Close-Up: Live Issue - Is product placement the future?

With rules set to relax and TV fragmenting, embedded advertising is on the rise.

Product placement has sailed a long way upstream since the 50s, when Gordon's paid the makers of the movie The African Queen to have Katharine Hepburn's prim missionary pour Humphrey Bog-art's gin supply into a river to save the dishevelled tramp-steamer captain from the demon drink.

Soon, product placement will drop anchor in the UK, where regulators have concluded they can no longer resist ITV's demands that it must be allowed to tap new revenue streams if it is to sustain anything like its current levels of programme investment.

Advertisers are equally concerned, fearing that the explosion in the number of personal video recorders (up to eight million homes are expected to have them by 2012) will make it ever easier for consumers to dodge ads.

As a result, Ofcom seems likely to relax the rules that currently prohibit the embedding of advertising within programmes. At present, neither the BBC nor ITV is allowed to accept money or goods in return for featuring products in their programmes.

A clear signal that the status quo is about to change was given at last week's ISBA conference by Stephen Carter, Ofcom's chief executive, who said his "temperamental inclination" was to allow product placement in TV dramas, comedies and other entertainment shows but not in documentaries and news programmes.

Product placement has its roots in Hollywood, where it has scored some notable hits for advertisers. Everybody remembers what happened when Mars turned down the chance to have M&Ms placed in the film ET. Instead, the offer was taken up by Hershey with Reese's Pieces. Sales soared by 66 per cent. More recently, US sales of pinot noir wine have risen 16 per cent on the back of the film Sideways, which features a pair of friends who embark on a wine-tasting road trip though central California.

On US TV, product placement isn't as far advanced, but the practice is growing significantly, fuelled mainly by reality shows. AT&T, Coca-Cola and Ford have forked out $26 million each to be involved in the most blatant product-placement exercises ever mounted, for the American Idol series.

Simon Cowell and his fellow judges are shown quaffing Coke as they critique contestants, while viewers are asked to cast their votes using their AT&T phones.

Not surprisingly, communications groups are rushing to get a slice of the action. The Aegis-owned Carat Americas and Interpublic's Initiative launched product-placement divisions last month.

They join specialist units already established by Omnicom, WPP and Publicis Groupe.

Many find the trend disturbing. The US Federal Trade Commission has just rejected a call for a probe from the watchdog group Commercial Alert.

The organisation claims that product placement blurs the boundaries between advertising and programming and may increase cases of obesity and diabetes in children. Three-quarters of Americans are said to find product placement too pervasive and distracting.

In the end, though, the biggest problem may be how to measure the impact of placements. Nielsen Media Research is broadening its TV monitoring service in the US. However, there is still no consensus on what factors make a placement valuable.

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CREATIVE CHIEF - Steve Henry, chairman and executive creative director, HHCL/Red Cell

"I'm always interested in new ways of breaking down communication barriers but I'm no fan of product placement. It's vital to have control over the way that brand is promoted. Product placement is simply 'piggybacking' on somebody else's culture.

"For example, if you place a car in a TV show, you may have no say in how it's driven or whether the driver is a hero or villain. There's no guarantee that your brand values will be protected. Product placement can be an excuse for slipshod, lazy and naive thinking.

"The future lies less in product placement, which may turn out to be a fad, and more in advertiser-funded programming."

MEDIA STRATEGIST - Ivan Pollard, partner, The Ingram Partnership

"Product placement will become a big thing in the UK, although it's already here. About 90 per cent of the products you see featured on TV are placed.Props managers act as intermediaries to get what's needed - as long as TV companies aren't paid, it's within the rules.

"I welcome what's happening, as long as there are clear guidelines. Product placement is just another means of engaging with consumers. We already know it works, and I'm sure some mechanism can be devised that allows its impact to be measured.

"Also, it should end the disparity in the rules that allows the BBC to use its Top Gear programme to stimulate sales of its Top Gear magazine."

PRODUCT-PLACER - Steven Read, managing director, 1st Place product placement

"Over the long term it's inevitable, with the fracturing TV market, that companies start to look for new revenue streams.In the US, if a brand that isn't paid-for appears in a programme, it's edited out.

"We work with production companies, helping them make TV shows on the understanding that we can't control how the products are used. Clients would demand more control if they were paying to get products in there.

"Measurement is another problem all product-placement agencies are looking at. If Tom Cruise picks up a can of cola and says how delicious it is and an extra does the same thing, how do you measure the different values?"

BROADCASTER - Lisa Opie, managing director, Flextech Television

"At the moment, there is a brick wall between advertisers and programmers. But in a world of non-linear broadcasting, we will all have to address how we are going to get the money for content. We have to face the fact that the way viewers look at TV is changing and product placement is something we should explore.

"I agree with Stephen Carter that we need some boundaries. In lifestyle programmes, for example, there seems no reason why we shouldn't have product placement, but it shouldn't be used in news under any circumstances. In reality, the viewers are the best regulators - if they get sick of seeing too many products, they will just switch off."