Introduction

The EU Audiovisual Media Services Directive (“AVMS Directive”) took effect in early 2010 and clarified the position on product placement in the EU. The previous incarnation of the AVMS Directive (the Television Without Frontiers Directive 89/552/EEC amended by 97/36/EC) was interpreted by most EU Member States as a ban on product placement in television programmes; however, there was some inconsistency in the various local implementations of the directive. The AVMS Directive, amongst other things, relaxed the rules on product placement with the aim of giving television broadcasters new opportunities to earn revenue from advertising.

The relevant provisions of the AVMS Directive were implemented in the UK by the Audiovisual Media Services (Product Placement) Regulations 2010, which amended the national legislation (Communications Act 2003) to allow product placement on television in certain circumstances. In accordance with the new rules, Ofcom (the UK communications regulator) subsequently amended the Broadcasting Code to address the new rules governing product placement. Under the amended Broadcasting Code, product placement has been permitted in UK television programmes since 28 February 2011 as long as it complies with the relevant rules and conditions.

In the UK, Ofcom has wide-ranging powers across television and other communications sectors and heavily regulates product placement in television programming. As mentioned above, Ofcom’s Broadcasting Code contains the rules governing the use of product placement in UK television programming and sets out a number of important restrictions. For example, products cannot be placed in news or children’s programmes or in religious or consumer advice programmes.

Product placement is however allowed in films, TV series, entertainment shows and sports programmes subject to a number of conditions which are detailed in the Broadcasting Code. A range of products can be product placed but cigarettes and prescription medications cannot nor can alcoholic drinks or food that is high in fat or sugar. Also, there must always be “editorial justification” for a product to be placed and importantly the broadcaster must always retain “editorial control” of the programme content. In other words, the programme should not be distorted just to feature the product or be subject to the direction of the relevant advertiser.

Market Value

Whilst there have been various estimates, it is relatively difficult to quantify the value of product placement in the UK. However, it is fair to say that product placement, at least in the UK, is still a relatively nascent market. Soon after the rules were relaxed, it was estimated that the value of product placement deals could be worth up to £150 million a year by 20161. However, market research suggests that the figures are actually much lower than this2. In 2011, product placement in UK television was estimated to be worth £2 million and in 2012 some reports suggested it was worth £5 - £10 million3.

However, notwithstanding the relative nascency of the product placement market in the UK, the continued pressure on broadcasters to maintain advertising revenue streams (in particular given the proliferation of digital TV channels and online content) coupled with the positive economic turn-around in the last couple of years, we have noticed a significant increase in product placement and associated “ad-funded” programming deals in the UK.

Post-production technology

While it is arguable that, initially, product placement in British television may not have had the impact that was initially envisaged, as mentioned above we have seen an increase in these types of deals over the past 2-3 years. In addition to this, significant developments in post-production technology have increasingly created new opportunities for content owners to generate revenue through “retrospective” digital product placement. Specifically, we have seen an emergence of products being retrospectively digitally placed into films and television programmes. For example, in 2012, PG Tips logos were digitally inserted on contestants’ previously blank mugs in the game show Deal or No Deal following a deal between Channel 4, Unilever UK and television production company Endemol. As far as we are aware, this use of retrospective digital integration was one of the first to feature in a programme aired by a UK terrestrial broadcaster.  

The opportunities for retrospective product placement are potentially far-reaching for advertisers, particularly as consumers’ attention is increasingly being divided amongst competing digital content services, and the widespread use of catch-up and on-demand technology and services means that, despite certain terrestrial broadcasters’ best efforts, viewers may often have the ability to “fast forward” through content and thereby avoid advertising. Now, a drinks brand for example has the option, instead of purchasing a traditional TV ad spot, to enter into a product placement deal whereby the product could be digitally inserted into refrigerators in re-runs of television shows which are proven to rate well. Another example could be where an advertisement for a particular product might appear on a street billboard as a character walks down the street in a television programme. Retrospective digital placement also allows for the placed products to be tailored for different markets, e.g. the same character may wear one brand of trainers in the UK version of a show and a local brand of trainers in the same scene of the show aired on Brazilian television.

A growing range of highly creative digital agencies are increasingly competing in this innovative and emerging space. A good example is the agency Mirriad, which launched in 2008 using patented technology to digitally embed brands into TV content. The agency works with major brands in the UK such as Unilever and Diet Coke. According to Mirriad, it is on a mission to “revolutionise advertising for the skip generation” referring to the fact that viewers increasingly “skip” through advertisements.

Transparency

While retrospective digital product placement creates exciting new opportunities for broadcasters to “monetise the past”, it also generates some interesting regulatory challenges. In particular, the Broadcasting Code prohibits “surreptitious” advertising in UK programmes and there is a transparency obligation to clearly signal product placement by displaying a special “P” logo which lets viewers know that the TV channel or the programme maker has been paid to include products in the programme.

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According to the transparency rules referred to above, any programme produced under UK jurisdiction that is commissioned to be shown on an Ofcom licensed channel must include the product placement logo where necessary.  However, broadly speaking, broadcasters  do not have to display the P logo on programmes that were originally broadcast outside the UK, for example, a US drama series that is then shown in the UK.  

Additionally, when a broadcaster acquires a programme containing product placement (but does not produce or commission it), then, again broadly speaking, there is no signalling requirement. In this case, the broadcaster is not deemed to have directly benefited from any product placement arrangements and therefore references to products that appear in the programme are generally not treated under the UK regime as commercial product placement.

However, if a broadcaster acquires a programme on the condition that product placement within the programme will remain within the programme when it is transmitted, the prohibition of surreptitious advertising may apply and the broadcaster will need to make it clear that the reference to the product serves as advertising by including the P logo.

Importantly, in the context of the type of retrospective digital product placement referred to above, if a broadcaster acquires a non-UK programme or programme which doesn’t include any product placement, and subsequently edits it to contain product placement (presumably as a result of a commercial arrangement), then this would likely trigger the transparency requirements. Even though the programme may be from abroad, the UK broadcaster would still be subject to the signalling rules if it has benefitted from the product placement in any way.  

Conclusion

Retrospective digital product placement appears to be on the rise in the UK. Broadcasters and production companies that employ one of these innovative agencies to retrospectively product place must ensure that they act in compliance with the law, particularly to avoid engaging in surreptitious advertising. Adequate disclosures must be made even in the case of broadcasters who have acquired content and were not responsible for the original commission.  

There is uncertainty over whether the value of product placement in UK television programmes will ever reach the levels that have been previously suggested. In the meantime, however, it will be interesting to see how digital companies develop new and creative ways for advertisers to incorporate their products into UK television programmes which were originally aired months, years or even decades ago.