Why ad agencies are launching entertainment units

“Consumers aren’t addicted to ads; they are addicted to entertaining content,” said Kristen Cavallo, CEO of MullenLowe and The Martin Agency. “To deny that reality is to do so at your client’s expense.”

That's the reasoning behind Martin Entertainment, an offering launched last month at the Interpublic Group of Cos. agency. Led by former Netflix executive Alanna Strauss, the unit is talking to current clients such as UPS, Geico, TIAA and Hasbro about opportunities in original content and is working on writing music and plays for clients.

Martin is just the latest example of an ad agency charging into the entertainment space. In December 2022, Dagger launched a TV development company called Dagger Originals. In February, WPP-owned global content investment and rights management company Motion Content Group, which helped finance over 1,800 shows including “Love Island” and “Wynonna Earp,” rebranded as GroupM Motion Entertainment in the U.S. In April, The Many launched The Many Studios and Known launched Known Originals. Last month, Havas launched a wellness entertainment offering.

“Eyeballs are moving away from advertising,” said Brad Roth, president of Known Originals. “Consumers are harder to reach … they're all over the place and they’re in ad-supported environments for sure, but they're in plenty of places where ads don’t exist at all.”

While some may view the current trend toward originals as a throwback to “Mad Men” era programs such as “Kraft Television Theatre,” executives involved in today’s originals say it is distinct from sponsored content, or what used to be termed “Madison & Vine.”

An example of sponsored content is a Samsung-sponsored competition series on Hulu launched by BBH Entertainment in 2021 and focused on competitors attempting to create the best photo art using Samsung phones. With originals, agencies are focused on sourcing talent and story ideas, then packaging it with partnerships to sell to streaming platforms.

Unlike traditional ad creative, which is owned by the client, shops creating originals get a financial stake in the programs and branded content they create. That’s a big benefit in an industry where ownership of work has always been a point of contention.

Strauss cites the short-lived sitcom “Cavemen” inspired by Martin's popular Geico commercials in 2007. “We will have a greater financial stake in our IP,” she said. “We will act as a publisher instead of a sponsor, collaborating on the storylines—especially with IP we create like the caveman.”

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Counting down

Known is focused on “brand-inspired” content such as a docuseries it created that ran on Netflix about the 2021 space mission in which Shift4 CEO Jared Isaacman chartered a space flight. The idea for the show, “Countdown: Inspiration4 Mission into Space,” came after Known helped launch a Super Bowl campaign designed to recruit the crew for the expedition.

“We broached the topic and said, ‘Listen, this story needs to continue. This is a historic point in space travel. We can't just stop it at the list of deliverables that we had scoped at the beginning of the project,’” Roth said. “[Isaacman] began to understand that we could tell this story in a way that wasn't initially contemplated. We followed him and the crew around to capture some of the training that they were doing and then we were able to put together a trailer and bring it into Netflix.”

Other shows that Known has created include Hulu’s first aftershow, “One Burning Question: The Handmaid’s Tale,” Netflix’s Kanye West's docuseries, “jeen-yuhs: A Kanye Trilogy,” and the “Future Legends of Advertising,” a podcast with iHeartMedia.

Currently, Known is producing a new docuseries about the McDonald’s All-American Games, the annual all-star event for high school basketball players in the U.S. that has featured stars including LeBron James, Kobe Bryant, Michael Jordan and Candace Parker since its launch in 1977. The series, which includes Roc Nation and Creative Control as partners, will air on Prime Video. Known is also working on two other series, for Toys “R” Us and Universal Music Group.

The trend comes as younger generations are more open to having brands tell their stories, said Scott Bradfield, managing director of The Many Studios and former VP of content at Red Bull Media. This is evident in recent box office hits such as “The Super Mario Bros. Movie” and the Nike-inspired film “Air,” as well as the buzzy upcoming “Barbie” movie. 

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Brand stories and authenticity

Some agencies are looking to create original content without a brand connection.

Of the 20 projects that The Many currently has in development, only a quarter have brand ties to them, Bradfield said, although the original shows can lead to sponsorship opportunities with new and existing clients. 

“The sponsorship integration isn’t necessarily needed,” Bradfield said. “It's nice to have. The goal is to develop the IP, get the sizzles and the treatments in place, and then go to market and speak to the streamers and the networks as they all are going to have more content opportunities as we get into the third and fourth quarter and beyond, depending on how long the [writer’s strike] goes.”

