Product placement - opportunity or simply a red herring?

actor's hair: no fewer than seven brands - Ford, Heineken, Omega,
Smirnoff, Sony Electronics, Sony Ericsson and Virgin - are integrated
into the action.

Meanwhile, Bond's small-screen counterparts on BBC drama Spooks are no
less brand-conscious - they use Apple computers and in a recent episode
caught their bad guy using a Cisco internet-capable phone network.

Over on Channel 4, popular soap Hollyoaks featured an episode with the
characters playing Sony PlayStation games in a social setting.

The difference is that the brands in Casino Royale paid handsomely for
the exposure, while Cisco and Sony did not - indeed could not.

Paid product placement has been illegal on British television since the
introduction of commercial TV in the 1950s, but events in Brussels this
month mean this could potentially change - in about three or four years'
time.

Yet the British public will continue to be exposed to product placement
in films and American TV imports, as well as free prop placement in
home-grown drama.

Product placement is also a growing area away from the small screen and
is perfectly legal on any non-broadcast medium, from film and publishing
to video games and broadband.

Why it is unlikely to succeed in linear TV

The wheels of bureaucracy turn slowly and it will be 2009 at the
earliest before any changes to the law on product placement take
effect.

First, the European Council of Ministers and the European Parliament
must reach agreement and pass legislation on a European level.
Individual member states are likely to be given an opt-out clause, so
even when that happens, it is still up to the British Government to
implement the changes locally.

It is unlikely that broadcasters will be given carte blanche to
implement product placement in any manner they like; the discussions in
Brussels this month indicate that any lifting of the ban will come with
strings attached.

The Council's view is that product placement should remain banned in
news and current affairs and children's programming, while the European
parliamentary committee considering the issue has proposed that
broadcasters should be forced to remind viewers that product placement
is taking place once every 20 minutes.

If and when product placement becomes legal, it is far from clear how
big the opportunity is and who - the broadcaster or the producer - would
benefit.

Ofcom has estimated that product placement could be worth £35m
after five years, but many broadcasters believe even this modest figure
is over-optimistic.

Gary Knight, brand partnerships director at ITV, says: "The only real
evidence comes from the States, but it is over-claimed and over-hyped. A
lot of these product placement deals are not done in isolation, but are
actually part of a wider relationship with the client that would include
spot advertising or sponsorship."

Steve Read, managing director of free prop placement specialist
1stPlace, says the size of the US market is often over-estimated, since
only about 20% of US product placement deals are paid for and most are
free arrangements. "Who's going to pay for it if they don't have to?" he
asks.

David Charlesworth, head of sponsorship at Channel 4, says there is no
way that product placement could even come close to matching the loss of
revenue from spot advertising: "How could it, when we (the industry) are
haemorrhaging vast amounts of money every month?"

Product placement is ubiquitous in US programming - from subtle messages
in premium shows such as Lost, Desperate Housewives, 24 and The OC, to
in-your-face placement, such as contestants in Survivor eating Snickers
bars after a fast and spending five to 10 minutes talking about it.

Tess Alps, chief executive of Thinkbox, says the UK has a different
culture to the US and believes it is important that broadcasters do not
go overboard if the rules are relaxed here.

"Our ads aren't like American ads - the British public is different and
broadcasters would be wise to take a cautious approach," says Alps.
"They should research it as they go and see how people react to it -
people will hate you if you mess up their programming."

Why it will happen in other media

The same rules that restrict product placement on television also
restrict radio, although it seems some stations push the boundaries or
are genuinely confused.

While it is not uncommon for a presenter to plug a product as part of a
commercial deal, this is actually against the law, according to the
regulators. However, product placement is fair game in any other medium
outside television and radio, with film the classic example.

It is also possible, although rare, in publishing, with the most
high-profile example being Fay Weldon, whose book The Bulgari Connection
was sponsored by the Italian jewellers.

Technology is opening up new opportunities such as in-game advertising
and IPTV, and Damian Blackden, director of strategic marketing
technologies at Universal McCann, believes this is becoming increasingly
important. "Messages must become non-interruptive and based on a closer
connection between the creative message and the environment," says
Blackden. "The opportunity with games is that they are going for more
and more realism and one of the things that makes life seem more real is
the existence of brands."

There are two types of in-game advertising - dynamic ad-serving within
video games that connect to the internet, such as Xbox Live, and
advertising in massive multi-player online games (MMOGs) such as Second
Life.

Advertisers are flocking to the new medium - in the US, players of
Second Life can order a Domino's pizza through the game, while in the UK
Channel 4's Four Radio recently became the first radio station to open
up inside the virtual reality game.

IPTV - TV via broadband - is another potential growth area and one that
broadcasters are eyeing keenly. ITV's Knight says the channel is
planning to launch its broadband offering next March and is exploring
the possibilities for product placement on this platform.

"Once you get into broadband, it is slightly easier, because it is not
on linear TV," he says. "Rather than the full 60-minute show, you might
have a brand extension for 10 minutes and there are more opportunities
to build product placement around it."

Pitfalls of how it is being done now

There is an entire industry around free prop placement, but because it
is handled by specialists such as 1stPlace and SeeSaw Media, it is
usually an add-on to an overall media strategy rather than part of its
core.

