American Idol's Ads Infinitum

Ronald Grover

Business Week

May 22, 2008

 

It was Beatles night at American Idol. At least, that was how a recent episode was billed. But sometimes it looked more like Apple (AAPL) night. Or maybe Coke night. Before Ryan Seacrest introduced a contestant warbling Lennon and McCartney, he cradled an Apple iPhone and, for nearly a minute, waxed on about how perfect it was for voting the guy off the show. The judges seemed to approve of Seacrest's Apple plug because when he was done, they raised red Coca-Cola (KO) cups in salute.

Seven years into a monster ratings run, Fox Entertainment's (NWS) American Idol has become as much a marketing showcase as musical slugfest. Contestants cavort in rock videos to pitch Fords (F), troop off to Apple to record iTunes tracks, and answer questions brought to you by AT&T (T). Now, as America's top show reveals mounting signs of weakness—ratings before the May 21 finale were off about 10% from last year—it seems fair to ask: Will product placement kill the video star?

O.K., so Idol is hardly dying. With an average of about 26 million folks tuning in to each telecast, the show clobbers its closest rival. The writers' strike drove off many network viewers, and most shows lose some pop after seven years. Still, Idol's ratings decline has been unusually steep. "I'm satisfied creatively, but not necessarily with the performance," says Fox Entertainment Chairman Peter Liguori. "[We] want to...inject [Idol] with new levels of energy, unpredictable twists and turns, and greater levels of storytelling."
A MOM SHOW?

The producers might also look at the clutter of in-show ads. "I know they want to make money," says Caitlin Knott, an 18-year-old from Brownstown, Mich. "But no one wants to see Ryan Seacrest selling stuff." Knott watches Idol these days only because her mom is a fan. That's another issue: The show is aging faster than a '70s rock act. The median viewer age is 43—about the age when advertisers start to recoil. "Idol is still the one place where an advertiser can reach a huge audience," says Andrew Donchin, an executive at ad agency Carat North America. "But if there are too many ads, the kids will be the first to notice." One danger, says Brad Adgate, senior vice-president of ad firm Horizon Media, is that young viewers will simply watch the show on YouTube.

Three years ago, Idol scaled back its sponsors from five to three to limit ad clutter. But this year it added Apple, figuring it fit the show's demographic. Meanwhile, advertisers like Ford Motor, which on May 14 unveiled a sportier Focus in a weekly 45-second rock video, became omnipresent. It's a lot of plugs to get through. Idol showed 4,151 product placements in its first 38 episodes this year, according to Nielsen Media Research. That's up just 4% from '07, but the time on screen jumped nearly 19%, to a total of 545 minutes.

Overload? "We haven't heard that from any of our focus groups, and the advertisers are pleased with the results," says Keith Hindle, who heads up licensing for FremantleMedia, which produces Idol with CKX's 19 Entertainment, which owns the show. "We spend most of our time turning people away." Ford general marketing manager John Felice expects to be back next year: "If we didn't, [the slot] would be snapped up by a competitor in a heartbeat."

Even with viewers aging, industry watchers say Fox gets $700,000 for a 30-second spot on Idol. CKX, meanwhile, reports making $63.3 million from Idol in 2007. This year, it says, net profit already is up 63%. Yet CKX says Fox has guaranteed Seacrest and the gang just one more season. So it may be some time before America speaks and Idol is voted off.