Resources / Seminar Papers

New Coin - Brand Funded Content

• by Michael Easton
• in Contract Guides
• posted 28 August, 2014

Introduction
This paper discusses practical legal issues arising in connection with the production of ‘Brand Funded’ media content.

Practitioners working in this area will, of course, need to tackle the tasks common to any film or television production – securing the chain of title, engaging crew and cast, clearing and allocating rights etc – however there are particular issues that need to be considered when the production is funded by a brand as part of a marketing campaign.

In this paper the term ‘Brand Funded Content’ is used to refer to content directly funded or underwritten (wholly or partly) by a brand, advertiser or agency. This is compared to the traditional model, where content is funded by broadcasters, production companies, distributors etc and recouped (partly) through the sale of sponsorship rights or advertising space in and around the content.

The concept of brand funding is not new. Many readers will be aware that the term ‘soap opera’ dates back to the 1930s where washing powder manufacturers such as Proctor and Gamble funded daytime radio and television dramas. Product placement has a long history – for example it is rumoured that De Beers paid for Marilyn Monroe to sing ‘Diamonds are a Girls Best Friend in the film Gentlemen Prefer Blondes, and the practice was memorably satirised in the 1992 film Wayne’s World.

However, the practice of brands directly funding content fell out of favour during the rise of television in the 1950s and 60s – attributed by some to the quiz show scandals of the time, and by others to the rise outside the US of public broadcasters who could not accept such programming.

In recent years, however, the model has been revived. There was some hyperbole about the potential of brand funded content in the mid-2000s reflecting the success of shows such as The Block and Masterchef, followed by disappointment as problems were experienced in implementing that potential.

However, with more realistic and sophisticated projects the model has persisted and in an increasingly complex and diverse media sector it has established itself as a profitable sector, in Australia. Many reasons are put forward:

• declining availability of traditional funding sources;
• viewers’ reduced interest in traditional advertising;
• time shifting of viewing patterns through personal video recorders (PVRs) as well as ‘catch-up’ and other online players diluting the ability to charge for ‘primetime’ viewing and allowing viewers to exclude ads;
• introduction of multiple digital channels and other platforms driving demand for more, and cheaper content (i.e. increase in Sydney metropolitan area from five free-to-air channels to 24);
• higher consumer engagement with brands, acceptance of brand involvement in content production;
• desire of brands to align themselves with celebrities and popular cultural values;
• increased control for brands over content to ensure that it meets their requirements;
• ability to synchronise media content with broader marketing schedules;
• longer lead time allows integration of programming within campaigns;
• ability for brands to exclude competitors from popular content;
• enhanced ability for brands to engage through social media associated with the content;
• right for brands to own content, to exploit and cross promote at events or on websites and other platforms;
• desire to create a ‘deeper brand experience’ throughout a 30 or 60 minute program rather than a three minute advertisement;
• further deal-making flexibility, for example, trading content for advertising time;
• combination with product integration into content;
• technological innovations allowing brands to measure return of investment into brand funded content;
• multiple platforms allowing particular audiences to be targeted.

There are criticisms of the brand funded content model. Quality of programming can be difficult to maintain when the creation of content is subordinated to the demands of marketing. Nor does the model fit all types of content (for example, investigative journalism). Proponents of brand funded content say that it must ‘inspire and inform’ audiences to be successful – a benchmark which can be difficult to attain.

More fundamental concerns have been expressed over the erosion of editorial independence, and the blurring of the distinction between content and advertising. Critics ask whether the integrity of the New York Times is compromised when it allows Chevron to fund an article titled How Our Energy Needs Are Changing (a practice known as ‘Native Advertising’), or whether adequate disclosure of brands involvement in the production of the content is provided to viewers.

All these factors, both positive and negative, must be kept in mind when advising on a brand funded content project.

