By Chris Hackley, Professor of Marketing at Royal Holloway, University of London
Chris Hackley argues that the Culture Secretary's recent announcement misses an opportunity to update regulations to the benefit of UK TV companies and viewers and will, in effect mean that, UK commercial and non-commercial TV will be subsidising American TV.
After a three-month consultation prompted by the European Union Audiovisual Media Services Directive, Culture Secretary Andy Burnham has announced that the current Ofcom ban on product placement in UK television will remain unchanged. His decision was described as "perverse" by commercial broadcaster ITV, while the European Commissioner for Media and Information, Viviane Reding, called it an "astonishing" decision that "really does punish UK TV production companies" because it denies them a potentially lucrative revenue stream from charging companies to place their brands in the script or scene of TV shows. ITV is currently suffering from a drastic loss of advertising revenue and its executive chairman Michael Grade is reported to be considering challenging the decision through a judicial review.
Mr Burnham has made no secret of his instinctive opposition to product placement on TV. He feels that it undermines the distinction between advertising and editorial content, a distinction that has been a cornerstone of British broadcasting regulation. Most viewers would acknowledge that if brands become the stars of TV shows then the quality of entertainment would suffer. But is Mr Burnham right, and what are the arguments in favour of changing the regulations to allow placement?
British TV is awash with brands in both domestic and imported programming. There is already a thriving product placement industry in the UK. It gets around the regulations by giving branded props free of charge to programme makers. The UK programme makers are not allowed to receive any revenue from this, but the placement agencies can. The UK's 'free prop supply' system, though, has a number of anomalies. Not least, it means that UK TV channels receive no revenue for the placements, which appear in syndicated American shows. When these are aired in the UK on both commercial and non-commercial TV it effectively adds value to product placement in those shows at no cost to the US TV companies or their brand clients.
The Ofcom ban results in a false market rate for product placement. Programme makers need brands to instil a sense of reality in their shows. Brands pay a retainer to the agencies who cultivate relationships with prop buyers, script writers and producers, so they can supply their client's brand when a show needs one in the scene. This results in exceptionally good value for clients. If brands had to pay TV programme makers directly, the process of bidding for a placement would be more transparent and the market rate, in all probability, higher as a result. Concomitantly, the total revenue generated by the UK product placement industry may well be held artificially low by the Ofcom ban.
There have been press exposés (for example in the Sunday Times) on how the Ofcom ban is undermined by private deals between brands and actors or other personnel involved in TV programme making. The current ban is difficult to police and it results in a grey area in which brand clients can exploit the consumer's mistaken belief that brands in UK TV shows are never forms of advertising. The Ofcom ban, therefore, has the effect of increasing the incentive for brands to use UK TV product placement as an implicit, and therefore more persuasive, promotion, while denying the programme makers access to the revenue.
Product placement is taking an increasing share of promotional budget for brand clients because of its value and persuasive power. Not only are TV shows ideal vehicles for brands because they can portray the product in use, identified with celebrities and celebrity culture. They also offer extended peak time exposure and indefinite repeats on DVDs, re-runs and internet viewing. TV viewing has become dispersed over different media and this means that the traditional revenue stream for commercial TV, the 'spot' advertisement, is losing its value.
The Ofcom ban is premised on an outdated notion of television exposure and funding, and is making UK television vulnerable to stronger funding models from countries where revenue from product placement can accrue to programme makers, especially the USA. As developing media technology results in more viewers accessing on-demand or interactive services or watching TV on PCs or mobile phones, the revenue from traditional spot advertising is likely to depress further. On the other hand, the revenue for product placement is likely to rise, at least for companies in countries, which have allowed it.
The fact that many young viewers, in particular, are indifferent to or cynical about the putative distinction between editorial and advertising in broadcast media is not a reason to abandon the principle. However, the younger viewing public are, generally, fully aware of the commercial inter-relationships which obtain in mediated entertainment. They often assume that brands in the script, scene or plot of a mediated entertainment vehicle are there partly from a promotional motive, even though most brands in TV, even in the USA, are there by coincidence, for dramatic verisimilitude, and not by contractual arrangement.
Most importantly, the promotion is implicit. It is important to note that 'implicit' does not have to mean hidden or obscured. It merely means that the product characteristics are implied rather than stated, even if viewers are perfectly aware that the brand might have paid to get on the show.
If all paid for product placement were to be allowed, viewers could make this very assumption by default. This might be a more open and honest arrangement than the present situation under which many viewers, especially older ones, are under the mistaken impression that products in UK TV are never there by commercial arrangement. There could be a distinction made, as in US TV, between news and informational TV and entertainment: editorial and advertising are separate in the former, but not necessarily in the latter.
Syndicated US-made comedy and drama shows are amongst the most popular in the world. Consumers are well-aware that brands cannot be allowed to drive the plot, narrative or cinematography. Movies that feature too many, or excessively obvious, placements are subject to robust mockery by audiences. On the other hand, brands that are integrated into the narrative development can enhance the quality of entertainment by deepening the sense of reality or visually reinforcing the symbolism of character and action. Research studies have shown that movie and TV viewers prefer placement to interruptive spot advertising, provided it fits with the show. The effectiveness of product placement as a promotional strategy and the creative integrity of TV programming are mutually dependent. Badly integrated placements damage the quality of programming and, therefore, reduce the salience of the placement.
Mr Burnham has taken a decision that will be welcomed by lobbies in favour of non-commercial broadcasting, and also with those with a slightly dated idea of British television excellence. But, in making no changes at all he has avoided complex issues that need addressing now. For example, the ruling ignores the striking anomalies, which the current Ofcom regulations raise. The product placement industry is alive and well in the UK under the 'free prop supply' system but the revenue is accruing to agencies and the surplus value to their brand clients, while the TV companies (including the BBC) are bearing the costs and the viewers are, at worst, being deceived. What is more, the announcement comes at a time when the media infrastructure for TV viewing is changing rapidly and, along with those changes, new funding models are emerging.
The existing Ofcom regulations on product placement trap the UK TV industry in an outdated model based on spot advertising on the one hand, and the license fee on the other. By the time the current situation is reviewed again, in two years, UK TV will already have lost ground, and much-needed revenue, against international competition. At a time when revenues are being squeezed the fact that the UK commercial and non-commercial broadcasters air syndicated shows from the USA means that, in effect, the UK TV industry will continue to subsidize American TV producers.
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Chris Hackley
13-Sep-09 19.46
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Chris Hackley
13-Sep-09 19.47
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