| Last year, an
unprecedented change in U.S. tax law occurred that may allow shrewd corporate executives
to partially or fully “subsidize” the costs of branded entertainment and product
placement using government funding. The change in law occurred as part of the American
Jobs Creation Act of 2004 (the “Jobs Act”), the primary purpose of which is to
bring jobs back to America soil. Several
provisions of the Act may be relevant for companies wishing to advertise or market their
products in a cost-effective manner. For instance, the Act grants a 100% same year
write-off (instead of capitalization & amortization) of production costs of films and
TV programs if 75% of the total compensation paid with respect to such production is
compensation for services performed in the United States.
Versus paying a Mark Burnett or an NBC for product placement
and hitting your P & L as an expense, you become a financier of a Television series or
Film and have it cost you nothing by receiving the same year write-off netting your
expense to zero.
The Act also effectively reduces the marginal rate on
“qualified production activities income.” Many states have also joined in by
granting various credits for films and TV shows produced within their borders.
Because some of the tax incentives will sunset in
2008, now is the time for companies to get serious about branded entertainment.
 Watch a Clip of Jeff Greenfield discussing Branded
Entertainment
Our team handles all aspects of the process from beginning to
end. In direct consultation with us, we will not only specifically tailor a financial
structure that reduces or eliminates production costs; we will also provide creative and
strategic marketing consultation and create proper content in which to integrate the
advertiser’s product or service. In many cases, we will even guarantee worldwide
distribution of the content prior to principal photography even beginning.
Our financial structures are designed to provide the
advertiser a vested equity ownership interest in the production. This means that the
advertiser will have creative control over how their product is integrated as well as
substantial upside if the show is a blockbuster hit.
Ownership is a key ingredient in permitting the advertiser to
qualify for some of the tax incentives. As an owner, the advertiser may qualify to
write-off the full cost of production, and if the initial investment has been leveraged,
the advertiser may obtain more in tax savings than it initially invested in the
production.
Watch an episode of the “The Apprentice” –
it’s one big commercial for brands, with each brand paying $3-5 million per episode!
This is the kind of commercial we want to create for our
clients, but without the enormous costs that brands are currently paying, and with
continuous exposure versus just one night!
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