It All Ads Up for Gotham’s Digital Players

Madison Avenue dollars fuel growth of new media shops in marriage of entertainment and commerce

Gotham's Digital Players

New Yorkers are a proud bunch. It can take sophisticated survival skills to live in the city. Even more so to do business there.

So when mayor Michael Bloomberg unveiled We Are Made in NY as his newest effort to attract more of Hollywood’s production biz, and startups to set up shop in Silicon Alley, it was hard not to ignore a sense of bravado behind the new motto.

When the dot-com bubble burst a decade ago, the plug was pulled on startups with lofty ambitions but little strategy to make money.

The companies that survived the economic fallout, and the recession that followed shortly afterward, are now showing others just what the Gotham mayor’s catchy slogan represents.

In brick buildings along leafy tree-lined streets in Greenwich Village, in Chelsea, uptown in the concrete jungles of Manhattan and inside converted warehouses across the river in Brooklyn, well-entrenched production banners such as Radical Media, Barry Diller’s IAC and Matter operate alongside new media rebels like Vice Media, Vevo and Maker Studios. They’ve all proved themselves bellwethers at embracing shifts in how consumers access entertainment.

At such stalwarts as Radical, it’s meant helping clients like Cadillac and Nike embrace virtually every digital platform to launch campaigns that play across devices — from TVs to smartphones. At Vice, an edgy image established through a print magazine has been replaced with Web series with attitude that features controversial chefs, ultimate fighters and news produced by a small army of twentysomethings.

All have one thing in common: When Madison Avenue’s happy, so is New York’s digital production community.

Producing content for the Internet is taking place everywhere, but the decision to produce online video in New York City is largely tied to the amount of marketing dollars managed by some of the world’s largest advertising agencies, whose clients are clamoring for attention from consumers at a time when people are overwhelmed with marketing messages. Every major agency now has its own shingle devoted to producing branded entertainment.

While some marketers would have shied away from Vice in the past, its ability to connect with younger audiences enabled the company to work with Intel and Starwood on a short film competition, “Four Stories,” produced with Roman Coppola.

Those kinds of brand-backed projects that cleverly blur the lines of content and commerce aren’t expected to disappear anytime soon — that’s especially true as the advertising industry spends more to promote products.

“As consumers grow overexposed to advertising, traditional forms such as television commercials, print advertising and billboards are becoming less effective,” said Shakuntala Makhijani, the study’s author. “As a result, advertisers are turning to more subtle techniques, such as promotional material on blogs, product placement, and interactive advertising on social media such as Facebook and Twitter. The distinction between advertising and media content is therefore increasingly blurred.”

Advertising spending in the U.S. grew 4.3% in 2012, representing nearly a third of the $497.3 billion spent worldwide, according to Worldwatch Institute’s Vital Signs Online service. The U.S. accounts for half of the world’s $8.2 billion in product placement deals, the study said. And mobile and social media now represents more than half of all ad revenue in the U.S., up more than 30% last year.

But other moves are also taking place.

Production companies are expanding into mobile gaming and the growing apps biz. Film festivals like Tribeca are promoting digital filmmaking, with this month’s event streaming an online film festival and hosting a Vine competition for the best six-second shorts.

And then there’s Bloomberg.

This summer, the mayor’s office will open the first Made in New York Media Center, in Brooklyn, to have a centralized place where filmmakers can interact and the city can support the local industry.

It’s only a matter of time before the next YouTube sprouts up alongside Foursquare, Kickstarter, Gilt Group, Gojee, Groupon or Etsy, which launched in NYC.

“We were also watching the trends of the entertainment and media industries, and it became clear that New York City was quickly becoming home to numerous startups and digital companies,” said Katherine Oliver, commissioner of the Mayor’s Office of Media and Entertainment during the unveiling of the media center plans. “If you think about it, the way people are consuming entertainment has completely changed in the past few years. Yes, people are still watching TV and going to the movies, but they’re also streaming films online and watching the latest episodes on smart phones and tablets. So for content creators following traditional business models — make a film, advertise a film, release a film — it may not be enough in today’s changing market.”