Big brands like Delta, P&G and Under Armour are increasingly hiring Hollywood talent agencies like CAA, Endeavor and UTA for marketing - posing yet another threat to traditional ad agencies
- Hollywood talent and entertainment giants, and companies with their roots in talent, including CAA, WME IMG (now Endeavor), and UTA have increasingly been branching out into advertising.
- Their pitch is that by being at the epicenter of entertainment and creativity, they are more plugged in than Madison Avenue and help drive popular culture.
- Brands including P&G, Delta, and Under Armour are using talent agencies to test new ad environments like streaming platforms Netflix and Hulu.
- Talent agencies have gone down the advertising path before, but not always successfully. Coca-Cola, for example, hired CAA in 1991, but the relationship didn't last.
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Consulting giants aren't the only ones circling the ad agency business. Hollywood talent and entertainment giants, and companies with their roots in talent management, including CAA, WME IMG (now Endeavor), and UTA have been branching out into advertising, helping big-name brands with talent tie-ins, strategy, and distribution deals.
While CAA's Brand Consulting group works with clients including Tissot and JPMorgan Chase, Observatory, which succeeded CAA Marketing in 2017, has developed branded content and experiences for the likes of Marriott, Anheuser-Busch, and Bonobos.
UTA Marketing has worked with brands like GM, Lyft and Procter & Gamble on branded content and distribution, and Endeavor Global Marketing's roster includes Audi, Papa John's, Visa, and Under Armour, according to its recent IPO filing.
The lines between Hollywood and Madison Avenue have started to blur, said Forrester Analyst Jay Pattisall, calling Hollywood talent agencies "yet another set of competitors for agencies." This exacerbates the string of existential threats ad agencies already face.
CAA, Endeavor, and UTA are charging into advertising
As talent agencies try to carve a piece out of the $240-billion US advertising pie, their pitch is that being at the epicenter of entertainment and creativity, they aren't only more plugged in than Madison Avenue, but they help drive popular culture. Their unparalleled access to the Hollywood production pipeline gives them an advance look into which movies and Netflix shows may be coming out, supplying them with fodder for brands hungry for new ways to get their message in front of ad-averse consumers.
"It's great when a brand can hold up a mirror and reflect culture, but it's even better when a brand can lead culture," said Amia Lazarus, head of strategy and entertainment consulting at Observatory. "I want my brands to be magnets, and not just a mirror."
Endeavor dubs itself in its IPO filing "the agency of record for global blue-chip brands" like Budweiser parent Anheuser-Busch InBev and Visa, which collectively spend more than $60 billion in advertising per year. It also lists acquisitions it has made to expand its services, including Philadelphia-based creative shop 160over90 and experiential marketing agencies IMG Live and Fusion Marketing.
Launched in 2011, CAA Brand Consulting has 250 employees and has grown annual revenue and profit by "double digits," said a CAA spokeswoman. It manages $4 billion in sponsorship rights under management.
UTA, too, has put a bigger focus on marketing in recent years, acquiring entertainment marketing firm Blue Group Entertainment in 2018 to expand to New York and picking up at least five new clients in the past year, said UTA Marketing co-head Julian Jacobs, adding that its clients make up a combined market cap value of $1.5 trillion.
"Talent agencies have had the reputation of being all smoke and mirrors for a long time, but we've really tried to arm our clients with data that shows why they should partner with a certain show or talent," said Jacobs.
One client is P&G, which has been focusing on nontraditional advertising avenues, topics and partners, such as over-the-top streaming content that expresses a brand's point-of-view and sponsorship programs that can help disguise advertising.
This approach has taken the form of long-term projects with Arianna Huffington and John Legend, documentaries with Queen Latifah on Hulu, and $15 million being pumped into Jeffrey Katzenberg's Quibi. Some of these deals have been orchestrated not by a traditional ad agency, but by talent agencies including UTA.
"It's very clear that mass marketing as we know it is being disrupted," P&G's chief brand officer Marc Pritchard told Business Insider earlier this year. "And our focus is to lead that disruption by reinventing brand building."
Indeed, a big reason for talent agencies' newfound place in advertising is the increased fragmentation of media and consumer attention. Advertising is being disrupted, traditional TV continues to decline, and even digital ads are being blocked, forcing brands to think beyond interruptive ad formats.
At the same time, over-the-top streaming is growing exponentially and streaming giants including Netflix and Hulu, are using brands to get attention for shows such as "Stranger Things." These environments provide brands with new testing grounds to figure out what advertising of the future could look like.
Amid this changing landscape, talent agencies see an opening to act as a broker between publishers, talent, and marketers. As they face margin pressures of their own, working with marketers is a way for them to parlay their access into new revenue streams that can reel in more money than traditional agenting. Endeavor, UTA and CAA have all made inroads sports marketing as well as production, for example.
"Brands today have to create content and experiences that attract and engage audiences the way that entertainment does," said Jae Goodman, former co-head and chief creative officer at CAA Marketing and current CEO of Observatory. "And we are the companies that can enable that."
