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Battle for Product Placement Profits Gets Nasty

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LOS ANGELES ( -- A week after Mark Burnett Productions filed suit against it, Madison Road Entertainment has countersued for $20 million, charging that Mr. Burnett's company is making false accusations in an attempt to "quash the competition" in the rapidly expanding branded-entertainment business.
Photo: Paul Hawthorne
Mark Burnett has been countersued by the competitors he sued last week.

The nasty legal tangle evolved out of both companies' involvement in NBC's runaway hit and product-placement bonanza The Apprentice, which was created by Burnett Productions.

Burnett's suit
Last week, Burnett filed a legal action in Los Angeles Superior Court in Santa Monica, Calif., alleging that Madison Road had fraudulently represented itself as the exclusive agent for brand integration deals in The Apprentice. It also alleged that Madison Road charged advertisers "exorbitant" amounts for Apprentice brand-integration deals. The details of the Burnett suit were reported in a front page story in the March 7 print edition of Advertising age.

In its own suit filed yesterday in the same court, Madison Road charged that Burnett's claims are "false." "Both Burnett's companies and the sponsors knew the exact role that Madison Road played in securing sponsors for The Apprentice. They also both knew that Madison Road would earn a reasonable fee for its services," accoding to the suit.

The Burnett lawsuit was filed at the same time the company is expanding the internal team it uses to broker and manage branded-entertainment deals with advertisers for Survivor, The Apprentice, The Contender, the upcoming Rock Star and two upcoming shows starring Martha Stewart. Details of the office expansion were first reported in the Feb. 2 issue of Ad Age's Madison & Vine weekly online newsletter.

Calls to Mr. Burnett's attorneys were not returned by press time.

'800-pound gorilla'
The Madison Road legal papers characterize Mr. Burnett as "the 800-pound gorilla" who is making "fabricated, defamatory and malicious accusations" about Madison Road "and then spreading those lies to third parties." The countersuit further charges that Burnett is "emulating the conniving, unethical and devious behavior that often leads to success for his reality show contestants."

According to the lawsuit, "Madison Road purchased from Mark Burnett's companies the opportunity for a task sponsorship on The Apprentice on an episode by episode basis, and then marketed and sold those opportunities to sponsors for a fair fee based on the actual success of the program. There was nothing underhanded about the manner in which Madison Road secured or sold the opportunities."

A "task" refers to the assignments that Apprentice star Donald Trump gives out to his candidates to prove their mettle in each of the show's episodes.

'Guaranteed sum of money
"In certain circumstances, Madison Road offered a guaranteed sum of money to the Burnett Affiliates to acquire the sponsorship opportunity for a task, and then Madison Road set out to find a sponsor to acquire that opportunity for Madison Road," the suit said. It added that "Madison Road recognized there was a risk involved in that if the program containing a sponsor’s product or brand performed poorly, Madison Road would lose money."

For the second season of The Apprentice, Madison Road secured four task sponsorships, including Levi Strauss & Co.'s Levi’s, Procter & Gamble Co.’s Crest and Mars’ M&Ms brands.

In its lawsuit, Mark Burnett Productions alleged that Madison Road charged clients 250% above the standard integration fee charged to brand partners, and then gave a portion of that amount to Burnett Productions. Mr. Burnett's complaint said charging such fees was confusing or alienating advertisers from wanting to sponsor his company’s shows.

But Madison Road counters that while it did charge a fee "above and beyond the amount going to the Burnett Affiliates ... Madison Road never marked up the fee for a task sponsorship opportunity anywhere close to the 250% claimed in Burnett's complaint. That is an outright lie. ... No sponsor has accused Madison Road of deceiving them or charging them an exorbitant fee."

$5 million fee
In fact, the company claims that it was Mr. Burnett's company that sought to increase sponsorship fees "as high as $5 million for a task" and it was Madison Road that "began questioning the outlandish fees being demanded by Burnett’s companies."

"If in fact Burnett is having any difficulty luring sponsors to The Apprentice, the real reason is because the steep fees he is demanding simply are not justified, particularly in light of the continually declining ratings of Burnett’s reality programs," the company said in its lawsuit.

The Madison Road court filing contains e-mails including one sent by Kevin Harris, co-executive producer for Mark Burnett Productions, to Madison Road CEO Jak Severson. In that communication, Mr. Harris said Burnett Productions would consider task sponsors on an individual basis. "Obviously, like Crest, the more the deal, the more we will look at it or, push others aside to open slots ... that is the nature of The Apprentice as a business," the e-mail said.

While Mark Burnett Productions was planning to charge sponsors $1.5 million to $2 million per task for the 14 tasks planned for The Apprentice 3, it hoped to secure far more for its single "Madison Avenue Pitch" task, in which the show’s participants create a 30-second TV spot and ad campaign around a sponsor’s product, according to the lawsuit. Roughly eight of the overall 14 tasks were to be backed by sponsors in deals expected to generate around $15 million in revenue for Mr. Burnett's company, the suit said.

'Playing with the big boys'
In an e-mail Madison Road said it received from Mr. Harris, the Burnett executive wrote, "We are shooting for 3.5 to 4 million on this one. Reason being, we are creating a 43 min commercial on the making of the free commercial for the company. Then we would want a commitment from the company to run the commercial in primetime. Please send me a list of companies showing interest and/or any Madison Ave Pitch partners interested in playing with the big boys."

In another e-mail Mr. Harris wrote, "[A]s for the Madison Ave Pitch episode we are going to do something crazy and go with the highest bidder ... meaning the company to bring in the highest task fee for our contestants to make a commercial around their product wins the episode ... think about it, it’s a commercial airing the entire length of the task ... so 4 million is cheap."

In The Apprentice 3, Unilever’s Dove sponsored the Madison Avenue Pitch task.

'Clearly authorized and encouraged'
Madison Road said all the e-mails from Mr. Harris last June and July should prove that the "Burnett Affiliates clearly authorized and encouraged Madison Road to seek out and solicit potential task sponsors for" The Apprentice, and that the two companies worked closely together to broker such deals.

As a result of Mark Burnett’s lawsuit, Madison Road claimed it has suffered damages in the form of lost income, damage to its professional reputation and humiliation and embarrassment.

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Marc Graser is the editor of Advertising Age's 'Madison & Vine' weekly online newsletter.

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