An experienced media lawyer is likely to be struck by some qualitative differences compared to the standard film and television funding frameworks and processes:

• there is greater flexibility and scope for creativity in structuring deals and agreements - parties are typically less bound by precedent, driven more by media innovations and the needs of their clients;
• content is likely to be part of a larger project or campaign, which may include live events, competitions, social media etc;
• advertising culture is generally less bureaucratic - clients move quickly, and demand simpler, less formal documentation;
• compliance with various advertising codes, legislation and standards can be an issue with some products and services;
• where the brand is a large corporation it can difficult to match its policies and expectations to media industry practice – broadcasters can be wary of this.

Examples of Brand Funded Content

Contractual Issues
In drafting contracts for production of Brand Funded Content the follow issues may need to be considered:

Brand Partner Agreements:

• clear outline of the benefits to be provided to Brand, with necessary qualifications when committing to broadcast timeslots, talent obligations etc, to ensure consistency with third party agreements;
• extent of Brand approval rights over content production, extent of editorial independence (more relevant, for example, where other non-Brand financiers are involved, who may wish to minimise Brand prominence);
• clearance requirements for talent and music, Brand may seek unlimited use without being aware of additional costs – also note that clearance costs may be higher where Brand endorsements are involved;
• where Brand is supplying products, logos services etc – quantity and specifications must accord with production schedule, warranties and indemnities as to quality, legal compliance etc;
• warranties that information provided by Brand is correct, and that products and services comply with relevant laws and standards;
• Producer’s rights in content - producer re-purposing for further exploitation (especially where content has broader appeal);
• Brand rights in content for further exploitation, especially online, consistency with any broadcaster or other holdbacks;
• synchronising production and broadcast schedules with Brand marketing campaigns;
• Brand partner obligations to cross-promote broadcast in other marketing materials, packaging, point of sale etc; and
• revenue share, on-sale of promotional rights to third parties, exploitation of content.

Broadcaster Agreements:

• usually no licence fee payable, Broadcaster may provide advertising spaces at no charge for Producer to sell or grant to Brand, or advertising may be sold at a discount to card rates;
• commitment Broadcaster is willing to make to timeslot (Broadcasters may cite editorial control to refuse absolute commitment, depending on value of Brand as advertiser), specify channel, make good arrangements if moved;
• where more than one episode is to be broadcast Broadcaster may require ratings targets to be met;
• content exclusivity - application of holdback windows which might impact upon intended Brand uses of content, eg on its own website;
• provision of category exclusivity with respect to competitors of Brand, both sponsor rights, and sale of advertising spots (less of an issue where advertising spots are included in deal);
• compliance with Commercial Television Code of Practice and any other applicable codes and standards (see below), especially with regard to identification as brand funded content;
• extent of Broadcaster approval rights (if any) in connection with editorial and quality control;
• cross-promotion, use of broadcaster logo in association with Brand packaging and marketing materials;
• ensuring consistency between terms of Broadcaster and Brand agreements;
• Broadcaster to include brand funded content in channel promotions – both on-air and other media;
• Broadcaster credits and options over future content – can be differing views as to the value of Broadcaster’s non-financial contributions to content production.

Talent Agreements

• right to use Talent’s name, image etc to endorse Brand;
• obligations beyond content production – appearing in commercials, events, packaging etc;
• use of Talent IP especially recipes (rights in which are typically guarded by Talent);
• requirement to use client supplied products, not act in a way which denigrates the brand;
• conflicting rights with other Talent sponsors - restraints on providing services to Brand competitors.

Regulatory Issues
Given the advertising component of brand funded content, in providing legal advice it will be necessary to consider the various additional laws, regulations, codes and standards that may apply. These will vary, depending upon the nature of the product or service featured, and the media through which the content will be communicated.

Australian Consumer Law
Schedule 2 of the Competition and Consumer Act 2011 (Cth), sets out general overriding obligation on advertisers to ensure that advertisements are not false, misleading or deceptive.

