Set, is also an interior design program funded by VSM Group and aired on TV456. It has only had minor success.

TV series and documentaries

The integration of advertisers and contents might be different for other types of format and products. For example, a documentary like The End of the Line about overfishing, for which the distribution was financed by the British grocery store chain Waitrose, had a different financing model. The advertiser, who didnt have any input into the editorial content of the documentary, nonetheless had the right to appear as a partner and to show the documentary on its internal TV channel to raise awareness about the problem of overfishing and state that the fish in its stores were
55
56

MiP TV International Conference, Cannes, France, April 2010 A. Hgman, A. Lindn, C. Nilsson, Advertiser Funded Programming - En ny vg runt mediebruset!?, 2007

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approved by the fishing authorities. Also in this case, the advertiser experienced an increase in fish sales of 14 percent over the previous year, according to Waitroses senior fish buyer, Quentin Clark57. Another example of a documentary is Summit on the Summit, funded by Procter&Gambles company PUR, but also HP, Microsoft and the United Nations Foundation, and aired on MTV. In the documentary, a talented team of musicians, actors, show business stars etc. attempted to make it to the top of Mount Kilimanjaro, the highest peak in Africa, in order to call attention to the clean water crisis. As Robert Friedman, President of @radical Media, the media agency behind this project, stated during the last MiPTV conference, the three weeks initiative has had a lot of interest with about a million unique viewers on the dedicated website, 5 thousands viewers of the daily content on MTV; it has created twitter and Facebook accounts, two you tube channels and actually by the time the show premiered, before the show premiere, and they got 8 hundred million impressions, and 2 billion impressions by the time the documentary ran on MTV. It was a significant initiative for all the partners, and was very unique. It wasnt the traditional kind of integration: it was really to take the DNA of the brands and integrate them into the show, which we think is the future.58 Finally, about TV series. A recent product is the TV program called Pedro & Maria financed again by Procter & Gamble to be aired on MTV. This project might be seen as a kind of updated soap opera by the company which started the phenomenon. The series will be a bilingual, modernday Romeo & Juliet in which audience members can suggest plot twists and story direction using websites like Facebook or Twitter59 in order to increase even more the interaction between the viewers and the TV series.

57 58 59

L. Partos U.K. retailer Waitrose bans swordfish sales, SeafoodSource, 19 June, 2009 MiP TV International Conference, Cannes, France, April 2010 B. Tourtellotte, Ben Silverman's Electus unveils shows, one for MTV, Reuters, 12 April 12, 2010

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5. BEYOND THE AFP STRATEGIES

In this chapter the focus will be on the dynamics between the actors involved in the production of advertiser-funded programming. The analysis of the network of actors is critical to understanding how much an efficient creation of value within the network should be considered one of the main assets of an AFP project.

5.1 The value constellation in AFP

It is quite clear that in AFP projects there is no a single model for the production. The issue is creating the right partnership between a numbers of different actors involved in the project. Thus, the partnership becomes a crucial and basic characteristic in any AFP production. The important point is that no single actor can deal and deliver the whole project alone and so the different companies should be willing to work integrated together with the other actors without feeling their contributions are being compromised. According to Normann and Ramirez (1993)60 one of the key challenges of the new economy is to integrate knowledge and relationships in order to have a greater impact in a highly competitive market. Kothandaraman and Wilson (2001)61 stated that today, the focus has moved beyond individual firms to examining the value-creating network formed by the key firms in the chain that delivers value to the end customer. This, then, is where every advertiser funded programming producer should tune in.

Because the AFP production is always a gamble from in the moment it starts, a well-formed network of partners is more and more important to secure the hoped for result of the entire project. In order to have an effective collaboration within the network, it is important that the network should be able to produce value to the end customers and to create superior value for the offering. However, Kothandaraman and Wilson (2001) point out that the creation of value depends also on the ability of each company to perform at the highest standard to produce the benefits generated by that companys competence. These are called core competences. Being quite rare that they exist within any one company, the network constellation works as a catalyst to bundle the companies skills together and create the desired superior value of the attributes that are important for customers. Moreover, the partners within the network have to be judged also for the level of the risk they present for each other and for the whole network as well. In fact, again Kothandaraman and Wilson (2001), formalized a matrix with the level of risk in a range from high to low, as well as the value contributed, in order to distinguish four broad categories of relationships: integrative, facilitative, developmental and losers. Integrative relationships are defined as those based upon the contribution of the partner to current products and future products design and development. Facilitative are the ones that involve important, but not usually core, parts of the market offering or technologies. Developmental relationships are represented by firms able to add value to its market offering and then help others to improve their ability to be a low-risk operating partner. Finally, what are called losers are firms that do not add value and are difficult partners. In order to have a clearer understanding of how the network can condense together the actors in each
60

R. Normann, R. Ramirez, From Value Chain to Value Constellation: Designing Interactive Strategy Harvard Business Review, 1996

61

P. Kothandaraman, D.T. Wilson, The Future of Competition: Value-Creating Networks, Industrial Marketing, 2001

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advertiser funded programming, it is useful to represent visually for each actor, which core competences usually are brought to the final product and the level of risk for the network.

fig. 27 Actors capabilities and Kothandaraman and Wilson (2001) risks evaluation

The actors themselves have to find the way to integrate their core competencies and core capabilities. According to Kothandaraman and Wilson (2001)62, the value creating networks will take the business into a competitive domain where competition will shift to the network level from the firm level, where a network of firms will compete against another network of firms. The idea of working together as a team in order to beat the competitors within the TV and advertising market seems to be well accepted by the professionals Ive interviewed. In fact everyone believes that the value-creating network is going to become the necessary competitive advantage for a successful AFP project.

fig. 28 Kothandaraman and Wilson (2001) value creating networks

The above scheme shows the nature of the interrelationships between the core elements of the network. The superior customer value, which is the goal of the value-creating network, appears as the result of the core capabilities of the actors, which are influenced as well by the nature of the relationships between them. Also, the quality of the relationship facilitates the creation of value. We can apply this model to almost every example of AFP in order to understand how to manage the network of actors involved in the project and how to improve the entire process.

62

P. Kothandaraman, D.T. Wilson, The Future of Competition: Value-Creating Networks, Industrial Marketing, 2001

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5.1.1 Partnerships characteristics

If the partnership and the network seem to be one of the most important characteristics of any AFP production, it will be more and more important to see the entire phenomenon not just as a flow of revenues from the advertisers to the broadcaster but as a constellation of actors that create value. The traditional TV ad value chain and the new AFP value constellation differ in many ways. As I discussed above, in the traditional television business, the value chain can be modeled as a flow from the creator - the advertiser and the advertising agency - to the end consumer. In contrast, the value in AFP productions is created by each actor involved in the project and, at the same time, it is also created by the users and viewers which are involved in and mobilized to take part in the show. Using the new communications tools offered by the digital environment, the users are engaged in the network, producing value themselves. In some of the examples I presented before, the role of the viewers as creators of content quite clearly adds value to the development of the TV show. This is what Kothandaraman and Wilson (2001)63 called the cooperative paradigm based upon cooperative relationships between the buyer and the seller. The case of the TV series Pedro & Maria, where viewers can shape the development of the plot using social networks, is quite illustrative. As can be seen in the scheme below, the flow of the content creation in AFP is more dense and wide, involving consumers, who are mobilized to take part in the value-creating network and be creators of content themselves, opening up new processes of value creation.

fig. 29 AFPs network value chain

The more complex a network is and the more the creation of value is spread around the constellation of actors, the better AFP is able to generate more opportunities for the creation of value and to pack those into new and particular offerings. At the same time, the creation of more opportunities of value requires the actors within the network to be more adaptable. Another characteristic in the network of AFP projects is that the roles seem to be constantly redefined as do the relationships between actors. Thus the network of actors must be much more flexible in order to be able to adjust the advertising campaign strategy more effectively during the evolution of the advertising campaign.
63

