Product Placement - a new avenue for advertisers

On 28 February 2011, OFCOM introduced new regulations which allow advertisers in the UK to pay a producer or broadcaster to feature their brands within a television programme. On the same day, the first paid-for product placement was featured on UK television – Nescafe's Dolce Gusto coffee machine was featured on ITV’s This Morning programme. It has been reported that the Dolce Gusto placement appeared 110 times in 14 days and that the media value of the placement to Nescafe was £525,000. It has also been reported that the fee for the placement was in the region of £100,000, which suggests that product placement could provide a profitable new revenue stream for commercial broadcasters as well as a new way for advertisers to reach consumers who are increasingly able to dodge traditional advertising methods.

Product placement has long been the norm in other countries (particularly in the USA), and UK television viewers have already been exposed to the practice on imported programmes and movies. However, the introduction of permissible product placement in UK programming has been controversial, with several campaign groups lobbying against its introduction. The result of that lobbying was the introduction of certain restrictions by OFCOM.

The new rules provide that product placement is only permissible on UK commercial channels, so all BBC channels are excluded. In addition, the new rules prohibit product placement on news and children's programmes and, where the programme is made for UK television, the ban extends to religious, current affairs and consumer shows. There are also categories of products which are banned, including cigarettes and other tobacco products, prescription medicines and all products made by tobacco manufacturers. Where the programme is made for UK television, the list of banned products is extended to cover alcoholic drinks, 'unhealthy' foods or drinks (i.e. those which are high in fat, salt or sugar) and baby milks.

Where there is product placement in a television programme, the new product placement logo must be displayed on screen for 3 seconds at the start and end of each programme and after advertising breaks. However, this requirement does not apply to acquired programmes (e.g. programming from the USA) unless the broadcaster is required to show the product placement. In addition, the new regulations provide that any reference to a product placement must not be 'overly promotional' or 'unduly prominent'. Fines of up to £250,000 will be faced by content providers who breach the restrictions.

The reported figures for Nescafe's first product placement suggest that product placement could provide a lucrative new source of revenue for broadcasters at a time when revenues from traditional advertising are in decline. In the UK, OFCOM research suggests that the product placement market will sit at between £25-£30 million when it reaches maturity. However, product placement revenues in the USA have grown steadily over three decades to $3.6 billion in 2009 and other commentators believe that the UK market could increase to more than £100 million over the next few years.

With viewers' increasing ability to dodge advert breaks through video on demand facilities, product placement could allow advertisers to reach new audiences. Whilst brands can still appear in programmes without having to be paid for, e.g. as props or just by chance, it seems likely that advertisers will seize this opportunity to advertise their products during the programmes themselves. Whilst the impact of the recent changes on brands is largely unknown, product placement could revolutionise the way brands advertise on television.

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