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Journalism’s branded content businesses are reaching industrial scale

Frédéric Filloux
By Frédéric Filloux

Editor, Monday Note

Media invests heavily in branded content production. Leveraging their notoriety and brand power, the largest companies have set up full-fledged production studios and creative teams, to the point where they could put a dent in advertising agencies’ revenue streams.

On the 19th floor of Renzo Piano’s 8th Avenue landmark skyscraper, The New York Times set up an entire division devoted to producing and commercializing contents for its advertisers: the New York Times T Brand Studio. As always, once the NYT settles on a choice, it takes the high road. Just as the Times spent years and millions of dollars to develop its paid subscription model, when it decided to go for native advertising the Gray Lady went full throttle.

Today, less than a year after landing at the Times from Forbes, Sebastian Tomich, the young SVP in charge of advertising innovation, oversees a team of 50 people. “We will be 70 in 2016,” he boasts. “We have a whole range of competencies here; the largest part, roughly 30%, is in production; about 20-30% are developers, 20% are editorial and creative, 10% work on video, and another 10% produce video. We also have a photo editor, a quality assurance person, and so on….” The unit also has a small team in London. All this staff is supplemented by scores of freelancers hired as needed. As a proof of the strategic importance of the branded content division, Tomich does not report to the head of the Times advertising department, but directly to Meredith Kopit Levien, the Times’ chief revenue officer.

When we met in his New York office last month, Sebastian Tomich outlined his strategy with a certain pride. “We [the T Brand Studio] work with 68 different brands and we just got our 102th work order, a GE campaign….”

Many of the division’s work can be seen here:

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As for his actual contribution to the New York Times’ total digital advertising revenue, Tomich wouldn’t say. But he won’t deny triangulated estimates based on other conversations I had that week: they put T Brand Studio revenue in the neighborhood of $30-40 million. This is 15%-20% of the $200 million the Times will make this year in digital advertising. (Ken Doctor, who produces excellent analyses of the NYT’s economics, estimates the T Brand Studio’s contribution at 15%).

Tomich intends to grow his business into nine figures territory. How can he do that?

The T Brand Studio built its pitch on three pillars: advising clients on promotional strategies; compelling creations, text, video, data-visualization, or even virtual reality; and a distribution strategy. This last element is quite important: Not only does the Times offers access to its own digital properties and global audience, but there is also a significant number of deals spreading the branded content on other medias. (Sometimes, an advertiser will contract with the T Brands Studio to produce contents that will never appear on the Times properties.) The advertiser that commissions the T Brand studio to produce a multimedia content retains complete ownership of the material; it will then want to maximize its reach by spreading it on third party platforms. Material produced by the NYT will sometimes find its way to the Huffington Post or Slate.

Increasing reach is actually a good way for the Times to raise what it will charge an advertiser for its campaign. This creates a virtuous circle: wider distribution allows for more ambitious production, meaning a higher margin for the T Brand Studio and an increased ability to attract clients… Hence the average budget for a branded content campaign: $500,000, which includes everything from production fees to charges for the NYT’s media space.

The T Brand Studio has pushed the New Times way up the advertising food chain, resulting in friction with Madison Avenue’s ecosystem. The overlap is likely to become an issue for the Times as it more frequently deals directly with the client, bypassing both creative agencies and media buyers.

To Trevor Fellows, chief revenue officer of the Wall Street Journal, the idea of large media brands leveraging their size and reputation to eat directly from the advertising trough might be considered with some caution. “We don’t want to follow that path,” he said when we met at the Dow Jones office in New York. “We don’t want to become an advertising agency. We [as a publisher] are in a long-term relationship with our client. We don’t want to jeopardize that by becoming an agency that might change its partner at will.” This former head of global sales for Bloomberg LLC (also a veteran British paratrooper during the Falkland war) believes the production of bespoke content must be approached with great care. To him, going too far into the ad creation business entails several risks. One is altering the relationship between the media and the advertiser or the agency that represents it. There is also an execution challenge as the media shifts from a long term partner, its ad agency, to a mere contractor, T Brand Studio. “Plus, I think it is quite important to preserve the status of the media, which is to produce strong, legitimate content. This actually is what an advertiser is looking for when it comes to us to showcase its brand.”