Commercial Television Industry Code of Practice (2010)
Where content is to be broadcast on a television channel, the Broadcaster will require that it complies with the Commercial Television Industry Code of Practice, provisions particularly relevant to brand funded content include:

• commercials must be ‘readily distinguishable’ from program material;
• commercial arrangements for inclusion of brand products or services in a ‘factual program’ (which includes infotainment programs) must be adequately disclosed either during the program or in the credits of a program in such a way that is readily understandable by a reasonable person;
• content must comply with the requirements of the classification zone in which it will be broadcast; and
• time zone restrictions which apply to commercials for alcoholic drinks, gambling, products of an ‘intimate nature’, R18+ rated films; children’s products and services.

AANA Advertiser Code of Ethics & Code for Advertising and Marketing Communications to Children
A self-regulatory code published by the Australian Association of National Advertisers. Compliance with this code is a requirement under the Commercial Television Industry Code of Practice, including the following pertinent provisions:

• content must not be misleading or deceptive or likely to mislead or deceive;
• content must not contain any misrepresentation which is likely to damage a competitor;
• content must not depict material that is contrary to ‘Prevailing community standards;
• particular provisions relating to motor vehicles, food and beverages, as well as environmental and Australian origin claims;
• it must be clear to children (where relevant) that it is a commercial communication;
• must not undermine the authority, responsibility of judgment of parents.

Datacasting Rules
Broadcasters are entitled to run additional digital channels known as ‘datacasting’ provided that the content shown on the channels complies with the requirements set out in Schedule 6 of the Broadcasting Services Act 1992 (Cth). 4ME, EXTRA and TVSN are examples of datacasting channels. The rules are administered by the Australian Communications and Media Authority (ACMA).

The intention of these rules is to ensure that datacasting services differ from traditional broadcasting services. Accordingly, the following types of programs may not be broadcast (although excerpts of up to 10 minutes may be):

• drama programs;
• sports programs;
• music programs;
• infotainment or lifestyle program;
• documentary programs;
• “reality television” programs;
• children’s entertainment programs;
• light entertainment or variety programs;
• compilation programs;
• quiz or games programs; or
• comedy programs.

The following types of brand funded content may be broadcast (noting that the rules also provide for other content, such as parliamentary broadcasts or foreign language news services):

• educational programs;
• information only programs;
• interactive services which facilitate or enable transactions, such as home shopping and banking;
• advertising or sponsorship material; or
• news and current affairs, sports or weather bulletins.

Typically brand funded content would be permitted on a datacasting channel as ‘information only’ or ‘advertising or sponsorship material’. An ‘Information only’ program is one where the sole or dominant purpose of the program is to provide factual information on a wide range of topics.

When advising on this issue, the practical approach is to ensure that:

• the content is clearly branded and identifiable as advertising material – for example contains messages urging the view to contact the brand; and/or
• information-only programs should have little or no emphasis on dramatic impact or entertainment value, nor contain extraneous material which does not actually convey information.

In 2012 ACMA ruled on complaints regarding content broadcast on EXTRA and 4ME.

Complaints had been made concerning a program BabeTVlive on Extra, that the interactive adult chat content was outside the R classification as the content was exploitative and degrading. Although ACMA ruled in favour of the channel – stating that the content was advertising and thus within the rules, and was not classified – the show was discontinued by Nine.

Other complainants referred six different 4ME programs to ACMA. ACMA dismissed the complaints in relation to four of the programs – finding that they fell satisfactorily into the information-only genres. Two programs however – All About Animals and Escapes 4 Me – were found to fall within the prohibited Lifestyle, Children’s and Sport genres. Seven agreed to provide training and take other steps to ensure compliance.

All About Animals was held not to be an ‘information-only’ program on the basis that it had a significant emphasis on entertainment, containing segments such as:

• children participating in entertaining activities;
• location filming, as opposed to a studio;
• celebrity owner;
• viewers’ pets; and
• animal jokes.

Instead the program was held to be a children’s entertainment program. In this case
boring would have been better.

Escapes 4 Me included segments with four different programs. Two of these were found to be in breach of the datacasting rules.

The first segment Corona Surfari was held to have significant emphasis on ‘entertainment value’, with the look and feel of a commercial travel/lifestyle program.