Brands are working with talent agencies beyond their traditional roles
Beyond P&G, Delta, Lyft, Anheuser-Busch, Marriott, and Bonobos have increased the scope of their work with talent agencies.
When Swiss watchmaker Tissot wanted to expand its US presence in 2016, it hired CAA's Brand Consulting group to handle the sponsorship strategy and marketing for its NBA sponsorship deal. Today, CAA Brand Consulting serves as its de facto agency of record, handling social media, content development, and experiential activations, said a CAA spokesman.
CAA created an influencer program for Tissot that tripled its social impressions, and got the watchmaker featured on timers across basketball courts. At the 2019 NBA All-Star Game in Charlotte, it built "The Tissot Style Lounge" at The Epicentre, a 2,000-square-foot pop-up shop that generated 660 million impressions.
Delta was UTA Marketing's flagship client and has used the division for years. To help Delta market to the tech and entertainment industries, UTA Marketing helped create "Delta Festival Shuttle," invite-only flights for talent, musicians and entertainment executives traveling to events like the Sundance Film Festival and SXSW.
More recently, UTA has developed content strategy and partnerships for the airline's in-flight entertainment platform Delta Studio, including podcasts with Goop, LinkedIn, and Wondery and distribution deals with Warner Bros. and National Geographic.
For Bonobos, Observatory has gone from being one of its many agencies to its agency of record.
Micky Onvural, CEO at Bonobos, has had a longstanding relationship with Observatory, in which CAA has a minority stake, since she was an executive at eBay and Observatory was still known as CAA Marketing.
"For some, the question is whether they can apply that to an advertiser's brand and business metrics," said Onvural. "But the clear advantage of talent agencies is their knowledge of culture, content creation and their obvious relationships with a broad array of talent."
Observatory has also worked on projects with Anheuser-Busch across Mexico and Brazil, such as The Corona Mexico "Mas Fina" campaign, which started rolling out in March. Ricardo Dias, VP of marketing at Cervejaria Ambev (Anheuser-Busch's Brazil unit), said that talent agencies will "without a doubt be the future" of advertising, and that expected 20% of his marketing budget to go to those agencies in two years, up from 5% today.
"The old adage was that nobody was ever fired for making a beautiful TV commercial, but the era of paid media is coming to an end," Dias said. "Now you can pay $10 a month to not be interrupted while watching content, so brands have to be creative to entertain people."
Talent agencies have gone down the advertising path before - not always successfully
Talent agencies have made a play for advertising dollars before.
Chevrolet tied up with Columbia Pictures in 1984 for "Ghostbusters" to build brand loyalty with college kids. And in 1991, Coca-Cola sent ripples through the advertising industry when it hired CAA to handle its media and communications, an unprecedented move that eventually pitted it against Coke's long-time agency McCann-Erickson.
But Coca-Cola ditched CAA in 1995 after its the "Always Coca-Cola" campaign that created Coke's polar bears. More recently, CAA spun off CAA Marketing into Observatory, an independent agency in which Stagwell Media has a majority stake; while Endeavor divested its 49% stake in Droga5 ahead of filing for an IPO.
These shifts suggest that talent agencies don't pose an immediate threat to ad agencies, said Robert Schwartz, CMO at Dentsu agency Carat. He acknowledged that talent agencies' relationships with culture, talent, and increasingly sports and athletes gave them an edge. But he said that they couldn't compete with the breadth of offerings, diverse talent, and global footprint of ad agencies.
"I haven't seen a lot of expansion beyond the core areas of documentaries, short films, and celebrity-driven endorsements," Schwartz said. "I don't wake up in the morning and think of them as a threat."
Some marketers said that it would be unfair overstate the importance of talent agencies. P&G said talent agencies are just one among the agencies and other content companies it works with.
"There are vast sources of creativity available today, and P&G is working with a number of partners in the ad industry and with other creative industries such as filmmaking, music, comedy, technology and journalism - to create stories never told or experienced before," a P&G spokeswoman told Business Insider.
And ad agencies aren't taking the threat lying down, either. Holding company Havas bought Los Angeles-based agency Battery, which will be integrated with its non-traditional agency Annex to focus on gaming and streaming entertainment. The Annex competes with the likes of Translation, CAA's Observatory, and Endeavor rather than traditional holding companies, Havas North America CEO and Annex co-founder recently Paul Marobella told MediaPost.
The advertising industry has been in a quest to reinvent itself, with holding companies trying to simplify their structures, generalists vying to become specialists, interactive shops trying to develop full-service capabilities, and traditional shops trying to evolve into digital agencies. Some brands see a future where clients are served by all kinds of agencies, talent agencies and consulting firms, as well as in-house teams.
"As creative teams are formed in house, there will be a 'third leg to the stool' - in-house creative, talent agency creative, and advertising agency creative," said Bonobos' Onvural. "The question will be the balance and working relationship between all three in order to create optimal outcomes for brands and businesses."