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Indie shop Anchor Worldwide’s entertainment offering, Anchor Entertainment, was launched in 2018 to create original and branded content. Then, Anchor Entertainment spun off as its own independent production company last year with certain executives from Anchor Worldwide retaining ownership. This was due to there being more success in creating standalone work rather than content that was supported by brands according to Sebastian Eldridge, CEO of Anchor Worldwide.

The production company has produced content such as documentaries “Undercurrent” on HBO and “Rebel Hearts,” which launched on Discovery+.

“At the outset, our goal was to create synergies between brands and long form, but we realized over time that our efforts were better used to create originals with no brand tie-ins, as our goal with Anchor Entertainment is to give an unfiltered platform to the storytellers we work with,” Eldridge said. “That doesn’t necessarily jibe with traditional client/agency relationships and their reliance on notes, brand guidelines, rounds of revisions, etc.”

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This original content can even include live events. In April, Horizon Sports & Experiences, co-founded by former Turner Broadcasting exec David Levy, launched “Pickleball Slam,” a pickleball tournament that featured tennis legends Andre Agassi, Michael Chang, John McEnroe and Andy Roddick competing for a $1 million prize. The event, which was launched in partnership with Hard Rock, which provided the venue, and InsideOut Sports & Entertainment, was the first of its kind televised on ESPN. 

The event in total took three months to produce, which Levy said is rare for any televised piece of content.

“Hopefully I've now created a long-term brand called ‘The Slam,’ said Levy. “I hope Slam Two, which gets announced in two weeks, becomes Slam Three, Four, Five, and Six. As I build it out, what else can I build out from Slam? Can I have a three-day slam versus a two? Can I make it more celebrity-focused?”

While Levy didn’t disclose how the agency and other partners were compensated, revenue was derived from ticket sales, merchandise, TV ratings and sponsorships from brands such as Subway, K-Swiss, Franklin and Athletic Greens. On ESPN, the inaugural event peaked with nearly 800,000 viewers.

Hollywood expertise

Agencies aren’t the only ones building out entertainment units. Earlier this year Anheuser-Busch InBev said it would launch an entertainment unit to create original shows, movies and podcasts. The world’s largest brewer enlisted the help of Superconnector Studios, which was started by Observatory founder Jae Goodman and John Kaplan, a partner at production company Alldayeveryday, to help create the unit. Goodman notably helped create Nike’s entertainment unit Waffle Iron Entertainment.

The goal of Superconnector Studios is to connect brands with agencies and production companies to develop content that Superconnector will then have a stake in. Current clients include Sony Music Group, Chipotle, TIAA and Major League Baseball.

“All marketers are realizing that, especially when it comes to brand dollars, they have been paying for the entertainment indirectly,” Goodman said. “They buy ads, the ads go back to the creator, and then the circle continues. And they're realizing that they could actually not only make money but also have more creative input in the entertainment.”

The challenge is being able to prove that agencies can consistently launch projects, which is why shops are tapping into Hollywood expertise, according to Goodman.

Dagger Originals is headed up Lance Krall, Dagger VP, group creative director, and Tara Ochs, head of development. Krall and Ochs previously launched Picture It Productions in 2016, where they worked with producers such as Jerry Bruckheimer, Laurence Fishburne and Drew Barrymore, as well as CBS Studios. Krall also previously wrote for TV shows including “It's Always Sunny in Philadelphia” and “Last Man Standing.”

The Ryan Reynolds factor

One threat to agencies coming into the entertainment space is the rise of celebrity-owned ad agencies. While Ryan Reynolds’ success with Maximum Effort may be the most well-known example, actors, athletes and entertainers such as Terry Crews, Issa Rae and Pharrell Williams have launched their own agencies. Shaquille O’Neal, Spike Lee, Tony Hawk, Reese Witherspoon, Tom Brady and Jimmy Kimmel have also invested in their own entities.

Ultimately, a focus on entertainment will provide more value for agencies, according to Roth, who said he noticed clients become interested in Known Originals during recent pitches aimed at highlighting the agency’s other capabilities in data and strategy.

“It's a revenue driver,” Roth said. “You may not make the sale, it may not be a huge thing, but if it brings in that client to do all the other stuff, it's like a halo. It adds something that I think makes people want to commit.”