P. Kothandaraman, D.T. Wilson, The Future of Competition: Value-Creating Networks, Industrial Marketing, 2001

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fig. 30 Current content television

However, what emerged during the interviews Ive conducted with professionals in the industry, is that in practice, the actors in the market are still working on a daily basis process they still do not have systems in place for working within a network. TV channels, media agencies and production companies still deal with these complex and articulated projects differently each time. According to Hakan Gustafsson, Managing Director and Head of TV Department at the media agency, Carat Nordic, each project is managed differently, with multiple negotiation stages and different dynamics. It seems that even on a single project, actors need to meet and deal with partners multiple times during the production process, making the development of the entire project longer and more difficult. Of course this situation of daily deal-making and having different points of negotiation during the production, doesnt help the efficiency of the network, especially when these activities are so complex, dense and multifaceted.

fig. 31 production process in AFP

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5.1.2 Partnership and networks goals

If the informal production process is one of the problems within the network, based on the interviews with production companies, media agencies and TV channels, it seems also that another important factor in establishing an effective partnership within the network involves the role of the advertiser. What each actor is looking for in an advertiser besides the ability to invest financial resources in the project, is its maturity. Production companies and TV channels in particular believe it would be easier to work with big advertisers that have the marketing knowledge to interpret the advertiser-funded programming, not only as a way to push more successfully the product or brand, but also as a new way to engage with consumers. This approach will lead to an easier collaboration and to a more qualitative production of content. In contrast, the professionals I interviewed also had experiences with small companies who started an AFP but unfortunately were unprofitable in terms of dealing with the content. Those small advertisers usually lacked an understanding of the necessity for long-term investment, instead were looking for an immediate return on investment. As Andreas Stenberg at TV4 stated the advertiser should immediately realize how much it costs to produce a TV show and how complicated it is to realize a welldesigned AFP project. We experienced advertisers who were thinking they could use the last money in their marketing budgets for AFP, without realizing that is a much more complicated and multilayered project. Production companies, as well as TV channels, prefer to work with big clients who have the knowledge to understand thoroughly the functions of the AFP. Andreas Erenius, vice president at OTW, was in agreement, stating: OTW, generally, doesnt want to produce TV content with small and cheap clients because the result would be not enough and would not match the broadcasters requirements. Moreover, it would also reflect poorly on the image of the production company itself. The goal in bringing the best-in-class players together should be, of course, the willingness to do everything for the advertiser funded programming to secure the success of the project. Douglas Scott, during his speech at the MipTV conference in Cannes in April 2010, describes his idea of partnership as the right production house, the right show runner, the right talent, and the right distributor. All those things need to come together helping to drive success in term of what exactly our terms of objectives are64. Finally, it is possible to say that the collaboration is the primary characteristic in the network for delivering more value using the constellation of actors as a resource. As Kothandaraman and Wilson (2001)65 state companies that can deliver superior value in the market place will win the battle for the consumer. The commitment to work together as much as possible becomes one of the most important resources in AFP productions and the network and is crucial in both on-air and offair activities. Nicky Buss, ITV customer relations director, said in this way: If the idea of advertiser-funded programming is to find new ways to create productions that can be of value for each actor involved in them and especially for the high demand customers, it is important to talk about content collaboration in a multiplatform sense.66

64 65 66

MiP TV International Conference, Cannes, France, April 2010 P. Kothandaraman, D.T. Wilson, The Future of Competition: Value-Creating Networks, Industrial Marketing, 2001 L. Rouse, Will branded content work for your brand? in Media Week June 2007

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5.2 The TV show as a spin-off

One of the most important characteristics of the AFP project is the idea that the actual TV production is just the starting point of wider and broader campaign involving different activities and communication tools to communicate in a better and more articulate way, the information about the product or brand while at the same time, being entertaining. In other words, the AFP itself is used as a spin-off for a broad range of external activities for the whole project, which connects together traditional advertising campaigns with new types of consumer/viewer communication strategies. For this reason, AFP production can be seen as an on-going process where the TV content is the beginning of a more vast and liquid communication campaign. Thus, the advertising campaign will be more intense, occupying more stages of the consumers life from the traditional outdoor posters to viral videos on the web. The on-going process can be seen as one of the core strategies behind every AFP production. The content in the TV show is the base for an integrated communication with customers, making the brand and the story integrated in a deeper and more effective way. The strategy is designed in order to create a 360 degree advertising campaign that involves different communication tools but, at the same time, it is flexible enough to be modified during the process. Having these characteristics of a flexible campaign, the AFP projects, starting from the TV show, can be shaped later on during development in different ways, based both on the success of the TV show as well as on the appeal of the external activities or the response of the customer.

fig. 33 structure of activities generated from the TV content in AFP projects

As it is possible to see in the picture above, in the actual AFP productions, the pure video content for television or web is the central part of a more extensive and multifaceted integrated marketing mix. For example Roger Troup, managing director of AFP specialist Flawless, talks about "integrated media" in using a TV channel to push awareness of an AFP project and then using the

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internet via an aggregator such as Joost, a video sharing website, to build a direct relationship with a brand's audience67. But it is not just that, because the activities around the advertiser-funded programming are many and different from the TV box and we can call those, off-air activities.

5.2.1 The off-air activities

One of the biggest advantages of AFP is that branded content can exist on many different platforms, from traditional TV channels to the web and beyond. The development and production of entertainment opens up a wealth of rich content opportunities for the brand to exploit off-air68 stated Douglas Scott, CEO at Ogilvy, one of the most important media companies in USA. The ability to build around the TV content, a wide range of entertainment activities on different platforms seems to be one of the most interesting and important advantages of this kind of project. Basing my research on different television markets and watching different TV content, I had the chance to notice that in almost every AFP project the off-air activities have a critical role in the overall campaign. Those are all the activities that the advertiser and media agency design around the story and the idea of the TV show. The editorial content, broadcasted on TV, becomes the base for a wide range of activities with the goal to engage the customers more deeply and to find new approaches to advertise the brand and the product besides simply the television commercial.

Internet: websites and social networks

The web is the platform where the off-air activities have the greatest impact and importance for every AFP project. It is essential to integrate the TV show with the web in order to better engage the consumer in what is called the media meshing. Douglas Scott, at Ogivly, describes it in this way: Todays teens are consuming four forms of media in a given moment of time! If before, the consumption of television was a solely moment of communication between the broadcaster and the viewer who was exchanging his/her time for the entertainment, now the young viewer is watching TV while chatting with a friend and googling something and listen to music all at the same time. This makes it harder for a brand to break through, thus a new form of entertainment, that is brand entertainment, is needed69.

This trend is also called the two screen and it seems to be one of the fastest growing phenomena in the business. The audience/consumers, especially in the segment of population between 15 and 35 years old (one of the most interesting and profitable segments), are usually watching the TV with the laptop open connected to the web and, if they are engaged in the show, they usually go on the TV shows website to discover more about characters, backstage etc. Surveys show that they do so especially during the show. In fact, according to the 2008 Nielsen report70 for the USA television market, 31 percent of internet activity occurs when consumers are also watching television. The opportunity to use the web in a more integrated way seems to be the best way to build a one-to-one relationship with customers and create a 360 degree multi-platform and

67 68 69 70

L. Rouse, Will branded content work for your brand? in Media Week June 2007 MiP TV International Conference, Cannes, France, April 2010 MiP TV International Conference, Cannes, France, April 2010 A2/M2 Three Screen Report, Nielsen, 4th Quarter 2008

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integrated communication campaign. But the web has also another great impact on the economy of the AFP project. On the internet, the space that can be used to show the brand of the advertiser is far bigger compared with that of the TV because the regulations about sponsorship and brand placement are less strict and not yet regulated. This means that the advertisers brand can be shown without any restriction on the TV channels website dedicated to the TV show. At the same time the brand is usually an active link to the brand website. This utilization makes the web a great place for advertisers to show off the brand and to re-direct the audience of the TV show to its own website.

