Marketers looking forward to bidding goodbye to a miserable 2009 may have good reason to ring in the new year with even more cheer than usual. On 8 January, the UK Government will end its consultation on how product placement could work on the nation's screens, paving the way for the launch of a welcome new revenue stream for beleaguered broadcasters.
Ofcom estimates that product placement could bring broadcasters an extra £35 million in annual revenue within five years of its inception. After a year that has seen slumping sales at ITV and Channel 4, those numbers are not to be sniffed at. But they pale into insignificance when compared with the US, where branded content is already a $1 billion business.
"Those who think it will be a silver bullet that can resolve pressures across the commercial TV industry are wrong, but, equally, when we receive so much imported programming that has been commercialised, there is clearly an imbalance that works against UK broadcasters and advertisers," Mark Eaves, the managing director of Drum PHD, says.
Eaves should know. He helped to bring together Sage with the ITV show The Krypton Factor for the country's first ad-funded primetime show. Relatively little cash is currently spent on ad-funded programming in the UK, but that is expected to change when the Culture Secretary, Ben Bradshaw, announces the parameters for new product placement regulations. Eaves thinks Bradshaw will have been studying events across the pond.
"I think all the lessons - good and bad - exist in the US market," Eaves declares. "There are some great examples of brand integration over there; equally, there are crude and uncreative instances where the product placement has punctured the precious relationship between viewer and programme."
Anyone with even a passing interest in Home Box Office shows such as Sex And The City and Entourage will be aware of the heavy product involvement that is sometimes jarring. For the UK ad industry, it is worth understanding what does and doesn't work in the US and, indeed, other countries where branded content has become well-established.
"Brands integrating into reality content tends to work well, as the audience is open to the presence of brands in their shows. In fact, they have come to expect it," Aimee Duell, the activation director at PHD US, says. The Coke-branded cups that Simon Cowell and his fellow judges sip from during American Idol are a prime example of this type of branded content.
Other approaches include working a particular product into a script or following the AFP path by creating a show from scratch. "Scripted content is less successful and too often done poorly with a heavy brand message," Duell warns. "Creating original content can go either way. If done well, it can be tremendously successful, particularly if it is shareable in the social space."
Regardless of the approach, the one constant is ensuring that brand involvement does not come at the expense of interesting programming. Paul Johnson, Endemol's global head of marketing and branded entertainment, points out that the best product placement is "the stuff that's totally integrated into the narrative".
He points to Endemol's Extreme Makeover Home Edition as a good example: "We seamlessly integrate a product - like HP computers - into people's lives. It's really a feelgood emotional attachment they have with these products."
Not every market is as developed as the US when it comes to branded content. But several are aggressively extending its boundaries, with interesting results.
China's version of Ugly Betty - Wudi - was created in conjunction with Unilever and its media agency Mindshare, and features significant brand involvement for Dove, Lipton and Clear. Both marketer and agency must be happy with a storyline that is set in an ad agency and revolves around pitches for specific products. Results have been stellar, with Dove's market share up by 18 per cent, and the show reaping a ratings windfall.
Mindshare China's Invention director, Karl Cluck, points out that Chinese viewers, used to a staid diet of state-produced TV fare, are more likely to trust a multinational corporation's brand to deliver better-quality programming. That may be true, but the number of brands that have begun piling into the third and fourth series - such as Bausch & Lomb, Perfetti Van Melle and the toothpaste brand Zhonghua - has led to criticism that the product placement is too overt.
This situation is mirrored to some extent in India, where brands are flocking to the popular reality show genre. They include Fair & Lovely, an initiative by the country's largest skin-cream brand, which is owned by Hindustan Lever. The show focuses on women achievers and the obstacles they have overcome to achieve their goals.
Starcom South Asia's chief executive, Ravi Kiran, believes shows such as Indian Idol and the Big Brother clone Big Boss are driving a "40 to 50 per cent" branded TV content growth rate. This is complemented, he adds, by thriving brand integration into Bollywood movies. Yet Kiran remains concerned that a lack of metrics, and differing expectations between marketers and media owners, are hurdles still to be overcome.
He says: "Agencies have to play the critical role of making sure that marketer and broadcaster expectations converge. Agencies should also set the right benchmarks and metrics so that the discipline evolves as more than just intuitive."
These comments point to an issue that lies at the heart of the branded content quandary - structuring the deal. "Every single situation is unique," Johnson points out, with internet protocol, distribution and licensing shifting depending on the specific agreement. For agencies unused to the area, it will be a test of their negotiating mettle as much as their creativity, adding another layer of complexity to a business that is some distance removed from the typical advertising model.
"This is a complicated area, but crucial," Eaves explains. "The entertainment and advertising industries are two incredibly creative sectors, but they speak different languages."
Not enough ad agencies, Eaves adds, are ready for this transition: "Success requires a skillset still rarely found in the agency world - creative thinking that can marry brand objectives and viewer enjoyment. We are suffering from the siloed legacy of the creative sector."
That creative thinking, observers warn, will eventually need to strike a path in tune with a more cynical audience - rather than aping other countries too closely. Johnson notes that UK audiences "want subtlety and humour".
Eaves is a little more blunt, pointing out that brands must not "selfishly gatecrash" the party. "The UK's advertising legacy is typified by wit, intelligence and reward," he adds. "These same creative principles need to be applied to how the UK approaches the merging world of brands and entertainment."
BRANDED CONTENT RULES
US: Branded content in the US is subject to minimal Federal Communication Commission regulations regarding transparency. Broadcast and cable networks must disclose if there has been some exchange of materials, monies or other considerations with a brand. However, commentators say the language is nebulous as to how this is done. Typically, a line appears in the credits. The Writers Guild of America is pushing for full disclosure in the front credits.
China: There are no clear regulations around branded content. All content has to pass through state censorship at script stage and before broadcast. However, the state regulator has clamped down on Idol-type reality shows, while political messaging is never allowed.
India: Probably the most lax of all. There's a lack of national regulation and many broadcasters adopt a laissez-faire approach to branded content.
UK: All paid-for product placement on terrestrial and cable TV is banned. Title sponsorship of shows is allowed. The ongoing consultation is considering how a more relaxed regime will apply in cases of alcohol, tobacco and snack foods. Childen's TV will remain exempt under European Union law.
- In all of these markets, and many others, digital media is unregulated where branded content is concerned.