Broadcasters lick lips as product placement lands

British TV is going the way of US channels – but with stricter rules. Nick Clark reports

In popular US television series Chuck, where an everyday guy is transformed into a super spy, the cast appear to be almost exclusively nourished by sandwiches from a popular fast food chain. Subway's product placement deal to finance Chuck in return for screen time in May last year convinced network NBC to renew the show, and characters are munching on "footlongs" well into the fourth season.

Product placement will be hitting the UK for the first time at the end of February, the communications watchdog confirmed yesterday. In sharp contrast to the US, and shows like Chuck, there will be heavy restrictions on what can be shown, including a ban on fast food.

Ofcom said: "Both sets of rules will enable commercial broadcasters to access new sources of revenue whilst providing protection for audiences."

After a drawn-out consultation process, which started in June 2009, the regulator finally published its rules for product placement on TV and paid-for references to brands and products on radio yesterday.

The UK's largest broadcasters broadly backed the new rules. A spokeswoman for ITV said the network "welcomes today's announcement and will now work closely with clients and producers on plans for the implementation of product placement in 2011."

Channel 4 was more circumspect, saying: "The quality and editorial integrity of all C4 programming remains our primary consideration and we will consider product placement only on the principle that the programme editorial comes first."

The regulator's move to draw up product placement rules follows the previous Government's change in legislation governing the issue in April. This in turn followed a liberalisation of European broadcasting legislation in 2007.

While there is nothing in the final document that surprised the industry, after a long consultation and well-publicised initial findings, 28 February will now be a significant day for the television industry. Mark Popkiewicz, the chief executive and founder of MirriAd, the digital product placement group, said: "We welcome the code; it levels the playing field with the rest of the world. This extra revenue stream will be key for under-pressure producers and broadcasters. It is very good news."

Ofcom's rules will keep a tight grip on product placement, with restrictions on the type of products that can make it to the screen, which programmes they can be placed in and limits in how they can be seen and referred to. With radio, the rules, which went live yesterday, will force any paid-for product references or brands to be clearly flagged to the station's listeners.

The regulator said that product placement on TV will be allowed in films, including dramas and documentaries, television series including soaps, entertainment shows and sports programmes.

"But it will be prohibited in all children's and news programmes and in UK-produced current affairs, consumer affairs and religious programmes," it said.

Yet producers will not be able to tap a series of industries for funding. Under UK legislation, placement of tobacco, alcohol and gambling are banned, as are medicines, baby milk, and food or drinks that are high in fat, salt or sugar. So, said one industry insider, do not expect Stella Artois to be on tap at the Rovers Return in Coronation Street.

Ofcom said it has also banned the paid-for placement of products that cannot be advertised on UK television, such as weapons or escort agencies.

One industry expert said: "These rules are much tighter than regulation in the US. It won't be like American Idol; Cheryl Cole won't be sitting on The X Factor sipping Coca Cola."

Mr Popkiewicz said: "We are perplexed at why there are different rules to the advertising legislation. Some products can't be placed in television shows, but there can be advertising of those products around the shows."

The rules say that product placement "must not impair broadcasters' editorial independence and must always be editorially justified. This means that programmes cannot be created or distorted so that they become vehicles for the purposes of featuring product placement."

A spokesman for the regulator said it is working on a logo that will appear at the start of programmes with product placement for a minimum of three seconds as well as the end. It will also appear following the return from every advertising break.

The next two months will see broadcasters ready themselves for the new rules as well as launch an audience awareness campaign overseen by Ofcom.

In the US, product placement runs at about 5 per cent of total advertising spending. Translating that into UK spending would see it total £150m. Mr Popkiewicz said: "It could be many times more than that if it proves a popular and easy way of advertising."

One insider at a large UK commercial broadcaster was less bullish, saying that its product placement revenues for next year were more likely to be closer to £1m. "There will be some placement that gets into daytime shows and soaps, but there is a longer lead time for drama," the source said, adding: "The real benefits should come through in 2012."

Separately, the regulator is to liberalise TV sponsorship rules. Advertisers will be allowed to place products in the shows they are sponsoring, and their logos will be able to appear briefly during transmission.

The question remains whether consumers will accept advertising in their favourite shows. Mr Popkiewicz said: "There is obviously a bit of give and take, they have to make sure the product is right for the show. Audiences are entitled to push back if they don't like it." Yet, he added that some audiences have welcomed product placement. "Many are perplexed by the fake brands that appear in shows, they believe it is not a natural reflection of life."

A survey carried out in August for Deloitte found six out of 10 UK viewers would welcome product placement if it meant more free content or cheaper premium television. It estimated that first-year revenues would be in the "low tens of millions".