The off-air activities on the internet can be attractive to viewers in various ways and be theme related. For example the TV game show The Kripton Factor provides viewers an opportunity to play with the TV shows games and with many other games on their own. On the website dedicated to the realty series, The GameKillers, the fans of the TV show can read more about the characters and get more tips on how to fight against every type of the gamekillers. For the documentary Summit of the Summit the viewers had the chance to see more videos about the ascent to the Mt. Kilimanjaro and on the web site dedicated to the reality show Nature beauty, women had the chance to share beauty tips and participate in a contest uploading their video profiles. Thus, it is clear that the advertisers can create a communication strategy on the web using spin offs from the TV shows. This web strategy seems to be very important for advertisers and for TV channels as well, providing them with an immediate response based on the number of web visitors. Andreas Stenberg at TV4 agrees when he said that the opportunities created on the web are unique for actors and that, at TV4, they are currently working harder on that integration. TV content can also be spread around the web using social networking, video sharing websites and communities, providing a greater awareness of the programming and feeding all the possible platforms. Aris and Bughin (2009)71 describe the off-air activities stating: There is increasingly a need for advertisers to use digital-marketing techniques across multiple platforms that will require from media companies the ability to come up with cross-media offerings.

fig. 34 itvs web site dedicated to the game show The Kripton Factor

71

A. Aris, J. Bughin, Managing Media Companies, Wiley, 2009

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fig. 35 Sages web site linked to the TV shows web site

Road-shows and live shows

Another type of off-air activity is called road shows, where the advertisers and the media agency set up a promotional tour, usually strongly related to the tone and subject of the TV show, to advertise the product and the brand in public spaces, like train and metro stations, public events and neighborhood fairs. In doing so, the advertiser can use the brand awareness created by the TV show in order to reinforce the message with the customers, engaging them in fun and informational games and live shows. This type of branded activity seems to be particularly important if the company wants to better communicate the idea of an entertainment brand. The road shows are great chance for any company to reinforce the advertising campaign message started on the TV show, and to engage the consumers in activities related to the core message of the campaign. In this way, the message will be reinforced and it will stick more easily in the consumers mind.

One example that demonstrates well the importance of this kind of activity in order to build interest and brand awareness and to create a more effective campaign is the TV show McCain Track and Field. In addition to TV shows and the TV sponsorships, McCain (the advertiser), Beattie McGuinness Bungay (the media agency) and the UK Athletics Organization (the additional partner) created a road show around England involving more people around athletics, giving them the chance to try different athletic disciplines. During the road shows, where famous British athletes are present to give advice to people, the McCain brand is always present in different forms. Some games are designed around the McCain core business, chips, such as the sack-running and the potato-on-the-spoon competition. The dedicated website completes the 360 degree McCain campaign around athletic and healthy lifestyles.

Road shows are not just great marketing opportunities for the advertisers but also for the TV channels and TV networks that can also use live shows to engage consumers and the audience even more, thereby reinforcing their brand awareness and the link with the TV show. Nielsens 2007 report72 showed that usually viewers are more loyal to the TV show as a brand than to the particular TV channel. Thus the road shows can be seen by the TV network as a great way to reinforce the channels brand recognition by using the brand awareness of the TV shows brand. The road show can create a new experience between the TV show and the viewers, designing new, unique
72

2007 report on US Television market, Nielsen, 3rd Quarter 2007

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participation opportunities in live events. In general, as Aris and Bughin (2009)73 state, off-air activities are great opportunity for media companies because they can also monetize branded content across different media product/channels and through merchandising, resulting in much closer cooperation between the different types of media than has traditionally been the case, potentially transforming the organization from a product-specific to a consumer segment oriented organization. Off-air activities can also take place before the transmission of the TV show, as Andreas Erenius, at OTW, experienced with a project they worked on. They used off-air activities as a starting point, where common people were engaged in a contest that ended with a TV show, a kind of gala, aired on TV in prime time.

In short, the integration between off-air marketing and activities, using the TV show as a spin-off, is another important strategy to obtain the maximum return and to create the most effective message that, in turn, can affect consumers behaviors. It is one of the most important tools to increase engagement with consumers, which is the main goal in todays TV and advertising strategies as Douglas Scott, President of Ogilvy, stated at MipTV 2010 in Cannes: This idea of distributive content is really becoming the connective tissue from a cultural standpoint to the audience, it is where we see this market is created. In fact, it is very important for us to be able to activate the content across all our media channels with our partners so as to spread the message more effectively reach the audience74.

5.3 Implications and suggestion for a better network strategy

Based on the analysis of the actors involved in the advertiser-funded programming project and based the description of how the network of players and the partnerships between them can increase the value of the overall project, it would be useful to formalize some suggestion for strategies, with their implications for how better partnerships and the value network constellations can ensure better results for AFP. As has been analyzed, the main goal for every AFP project is to create a strong relationship between the actors involved. The long-term relationship should be the focus for every firm working with advertiser-funded programming because, as Kothandaraman and Wilson (2001)75 state, the main way that firms assemble the network of firms is through developing strong relationships with key partners who can add value to the market offering. The point, as many professionals in the field have already realized, is to find the right partners who can ensure an increase in the valuecreating process within the network. The network being the central pillar of the whole project, it must be strong enough to support all the activities needed in a branded content. Thus, it is important that the actors be chosen based on what Kothandaraman and Wilson (2001) called their core competences. Only by having the best players with the best knowledge about the project and

73 74 75

A. Aris, J. Bughin, Managing Media Companies, Wiley, 2009 MiP TV International Conference, Cannes, France, April 2010 P. Kothandaraman, D.T. Wilson, The Future of Competition: Value-Creating Networks, Industrial Marketing, 2001

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with a long range perspective toward achieving goals, can advertiser funded programming succeed. Thus, integration of different disciplines and expertise within the constellation helps to leverage the level of value-creating activities. To accomplish this, AFP projects have to combine different activities into branded offerings, producing new opportunities for creating value. In successful AFP projects, every actor involved has been willing to contribute from the beginning of the project. Players within the market have started to realize how important it is to engage with the networks partners in a cooperative effort instead of just pitching ideas through media agencies or production companies, as happened in the traditional television commercial market. This proactive approach in developing the project from the first stages of development is an important asset for the overall project that will increase the value of the final product. This early involvement does represent a more expensive and time consuming effort than if they wait until a later stage of the production, according to the actors interviewed. Thus, if the network of actors wants to maintain a high level of quality, assured by the cooperation of every player at the starting point of the development, companies should try to create the necessary conditions for better project organization. This is why, as also suggested by an IBM Report, actors involved in the TV value chain should create standards-based network operations in order to optimize content development and distribution, as well as to enable continuous improvements in business flexibility and network cost-efficiency. If the network can be moved to an optimized delivery platform, actors should be able to improve their agility to meet different production needs, producing product faster for launch in the television market, which, in turn should reduce production cost as well as time consumed in dealing within the network. A standardized network structure would also benefit by the responsiveness to market needs, shaping and developing content and off-air activities, tuning with the consumers needs and acceptance, utilizing each actors resources in a better and more effective way, thereby increasing the overall value-added activities of the network. Use of the elasticity of partnerships in the value-creating constellation is where a TV show has also the opportunity to build proprieties over time. If it starts small, it can grow by introducing new elements and additional contents and also the format can evolve during the different seasons. This could be the real advantage in AFP production and the characteristic any partnership should try to achieve, because better internal organization of the actors within the network will lead to a more qualitative and efficient production of any kind of advertiser funded programming. Moreover, this way of creating value can redefine the traditional value flow and can redesign the ways of value creation. According to Norman and Ramirez (1993)76, the goal of the value constellation is not just to create value for customers but also to mobilize customers to create their own value from the companys various offerings. From this perspective, the network of actors involved in every AFP should be looking at all the possible off-air activities as a way to involve consumers in the creation of value for the overall project. This can turn out to be a real asset for this kind of production making it different from all other types of TV and advertising contents. As, will be shown in the next chapter, mobilizing the audience and the consumers will not just help increase the value creation of the offering itself but also it will help to retain and engage viewers more deeply so that they become loyal advocates of the AFP, of the brand and the TV channel.

