Pop Star: PepsiCo Makes Big Bet on In-House Content Creation
If you have Hollywood ambitions, rubbing shoulders with Meryl Streep isn't a bad place to start. And if you want to make it big in the music business, Usher is a pretty good guy to know.
So it was fitting that the two megastars were among the first celebrities to make use of PepsiCo's sparkling new, state-of-the-art content studio in Manhattan. That space will be key as the food and beverage giant strengthens its ties to the entertainment world, pumping out branded content while also pursuing distribution deals with film studios, online publishers and other outlets for brand-agnostic content. And the central mission of all of that content is to entertain, not to sell chips, soda, oatmeal and other PepsiCo products -- at least not directly.
PepsiCo envisions selling enough unbranded content to cover the costs of creating ad content that does fuel product sales. The unit, called the Creators League, will serve as an internal production arm for scripted series, films, music recordings, reality shows and other content distributed for TV, online viewing and services such as Amazon Prime.
It is an ambitious venture considering that marketing is typically viewed as an expense, not a profit center. But PepsiCo executive Brad Jakeman said he believes that PepsiCo's massive brands, from Doritos to Gatorade to Mtn Dew, have value beyond what is in the bag or bottle -- and he wants to monetize it.
"Our goal is to really behave like a Hollywood studio," said Mr. Jakeman, president of PepsiCo's global beverage group. He oversees the content studio along with Kristin Patrick, senior VP-global brand development. So, for instance, brand Pepsi might sell music-related content during the NewFronts, and Gatorade could work with sports leagues to package and sell content like behind-the-scenes videos.
"The holy grail for me is to leverage the incredible power of our brands and their equities to essentially fund their own marketing," Mr. Jakeman said last week, as he and Ms. Patrick gave Ad Age a tour of the studio. "Will we ever get there? It is going to take a while. Are we making steps toward that direction? Absolutely, we are."
"For many, many years, we have been the people who have been renting the content from the networks and the studios. There's an opportunity for us to become more ingrained in that profit pool," added Ms. Patrick, who joined PepsiCo in 2013 after serving as chief marketing officer for Playboy Enterprises. Her resume also includes stints at Walt Disney, NBC Universal and William Morris Endeavor. At PepsiCo, she is stationed in Los Angeles, close to the entertainment moguls the company is wooing.
Already, the Creators League has signed a development deal with AOL's Partner Studios to co-create a slate of branded and unbranded content around music, pop culture, and health and wellness for distribution on AOL and Microsoft properties. PepsiCo is even getting into the movie business, after inking a deal with The Firm, a management and production company, and hip-hop artist Tip "T.I." Harris to make what is described as a coming-of-age feature film.
The planned movie, which Ms. Patrick described as an "urban 'Pitch Perfect,'" is in its early stages. A key player in the deal is The Firm's film division president, Robbie Brenner, whose credits include producing "Dallas Buyers Club." She hooked up with PepsiCo through Ms. Patrick, with whom she has a social relationship, she said. PepsiCo will be an executive producer of the movie, which will star T.I. "This isn't about branding and putting Pepsi in the movie at all," Ms. Brenner said. "It's about a culture. And because the content and the subject speaks to their demographic, this is a great fit for them."
The Creators League has been in the works for years and PepsiCo executives have previously discussed the concept. But with the recent opening of the 4,000-square-foot content creation studio in the heart of SoHo, PepsiCo has kicked the initiative into a higher gear.
The studio occupies the same office building floor as PepsiCo's two-year-old design and innovation center, which Mr. Jakeman also oversees. It was designed by architect and acoustician John Storyk, whose credits include designing studios for the likes of Jay Z and Bruce Springsteen. The space includes a 2,300-square-foot, multiuse recording studio, five editing and production bays, and a theater-style screening room with 10 oversize leather chairs. There's even a green room for celebrities, which last week was stocked with bags of Doritos, Lay's and Cheetos.
The studio is staffed by seven full-time PepsiCo employees, including an engineer, editors and producers. The plan is to bring in writers, art directors, cinematographers and other talent on an as-needed basis.
