The UK - no place for product placement?

Product placement is big business in the world of Hollywood films; remember the lingering close-ups of Omega watches in the last James Bond film, Casino Royale? Traditionally, however, the use of product placement within British television programmes has been severely hampered by a strict regulatory regime.

A new European Directive, the Audio-Visual Media Services Directive 2007/65/EC (AVMS) seemed to herald a relaxation in the rules. Surprisingly, the Culture Secretary, Andy Burnham, announced last month that the UK Government will not exercise its option under the AVMS to allow paid product placement to appear on British television. With the Government obliged to hold a consultation process, now is probably the last chance for advertisers and broadcasters to lobby for a change in approach.

Background

After a long period of consultation, the AVMS was adopted by the European Parliament and Council and came into force on 19 December 2007. The AVMS amends and renames the Television Without Frontiers Directive 89/552/EEC (as originally amended by Directive 97/36/EC) (TVWF). The AVMS is required to be implemented by member states by 19 December 2009.

The TVWF- the current law

The TVWF was originally enacted to provide a single market for the free movement of television broadcasting services within the EU. Its aim was to harmonise laws on television broadcasting. The UK Government considered that the TVWF contained an implicit prohibition on product placement (i.e. payment by advertisers for their products to appear within television programmes) and so made that prohibition explicit in the Ofcom Broadcasting Code.

The ban does not entirely prevent the use of branded products within television programming. Broadcasters are permitted to use products as props if the props were acquired for free, or at less than full cost, and their use can be justified editorially. In addition, programmes acquired from abroad and films made for the cinema are an exception from the ban on product placement, provided that the broadcaster does not directly benefit from the arrangement. For example, Channel 4 was able to show the episode of Desperate Housewives, where Eva Longoria's character, Gabrielle, takes on a modelling job with the US car manufacturer Buick, because Channel 4 did not directly benefit from any financial arrangement Buick had with the show's producers.

Not all member states have interpreted the TVWF in the same way. For example, product placement is permitted (and growing in importance) in Spain.

Why the change?

A convergence of media and their audiences has meant that the traditional regulation of television services needs to be extended to cover new media. Under the current law, traditional broadcasters, subject to harmonised regulation, are potentially disadvantaged as they come into competition with those broadcasting via the internet or providing television-on-demand services, who are not covered by the TVWF.

The AVMS

The AVMS seeks to be technology neutral and to extend the scope of regulation beyond traditional television broadcasting to cover "television-like" services broadcast via new media (e.g. internet or mobile phone) and video-on-demand. Interestingly, the AVMS does not seek to cover content generated by private users which is primarily non-economic and not in competition with television broadcasting. This should mean that videos published on MySpace and YouTube by individuals are, in most cases, not regulated by the AVMS. It is though a grey area as to when such users may become 'professional' and such activities cease to be considered primarily non-economic.

Amongst other matters, the AVMS explicitly states that "product placement shall be prohibited". However, it subsequently includes far-reaching derogations from this apparent ban. So, where member states exercise their right to derogate, product placement will be permissible in cinematographic works, films, series, sports programmes and light entertainment programmes (though expressly not in children's programming and, by implication, not in news programmes or documentaries).

The use of product placement is then made subject to certain conditions including the following:

• the content and scheduling must not be influenced so as to affect the responsibility and editorial independence of the person responsible for the content of the service;
• the programme must not give undue prominence to the product in question and must not directly encourage the purchase or rental of the good or service;
• viewers must be informed of the existence of the product placement at the beginning and end of a programme and upon resumption after an advertising break; and
• the programme must not include product placement of tobacco, cigarettes or prescription medicines.

The "country of origin" principle will apply to the AVMS ensuring that broadcasters are regulated only in the country from which they broadcast. However, there are some restrictions aimed at preventing "forum shopping" in these circumstances.

The UK is obliged to implement the AVMS by the end of next year.

Debate in the UK

Access to multiple channels and increased competition from alternative sources of entertainment (such as computer games and You Tube) has made it far more difficult for broadcasters and advertisers to reach a mass audience through television. Alternative and on demand audio-visual media platforms, such as 4oD, and hard-drive recording (e.g. through Sky Plus) have allowed viewers an easy means of skipping through commercial breaks. Consequently, the value of television slots to advertisers has declined, resulting in a fall in advertising revenues and a need for broadcasters to find new sources of funding. This is in part so that they can continue to commission new projects.

Controlled product placement could have been one solution (and perhaps a less costly one than the premium rate phone-ins for which broadcasters have recently been censured or fined). Advertisers are also anxious to take advantage of this means of increasing awareness of their brands and products.

Those involved in product placement within 'television-like' broadcasts on the internet will be particularly concerned at the extension in the scope of regulation. Although regulated under e.g. the Consumer Protection from Unfair Trading Regulations 2008, internet-based activity is not subject to the TVWF or the current ban, but clearly will, to a large extent, have to be covered by the legislation implementing the AVMS in the U.K. Programmes such as 'Kate Modern' on the social networking site Bebo, have reaped huge rewards from companies like Orange paying to have their products written into storylines.

Conversely there is a high level of concern amongst consumers and consumer interest groups, who are concerned to maintain trust in television by ensuring that editorial independence is not threatened. The flagrant nature of product placement within countries such as the U.S. has put off many and the level of trust in television is perceived to be at an all-time low following recent scandals.

The UK Government stance

Surprisingly, the UK Government has come down firmly against product placement, expressing the view that it may contaminate television programmes and create mistrust amongst viewers. In the words of the Secretary of State for Culture, Media and Sport:

"….as a viewer, I don't want to feel the script has been written by the commercial marketing director. If Jim Royle gets out of his chair for a Kit Kat, I want to think, 'he fancies a Kit Kat' – not, 'Kit Kat my arse!' If I thought it was because someone has paid for him to eat one it would change the way I felt about the programme…."

Overall, the initial stance taken by the Government is that the integrity of British programming should not be put up for sale. But with a consultation process soon to be opened, the discussion is not yet closed.

A new opportunity denied?

We are merely at an embryonic stage of the product placement market in the UK. Such marketing tools have been used to a much greater extent in the US where content producers are reported to have received over US$1 billion from product placement deals as long ago as 2004. Commentators have speculated that the product placement market could be worth up to £100m in the UK, though Ofcom has provided the more conservative estimate of £25-35m after five years. Unless the Government changes its stance, this valuable new market will be strangled at birth.

Given the potentially huge opportunity for broadcasters and brands alike, the television and advertising industries should begin to formulate their strategies now, so that they can submit their considerations to the Department for Culture, Media and Sport as soon as the consultation opens. A change in approach may be unlikely, as the Government stance was expressed in no uncertain terms, but this could well be the last chance for product placement in the U.K.