76

R. Normann, R. Ramirez, From Value Chain to Value Constellation: Designing Interactive Strategy Harvard Business Review, 1996

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6. EFFECTIVENESS IN AFP
This chapter will analyze which characteristics are important to increase the effectiveness of advertiser-funded programming in term of consumer engagement and consumer loyalty. Those are two critical characteristics that any AFP should try to activate among the viewers in order to secure the success of the whole project.

6.1 Content and engagement

Every advertising campaign determines its efficiency and effectiveness based on the return-oninvestment. However what makes the effectiveness of any campaign greater is its engagement with consumers, especially now, when media cannot be treated as simply as a vehicle and consumers cannot be consider simply passive viewers. As Calder and Malthouse (2008)77 state the effectiveness of advertising depends on the brand being advertised, the quality of the ad itself, and the characteristics of the execution such as the size of the ad and placement in the medium. If that is true for the traditional television commercial, the same would be even more relevant when we talk about AFP. In the current situation, the clutter of advertising which has been actually created by the advertisers themselves, is almost saturating the market and the advertising industry is in a desperate struggle to break through this clutter even as they create more clutter! Brands and companies dont just come forward with what they want to sell, they want to engage the consumers with things they want. And that is why advertisers have blurred the line between programming and products78. The idea is to give people advertisements that they do not just tolerate, but even go in search of it. What the advertisers always wanted to do is not simply to suffuse the atmosphere but to become the atmosphere. They want to become the cult and so they study cults and how they can affect the consumers into the right frame of mind79. This is what an AFP should be designed for: to create an atmosphere where the brand surrounds the content without having to be shown, increasing the power of the message. As Alberstat (2001)80 states the main interest of an advertiser lies mainly in adding marketing support and building a culture around the programme to benefit both the programme and its brand. The need for a better-planned and conscious development of brand entertainment and AFP projects is related also to the new consumers changes in habits and cultures. If, on one side, the market today is made up of sophisticated consumers who are well informed and do not easily buy into catchy slogans and unsubstantiated claims, on the other side, the consumers are indeed changed. Dawson and Hall (2005)81 highlighted two particular factors: the first one is that western cultures are increasingly driven by entertainment, news and celebrities and thus brands have to deliver entertainment to compete for attention. The second factor is that consumers usually edit out brands
77 78 79 80 81

B.J. Calder, E. Malthouse, Media Engagement and Advertising Effectiveness in Kellogg on Advertising and Media, Wiley, 2008 Frontline PBS, episode: The Persuaders Nov, 9th, 2004 Frontline PBS, episode: The Persuaders Nov, 9th, 2004 P. Alberstat Law and the Media, Focal Press, 2001 N. Dawson, M. Hall, Thats brand entertainment for World Advertising Research Center February 2007

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that fail to entertain them, affecting so the entire brand communication. That is why advertisers, as well as TV channels, should not lose the opportunity to entertain consumers and in turn to become closer and more essential for them. The figures tell us that in 2004, for the first time, American consumers spent more on entertainment (movies, music, cable TV, websites, video games, and so on) than business spent on advertising ($178.4 billion vs $175.8 billion). These statistics are quite illustrative about the role that content and entertainment represents for advertisers and television markets in general.

6.1.1 Content to increase customer satisfaction and retention

Best (2009)82, analyzing marketing dynamics, points out that in a competitive market with many choices and low customer switching costs, such as in the television market, even relatively high levels of customer satisfaction may not ensure against customer defection. That is why, in these types of markets, a customers retention is much more difficult to achieve. It takes higher levels of customer satisfaction to retain customers and, in turn, it is why it is extremely important to investigate what makes viewers satisfied and how to drive them to become loyal consumers, a crucial objective for both TV channels and advertisers involved in advertiser-funded programming and in any branded content. According to many professionals within the market, and based on what has been explained in the previous chapters, the content itself represents the first element of attaining a higher level of engagement. So, it would be useful to start analyzing the power of the content as the touchstone of the customers engagement and to move later to investigate which techniques and strategies allow advertiser funded programming and brand entertainment might help to create loyal customers. The editorial content has as its main goal the creation of contact with the audience. The objective of reaching the desired customers, however, is not easy to accomplish, especially today as the television market is facing increasing audience fragmentation and increased clutter. The fragmentation of the market, as Aris and Burghin (2009)83 analyzed, has made it increasingly important to identify and understand its different segments in order to tailor products effectively, especially as most segments tend to like multiple types of content rather than just one genre. Also, according to Aris and Burghin (2009), media companies have to develop a deep understanding of how and when people would like to access content, as there are many more channels to access the same type of content and consumers have much more freedom to determine the timing. This is because, as Singh (2008)84 states, the media market in general has moved from a time based paradigm to a content based paradigm, and thus it seems increasingly important to focus on quality and relevance of the content, as the way to engage with costumers.

6.1.2 The value of qualitative content

Aris and Bughin (2009)85 describe the content produced for entertainment as a perishable commodity, at the heart of every media business, something intangible and depends on fashion,
82 83 84 85

R.J. Best, Market-Based Management, Eastern Economy Edition, 2005 A. Aris, J. Bughin, Managing Media Companies, Wiley, 2009 S. Singh, Marketing Strategies for Protection of International TV Formats, 2008 A. Aris, J. Bughin, Managing Media Companies, Wiley, 2009

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trend and inspiration. Thats why the content, especially in AFP, has a central and crucial role and it has to be well designed and planned in order to be successful. In fact, according to Aris and Bughin (2009), the focus of most media companies top management is still very much on the content generation process. This is because this process has the largest potential impact on net income, and especially within branded content, affecting both advertisers and TV channels, especially in AFP projects, that has as main idea that the editorial content is in any sense influenced by an outside interest to convey a message or reach an underlying order. The intention may be to increase interest in an industry, product category or phenomenon, creating a need to drive a trend. The overall message of the content needs to fit within the corporate philosophy, however, it is important that advertiser doesnt compromise the genuineness of the editorial content in its entertainment characteristics or in its quality as television programming. In fact, quality is also by far expected and, even though it could be perceived as a commodity and standard, it is still fundamentally important. The value of the content in television programming, and especially in branded entertainment, is incredibly important for consumers and its value is well explained by Douglas Scott, President at Ogivly, who defines and suggests the term content as a currency. Thus, it is possible to talk about content as social currency, whether water cooler talk, Twitter talk or blog conversation about the content of the TV show, it helps engage people about the content and makes them want to share with others their thoughts. The content will represent for viewers fuel for conversation in their social community activities whether on the web or in real life, making them more engaged with the TV show. At the same time, the content can be also seen as promotional currency, in terms of reward that the advertiser and the TV channel give to consumers without selling anything. The viewers give to the TV channel their time and they get back pure entertainment/ educative/ informative content and this can activate engagement. Lastly, the content can have also an economic currency for the advertiser because either through licensing or in a format value, content created can be re-used and subsequently played back in the economic model of investment thats happening today between producers of content and distributors of content86.

fig. 35 Content as a currency - how to activate engagement through qualitative contents

6.2 Engagement and Brand Experience

The challenge for advertiser funded programming and brand entertainment in general, compared to the traditional advertising models, is to create a higher level of engagement for consumers, filling the gap between entertainment, content and the brands philosophy. Todays viewers are more
86

MiP TV International Conference, Cannes, France, April 2010

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skeptical about everything and they are not easily persuaded. Besides the traditional 30 second television commercials, which, as previously discussed, seem to be ineffective, advertisers now have to spend more in engaging the audience rather than simply telling them to buy a product. Broadcasters and TV networks as well are facing an urgent need to capture a higher level of consumer engagement and to respond to changing consumption habits to secure their positions as content providers. Thats why brand entertainment in the form of advertiser funded programming, plays a crucial role. Thus, a new relationship between consumers and companies should be the objective that media companies involved in AFP projects, such as media agencies seek, and production companies and especially TV channels, should educate advertisers about this new way of increasing sales and revenues.

