Sorrell's Interest in Branded Content Is Explained by WPP's Finances

(MoneyWatch)  WPP chief Martin Sorrell showed up at the MIPTV Festival in Cannes and touted a sudden interest in product placement, branded entertainment, and the type of advertiser-producer partnerships that were trendy four years ago. Why? Here's one theory: The answer lies within WPP's inefficient use of its own operating expenses. Here's what Sorrell said, per The Hollywood Reporter:

Sorrell said the recession might have the greatest effect on production, with content producers being forced to trim costs and be more creative in financing their programs.

"Production models are too expensive and will have to change," Sorrell said, suggesting more partnerships between ad agencies, talent and content producers will be the wave of the future.

"This is actually a big opportunity for content producers, who those who control talent and for the agencies," he said. "These groups have to work together to try and develop content that is attractive for the new platforms, particularly the growth platforms of mobile and the Internet."

What does all this have to do with WPP's finances? As BNET noted in March, WPP is one the least efficient agency holding companies, and the most indebted. So Sorrell needs to find projects that make a lot of cash based on very little effort.

For an agency, branded content deals are exactly that. It's a lot easier to get a producer to do all the work -- writing a show, integrating your client's brands -- than it is to pay your own creatives to sit around dreaming up scripts and shoots for traditional ads. The ratio of revenue earned to resources spent is a lot higher in branded content than it is in regular advertising, where margins are squeezed.

Pitching a two-fer, Sorrell also mentioned ZillionTV -- an online TV service, like Hulu, that allows viewers to either watch free TV if they choose what type of ads they want to see or pay TV if they choose to view without ads.

What's in this for Sorrell? The ads his agency already makes can be easily placed on this new media, thus generating extra billings and revenues for WPP with no extra resources. Again, it's all about turning around the declining productivity of WPP staff.

• See BNET's previous coverage of WPP's finances:
• Alloy, Aegis Top BNET's Network Efficiency Ranking; WPP Slips
• WPP's Layoffs Plan Explained -- Wall Street Doesn't Believe Sorrell's Rosy View of the Future
• WPP Q4: Lower Profits Increase Likelihood of More Layoffs
• Video: Why WPP Does Not Run Strip Clubs
• WPP to Lay Off "Several Thousand" on Accounts Where Staff Cost More than 60% of Revenue
• Ogilvy Cuts 150 Jobs; First of "Thousands" Expected at WPP
• Sorrell Used WPP Stock as Collateral for Personal Loans
• WPP's Ireland HQ Is Nothing But a Tax Dodge
• WPP Leaves U.K. for Ireland to Avoid Tax
• IS WPP at Risk of Breaching Its Debt Obligations?
• Fitch Cuts WPP's Debt Rating; Suggests Pay Reductions