For Broadcast March 24, 2011

Product placement is expected to generate £150m in revenues over the next five years, but the split between broadcaster and producer is still to be worked out. Kate Bulkley reports.

Last month, This Morning viewers will have glimpsed a Nescafé coffee machine sitting demurely on the daytime show’s set. Soon, Channel 4 will launch a show featuring clothing from high street retailer New Look, which will also have a place on bumpers and title sequences.

These are the first (not very earthshattering) baby steps into the new world of product placement.

But make no mistake: the product placement engine is revving up and voices are set to get a lot shriller as broadcasters and indies try to work out how best to structure these new deals and where the remuneration is due. The Nescafé deal was the first fruits of product placement on a British TV show and it is worth £100,000 over three months.

Shows from Coronation Street to Pineapple Dance Studios and Hollyoaks are all being offered up for product placement. Sales executives at ITV, Channel 4 and Sky have been particularly busy since January with Power-Point presentations explaining their product placement ideas to advertising agencies and brands as they prepare to line up as much of this potentially lucrative new revenue stream as possible.

Direct relationship

Once, prop placement meant a Volvo might be loaned to a production to save a few days of car rental on the budget, or a British Airways passenger jet would appear on screen bartered against a few plane tickets to fly in the star of the show. Now there will be a much more direct relationship between a brand’s on-screen presence and the money that the broadcaster or production company charges for it to be there.

Instead of brands offering themselves to a programme and hoping for screen time, sophisticated metrics will tally up prices for specific verbal mentions, for showing products within particular quadrants of the TV screen, and even for those products being used by on-screen talent.

Every use of a product can now be measured and paid for. What was once the somewhat mysterious art of prop placement and an arm’slength deal between the two sides will now, in the UK, become more of a TV science.

According to Barclays Corporate, there is forecast to be as much as £150m worth of new revenue from product placement at stake over the next five years.

Almost inevitably, there is a fight brewing between broadcasters and indies about who gets the cash.

Pact is deep in discussions with all commercial broadcasters about how any new money raised through product placement is to be shared, with no early resolution in sight.

“A lot of ridiculous percentages have been talked about that I think our members will walk away from,” says Dawn McCarthy-Simpson, a director at Pact.

The trade body’s starting point is to split any new monies 50/50, but McCarthy-Simpson admits that any kind of deal with broadcasters is still several months away.

She believes that indies have a right to at least 50% of any product placement money - and maybe more if the indie identifi es a brand for product placement.

“There is more risk for our members than for the broadcasters because products will be embedded in our programmes,” she says.

“If anything, we are doing a lot more work on the production side because we have to manage and control the brand within the programme, and there may also be more work in the edit and post-production phase as well.”

The broadcasters have their own views. For the moment, they are saying privately that it is too early to set up an across-the-board system for dividing any new monies.

“Until we learn more functionally about how product placement works and who brings what to the table, it has to be case by case,” says one source close to ITV.

But all of the main UK commercial broadcasters say that product placement brings new costs, from monitoring the placements to figure out the value the brands need to pay for, to liaising with producers “in a different way than before”. All of this, they say, must be paid for.

Then there is the object identification technology available from companies like Mirriad, where brands can also be inserted in post-production as well as during actual filming.

Sky has told agencies that valuing product placement is “not an exact science”. Nevertheless, it expects to use quantitative and qualitative analysis in both pre- and post-transmission to determine the “true value” of the placement on minimum and maximum sliding scales.

So Sky will require an initial fee from brands (the minimum value) and agree a cap level for the placement upfront.

And what is the base value? According to Sky, it will be calculated as approximately equal to 30 seconds of placement in a show to determine the initial fee. Sky Media Research will provide a final evaluation once the programme has aired.

Meanwhile, Broadcast has seen a sophisticated presentation from ITV doing the rounds among media agencies, which have been told that placement will appear in ITV Studios-made programmes first, with soaps Coronation Street and Emmerdale likely to follow This Morning.

ITV has appointed Repucom, a sponsorship agency with a proprietary methodology that adds together a brand placement score with a contextual integration score to arrive at the price the brand pays for any particular on-screen mention, appearance or use by the characters.

It’s a complex formula and includes the same kind of attributes that Sky is looking for: the size, location, duration on screen and the number of exposures a brand receives, as well as how integrated it is in the programme. The last of these is determined by seven categories, from passive to active integration.

High yields

The interesting thing for brands is that the top three highest levels of integration on screen yield higher percentage values than a traditional spot advertisement. In fact, it can give up to 200% more impact than a spot ad.

Like Sky, ITV will fix a maximum price in advance and ask the client to pay only for actual value delivered. A percentage payment will likely be required in advance of the programme airing, with regular payments throughout the run of the programme, according to the ITV presentation.

ITV has other ideas about how to take placement further than the linear TV programme, including for VoD clips and international sales.

It is also looking to expand web opportunities for brands, using ‘click to buy’ tools, short-form branded content clips, interactive companion display ads and licensing packages with an ‘as seen on ITV’ logo available for competitions and social media as well as in-store retail.

Brands are keenly interested but there is also a “suck-it-and-see mentality” as the first guinea pig placements come on screen, says Chantal Rickards, head of programming at media agency MEC.

“None of these deals are going to be straightforward because there are going to be at least three, if not four, different players around the table negotiating: the broadcaster, the brand, the agency and the independent producer,” she says.

“I think it’s going to be really tricky at the beginning to make sure the brands are happy as well as the programme-makers.”

According to Vicky Kell, Channel 4’s business manager for sponsorship placement and funding content, the New Look deal involved more than eight different parties, from the production company and the C4 commissioners to the creative agency, the media planning agency, the media buying agency and “a myriad of consultants”.

In this light, product placement does not look like it will be a simple sell.

Structuring the deals is going to be key to making them work for all parties. “I can only see product placement leading to more content,” says Sean Duffy, head of TMT at Barclays Corporate. “It may take a while, and some of the structures may be complex, but it can only be good news to have more money coming into the business.”

At least one indie, True North, is looking at the possibility of creating two versions of product placement shows: one for the TV and one for the web, where there are even fewer restrictions on placement.

“If there is money to be made, then maybe there is a way to do it,” says True North chief executive Glyn Middleton.

John Nolan, head of commercial and digital content at North One, adds: “Product placement in the early stage will be about rope. Giving bad people enough rope to go and hang themselves.”

Nolan believes that common sense will prevail, both on how placement is done on screen and how the money is raised and apportioned afterwards.

“I am a pragmatist. I think that the person who sells the product placement is the one who can raise the most money, but what we as an indie won’t concede is that we own the programme. Without a conversation with us, there is nothing to sell.”

• Who is responsible for raising the brand money?
• If it is a joint effort between the indie and the broadcaster, how is that being structured?
• Get the deal structure right. Where in the overall production budget does the product placement money sit?
• To whom does the bank cash-flowing the project have recourse?
• Who bears the risk if the brand is not satisfied with the PP final on-screen result?