Study: Product Placement to Surge 25% in '06

Agencies Revamp Role as Paid Product Integration Becomes a Key Strategy

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LOS ANGELES ( -- The global product-placement market will soar 25% to $7.5 billion this year and hit $14 billion by 2010, a study finds. But the explosion is causing product-placement agencies to rethink their business models and leading some to wonder how effective placement can be amid all the noise.
A new PQ Media study finds that marketers are rapidly increasing their use of product-placement techniques.
A new PQ Media study finds that marketers are rapidly increasing their use of product-placement techniques.

Key strategy
"Product placement has evolved from a novel marketing tactic to a key marketing strategy on a global scale, as brand marketers seek more effective methods to make important emotional connections with consumers," said Patrick Quinn, president of PQ Media, which conducted the study. "Fear of ad-skipping technology, doubts about traditional advertising's effectiveness and declining government media subsidies have fueled a dramatic increase in the value of seamless brand integration."

New deals
As a result, product-placement shops could reap big benefits. Firms in that sector have landed a number of new clients in the past six months:

  • NMA Entertainment won AMC Theatres, Dyson vacuums, Capital One and Perles de Tahiti, a fashion and jewelry marketer.

  • UPP Entertainment Marketing picked up Silk Soymilk, Sundance Spas,, Waste Management Recycle America, H2 Ultra, XS Energy Drink, Power Horse Energy Drink, Enyce urban fashions and Nature Made Vitamins.

  • Propaganda Global Entertainment Marketing signed on Campari, Santa Margherita wine and Diesel.

  • Set Resources took on Patr┬ón and Beefeater Gin.

  • Creative Entertainment Services added Volkswagen.

Cluttered market
"Brands know that in this cluttered market they have to raise their game," said Daphne Briggs, managing director, Propaganda Americas. "Historically, placement was a function of PR, but companies now understand that it's viable and needs to be funded."

Still, while there's a commitment to placement and promotions, the money is coming from existing budgets. "It's not new money," said Devery Holmes, president of NMA Entertainment and Marketing. "We wish, but that's not the case."

More marketers also are moving to paid placements and integrations from barter deals, boding ill for placement agencies built on monthly retainers from brands to broker barter deals to place products on sets, according to PQ Media.

Global surge of product placements
Paid product-placement spending surged 42.2% globally in 2005 to $2.21 billion, according to PQ Media, while the value of nonpaid placements rose only 21% to $3.8 billion. Paid placements in the U.S. accounted for $1.5 billion in 2005. That figure is expected to increase to $5.5 billion in 2010, PQ Media said.

"The retainer model is losing share," Mr. Quinn said.

The business is changing in other ways as well. Many marketers want to move beyond traditional product placement into co-promotions that extend outside TV, film or music videos, Ms. Holmes said. And they are talking more often about investing in their own content. They're also increasingly interested in digital and online entertainment.

The changes have forced placement agencies to expand what they do. Most also broker sponsorships and promotions, negotiate strategic alliances, produce after-parties and event marketing, and handle celebrity outreach and PR.

"The fact that there's so much product placement shows that we have another advertising medium," said Jay Newell, a communications professor at Iowa State University who's studied product placement extensively. "But it's starting to be saturated and might lose its effectiveness in the short run."
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