Agencies Can Profit From New Rules on Residuals

Producing commercials for the Internet has been a dicey proposition. There’s been a lot of talk but not much real work.

At the same time, smart agencies are doing a lot to take advantage of the converged media landscape, and more brands are profiting from low-cost viral marketing campaigns that leverage the one-to-one marketing power of the Internet.

A notable side effect of all this turbulence is that conventional broadcast models for talent and residuals are now in doubt. During last year’s bitter contract dispute, the Screen Actors Guild tried to address this issue and in the process managed to wrangle some potentially significant concessions from the advertising community (see “2000 Commercials Memorandum of Agreement“).

Under the new guidelines, marketers would be wise to consider three principles for effective convergence marketing:

  1. Watch what you’re doing, because the SAG is taking notes. Under the new agreement, producers have 12 days to file with the union a copy of any agreement with a performer that involves production of an Internet commercial.

  2. Play by the rules. Existing stipulations for rights fees on repurposed content have been renewed. An advertiser that fails to secure Internet distribution rights for work that winds up on the Web may get slapped with a costly copyright violation.
  3. Let your audience do the work. Great ideas spread like wildfire on the Internet. Encourage this by collecting audience data and developing viral marketing campaigns.

Internet Commercial Production

The tremendous potential of convergent media has not gone unnoticed at SAG. The union went to the picket lines and fought hard for jurisdiction of content produced exclusively for the Internet.

SAG’s new contract sets no minimum wage for Internet-exclusive talent, primarily because the space is new and little data exists on which to base a practical wage scale.

Rather than press for a piece of action that nobody really understands, the union instead decided to devise a way to define the space in hopes of collecting residuals later. To accomplish this, SAG has launched a program to document commercial work that is produced for the Internet (see Section 36 B, Paragraph 3).

“The idea is to track the kind of work our actors are getting and determine from that if there’s a rate structure that makes sense,” says Allen Weingartner, SAG official for industrial and interactive contracts.

For commercial producers, the message is clear. Pay close attention to what you’re negotiating in the Internet space. The deals you’re working on now could have a great deal of bearing on what happens down the road.

Weingartner concedes that SAG’s approach is “experimental,” adding that existing broadcast models may prevail if Internet distribution of commercials fails to become viable.

That’s a likely scenario, according to Matt Miller, president of the Association of Independent Commercial Producers. Noting the “unclear monetary models” at present, Miller says it’s impractical to produce ads for the Internet “vis-`-vis normal TV models when you can have two kids in a garage who are doing the same thing at a fraction of the cost.”

Repurposed Content

As for copyright-protected work that’s repurposed for online distribution (see Section 36 A), the SAG contract renews existing fee schedules.

Internet distribution rights remain $1,500 per cycle (18 months). Weingartner says the union considered trying to increase rates for repurposed content during last year’s negotiations but decided against it for fear of strangling the nascent business of Internet commercial production.

As a result, agencies may actually find themselves with a real bargain on their hands — provided they play by the rules and secure Internet rights as a cost of doing business.

Agencies do this routinely. But there’s no guarantee that the Internet will make a difference, particularly if the message doesn’t sizzle or an integrated campaign that leverages traditional and interactive media is poorly conceived.

Let Your Audience Do the Work

Smart agencies have discovered that the Internet is an extremely effective way to spread the word to individual customers.

A case in point is Arnold Communications’s “Milky Way,” a commercial for Volkswagen’s Cabrio. The spot depicts a group of young people driving down a moonlit road, augmented by a wistful tune, “Pink Moon” by the late British folk singer Nick Drake.

Arnold bought Internet distribution rights for “Pink Moon” at the going rate and launched the Cabrio ad on the Internet, distributing the commercial online before it was broadcast on television. The agency sent out 250,000 emails to registered consumers, directing them to the VW Web site.

The email campaign generated a lot of buzz for the TV campaign and boosted traffic to the VW site. There, visitors were encouraged to download VW’s “Milky Way” spot or browse automobile specs and other consumer information. The site even offered an online drive-in theater promoted in conjunction with Seattle-based AtomFilms.

VW’s aggressive posture online is indicative of the direction of convergence marketing.

The campaign works because it integrates email, Internet, TV, and print in a way in which each medium enhances the other. Rather than pushing the message out to a mass audience, Arnold’s VW campaign lets fans use the Internet to do the heavy lifting — at minimal cost and with enhanced impact.

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