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Instant Gratification

June 2004

Stewart Schley

If Upstart Thought Equity has its way, your next commercial has already been produced.

Advertising's 80-20 rule is a well-known axiom built around the idea that most of the business comes from a small number of large clients. But a new company is betting the same sort of ratio applies to a lesser-known adjunct of the cable advertising trade: shooting commercials.



"In production, 80 percent of the footage ends up on the cutting room floor," says Kevin Schaff, the founder and CEO of the two-year-old Denver company called Thought Equity. Rather than leave it there, Schaff figures the better idea is to collect it, catalogue it, display it and sell it - with a primary market target being cable advertising companies.

There's logic to the idea. With a heavy reliance on local retail advertisers that lack resources for producing their own commercials, cable advertising companies collectively produce hundreds of thousands of original spots annually. Most of them require that crews develop original scripts and shoot on location to capture original footage. That's fine, says Schaff, but it gobbles up time and cost unrelated to cable advertising's core competency of delivering targeted TV advertising to help clients make money or develop awareness. And in some cases, says Schaff, the entry barrier between a willing advertiser and a lucrative cable spot schedule is the lack of a commercial that's ready to air.

Instead, Schaff wants to provide cable companies a library of pre-produced commercials and commercial footage that can get advertisers on the air faster, and often with better production values, than original production can yield. The concept borrows in part from a longstanding newspaper tradition of offering up pre-produced graphics and ad templates. "For the first time," says Schaff, "It's just as easy to place an ad on TV as it is in the newspaper."

Even in cable, the idea isn't altogether new. A handful of vendors have attempted to sell pre-produced commercial templates to cable operators in the past, with modest success. But those efforts typically revolved around supplying a small number of "canned" commercials via a videotape. Thought Equity's approach is much broader - the company has more than 25,000 commercials and identifiable video segments in its database - and it makes use of instant search-and-transact capabilities of the Internet.


  How it Works

Thought Equity collects thousands of hours of pre-produced commercials and commercial segments, plus licensed collegiate sports footage, from ad agencies and video producers.

The content is evaluated, catalogued and coded for keyword and category searches. All rights associated with actors, music and images are cleared in advance by Thought Equity staffers.

The video material is stored on web servers located at Thought Equity's "digital refinery" in Wyoming.

Customers can preview lower-resolution video, search for material using keywords or other search instructions, and submit orders online. Selected full-resolution digital files are typically shipped overnight for local customization.

Once licensed within a DMA, video footage and commercials are exclusive for a year - meaning the same material won't be used in-market by other advertisers.

The material itself has improved, too. Schaff's company collects remnant and previously aired commercial content from advertising agencies and skilled commercial production firms all over the country. Much of it is shot originally on film, yielding a superior visual texture.

For the films that make commercials, licensing content offers a way to capture additional revenues beyond their original assignment. For Thought Equity's customers, it produces a pool of professionally produced, searchable material that can be identified, ordered and downloaded or physically delivered within a day. Laptop-toting AEs can show off downloaded video spots to clients in the same way that newspaper and Yellow Page representatives display pre-produced ad templates. Even if clients don't immediately embrace a piece of pre-produced video, simply surveying samples of other commercials can inspire fresh ideas and help close sales, says Schaff.

Even so, the deal making within the industry has been slow so far. Comcast's Colorado-Wyoming cable advertising operation has made extensive use of the Thought Equity databank, helping clients including GolfTECH and the Colorado Lottery develop campaigns or campaign ideas inspired by existing commercials. But no corporate had been reported with Comcast of other MSO's through May.

One reason may have more to do with pricing models than anything else. Notoriously reticent to spend upfront cash, some cable operators have resisted overtures from Thought Equity that required hefty advance payments coupled with per-transaction license fees, says Peter Moran, a well-known cable advertising executive who previously led the company's business development efforts. "I love the idea," says Moran. "But I had differences over the economic model."

Schaff says costs are in fact relatively inexpensive, especially when compared to average costs to create original commercials. Plus, he says time-to-air is reduced dramatically with stock footage, allowing operators to get commercials on the air, and invoices in the mail, sooner.

If the MSO deals do come, there's no assurance Thought Equity will have a lock on the market. The giants of still-photography licensing, Getty Images and Corbis, both have small licensing firms like New York City's Re:Stock are in business to supply quick-turnaround video. Most of them target larger ad agencies, however, and some take longer to deliver materials, Schaff says, because they clear rights only after a client has made a selection. Plainly, none have pursued cable industry relationships with the vigor Schaff has displayed. In March, Thought Equity formed a partnership with interactive advertising developer Visible World Inc. to help supply video assets for customized cable TV commercials tailored to unique viewers.

Based on those attributes, Schaff figures he has a better solution for cable - one he hopes will translate into a significant presence in the industry. The sell-in effort to the cable industry hasn't been more difficult than Schaff anticipated when he identified cable as a key market more than a year ago. But the time devoted has. "Everyone's been very receptive," Schaff says of his MSO dealings. "It just takes a while to get through the process.



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