PepsiCo execs envision the studio as a way to network with established talent and up-and-coming stars. Ms. Streep stopped by last week to film a project whose details remain under wraps, although a PepsiCo spokeswoman confirmed that it will not be a Pepsi ad. Usher used the space for what was described as a "personal project." Serena Williams also dropped by recently to film a video for her Serena Williams Fund, which benefits educational programs.
Singer Kacy Hill, who is signed to Kanye West's label, recently performed in the studio in front of a live audience for a video called "Creators League Live." The video, which will be posted to Ms. Hill's website, was absent Pepsi branding except for a tag at the end that included a Pepsi logo and labeled it a "Pepsi Studios Production."
PepsiCo does not charge musicians to use the space. "What we hope is that as they build their careers, they remember us as somebody who authentically leaned in to help them, and that when we do want to do a more commercially oriented deal with them, they are going to be more predisposed to doing that," Mr. Jakeman said.
The Daily Grind
Last Tuesday was a typical day at the studio. In the main recording studio, staff carefully positioned three cans of Pepsi in front of a guitar during a shoot for Pepsi social media channels. In an adjacent room, a video showing a handful of rolling oranges was being edited for distribution by Tropicana in Canada. In one editing bay, staffers were working with video content featuring Alicia Keys that is being produced for PepsiCo's sponsorship of the Union of European Football Associations Champions League final on May 28 in Milan. The studio is also shooting videos for a new Gatorade philanthropic program rolling out this summer called "For the Love of Sports" that features Ms. Williams, Usain Bolt and pro beach volleyball player April Ross.
Much of the daily grind at the studio involves pumping out content for PepsiCo's own brands, whose needs have ballooned as media channels multiply. "It just becomes more efficient at some level to have it in-house," Mr. Jakeman said.
In traditional arrangements, money typically flows from marketers to ad agencies, which in turn pay production agencies. But at the PepsiCo studio, work is created in the confines of the one-floor studio. That allows the marketer to eliminate overhead. Of course, running the studio comes with its own costs, though PepsiCo declined to detail those expenses.
Bringing content production in-house potentially threatens creative agencies, which are rushing to boost their own creation capabilities. But Mr. Jakeman, who has had tough words for ad agencies in the past, says he is not trying to upstage his shops. Instead, he views his agencies as necessary for higher-level guidance on brand strategy.
"We really value that part of the process," he said. "Will [agencies] ever be able to produce $15,000 films in eight hours and do 400 of them [a year]? Who knows. But that is not the problem I need them to solve right now. I really value them for that upstream brand stewardship." His message to agencies? "It's not about a land grab. It's about sticking to your knitting, doing what you know how to do the best, and being ego-less and willing to work well with others."
That runs somewhat counter to the goals of many agencies, which are adding production to their core offerings. "In-house capabilities need to become the soul of the agencies in general," David Rolfe, director-integrated production at BBDO New York, told Ad Age last year. "If you have that capability, and it is part of the creative process from the beginning, it helps to inform and calibrate the entire agency."
Employees of BBDO, which is a key PepsiCo agency, have toured the marketer's new studio but the agency has not yet used it, said Lauren Connolly, an executive creative director at the shop who works on the PepsiCo business. "I don't see it as a competitor of what we are doing," she said. "I don't think there is one way to do production. I think it is about expanding the tool kit and the creative minds as opposed to limiting it."
Matt Miller, president of the Association of Independent Commercial Producers, which represents production companies, said marketers might be able to crank out "short-lived disposable content." But he is skeptical about them making highly crafted pieces of content because they don't have enough volume or breadth of work to draw top production talent, he said.
Ms. Patrick, in response, said: "The reason we called it the Creators League is to illustrate that we are open to collaboration and creation in all forms with a variety of partners. Our model is not exclusionary in any way. We are opening our doors to the best production companies, agencies, creatives, so together we can work on all forms of content."
Mr. Jakeman said his goal isn't to disrupt the advertising model. "Who are we disrupting? Hollywood," he said. "I want to be a content partner with them. Sometimes we'll be competing, sometimes we'll be partnering. That's how Hollywood works."