6.2.1 Emotional connection

In order to engage with customers in a deeper way using advertiser funded programming, it should be kept in mind that branded entertainment requires that the content be relevant to the consumers in terms of the context of the story. Relevance, also according to Hakan Gustafsson at media agency Carat Nordic, is the only way to create engaging contents. Though content can play many roles - it can educate, can inform and entertain- it is important to first have a clear understanding of what matters most to the consumers. Content needs emotional resonance, in terms of its relating to viewers personal lives and interests. If an AFP project can build those two characteristics, it can aspire to realize what Curry (2004)87 calls emotional connection with viewers, because according to him, television is about delivering experience. As Kevin Roberts, CEO of Saatchi and Saatchi Advertising, says What consumers want now is an emotional connectionthey want to be able to connect with what's behind the brand, what's behind the promise. The brands that can move to that emotional level, that can create loyalty beyond reason, are going to be the brands where premium profits lie88. This is the new frontier and the goal of any advertiser-funded programming that will enable the advertisers and TV channels to create relationships with their consumers. For example right now, Uniliver is shifting its marketing efforts towards something called its relationship campaign, a term quite self-explanatory of the firms goals89.

To be able to activate an emotional connection with consumers advertiser funded programming should make a shift from the traditional advertising strategies. Based on a recent research study90, the old models in advertising dont work anymore: those that focus on creating awareness, repeating information over and over or focus on persuasion, trying to influence and sometimes forcing consumers to buy the product. What now seems to influence consumers is an engagement model based on creating experiences, activating personal and emotional connections with the consumers who in turn feel more like a part of a community making them feel more relevant. Thus engagement enables interaction, creates distinct experiences that connect brands and people, and provides something that stands out as valuable and believable91.

87 88 89 90 91

A. Curry, The Branding Bubble in The New Medium Television, Interactive Digital Sales, 2004 Frontline PBS, episode: The Persuaders Nov, 9th, 2004 Frontline PBS, episode: The Persuaders Nov, 9th, 2004 2010: The Year of Experience Brands, Jack Morton Agency, 2010 2010: The Year of Experience Brands, Jack Morton Agency, 2010

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6.2.2 Experience economy in AFP

Experience has always been an important characteristic for AFP and for the traditional television commercials as well because, as Calder and Malthouse (2008)92 write, media engagement and experiences can make ads more effective. However there may be drawbacks because of the intrusion of the traditional 30 second ads within the television experience. Calder and Malthouse (2008) confirm that what can make the difference is a better understanding of how the experience of the media product and the experience of the ad fit together and how intrusion can interfere with this process. It seems that AFP productions are on the right path, having a more integrated and non-intrusive way to advertise and promote brands. According to Pine II and Gilmore (1999)93 todays consumers desire experiences and experiences have emerged as the next step in what is called the progression of economic value. From the TV show to a wide range of other activities, the offering value is continuously reinforced and maintained at high level of consumer engagement. Engagement is one of the most important characteristics that delivers a high level of value experience for consumers: thus it is important to understand the lessons from the Internet and aim to increase viewer engagement in the most powerful medium, broadcast TV. Engagement in advertiser-funded programming is activated directly from each set of activities created around the TV show. Consumers, when they feel involved in the development of the plot of a TV series or when they have the chance to offer advice to the shows characters or especially if they themselves can participate in the shows programming, are able to connect directly with the content, making them a part of what they are seeing. This deep involvement in the content experience results in viewers being particularly engaged with the TV show. Consumers need memorable events, experiences that are inherently personal and that engage them at an emotional, physical and intellectual level. Pine II and Gilmore (1998) say that experience occurs when a company intentionally uses service as the stage to engage individual customers in a way that creates memorable events. That is why road shows and activities, set up in the everyday lives of consumers (at train stations, grocery stores, neighborhood fairs etc) are extremely important in AFP projects, creating face to face relationships with the audience and giving them the feeling of being in the TV show and furthering their feeling of relevance to the show. Road shows thus are perfect examples for understanding which demonstrate how much the consumers need to be involved in a brand and story experience. It is increasingly important to connect the brand with a story and to try to blur the borders in order to get the viewer lost in the wonderful world of the brand.

6.2.3 From the experience to loyalty

The ability to build experience around and within TV content is likely one of the reasons that branded entertainment is effective and why it has an important position within the marketing mix. But it is also extremely important to understand how the experience economy can be translated to engagement and loyalty which are, in the end, the goals for both advertisers and TV networks. Engagement is maximized by the enjoyment that the TV show gives to consumers, without asking for anything in return. Consumers perceive that enjoyment as a gift that the TV show gives them as a reward for the time they spend with the programming. For example American Express in the
92 93

B.J. Calder, E. Malthouse, Media Engagement and Advertising Effectiveness in Kellogg on Advertising and Media, Wiley, 2008 B.J. Pine II, J.H. Gilmore, Welcome to the Experience Economy, Harvard Business Review, 1998

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period between 1996 and 2006 cut the investments in traditional television commercials more than a half and instead started to pour in millions of dollars into producing web episodes starring Jerry Seinfeld. As John Hayes, Chief Marketing Officer at American Express, said we did this operation because we knew that consumers want to be entertained and the American Express message, built in a fairly seamless way that it doesnt interfere with the enjoyment of the entertainment, assures that the consumers get something and that they start to see the value of the relationship with American Express94. American Express didnt want to come directly forward with what they wanted to sell but they instead engaged the consumers with things they want in the way of entertainment. If TV shows can activate involvement and a perception of personal importance and interest in the show, and consumers feel that the content of the TV show has some kind of value for them, advertiser funded programming may also activate an attitude that makes viewers loyal to the programming. Hopefully this will in turn commit consumers to the TV show and make them show advocates, suggesting it to others. This would result in word-of-mouth spread which is of great importance in building what Dawson and Hall (2005)95 call the media multiplier that gives brand entertainment the chance to increase its effect. Word of mouth effect also has social implications, as consumer recommendations are of great importance in increasing awareness about a TV show, promoting a loyal and engaged audience which will endorse brand philosophy.

Fig. 36 Word-of-mouth effect and media multiplier

This process of involvement and loyalty is confirmed by Andreas Erenius, vice president at OTW, who talks about the factual entertainment format as one of the most effective types of advertiser funded programming for its ability to combine learning, reality and competition that help people get involved. The learning rewards the consumers with good tips that they can use in real life, the reality moves the consumers closer to the character of the show, feeling an identification with him or her, and the competition spices it up. Thus, those three components can activate engagement and in turn loyalty to the program, moving them to talk about.

94 95

Frontline PBS, episode: The Persuaders Nov, 9th, 2004 N. Dawson, M. Hall, Thats brand entertainment for World Advertising Research Center February 2007

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At the same time, in both Duncan and Moriaty (1997)96 and Calder & Malthouse (2008)97, it is clear that both talented and famous people, promoting a brand or a product, have an important impact on decision making and in increasing the effectiveness of the message.