Some media agencies do product placement work - for example, Universal
McCann's in-house brand placement specialist Rogers & Cowan has done
some strategic placement work for Bombay Sapphire gin.

However, most mainstream media agencies leave the area well alone. Tony
Manwaring, communications planning director at Initiative, says media
agencies are likely to take a greater role if paid product placement
becomes legal. "If deregulation happens, then that is an opportunity to
be more strategic about product placement," Manwaring says. "It means it
becomes a different thing to the tactical beast it is now and I could
imagine planned campaigns based on product placement."

The biggest limitation with free prop placement is the lack of control
over how the products are used and the fact that current regulations
prohibit products from being given "undue prominence".

The client and prop placement agencies can vet the script before
providing free product to producers to ensure the context is not harmful
to the brand, but they are not in a position to demand changes to the
script.

For example, 1stPlace's Read says his brief from Sony is to loan out
PlayStations only when the script shows them used in a social setting
and he turns away inappropriate requests every day of the week. "The aim
is not just to get exposure, it is to manage that exposure," says Read.
"We are very choosy - we don't do that many, but we do the right
ones."

This is not a problem that will go away entirely even if paid product
placement comes into effect - if 1stPlace and Sony withhold the
PlayStation, there is nothing to stop the producer buying or borrowing
the console if the script demands it.

There is limited product placement in publishing, mainly because of a
deep-seated cultural reaction: books are considered art, rather than
simply entertainment. Some publishers believe there is growing potential
for product placement in fiction, though most advocate it more for short
stories and podcasts because the audience is judged to be more
accepting.

The newer forms of product placement are limited by size at this stage.
IPTV is still largely theoretical, although it is expected to take off,
while the in-game advertising market is still quite niche.

Universal McCann's Blackden cautions that the potential size of the
market is sometimes overstated, since advertising only makes sense
within reality-genre games such as Second Life, but by far the most
popular genre is fantasy.

"You're not going to be sponsoring dragons in a fantasy game - someone
might have a crack at it, but I can't see it," Blackden says. "The
people who choose to play in Second Life are going to be those who are
more brand-conscious, because they are more interested in playing a game
that is related to their lives."

Initiative's Manwaring says an additional problem is that the audiences
for IPTV and video games, and even most films, are so fractured and
difficult to predict or measure that the tactic is likely to remain
niche.

So whatever the hallowed halls of Brussels decide, it seems product
placement may not be as straightforward as some may have hoped after
all.

TIME LINE

- 1954

Television Act paves the way for commercial television in Britain and
establishes the principle of separation between programming and
advertising. Product placement and programme or channel sponsorship are
not permitted under this principle

- 1989

Television Without Frontiers Directive comes into force across Europe
(revised in 1997). It maintains separation principle and bans
"surrepticious advertising". Product placement is not explicitly
mentioned

- 2005

Ofcom undertakes public consultation on product placement ahead of
discussions at European level on amending the Television Without
Frontiers Directive to lift the ban

- October 2006

Ofcom announces it will amend Broadcasting Code to allow sponsorship of
television channels or radio stations

- November 2006

European Council of Ministers and a committee of the European Parliament
indicate they would like to allow product placement, with some
restrictions. The draft text retains a prohibition on product placement,
but proposes to allow member states to permit in certain programmes
providing certain conditions are complied with. It will be 2009-2010
before anything changes

RESEARCH

Product placement could actually enhance rather than hamper viewers'
enjoyment of a television programme, research suggests.

MEC MediaLab, the research division of WPP-owned Mediaedge:cia, has
published a report showing the introduction of paid-for product
placement onto UK television could be beneficial for advertisers,
broadcasters and viewers.

David Fletcher, head of research for Mediaedge:cia, says the highly
prominent Coke cans on American Idol were "a step too far" for British
audiences.

"What works for UK viewers is respecting their intelligence and allowing
them to join up the dots for themselves," he says.

The study participants, who were told the research was on programme
formats, were shown a specially created entertainment news programme and
asked to rate their enjoyment of it.

There were four test brands and four versions of the show for each brand
- the control group with no advertising or placement, one with
traditional spot advertising, one with an ad followed by product
placement of the brand within the programme and one with an ad followed
by product integration - where the brand is mentioned by name in the
programme rather than just placed.

The study found higher enjoyment scores for the programmes with product
placement or integration than those without.

Significantly, product placement lifted awareness by 16% over the
30-second slot and a massive 45% of viewers said they would be more
likely to purchase a product if they saw product placement or
integration in a TV programme.

However, while integration lifted awareness by 24% against commercial
exposure, it was not the best way to improve viewers' affinity with a
brand; product placement improved affinity by 22%, but integration
lifted it just 8%.

The quantitative part of the study was based on 318 UK adults aged 18-40
in March 2006.

By contrast, Ofcom's public consultation into product advertising
revealed that, while some individuals are supportive of moves to allow
paid product placement, organised viewers groups remain opposed.

Organisations such as Voice of the Listener and Viewer, NCC, Sustain,
Public Voice, National Heart Forum and Campaign for Press and
Broadcasting Freedom argue strongly that the ban should remain in place,
citing concerns that the blurring of the line between editorial and
advertising would be to the detriment of viewers and may even amount to
surreptitious advertising.