Ad-Ventures in film financing: Adidas deal to bankroll trilogy of soccer movies elevates concept but raises concerns over control.

Product placement, or the art of weaving an advertiser's goods into a movie, is an industry in Hollywood. But earlier this year, Adidas AG went one step further. Instead of paying for its product to appear in a scene, Adidas bankrolled the movie.

"Goal! The Dream Begins" was the first of three films Adidas has backed for a total budget of about $100 million. According to Schuyler Moore, partner in the law firm Stroock & Stroock & Lavan LLP and a negotiator for the deal, it marks the first time an advertiser has financed a film at that budget level for mainstream theatrical distribution.

It's hardly the first time that commercial entities have helped finance films, but "Goal!" represents the latest example of advertiser-based financing agreements that are more extensive and complex than ever before. The film's box office success--or relative lack of it--is unlikely to staunch the flow of advertiser cash to filmmakers.

There are a number of recent examples of "advertiser equity funding" in the film industry.

Lego Holdings financed the first "Bioncle" film in 2003, based on one of its toy lines. Two sequels followed, also funded by Lego. All three projects were designed for home video release, not movie theaters.

Studios now have multi-project placement deals, such as Coors Brewing Co.'s partnership with Miramax and Samsung Corp.'s agreement with New Line Cinema.

Ford Motor Co. has hired New York advertising executive Kirt Gunn to write and direct a theatrically released film featuring the Lincoln Zephyr and Mercury Milan models.

DaimlerChrysler Corp. owns a minority piece of the 2005 release "Cry Wolf." The $1 million budget was prize money from the first annual Chrysler Million Dollar Film Festival in 2002.

For moviegoers, advertiser equity raises the question of whether the film's main purpose is to entertain or sell a product. In the case of "Goal!" the script reads like a sports marketer's dream, hitting the crucial demographics and motivation buttons. Santiago, a Mexican-American boy living in Los Angeles, wants to play professional soccer, but poverty and family problems make it a virtual impossibility. Then a scout recommends the kid for a try-out with Newcastle United in the English Premier League, and the rest is a movie. In terms of casting, the film features Mexican-born Kuno Becker and cameos from British soccer stars David Beckham and Alan Shearer.

But Hollywood films also pander for tickets, and studios make creative demands on filmmakers. The advantage of working with advertisers is that they "have the unparalleled capacity to make a film happen," in Moore's words.

He hoped "Goal!" would spark a surge of advertiser-financed projects, but the film stumbled at the box office. Its total take in North America amounted to $3.6 million, well below the estimated $30 million required to make the film. According to Web site www.the-numbers.com, "Goal!" has scored a worldwide gross of $20.6 million, or about two-thirds its production cost.

But Moore believes the movie represents a solid piece of entertainment that doesn't compromise viewer interest on account of its financing source. "Because it is a soccer film, the Adidas stuff doesn't stick out. It really was up to the producers to make sure it was not a commercial, and they did," he said.

He blames the lackluster performance on bad timing and a U.S. audience that doesn't gravitate to soccer. Indeed, the film has performed better in Europe and other soccer-friendly territories. "It would have been nice to come out after the World Cup," Moore opined.

Creative differences?

Matt Barrelle, one of the producers of "Goal," realizes that the film's funding could impact perceptions of moviegoers. He prefers to see Adidas as one marketing partner in a business that has plenty of them.

Besides Adidas, "Goal!" has an official endorsement from FIFA, the international soccer organization. FIFA wanted a movie that would "legitimize the sport for fans, because they don't want to be cheated, they want the real thing," according to Barrelle. To that end, the movie had access to logos, names and real-world soccer teams. Film crews are now in Germany to get footage of the World Cup for inclusion in the second and third segments of the trilogy.

During the making of a film, advertisers "may feel entitled to exercise ultimate creative control," said Moore, which could cripple the quality of the film. "The trick is putting into words a mechanism that assures the advertiser the desired exposure yet gives the producer the flexibility to make a compelling film," he continued. "The solution may require mutual script approval and guarantees of a certain amount of on-screen product time."

On the business side, the advertiser-financier may demand conditions that producers simply can't guarantee. For example, the advertiser might want the images of lead actors to promote its product, the appearance of actors at promotional events, and a guarantee that the actors won't somehow endorse competing brands.

"If BMW finances a film, they would not want the star driving up to the premiere in a Mercedes," Moore said.

On the back end, the advertiser may require that distributors don't edit the film or that it open in a minimum number of theaters. Editing for local audiences is standard practice in many countries, and distributors may balk at a contract requiring them to spend their money for prints or publicity. Again, the producer simply doesn't control the global film distribution system.

In return for meeting advertiser demands, producers have the chance to negotiate on other points. "Don't assume that the return on an equity investment from an advertiser must be structured the same as for other equity investments," said Moore. "Advertisers have motivations that go far beyond economics, so it is possible to work out creative financial structures that reflect the trade-off of certain controls ceded to the advertiser in exchange for enhanced economics to the producer."