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Product Placement Becomes More Essential as TV Viewing Changes

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Moments before climbing into bed with supermodel Christie Brinkley, Donny Deutsch turns to the camera and tells viewers that a certain brand of vodka is perfect for the occasion.

The scene is from Mr. Deutsch's new comedy series "Donny!" debuting next month on NBC Universal's USA Network. It's the latest example of how TV shows, which have long avoided overtly acknowledging product placement to their viewers, are becoming increasingly upfront about it, even turning it into a joke.

Product placement is becoming more over-the-top as seismic shifts in TV viewing habits have forced programmers to find new ways for advertisers to reach U.S. consumers. Viewers aren't just skipping ads with DVRs these days, many are watching shows on ad-free streaming services like Netflix or staring into smartphones during commercial breaks. So the classic paid endorsements of a few years ago -- "American Idol" judges sitting behind giant red Coca-Cola cups -- aren't enough anymore.

That's why former ad executive Mr. Deutsch, who has described himself as a "shameless shill," is opening his show to pitch vodka, and Stephen Colbert endorsed Sabra-brand hummus during his "Late Show" debut last month on CBS. Mr. Colbert joked that he'd made "certain regrettable compromises" in exchange for becoming host and swore a "blood oath" to an amulet that he'd pitch products to viewers.

"Ladies and gentleman, the amulet has commanded me to inform you of the delicious taste of tonight's sponsor: Sabra roasted red pepper hummus," Mr. Colbert said.

Be creative
NBC Univeral plans to experiment more with new types of product placement, Linda Yaccarino, chairman of advertising sales, said last week. As an example, she cited "Playing House," another show on USA, in which the characters star in customized ads for sponsors like Samsung Electronics and Toyota Motor that appear during the program when viewers watch on demand.

"We see that happening at our company more and more often," Ms. Yaccarino said during an Advertising Week panel in New York. "You have to acknowledge the challenges with ad-skipping and lapses in measurement and break out in a more creative way."

More product placement could help Comcast-owned NBC Universal make up for ad revenue that fell 3% at its cable networks to $917 million in the second quarter, at least the fifth-straight quarterly decline.

In August, ratings at NBC's cable networks, which include USA, E! and Bravo, were down 16% from a year earlier, according to MoffettNathanson. Cable networks owned by Time Warner, Viacom and Walt Disney also suffered drops in ratings.

$300,000 an episode
Advertisers can pay more than $300,000 for product placement in an episode of a popular TV show and more than $1 million for season-long integration, according to Tom Meyer, president of The Marketing Arm Entertainment, a brand management agency. By comparison, a 30-second commercial on a top show can cost upwards of $400,000 on broadcast or cable, according to data compiled by Advertising Age.

As marketers struggle to reach distracted viewers with traditional 30-second spots, they are spending more on integrating their brands into scripts. U.S. TV revenue from product placement grew about 14% last year to more than $4 billion, compared with $2.5 billion in 2009, according to PQ Media in Stamford, Conn., which tracks the branded entertainment industry.

Mr. Deutsch said the old method of placement -- writers trying to seamlessly weave products into scripts -- no longer works. Once during each episode of his show, a fictionalized comedy based on his life, Mr. Deutsch stops what he's doing and starts selling a product to the viewer, whether it's vodka or a wireless company's phone plan. The strategy harkens back to shows from the 1950s when advertisements consisted of sales pitches from the actors themselves.

'Hip' audiences
"Today's young people are hip to what we do for a living," Mr. Deutsch said on stage during Advertising Week, which ended Oct. 1. "You've got to let them in on the joke."

Not everyone is happy about product placement. For years, TV writers have resisted including brands in the creative process. In 2007, the Writer's Guild of America went so far as to call for the U.S. Federal Communications Commission to regulate product placement, saying it "forces content creators to become ad writers."

Product placement still causes friction in writers' rooms. On "Gossip Girl," Verizon Communications representatives held meetings with the show's writers to demonstrate how the phones worked, which characters should use them, and reviewed scripts, said Felicia Henderson, who was a writer and co- executive producer on the show. At times, Ms. Henderson said she felt like the phone company "had a voice in the creative process" on "Gossip Girl," which ran on the The CW Network, owned by CBS and Time Warner, from 2007 to 2012.

"There are rules of what you can and can't do with product integration," Ms. Henderson said. "It gets very frustrating because it adds one more layer to your process."

She said some writers resent product placement but she's accepted it as part of her job.

"If you want to work you have to understand the business and be a team player," Ms. Henderson said.

-- Bloomberg News