Dow Jones is pretty active in that field, though. Dow Jones’ WSJ. Custom Studio is indeed a big operation, staffed with 40 people and a structure comparable to the New York Times’ T Brand Studio (producers, writers, videographers, etc).

Since its March 2014 launch, The WSJ Custom Studio produced about 150 campaigns, large and small. One of the most recent and spectacular ones was a special report-like piece titled “Cocainenomics” commissioned by Netflix for the launch of its much acclaimed show Narcos.

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Dow Jones’ branded content activities contribute to about 20% of the WSJ’s digital revenue, roughly similar to the New York Times. And Trevor Fellows is not keen to go much beyond that level. “One of the problems with branded content is that if everyone does it, it will lose its value,” he warns.

Branded content is often associated with ethical issues. Media such as the Times, the Wall Street Journal, or Quartz expend a great deal of care to emphasize the distinction between paid posts and legit journalism. Nevertheless, as Tomich points out, the content T Brand Studio produces does compete for the same eyeballs with traditional journalism produced by the newsroom twelve floors below. (Actually, it’s not uncommon to see a well-staged branded report, enhanced with high-quality video and data visualization, attract a much larger audience than a dry newsroom-produced piece on the same subject.) Whether at the New York Times or at the Wall Street Journal, branded content units strive to hire top-notch talent.

Adam Aston is the editorial director at NYT’s T Brand Studio.  He holds an impressive resumé as a business writer who worked at Business Week and the Economist, spending many years in Asia, including a stint as a teacher in Jakarta. He switched to branded content a few years ago without hesitation. At T Brand Studio he finds what a business writer loves: interesting subjects, time and resources to produce, and access. “When we do a complete feature on [private aviation giant] NetJets, we interview dozens of people, and spend a long time on location to shoot high-quality video; the result is a compelling story,” he says. He has a point. But many facts about NetJets are absent from the story: NetJets’ uncertain financial situation, recurring pilot protests, the controversy surrounding private aviation safety, or stiff competition for carpet-flying the wealthiest. In spite of that, T Brand’s production offered a rare glimpse of how such a company operates. In fact, the coverage is neither better nor worst than the results of press junkets inappropriately labeled as “journalism” (sadly, the French press is second to none in that regard).

The branded content business takes advantage of the growing sophistication of brands eager to go beyond traditional advertising, to tell stories about themselves or their sector. That was not a given just five years ago. Adam Aston’s team goes well beyond reporting within the promotional framework defined by the client. It acts as an advisor to the brand, helping it find the best way to tell its story based on undisputed facts and solid analysis.

Traditionally, the brand or its creative agency would brief a small set of media  and would issue a Request for Proposals. The best response to the RFP, the one offering the best bang for the buck, wins. But, according to Adam Aston, more and more frequently, the client, not the agency, makes direct contact with the media it wants to work with. A delicate discussion ensues between the client and the content studio: what can and cannot be told. Since the media’s interlocutor is not a journalistic source but a paying client, the result is a brand’s wet dream: reading the story prior to its publication and retaining final cut on the published content.

The game has some limitations, though. During our conversation, I asked Adam Aston if the Times T Brand Studio would be willing to publish a story commissioned by Theranos, the blood-testing startup at the center of a controversy regarding the accuracy of its technology (read a previous Monday Note on the subject).

What would prevail? A $300,000 project or the Times’ reputation? And who would call the shots in the end? Adam Aston admitted to have had conversations of that kind with execs at the New York Times (he declined to name the industry involved). “I’m one of the key gatekeepers in the process,” he says. “Usually, we’ll walk the client into a more strategic media discussion, perhaps suggesting that pursuing a particular idea would lead to ridicule and trigger devastating social backlash. In the end, a failure in every respect”

While Dean Baquet, the Times’ editor, does not get advance review or veto power on commercial productions, the T Brand staff is careful not to ruffle feathers in the newsroom, always discussing potential issues in advance.

Credibility is a two-way street: The T Brand Studio needs it to continue to blossom in the Times’ delicate balance of power, and the newsroom can’t afford to dismiss a revenue stream that represents about 20% of its annual budget. For the NYT or the WSJ, advertisers value the trust and credibility associated with unique media brands. That’s a delicate equilibrium to maintain.

This post originally appeared at Monday Note.