6.3 Implications and suggestions to increase engagement and loyalty in AFP

As has been analyzed, many elements help the TV show create an engaged and loyal audience base, which is the main and most important goal for both advertiser and TV network involved in advertiser-funded programming. Additionally, it is important to point out that some characteristics that emerged during the investigation can have important implications in designing an effective AFP. It is useful to point out the role of the advertiser, in terms of involvement in the project and in the development of the editorial content of the TV programming. From what appeared in the interviews Ive conducted and based on the statements of international professionals in the field, it is clear that AFP is not for every business: it is a really powerful tool only when a brand has authenticity in a particular area. Moreover, if the advertiser wants to contribute to creating the content, it must have something of interest to say. Otherwise if it simply wants to push the product or the brand the risk of corrupting the editorial relevance is really high. It is clear that when the advertiser invests its financial resources in a branded entertainment production, but remains at arms length from the editorial content, it may seem more risky from a marketers point of view. However, this is where the really interesting territory lies. If the advertiser wants to communicate authentic messages, it has to let the production companies, the TV channels and even the media companies, which have competencies within the market, do the job independently because thats when the brand gets the most potent results. In fact, it is possible to highlight two broad approaches on how to interpret the role of the brand or product within the editorial content: the advertiser can put the brand in the editorial content or let the brand surround it. The latter may be more efficient for both the content and brand, especially in the way the audience approaches it. Advertisers, and especially TV channels, should maintain the integrity of the core content as a vital prerogative, without forgetting that is a TV show, and that the actors want to build an audience, not irritate people. Content and entertainment that really speak to the audience are incredibly powerful and can give a distinctive voice and point of view, aligning the advertiser and TV channel with the audience. This is where the true focus should be.

96

T. Duncan, S. Moriarity, Driving Brand Value: Using integrated marketing to manage profitable stakeholder relatioships, McGrawHill, 1997 B.J. Calder, E. Malthouse, Media Engagement and Advertising Effectiveness in Kellogg on Advertising and Media, Wiley, 2008

97

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fig. 37 how the editorial freedom can increase value for the brand

Second, because the media market, as well as the television market, is more and more fragmented and consumption habits have changed, the segmentation of the consumer and the market represents a crucial point on which to build a successful AFP. The first step for any advertiser-funded programming would be to pinpoint the individuals or segments the advertiser and the TV channel want to reach, in order to engage them with the right message, at the right time, around the frame of mind and provide them with as much utility and information as they actually can. As Hakan Gustafsson, at media agency Carat Nordic, said consumers insights nowadays give enough data to be able to reach those individuals when they are in the market or when their behavior is set to actually engage them with the brand message. Thus, the content, as the first touch point with consumers, has to be relevant for them without wasting their time and must give them something important which is tailored to their needs and wishes. Another important characteristic in designing effective advertiser-funded programming is the maintenance of a high level of engagement with the TV content. The overall AFP project needs to put pull-through tactics in place to maintain interest and build the relationships and emotional affinity needed to drive some measurable value back to the sponsors brand, in order to finally turn the brand fan or the TV show fan into a fanatic with an addictive appeal. This can be done if the TV show is able to create moments of dialogue with its audience, as happened in some TV formats I previously described, using the web and social networks to obtain feedback that can be positive or negative but which, in either case, help to build confidence with the audience. TV programming should use social networks in order to engage people with similar tastes and passions so they can meet and share mutual feelings. This is turn will give the TV programming, the brand and the TV channel the opportunity to be viewed as a common place for meeting like-minded people, people who have an emotional connection with the TV show.

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7. FUTURE PROSPECTS AND POSSIBLE DRAWBACKS OF AFP

This chapter will be briefly discuss what the possible future applications of advertiserfunded programming model might be for social and educational projects. It will also trace briefly the impact that a change in the product placement regulations could have for AFP projects and finally it will touch on some problems of measurement when we talk about branded content and advertiser-funded programming.

7.1 Social and educational prospective of AFP

As has been explained during this report, advertiser funded programming should aim to establish itself, first of all, as a high quality television production. In addition to high quality standards we can also add the high level of engagement it creates. These two characteristics, then, are the most powerful tools of an AFP project. For this reason advertiser-funded programming can also be seen as a great way to help social entrepreneurs amplify their message and reach more viewers. The ability to engage the audience and involve the consumers in the TV show can be useful for a broad range of social and educational activities. Another benefit of AFP is that companies with social and educational goals can use the TV content to move people towards their activities and involve them through social networks and off-air activities. AFP and branded entertainment in general thus can be an effective tool to build awareness around themes and arguments with social relevance, using the entertainment value of TV content to help increase the appeal among viewers. There are already examples of television contents with specific social and educational subjects, created to build awareness of relevant social and humanitarian problems. I previously mentioned the documentary Summit on the Summit that had the goal of making people think about and be aware of the problem of clean water in Africa, using famous artists testifying about the campaign and using extensively digital technologies and social networks to increase the involvement of viewers in the African problem. Another advertiser-funded documentary called The End of the Line, talks about the problem of overfishing. It had the goal of creating awareness of an environmental issue. Likewise, TV concert and TV series Orange Rock Corps created by the association RockCorps, used AFP projects to engage more young adults in community works, giving them a concert ticket in return. The high level of engagement and loyalty that these kinds of content can provoke is extremely appealing, not only for companies because of its impact on revenues and sales, but also for associations and educational projects in order to nurture closer relationships with the audience and engage them in a fun and enjoyable way.

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7.2 Product placement; will it help AFP to grow?

Many in the media industry see the growth of the AFP market directly correlated with a new atmosphere of regulatory flexibility related to product placement. This will make companies and brands more willing to invest and in turn it will help the creative industry play at the same level as other international content providers and creative industries. The increasing flexibility within the industry should tempt advertisers to invest more in AFP. The increased investment could also help the market move AFP up on the agenda, to start to produce more prime time content and more articulate and sophisticated TV shows. However, product placement doesnt seem to be the panacea for everybody in the media industry. For example Daniel Knapp, an analyst at Screen Digest, seems skeptical about product placement: In Austria, where product placement is allowed, it generates 2% to 3% of commercial broadcasters revenue, he said. Its not enough to buffer the revenue downturn98.

Product placement has additionally been criticized excessively, especially in Europe, but today the old fear that that type of programming could become hour-long television commercials has been dispelled. European viewers and consumers are already used to seeing product placement in foreign television productions, mainly from USA. Shows like Desperate Housewives, Friends and 24 have largely used product placement but nevertheless have proved to be massively popular after many seasons. Of course some kind of deregulation of product placement would definitely help the entire business of AFP, at least in attracting advertisers. The media agency MPG believes strongly that help for AFP is needed stating: Whereas before these deals could make no reference in the editorial to the brand, and as such were over dependent on the sponsorship boards making the link between the brand and the message, it would be possible to more closely link the two throughout the content. So the result would be a win-win situation for all. Producers and broadcasters would be able to open up valuable new revenues streams and offer a more integrated marketing solution to brands and agencies. This is turn would help to protect TV spending and prevent it slipping away at a faster rate onto the internet99.

