PRODUCT PLACEMENT AND IMPACT ON ITV REVENUES

Paid for product placement on TV is currently outlawed in the UK and as recently as March 2009, Andy Burnham, the Secretary of State at the time, showed no signs this was going to change. He stated he had “very serious concerns” about the relaxation of product placement laws because it was “blurring the boundaries between advertising and editorial.”. Six months on, the new Secretary of State, Ben Bradshaw, is expected to make an announcement this week at the Royal Television Society which will pave the way for relaxation of the rules on commercial television. A consultation is expected to take place over the next three months with changes, if they are to occur, being implemented next year. A change in the rules has the support of the Conservatives and the Liberal Democrats so even a change in Government next year is unlikely to affect the outcome of the consultation.

Currently producers of UK TV programmes are allowed to include “real” products as props in the production of television programmes. As a result an industry that has grown out of this need in which placement agencies are paid by advertisers to arrange for their brands to be placed into TV programmes by providing the product as a free prop to production companies. This saves the producers money as they don’t have to buy the products they need and, for the client, they get some “free” exposure for their placed product. However, due to the rules preventing undue prominence of products in programmes, the exposure brands get is normally small, uncontrolled and incidental. This, in itself, is not a problem as the money invested by the brand is usually a relatively modest fee paid to the placement agency, in return for what can be potentially high profile media exposure.

What might happen?
At this point no one knows what the Government policy will be on this matter as they seem set to take a significant u-turn in the space of just six months. It seems, however, increasingly likely that some form of paid for placement will be allowed on commercial TV from some time next year. In other words, brands will be able to pay for the right for their product to be featured in the programme, in return for a certain set of contracted rights and benefits from the producer of the programme. This has divided the commercial television broadcasters with ITV keen to see the rules relaxed, whilst the likes of Channel 4 and many of the others less enthusiastic. ITV are the broadcaster and the producer in many cases, while the others are largely just broadcasters who are commissioning the programmes for the independent producers - it’s more difficult for them to see the commercial benefits.

The Arguments in favour of relaxation are;
• Product placement already exists in Film and imported US TV programmes which are broadcast, unedited, in the UK. Viewers are used to it and it levels the playing field for UK producers
• Content broadcast online is not regulated and product placement is common place in dramas such as Kate Modern and Sophia’s Diary
• Real products lend credibility to programmes; it makes the programmes more “real”
• Product placement in programmes gives credibility to brands
• It can help change consumer behaviour by allowing advertisers to demonstrate how they want their products to be used e.g. new mobile phone functions
• Media exposure can be easily measured and priced
• Advertisers who fund TV shows will be able to include their products

The Arguments against are;
• It will blur the lines between editorial and advertising causing viewer confusion and/or cynicism
• Editorial integrity will be compromised by the demands of the advertisers who have their products placed
• The use of the product is not controlled so that clients run the risk of inappropriate use of their product or it being placed in a bad light e.g. brake failure on a car, skin issues from cosmetics etc
• You might be able to put a price on exposure but if it’s subliminal how do advertisers put a value on its effectiveness?
• Paid products placed in programmes could be ambushed by brands who sponsor the programme unless safeguards are put in place
• Logistically and contractually complex to deliver
• A marginal commercial benefit for significant editorial compromises

Figures of £100 million in product placement revenues have been banded around, but this seems to be a long term goal. If this iniative is allowed, this is good news for ITV revenues and therefore shareholders though the actual effect on the bottom line may not be felt to a great extent for many years.