Even In The US Where It’s Difficult To Gain Unanimity On Just About Anything, TV Product Placement May Have Just Earned That Distinction On Things Having Gotten Out Of Hand

Philip M. Stone June 27, 2008

It’s the old story of killing the golden goose. Once the Federal Trade Commission (FTC) advised back in 2005 that TV product placement was perfectly ok without having to tell viewers that a product was being “placed” as an advertisement, then the networks and Hollywood just plain went to town on a new way to print money. There are shows today where it’s not uncommon to find from 3 - 5 product placements per minute.

How big a business is this? According to Nielsen the US broadcast networks saw a 39% increase in product placement during Q1 this year. The top 10 programs featured 15,404 product placements during the period compared with 8,893 in the same period in 2007 – that’s a 73% jump. Paid product placement spending grew 33.7% to $2.90 billion in 2007 and at a compound annual growth rate of 40.8% from 2002 to 2007 according to PQ Media. 

But even in America, enough seems to be getting near to being enough.  The Writers Guild of America (WGA) has written to FCC chairman Kevin Martin that “broadcasters must adequately disclose the products that are integrated into a story in order to ensure that viewers know they are watching a paid advertisement.” The WGA idea is that a crawl should run at the bottom of the screen basically saying – “that Coke bottle being held is a paid advertisement”.

The FCC has been rather blasé about product placement. After the FTC’s advisory there was a hue and cry for the FCC to issue its own rules, but the FCC’s silence was deafening. But now with such rampant product placement going on it’s difficult to not pay attention anymore and the FCC voted unanimously last week to reexamine the issue with formal proceedings expected to start soon.

The issue is not to do away with the product placements – that horse has already bolted from the stable -- but rather ensuring the public understands it is being bombarded with such ads. Doubtful there are a lot of people who haven’t gotten that message by now. Naturally the Association of National Advertisers and others believe the FTC advisory opinion should continue to stand, no new rules are necessary, and that current rules requiring advertising credits to be listed at the end of a show suffices.

But FCC Commissioner Jonathan Adelstein was having none of that. “A crawl at the end of show shrunk so small the human eye can’t read it isn’t really in the spirit of the law.”

Product placement is also a big issue in Europe. A new directive on audiovisual media services allows product placement for the first time in such programming as TV films, sports broadcasts and light entertainment programs, but the broadcaster must tell viewers at the beginning and the end of such programs and after commercial breaks that product placement is in play.  Placements are banned from news programs, current affairs, documentaries and children’s programming.

The directive requires member states to say by the end of summer whether they will permit product placement and it is by no means a done deal. Andy Burham, the British Culture Secretary, for instance, took the UK TV industry by surprise a couple of weeks back when he signaled he was against it. He reasoned, “You can buy the space between programs on commercial channels, but not the space within them.” He also claimed to be saving the integrity of British TV, “British programming has an integrity that is revered around the world and I don’t think we should put that hard-won reputation up for sale.”

That concern, of course, has never affected the American networks and it is why product placement really is on European television whether the Europeans approve or not. All the big US hits, including some reality shows where the placements are at their worst,  are playing on European channels, dubbed into local languages and, let’s face it, a Coke bottle is recognized as a Coke bottle no matter which country.

The UK Office of Communications had estimated that product placement could be worth some £35 million within five years although advertising agencies believe the figure could be double that.

ITV, the main commercial channel that has been suffering from the commercial television advertising downturn, had really been counting on product placement to boost its financial bottom line, and the minister’s announcement came as a shock. Since then, ITV’s shares have dropped 15%, finishing Wednesday at 48.5 pence – a 52 week low leaving the company capitalized at just £1.95 billion.

(Incidentally, this is the same ITV that BSkyB, the UK’s main satellite TV operator then headed by James Murdoch, snapped up a 17.9% holding in November, 2006, paying 135 pence a share (total cost £940 million -- €1.39 billion, $1.78 billion). Business Secretary John Hutton in February this year said the purchase was anti-competitive and ordered BSkyB to reduce its holding to less than 7.5%. He agreed to a Sky request to keep secret the timeframe for the sale, but it is quite possible ITV’s falling share price is compounded by BSkyB selling shares.)

The culture minister didn’t left much room for back-tracking on his product placement leanings although he did say the government would hold consultations. “There is a risk that product-placement exacerbates the decline in trust and contaminates our programs. There is a risk that, at the very moment when television needs to do all it can to show it can be trusted, we elide the distinction between programs and adverts.” he explained.

Back in the US the Writer’s Guild is also taking on one other aspect of American television that it doesn’t like – video news releases (VNR). VNRs are stories prepared by manufacturers or organizations and are used “as is” within local newscasts without any reference as to the source of the story – a cheap way for local TV stations to fill news time, they don’t have to do so much themselves, and they get paid for the showing the package, too!

In asking the FCC to ban VNRs, the writers’ guild told the FCC in its letter, “This practice is unbelievably deceptive and is an attempt to trick the viewer to think that a paid advertisement is actually news.”

Amen.