For Broadcast February 24, 2011

ITV and Sky will only finalise the value of product placement deals once the shows involved have aired, as a business model for the ad format begins to emerge.

The two broadcasters have embarked on roadshows to media agencies to secure product placement deals with brands, having agreed terms with indies to represent their shows.

The broadcasters are suggesting a model in which they and the brand agree an initial maximum price for a product placement, linked to the spot advertising rate at the time of TX, and receive an upfront payment.

Once the show has aired, ITV and Sky will ascertain the final value of the placement, and adjust what they charge the brand accordingly.

Factors affecting the final payment are likely to include size, location, duration and number of exposures of a product, as well as if it is actively used or audibly referred to.

It is unclear if how a show performs in terms of viewer numbers will help to determine the amount to be paid.

ITV will use brand analysis specialist Repucom to gauge the final value, while Sky will manage the process in-house via its Media Research division, with both broadcasters understood to be flexible about adapting the model as it evolves.

A senior media agency source, who has seen the broadcasters’ presentations, said capping the maximum cost of any deals would help to attract brands.

He added that the introduction of a “reconciliation model” was the most sensible way to cost the ad format, as long as brands agreed with the broadcaster’s measurement techniques.

Sky is also understood to be offering digital product placement insertions, following an agreement with embedded-advertising company MirriAd, while ITV is hunting for a digital partner.

While ITV is focused on ITV Studios shows such as Coronation Street and Emmerdale, Sky’s presentation to agencies earmarked Tidy Productions’ comedy-drama Stella, CPL panel show A League Of Their Own, Britain’s Next Top Model from Thumbs Up Productions and Living With Katie from Pricey Media, although a Sky spokesman stressed these were hypothetical examples.