Still No Product Placement Allowed on U.K. TV

Government Looks to 'Preserve Editorial Integrity' Amid Collapse of Advertising Market

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LONDON (AdAge.com) -- Despite U.K. commercial TV's funding crisis, the government has refused to sanction product placement, denying a new revenue stream to broadcasters desperate for one.

The European Union greenlighted product placement across the continent last year but left it up to individual countries to make their own decisions.

Andy Burnham, the U.K. culture secretary, said today, "There is a lack of evidence of economic benefits, along with very serious concerns about blurring the boundaries between advertising and editorial."

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Many observers believe that the traditional advertiser-funded, free-to-air model for TV is broken. Annual ad revenue for the biggest commercial channel, ITV, is down about 20%, and it recently announced a $3.76 billion loss in 2008, along with studio closures and a 13% reduction in its work force.

ITV's biggest rival, Channel 4, recently announced it will have an annual shortfall of $207 million by 2012 after a collapse in advertising revenue.

'Scrapping for its life'
Rupert Howell, managing director, ITV brand and commercial, said ITV is "scrapping for its life" and lobbied hard for product placement in the U.K., which is banned for locally produced content but not for imports.

Mr. Burnham defended his decision by saying, "We need to continue to preserve editorial integrity. ... I am well aware that a number of commercial broadcasters are facing difficult economic times, and I will continue to work with the industry to explore ways we can support them, but my preference is to consider all other avenues before allowing product placement."

Daniel Knapp, an analyst at Screen Digest, said he is skeptical about product placement as a panacea for TV's ills. "In Austria, where product placement is allowed, it generates 2% to 3% of commercial broadcasters' revenue," he said. "It's not enough to buffer the revenue downturn."

Brits are traditionally suspicious of product placement, often deriding it as a clumsy, unsophisticated commercial tool. But the truth is that British TV is riddled with clumsy brand avoidance.

"When you see people on TV pouring cornflakes and it's a made-up brand, it takes away from the entertainment," said Simon Willis, head of programming at Mindshare Worldwide.

Alternate revenue sources
Mr. Willis said he is "passionate" about product placement but also advocates alternative revenue sources such as merchandising, subscription models such as HBO's and advertiser-funded programming, or AFP.

AFP is traditionally at the periphery of TV schedules because of the low budgets and the sniffy attitudes of the broadcasters. But Mr. Willis said, "It's a no-brainer. Why aren't we having serious conversations with broadcasters to realign these relationships? Brands absolutely understand the market at a level unheard of from the broadcasters. Why shouldn't AFP be further up the agenda?"

Mindshare recently created a one-off piece of AFP for Nike. "It got a decent audience, but the relationship could be so much bigger," Mr. Willis said. "Of course, programs shouldn't be ads, but this is the 21st century. Why shouldn't we have other relationships with broadcasters?"

Mr. Knapp said he sees hope for broadcasters in the relaxation of ad and sponsorship rules; the introduction of split-screen ads, which have worked in Germany; and the acknowledgement of the power of TV.

Migration to web
In the U.K., the web and TV each represent 26% of the advertising market. "The migration here is more advanced than other countries; it's completed," Mr. Knapp said.

As a result, a new trust in TV advertising is building. "There has been a sudden increase in concern about the ability of online display as a brand-building medium. It can't compete with television advertising," Mr. Knapp said.

Vincent Letang, head of advertising at Screen Digest, said he also sees a future for TV advertising. "The biggest hope for TV advertising is regulation flexibility. Plus, it is so cheap these days that at some point agencies and advertisers will see the fantastic opportunities and come back and buy again."

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