7.3 Problem of measurement

One of the main problems standing in the way of exponential growth of advertiser funded programming is the need to create a relatively acceptable way to measure the effect of the TV show. The content-led marketing essence of any branded entertainment, of course, doesnt help in search for a way to measure the experience that AFP creates, so there is still the challenge of proving it with numbers. One interesting way to measure and analyze the effectiveness of AFP programming in general might be to compare the traditional television ratings with the impact of the show in the social environment, such as on the web and social network. The comparison of the two could provide interesting insights into TV contents viewers and their social interactions. In fact, as the American consultant agency Networked Insights discovered, the most widely viewed TV shows are not always the ones that create the most discussion on the web, in blogs and communities, a conclusion that provides the creators, channels and even the advertisers a new way to look at ratings. What Dawson and Hall (2005)100 call the media multiplier has to be taken into account in addition to the traditional television ratings because if a TV show can create discussions and conversation
98 99

E. Hall, Still No Product Placement Allowed on U.K. TV, in Advertising Age, March 2009 E. Thwaite, Product Placement - A more integrated future beckons, MPG Thinks, October, 2009 N. Dawson, M. Hall, Thats brand entertainment for World Advertising Research Center February 2007

100

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about itself, it increases its level of entertainment and engagement. Below, are two charts that present the comparison made by the agency Networked Insights.

fig. 38 comparison between TV rating and social index

fig. 39 comparison between TV rating and social index for TV networks for TV programming

This approach, I think, is going to be the next step for a more comprehensive understanding of the phenomenon of the two screens that can definitely help the overall comprehension of advertiserfunded programming as a great way to redefine advertising messages. However, an increase in studies to evaluate the effects of AFP as well as a total commitment of each actor to find a common ground for measurement are the two goals that should benefit the whole industry. Evidence of brand effects and commercial results will encourage more brands to invest in brand entertainment as it becomes justified and its strategic role fully understood. This in turn will also positively affect and position media companies for future growth101.

101

N. Dawson, M. Hall, Thats brand entertainment for World Advertising Research Center February 2007

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8. CONCLUSIONS
Finally, based on what emerged during this research and based on the analysis that was done and the suggestions given, I will summarize the main points touched on in order to bundle them together in synthesis to provide the response to the initial question.

8.1 Partners network and value constellation is at the core of AFP

As emerged in the analysis of different types of advertiser-funded programming formats and having collected information and insights from the different actors involved in these types of productions, one of the most important characteristics that can affect the result of an AFP production lies in the structure of the network and in the roles of the different partners. First of all, according to Kothandaraman and Wilson (2001)102 the value creating networks will take the business into a competitive domain where competition will shift to the network level from the firm level, where a network of firms will compete against another network of firms. Thus, different actors have to work together to be more competitive in a fast-evolving market, using the different knowledge of each actor to create the best network as possible. The network works as a catalyst of value across the actors and partners. According to Normann and Ramirez (1993)103 one of the key challenges of the new economy is to integrate knowledge and relationships in order to have a greater impact in a highly competitive market. Knowledge comes from the partners within the network and, using the relationships between partners, can be transfered to the entire value-creating process. Kothandaraman and Wilson (2001) called the knowledge of each actor core competencies. Thus, the network has the ability to increase the value of the entire production and to ensure an higher value at the final product, using the constellation of actors as a fundamental resource of specific, but usually scarce, assets which brought together can create an essential competitive advantage in the competition within the market. The integration of different disciplines and expertise within the constellation helps to leverage the level of value-creating activities. Using the partnership of firms, the network can create the sum of particular assets in order to bundle them together, combining different activities into branded offerings, producing new opportunities for creating value and finally creating the desired superior value on the attributes that are important for customers.

The superior customer value, which is the goal of the value-creating network, appears as the sum of the core capabilities of the actors, which are influenced as well by the nature of the relationships between them. At the same time, the quality of the relationship facilitiates the creation of value.
102 103

P. Kothandaraman, D.T. Wilson, The Future of Competition: Value-Creating Networks, Industrial Marketing, 2001

R. Normann, R. Ramirez, From Value Chain to Value Constellation: Designing Interactive Strategy Harvard Business Review, 1996

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The multifaceted network and the creation of value spread around the constellation of actors, make the AFP able to generate more opportunities for the creation of value and to pack those into new and particular offerings. These greater opportunities for value creation require that the actors within the network be more adaptable. That is why the network has to remain as the internal goal for all the actors involved because if everyone will be committed to the network process, it will have a positive effect positively on every actor involved.

8.2 Consumers involvement as a way to increase engagement and loyalty

Based on the research Ive conducted and based on the analysis of advertiser-funded programming, it is possible to say that an AFP, in order to be successful in creating an engaged and loyal audience, needs to follow some strategies that can ensure that the project can be designed in an effective way. The creation of engagement and loyalty in AFP is vital in order to secure for the TV show a stable base of loyal viewers for both the TV channel and the advertiser as well. AFP, using different tools and strategies, can increase dramatically the effectiveness of the advertising message and therefore it can be a powerful production and business model for TV advertising. Again, it is important to keep in mind that the goal is to give people advertisements that they do not just tolerate, but even go in search of. AFP offers a perfect example because what consumers mostly are looking for these days is entertainment. In whatever form and platform, they want to find content that will entertain them, speaking to them in a fun and exciting way, creating an enjoyment in watching that will move them into a new stage of experience. The power of the content is the touch point for customers engagement. The editorial content, in fact, has the main goal to create contact with the audience, using relevance, designing contents that can be relevant for the consumers, in term of context of the story. The content relevance will activate what Curry (2004)104 calls emotional connection, creating experiences, activating personal and emotional connection with the consumers who, it turn, will feel part of a whole community, something relevant for themselves. Thus, engagement enables interaction, creates distinct experiences that connect brands and people, and provides something that stands out as valuable and believable. This emotional connection and engagement is created with a multiple set of activities created around the pure TV content, increasing the power of the entertainment value of the TV show. The utilization of web activities, social networks and live shows will create 360 degrees of entertainment experience, giving to consumers memorable emotions. These emotions will have definitive value for consumers, who in turn will become loyal to the TV show and to the brand that gave it to them.

104

A. Curry, The Branding Bubble in The New Medium Television, Interactive Digital Sales, 2004

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References

References
Books, Academic Article and Researches
CORBETTA P., 2003. Social research: theory, methods and techniques. SAGE Publications Ltd. ISBN 0 7619 7252 8 KIRK J., MILLER M.L., 1986. Reliability and Validity in Qualitative Research. SAGE Publications Ltd. ISBN 0 8039 2560 3 ARMSTRONG G., KOTLER P., 2006. Marketing an introduction. Pearson Prentice Hall. ISBN 0 13504 4136 ANDERSON J.C., NARUS J.A., 2008. Business Market Management. Pearson Education. ISBN 978 81317 08064 HKANSSON H., JOHANSON J., 1993. Industrial Functions of Business Relationships. Advances in International Marketing, Volume 5. JAI Press. ISBN 1 55938 4077 PORTER M.E., 1985. Competitive Advantage: Creating and Sustaining Superior Performance. Free Press Edition. ISBN 0 68484 1460 KOTHANDARAMAN P., WILSON D.T., 2001. The Future of Competition: Value-Creating Networks. Industrial Marketing Mangement. NORMANN R., RAMIREZ R., 1996. From Value Chain to Value Constellation: Designing Interactive Strategy. Harvard Business Review BEST R.J., 2005. Market-Based Management. Eastern Economy Edition. ISBN 81 203 2806 X DUNCAN T., MORIARITY S., 1997. Driving Brand Value: Using integrated marketing to manage profitable stakeholder relatioships. McGraw-Hill. ISBN 0786308222 GRONROOS C., 2007. Service Management and Marketing. Wiley. ISBN 0470028629 CALDER B.J., MALTHOUSE E., 2008. Media Engagement and Advertising Effectiveness. Kellogg on Advertising and Media. Wiley. ISBN 9780470119860 ROSSITER J.R., PERCY L., 1997. Advertising, communications and promotion management. McGraw-Hill. ISBN 007053943X

