NBC Breaks into the Ad Business

The network blurs the lines between broadcaster, ad agency, and marketer

NBC Universal: ad agency. Or it will be, sort of. Its new digital czar, Beth Comstock, and her staffers are approaching key advertisers with a simple yet far-reaching proposition: Let our digital studios create some advertising for you. In other words, although NBC executives chafe at this characterization, join with us to demolish long-standing notions of what separates media companies from ad agencies. "The next natural place to use the talents of the studio is with marketers and advertisers," says George Kliavkoff, NBC Universal's (GE ) chief digital officer. As Comstock conceded at a recent international TV conference, everyone must "get used to the idea that the media marketplace will be full of contradictions and tensions."

One big tension: A direct relationship between networks and marketers could threaten ad agencies' middleman role. Comstock is quick to point out that NBC's marketing efforts will primarily be "adjuncts" to existing campaigns and that "most of the discussions" with marketers involve ad agencies. Still, says one executive familiar with the discussions, in a world of product placement and digital short films built around products, what's message and what's content "starts to become all the same.... That's one of the things Beth Comstock is sitting there recognizing."

THESE DISCUSSIONS HAVE BEEN going on for about three months, Comstock says, and the first deals could be done in a month. The unit working with advertisers is a yearling production outfit called NBC Universal Digital Studios. Kliavkoff says its work is likely to appear outside company properties, perhaps on mobile devices or advertisers' own Web sites, and that it won't just be video. Also on tap: "casual games that can be associated with a particular brand."

Perhaps the toughest obstacles are internal. Even by the low standards set by modern media conglomerates, NBC Universal is "the hardest to work with" on ambitious marketing plays, says one key ad agency executive (who still applauds NBC Universal for its new clothes). There are fault lines within such behemoth organizations, and what works for the larger company may not be good for specific departments or salespeople. Various forms of big-company inertia have made mud of past attempts to try broad-gauged marketing moves. (The failed synergies of AOL Time Warner (TWX ) and Tribune Co. (TRB ) leap to mind.) One reason a newish digital studio leads this charge: The fewer the dog years, the greater the likelihood of learning a new trick.

While it's a first for a Big Three network, NBC's move to produce advertising is not entirely unique. This spring, Viacom's (VIA ) Nick@Nite, Procter & Gamble's deodorizer Febreze, and agency Starcom MediaVest teamed up to produce 90-second sitcoms--including an extremely miniaturized commercial break--featuring talking dogs called The Poocharellis. These aired for nine weeks at precisely 9:57 p.m. eastern time. But Viacom does not own anything like NBC, nor is Viacom's institutional gravitas anchored by a news department that must maintain an ironclad divide between ads and programming. (No, Comedy Central's The Daily Show with Jon Stewart does not count as news.)

Nothing next-generational at a broadcast net arises in a vacuum. NBC still trails ABC and CBS. In October, NBC Universal announced pending cost and staff cuts and signaled a tighter focus on cheaper fare like game shows and reality TV for the first hour of prime time. About 40 news staffers were just laid off. The company's latest moves won't quickly turn around NBC, but its new dances with advertisers rejigger the entire notion of what a network is and how it participates in marketing. As for the ad agencies now feeling the tectonic plates rumble and the fear rising, well, nothing is stopping you guys from making like networks and creating your own programming, as some of the smart agencies have done for some time.

For Jon Fine's blog on media and advertising, go to www.businessweek.com/innovate/FineOnMedia

By Jon Fine

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