The Oscar-winning producer, talent manager, and cofounder of Sugar23 talks about a new model for brands to become full-fledged creators of long-form film and TV programming.

Over his three decades in the entertainment business, Michael Sugar has witnessed the steady decline of traditional TV advertising’s effectiveness and reach. Sugar—the talent manager and producer of such award-winning and lauded titles as Spotlight, The Knick, and 13 Reasons Why—maintains that brands can help counter that challenging trend by becoming genuine partners in the production and creation of premium content. In a recent interview with McKinsey senior partner Marc Brodherson, Sugar spoke about the evolving entertainment and advertising business landscape, the challenges and opportunities of this new approach to brand marketing, and how his company is hoping to help scale it over the coming years. The edited transcript of their conversation follows:

Hollywood and brands—an evolving market

Marc Brodherson: Tell us a little bit about how you decided to expand significantly into this new form of content that is not what we typically think about as branded content or marketing spend. What specifically did you see happening or not happening in the entertainment and advertising marketplace that made you realize there was this underappreciated opportunity?

Michael Sugar: Everyone knows that there’s a lot of contraction in Hollywood. The post-strikes environment has created all kinds of distress in the industry. On the other side, the brands have been disintermediated. Linear television has dissipated quite a bit. We know that ads are being skipped. We also know that the thirst for attention is ever increasing, that audiences are hard to reach and harder to keep. But they still watch shows and movies, listen to podcasts, and read books.

I spent the majority of my career making films and television and managing the careers of iconic artists. It’s no surprise that things have not been going great in the entertainment industry. So about two years ago, the company pivoted to thinking holistically about how we can enhance brands’ relationships with the consumer by helping brands make the content they would otherwise just advertise against. I feel like the opportunity at this moment is for brands to reach the consumer directly through entertainment, rather than simply advertising against it.

The audience is searching for an authentic relationship with the brand. We’ve become very savvy. We don’t want to be sold to. In this climate, you need to sell a product to the consumer that has an authentic connection with the brand and believes the brand understands the consumer.

In our mind, the best way to do that is to create something the consumer already wants. Over the years, we’ve seen brands connect the content in different ways. We see brands put their names on stadiums. We see brands put their names on race cars. Crypto.com reportedly spent $700 million to put its name on what was the Staples Center. But they’re not telling LeBron James which plays to run. They’re not telling the Lakers which uniforms to wear. What they’re doing is creating this relationship. They are the entry point between the content, the sports or the concerts in that building, and the consumer.

What we’re doing is not branded content. If somebody wants to make branded content, I am all about it, but that’s not for us. I feel branded content is just a longer commercial. I think fundamentally, what’s different about the opportunity we’re creating with brands is that when you make branded content, you spend a lot more money getting the eyeballs than you do on the production itself, by a lot.

What we’re trying to do with brands is create shows, movies, and podcasts that are commercial, good enough for Netflix, Amazon, Apple, or linear television to want to air. And in that scenario, you don’t have to buy the eyeballs, right? You’re delivering a full show.

Shaping entertainment content to work for brands

Marc Brodherson: Are these primarily existing projects and ideas that brands jump into and help shape, rather than start from scratch?

Michael Sugar: The key here is that creators do not go to brands with the stuff they can’t get made in Hollywood. Brands want the best stuff, and historically, Hollywood has come to brands with its hands out.

We’re focused on original IP that can work for a brand or myriad brands. Modern Family or any half-hour sitcom you might have seen usually had 16 advertisers every half hour. That means some content could be right for 16 different brands, at least in terms of the audience it’s attracting, the demographic, and the message of that show.

I think the most interesting opportunity for brands is to see the things that Hollywood producers don’t need the brands for—things that are good enough to sell without a brand. If you can get a brand in early, the brand benefits, but the distributor also benefits from having a marketing partner, which is very helpful in this marketplace. Fundamentally, our secret sauce is tweaking the core idea, matching what Hollywood creates and what the brands want.

We had a great experience with one brand, for instance. We heard a strong pitch that included a particular type of business, and we just changed the business to a different category. The creator didn’t have an issue with it, because she was focused on the characters. For us, it was about the messaging that could come through those characters if their business amplifies something the brand was looking for.

I think the opportunity for the brands is to actually own the content, which gives them multiple benefits. One, they can impact the creative rather than integrate into someone else’s creative. They can make it just right. Two, they turn this media spend into an investment with its own ROI.

The content has to be brand forward, with the brand ethos at the center of its proposition. But the brand doesn’t have to be in every frame of that content. As long as the audience understands that the brand is behind the content, just like the consumer understands that Crypto.com is behind the building that creates the Lakers, loyalty and attribution will be associated with it. At the end of the day, the more forced the product integrations are, the more on-the-nose the content about the product is, the less authentic it will feel to the audience trying to consume this as entertainment, not as branded content or a commercial.

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