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References

PINE II B.J., GILMORE J.H., 1998. Welcome to the Experience Economy. Harvard Business Review. BRIERLEY S., 2002. The Advertising Handbook. Routledge. ISBN 0415243920 VARIOUS AUTHORS. 2009. When viewers control the schedule: measuring the impact of digital recording on TV viewership. Google, Inc. and DISH Network L.L.C BLONDE K., ROOZEN I. An Explorative Study of Testing the Effectiveness of Product Placement Compared to 30-Second Commercials. Vlekho-Business School, Belgium NILSSEN T., SORGARD L., 2000. TV Advertising, Program Quality, and Product-Market Oligopoly. Competition Policy Center, Institute of Business and Economic Research, UC Berkeley HGMAN A., LINDN A., NILSSON C., 2007. Advertiser Funded Programming - En ny vg runt mediebruset!? Lund Universitet, Sweden ALBERSTAT P., 2001. Law and the Media. Focal Press. ISBN 024051629X SINGH S., 2008. Marketing Strategies for Protection of International TV Formats. Bournemouth University, UK

Articles and Web Sources

DAWSON N., HALL M., 2005. Thats brand entertainment. World Advertising Research Center, February 2005 www.bulldozermedia.com/adm/imagens/.../BrandEntertainment.pdf ROUSE L., 2007. Will branded content work for your brand? Media Week, June 2007 http://www.mediaweek.co.uk/news/rss/663853/Will-branded-content-work-brand/ COOPERSTEIN D., 2010. TV Advertising Budgets Are Under Siege. Forster Research, February 2010 http://www.forrester.com/rb/Research/tv_advertising_budgets_are_under_siege/q/id/56384/t/2 HALL E., 2009. Still No Product Placement Allowed on U.K. TV. Advertising Age, March 2009 http://www.commercialalert.org/news/archive/2009/03/still-no-product-placement-allowed-onuk-tv

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References

FROST V., 2009. Could advertiser-funded programming solve TV financial problems? The Guardian, 27 July 2009 http://www.guardian.co.uk/media/2009/jul/27/television-advertiser-funded-programming FITZSIMMONS C., 2008. Advertiser-funded masterstroke proves hard to beat. The Guardian, 3 March 2008 http://www.guardian.co.uk/media/2008/mar/03/insidemedia.insidemedia11 PARTOS L., 2009. U.K. retailer Waitrose bans swordfish sales. SeafoodSource, 19 June 2009 http://www.seafoodsource.com/newsarticledetail.aspx?id=4294967452 TOURTELLOTTE B., 2010. Ben Silvermans Electus unveils shows, one for MTV. Reuters, 12 April 2010 http://www.reuters.com/article/idUSTRE63B63120100412 THWAITE E., 2009. Product Placement - A more integrated future beckons. MPG Thinks, October 2009
http://www.mpg-uk.com/flash/#/news/what_we_think/mpg_thinks_oct_09_product_placement_a

CURRY A., 2004. The Branding Bubble. The New Medium Television, Interactive Digital Sales, 2004 www.re-thinkingtv.com/pdf/Curry.pdf VARIUOS AUTHORS. The Thinkbox Guide to Advertiser Funded Programming (AFP). Thinkbox www.thinkbox.tv/upload/pdf/Thinkbox_Guide_to_AFP.pdf VARIUOS AUTHORS. Broadcast Sponsorship UK October 2009. Mintel International Group Ltd, 2009 http://oxygenacademic.mintel.com/sinatra/oxygen/display/id=395161 VARIUOS AUTHORS. 2007 US Television Report. Nielsen Media, 3rd Quarter 2007 VARIUOS AUTHORS. A2/M2 Three Screen Report. Nielsen Media 4th Quarter 2009 http://en-us.nielsen.com/ VARIUOS AUTHORS. Emerging IPTV Advertising Opportunities. Alcatel-Lucent report 2008 http://next-generation-communications.tmcnet.com/topics/service-provider/articles/42283emerging-iptv-advertising-opportunities.htm VARIUOS AUTHORS . 2010: The Year of Experience Brands. Jack Morton Agency, 2010 www.jackmorton.com/takeaway/.../files/Jack%20Mortan_Ezine_v1.14.pdf

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References

VARIUOS AUTHORS. Advertiser Funded Programming Marketplace Summary. Viacom Brand Solution, 2010 http://www.getmemedia.com/DB/market-insight/advertiser-funded-programming.html

Video Contributions
FRONTLINE PBS, episode: The Persuaders Nov, 9th, 2004 http://www.pbs.org/wgbh/pages/frontline/shows/persuaders/etc/synopsis.html MipTV, April 12-16 April 2010, Cannes http://www.mipworld.com/en/miptv/ Festival of Media, April 18-20 April 2010, Valencia http://www.festivalofmedia.com/ SYnc: The Brand Wagon Screen Yorkshire http://www.youtube.com/watch?v=_H3UnuOTZSc Aqua Dor Case http://www.youtube.com/watch?v=eo_sEcjsWgo Some examples of AFP http://www.youtube.com/watch?v=9gbf7jhQOJo http://www.youtube.com/watch?v=Go3e35rRl6A http://www.youtube.com/watch?v=kA5PnCQmJaw http://www.youtube.com/watch?v=OGPAkAWeB0A http://www.youtube.com/watch?v=xgbN39wcUXU http://www.youtube.com/watch?v=3H-ep4CUv1Q http://www.youtube.com/watch?v=J4iX2cXSlMc http://www.youtube.com/watch?v=u9nt-iDjDOc

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References

Questionnaire sample
Preliminary background questions
What is the main goal that you want to achieve using AFP? Why do you think AFP can be suitable for you? Which are the main driving forces in AFP for your company?

Network and partnership in AFP

It appears quite clear that in AFP projects there is not a single business and production model, however it is about creating the right partnership between actors. How your company usually manages the partnership with other actors? How can you be sure if it is the right partnership for the advertiser and its brand strategy? How works the negotiation between actors? Is it daily basis, working differently for every project, or has it some fixed procedures and predeterminate requests from your side? How you and your company handle the relationships with most important advertisers and how you try to satisfy their requests? Have you experienced substantial problems in dealing with your partners and, if yes, how can you minimize the risks? From your experience, is it most common that AFP projects are financed by just one advertiser or by a group of advertisers, sharing the investment efforts? What are the most important assets that your company can deliver to an AFP project?

Content and quality in AFP

Content is a crucial characteristic for any advertising product, especially for branded contents. How your company can ensure a high and qualitative copy content that can be effective for the advertisers purpose? What is the level of involvement of your company in the development of the editorial content? AFP still seams not yet a kind of prime time content. What do you think should be done in order to create prime time AFP contents? Do you think that niche channels, with more targeted audience, could be work better for AFP?

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References In terms of quality and contents, do you think is better to pitch a already prepared idea or to be involved from the beginning of the production? AFP projects can involve many different stages and it is a 360degree project. Beside the TV content, how much important are the offair activities that can be generated using the TV show as a spinoff? Have you ever experienced any of those activities (such as road shows, fairs and promotional shows) using the awareness created by the show?

Engagement and loyalty in AFP

Content and entertainment really speaks to the audience and it is incredibly powerful. Which characteristics AFP needs to have in order to achieve the goal of creating engaging contents for your audience? Viewers seam to be more loyal to their favorite TV show rather to the TV channel (source Nielsen report). How can you increase loyalty for the TV show in order to create advocacy towards the advertisers brand or product? What kind of TV format do you think can work better in order to increase loyalty but also in AFP in general? How much do you think web and social networks can increase loyalty and engagement for the TV show and as well as for the advertiser? Are you using significantly any of those tools? How do you define the success of a AFP production?

Future implementations of AFP

Scandinavias best practice in creating new format and content can be a crucial asset for the development of AFP in Sweden. What do you think about it and what are your forecasts for the future of this market? What is the most crucial aspect to secure a successful AFP? What do you think should be the focus for the future development of AFP?

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