A while ago, after years of development and stewardship of brands (protecting those using copyrights and trademarks, and assigning appropriate “brand value” to each) I was assigned to the task of developing new businesses and revenue based on the BBC (British Broadcasting Corporation) brand in the U.S. Actually this was a self-inflicted project as the BBC itself was certain that the BBC logo had absolutely no value in market but I, with great courtesy and conviction, begged to differ. The BBC had tried this before and whatever it was they did had flopped. To date, the BBC was making a modest profit selling licenses for any television property that the BBC produced by stripping it of its real identity and letting the licensee brand these programs with “Masterpiece Theater” identity and umpteen other “presentation/producer” brands across the U.S. television landscape. So the reality is that pretty much every classic period series with British accents comes from the BBC but its identity is nowhere to be found. Essentially the BBC was sacrificing their own brand to the benefit of others. A classic OEM strategy – backwards. When they decided to make a go of branding themselves, the licensees such as WGBH, WNET, Nova, Discovery, National Geographic and others screamed “foul”. Their audiences were hopelessly addicted to the programming yet the stations made a gamble. Playing chicken across the table, the licensees played the hostage revenue card, knowing that the BBC itself depended on a steady stream of revenue as much as the stations were dependent on the intravenous drip of BBC programming. The BBC, having no distribution channel of its own, had little negotiating leverage because the stations’ gamble worked – the BBC was terrified to blow its licensing revenue and its relationships with American broadcasters. So naturally the BBC caved. Their parabolic conclusion: no one wants the BBC brand in America.
Personally I knew that this was money left on the table. Of course, the proper solution was to create a BBC Americas cable channel, put a proper BBC logo on each program and withhold the decent properties from their long standing customers who would feel jilted if they didn’t get high quality unbranded material for them to brand themselves. Eventually that came to pass with the advent of the BBC Americas cable channel, which occurred later when Discovery apparently agreed with me, but unlike me put a huge amount on the table to license the BBC brand to create the channel as well as take over number of other branded businesses. In fact there were a couple of huge U.S. based companies with household names that were hot to grab the BBC brand and call it their own.
I tell that story to tell another. And in addition to illustrating how curious companies sometimes behave in the wondrous world of branding, and how little understanding there is about what branding and licensing is all about, this anecdote should drive home the importance of understanding the hard cash value of a brand.
Now, faced with the checkered history of BBC branding in the U.S., I prepared myself for some hot water ahead as I sought non-theatrical revenue from the brand. First things first: research. I segmented the market and found pockets with enormous brand awareness and esteem. These were relatively sophisticated and cultured audiences. But of course the BBC was licensing its non-branded product into the non-theatrical market for slivers of revenue. And – as if that wasn’t enough – when I approached the home video market, something worse happened. Broadly speaking, the BBC is divided into two parts: the first is the national broadcasting network itself and it invests in producing programs of all kinds for British audiences. That part is purely non-commercial. The BBC is a public British network funded by revenues from taxes and turns that into television and radio programming. The second part is a global commercial enterprise which sells BBC programming and other assets in the form of licenses, and it makes money which is turned over to the BBC’s non-commercial core for more programming. The two parts are totally separate, and in fact are not encouraged to talk with another lest the commercial hounds tempt the public servants from producing something actually marketable outside of the UK.
As a result of this separation the BBC producers don’t think about U.S non-theatrical needs when they produce programs and create contracts with BBC actors, directors, producers, etc. So the commercial arm receives a finished program after it has run in the UK as well as the contracts which include royalties of unfathomable dimension committed by contract to talent and practically everyone who had anything to do with the show. That in itself is quite unusual, and what would happen is that when a non-branded home video of a BBC program was sold, the BBC’s commercial arm actually lost money on each cassette because of the great sucking sound of talent and residual (T&R) payments accompanying receipt of any amount of money from the licensee.
Now the problem was all mine. Frankly I little to lose since there wasn’t much there to begin with. So on that basis I did a bit of kibitzing with the major home video distribution companies out there, and to my pleasant surprise their reaction to the notion of a BBC logo on their cassette boxes and the tapes themselves was 100% positive. In fact almost all of them wanted a shot at it.
Now, for those lawyers reading this, here comes the good stuff. Fueled by the positive reaction about the logo I had an interesting thought and walked into the chief counsel of our BBC Worldwide Americas operation. I asked a key question. If revenue from any home video content was subject to talent costs skimmed off the top of wholesale revenue, would my licensing the BBC brand name as a separate licensing agreement with the distributor be subject to the same T&R bloodletting? The answer from the attorney was “no”.
Thank you very much. I then contacted the best video distributor I could find and negotiated a 10% surcharge for exclusive use of the BBC logo -- exempt from any talent vampirism. The deal was made, the BBC started to unleash a flood of product and we recovered others, branded them all BBC, and suddenly a near-death business delivering almost $0.00 profit, shot through the roof and made millions in a matter of weeks. It was all gravy.
In effect the whole business was now the sum of what we were bringing in from licensing the brand. That’s how a $50 million business can turn into $500 million of brand value, with the actual content representing far less actual cash value than what the brand itself was generating.
That’s a good reason to like brands.
© 2011 Michael Gury
No comments:
Post a Comment