FCC to Weigh Requiring Disclosures for Product Placement

Brian Steinberg and Ira Teinowitz

Advertising Age

June 27, 2008

NEW YORK (AdAge.com) -- Product placement, which in recent years has been viewed as a way to save TV advertising, is fast coming under siege.

The Federal Communications Commission is moving forward with a plan to examine the requirements for identifying product placements on TV, and whether today's rules do a good enough job of telling consumers what sponsored product appearances may surface in their favorite programs. The Writers Guild of America West this week told the FCC it believes "broadcasters must adequately disclose the products that are integrated into a story in order to insure that viewers know they are watching a paid advertisement." Meanwhile, the U.K. appears to be on the verge of rejecting a European Union proposal that would allow product placements in programs, with British officials suggesting such placements might spark viewer distrust.

FCC's 'growing concern'
"TiVos and digital video recorders now allow viewers to more easily skip through commercials. Due in part to these technological developments, networks may be turning to more subtle and sophisticated means of incorporating commercial messages into traditional programming. As these become increasingly prevalent, there is growing concern that our sponsorship identification rules may fall short of their ultimate goal: to ensure that the public is able to identify both the commercial nature of programming as well as its source," FCC Chairman Kevin J. Martin said in a statement.

FCC Commissioner Jonathan Adelstein has pushed for a revision of the current rules surrounding product placement -- advertisers' in-program appearances are typically cited briefly before or after a program runs -- and said he was especially pleased the agency would look at strengthening disclosures for children's programming and the length of disclosure. Display size and length of appearance of current disclosures "make a mockery" of the FCC's current requirements, he said. The examination of children's advertising is necessary because of "the concerns that parents, experts and I have been voicing for years about the unhealthy messages American media are feeding our kids," he said.

Weaving products into programs is a technique as old as TV itself, as anyone who once watched "Texaco Star Theater" can attest. As more audiences gain technology that lets them skip past commercials, or watch TV programs in new venues that use fewer ads, inserting more logos, endorsements and name-brand goods into viewers' favorite comedies and dramas has steadily attracted more interest. In 2005, CBS CEO Leslie Moonves predicted a "quantum leap" in the use of product placement, and Procter & Gamble that year scaled back some of its upfront TV commitments, according to TV and cable executives, in order to fuel more experimental TV advertising, including product placement.

Placements on rise
In-show product appearances in the first quarter of 2008 rose 6% on prime-time programming for 11 measured broadcast and cable networks, according to the Nielsen Co. Broadcast TV placements rose 39%, Nielsen said, while cable fell 1%. The top 10 programs on broadcast networks featured 15,404 occurrences in the first three months, compared to 8,893 in the year-earlier period. All of these appearances were not necessarily paid for by a sponsor; sometimes products show up on programs simply because they are true to the circumstances of the episode and the writers and producers want them. Other times, prop masters simply choose to use a certain product.

Even so, the market for product placements has been expected to grow substantially. Spending on so-called "branded entertainment" grew 14.7% in 2007 to $22.3 billion, according to Stamford, Conn., market-research firm PQ Media. Spending is estimated to rise another 13.9% in 2008, the firm said.

Advertisers fear that requiring additional disclosure would ruin the effectiveness of a good product placement. What viewer, for example, would want to have their program interrupted by a pop-up telling them the soda in Charlie Sheen's hand was paid for by the company that makes the drink? The Writers Guild suggested placing text at the bottom of the TV screen in a "crawl" that would tell viewers not only the name of the product in question but also the parent company that makes and sells it.

Instead of just asking about possible changes, the FCC is proposing broadcasters offer longer and bigger disclosure of product placement -- up to four seconds in length. It is also questioning whether similar requirements should apply to cable operators and questioning the use of embedded messages in children's programming.

A turn-off for viewers?
Such methods could ultimately "be disruptive to the viewer, and I think that's going to be a big issue for everybody. The viewing experience, the entertainment experience, will be affected," said Pat Jones, senior VP at Aegis Group's Carat Entertainment and head of a committee at the American Association of Advertising Agencies devoted to branded entertainment.

"I really don't think product placement is sinister or fooling anybody. It's just part of life," added Dan Jaffe, an exec VP at the Association of National Advertisers. "A crawl or bubble would be totally disruptive of what is going on in the program itself and is not necessary to protect the consumer."