Self-Financed Marketing: How Long-Form Content Costs Can Add Value to Your Company’s Balance Sheet
Dan Fricker, MBA Student, Cornell University
As readers of this space know more than most, companies are now in the business of movie- making as a means of building/extending their brands. From Airbnb to Johnson & Johnson, Nike and North Face, this emerging trend in marketing is happening across all categories. Although the costs of film, or TV, can get expensive - especially for companies with declining marketing budgets. While not all stories need to be produced with a price tag quite like The Morning Show’s or the Avengers’, costs are incurred, nonetheless. So if you’re an in-house marketer trying to secure spend approval from your CMO/Finance team to invest in the production of a film/series, making a business case to cover these costs may seem at times like an uphill battle.
However, there’s an opportunity here for brands to be a bit more sophisticated with their accounting practices, in terms of how dollars spent on longer-form content actually show up in their financial statements. Instead of the Finance department looking at this like Marketing just spending all of the company’s money, instead, we should recognize value’s actually being kept in the firm. If you capitalize your content costs as assets, rather than treat as operating expenses, your balance sheet stays high and net worth of your company goes up.
You see, normally most marketing activities - out of home ads, social spends, print promotions, experiential events - are all considered operating expenses, where monetary value leaves the company right away, at the time the transaction occurs. These expenses are tracked under SG&A (Selling, General, & Administrative Expenses) in your company’s income statement.
Let’s say for the sake of simple illustration your company has $1000, and puts $50 aside for your marketing budget this fiscal. Throughout the year, your Accountants record those expenses under SG&A, and your company’s left with $950 by year’s end - $50 in value has left the firm.
However, if you can reasonably prove that what you’re getting for that $50 (in our case, content) will earn your company value well into the future, your Accountants can capitalize those costs over a longer period of time. Meaning, whether you’ve spent the cash now or not, you don’t have to use up your full $50 marketing budget, and instead only a fraction in this fiscal period.
So again, let’s say that $50 you’ve invested in content will earn you brand value over 5 years, your costs should be divided up - $10/year across your next five fiscals. With capitalized costs, monetary value isn’t leaving the company right away, it’s retained in the form of an intangible asset. At year’s end, your company’s only expensed $10, and is still left with $990 in value.
If both the value and lifespan of your content can be quantified, it allows your CMO to stay in the black. These once-assumed marketing expenses are actually investments into assets, and instead of seeing your retained earnings go down, you can help your company’s assets go up.
We know that brand content works - it provides value by driving higher recall, favorability, and intent. Not to mention the potential of sales dollars, as we’ve seen with some recent acquisitions. Beyond its direct impact on audiences, it has additional monetary value in the market - distributors, cable/network and streamers alike, are paying to acquire brand entertainment, including Apple,