4ME was unable to rely on the argument that it was a extract from a longer program as ACMA held that each segment was self-contained.

The second segment Sail Melbourne was found to breach as it comprised a sports program, which is a prohibited category of programming for datacasting.

Therapeutic Goods
Given the ‘lifestyle’ focus of much brand funded content, and the broad interest in health and well being, it may be necessary to consider regulations regarding ‘Therapeutic Goods’. This is a broadly defined term, which covers any health related good or service: bandages, herbal remedies, weight-loss products, over-the-counter medicines, and prescription medicines.

Direct advertising of prescription medicines is not permitted (except to healthcare professionals).
Where advertisements are produced for other therapeutic goods, they must be approved by the Australian Self-Medication Industry before they are shown on television or outdoor advertising.
Advertisements for therapeutic goods must comply with the Therapeutic Goods Advertising Code. This code provides, amongst other things that the advertisements must not:

• be likely to arouse unwarranted and unrealistic expectations of product effectiveness;
• be likely to lead to consumers self-diagnosing or inappropriately treating potentially serious diseases;
• abuse the trust or exploit the lack of knowledge of consumers or contain language which could bring about fear or distress;
• encourage, or be likely to encourage, inappropriate or excessive use; and
• contain any claim, statement or implication that it is infallible, unfailing, magical, miraculous, or that it is a certain, guaranteed or sure cure.

All claims made by health professionals need to be current and correct, and able to be substantiated. Producers should be mindful of the need to avoid overstating results or effects. Particular restriction in each state as to how medical services can be advertised (eg should not contain testimonials from previous patients, claim that one practitioner is better than another, or self-promotion in an excessive manner).
Dental, optometrist and other professional health services regulated on a state by state basis. You should only refer to registered practitioners, and avoid promoting unnecessary or inappropriate use of services.

In the course of researching and producing content, it is important that producers should use reasonable efforts to ensure that the content is current and correct. This could include ensuring that:

• the qualifications of any ‘experts’ appearing in a segment are verified;
• any claims made are supported by evidence;
• all points of view (for and against) are represented; and
• claims are accurately reported, in particular, including any qualifications, reservations and disclaimers.

It is particularly important that producers document and retain the results of their research in case the segment is subsequently the subject of a complaint.

Problems may be minimised by ensuring that information is general in nature, as opposed to directly endorsing the therapeutic good. A disclaimer similar to the following may also be appropriate:

The information provided in this program is general in nature, and may not apply to all individuals and medical conditions. If you are unsure please seek appropriate professional advice.

Similar disclaimers should be considered with any content that provides advice in areas that may be considered ‘professional’ – for example, legal or financial.

Gambling
Material relating gambling and gaming is heavily regulated:

• state and territory laws prohibit various representations, including that every bet will be successful or that gambling will improve a persons finances;
• prescribed message containing telephone number and website of national helpline must be included;
• Interactive Gambling Act 2001 (Cth) prohibits promotions for unlicensed gambling services that are accessed using the internet or a TV.

Financial Products and Services
Advertising and promotion of financial products, such as credit cards, financial planning advice and insurance, is regulated under the Corporations Act and enforced by ASIC. Disclose of matters such as applicable annual percentage interest rates, fees and charges, and product warnings may be required.

Competitions
Where content is run in conjunction with a competition that may be regard as a ‘game of change’ (i.e. where winning does not rely on skill), the need to obtain a formal permit in each state or territory in which the competition will be run needs to be considered.

Conclusion
Media lawyers are dealing with an industry that is innovative and in a constant state of flux. At this point in time, it seems that the pace of change is accelerating at a daunting rate. Some traditional media models are struggling or becoming irrelevant. Practitioners must comprehend and deal with a dizzying range of new models, deals, platforms, rights and players. We draft agreements for things that did not exist a few years ago (eg. providers of ‘supply side digital media marketplaces’). With the funds and resources that advertisers possess, and their relentless quest for new ways to reach and influence consumers, it is clear that the production of brand funded content will continue to be a growth sector.