Product Placement: Who's Fooled?

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Product placement has come under attack by Commercial Alert, a small consumer group backed by Ralph Nader, that claims viewers are being duped by the mere appearance of commercial products in TV shows.

The group contends that viewers need to know —in real-time—that a company has paid to put its product in the program. They have asked regulators for new rules requiring every negotiated product appearing in every single show to display a sponsorship ID tag as soon as the product appears.

Imagine this. You are watching a sitcom and the lead character opens a carton of orange juice and pours some for his girlfriend. Just as the comedic banter begins, a boldface notice flashes which reads: “ADVERTISEMENT: Promotional consideration has been paid for by the Orange Juice Company of Florida.”

In the next scene, the girlfriend is driving her shiny new sports car. A notice appears on screen: “ADVERTISEMENT: Promotional consideration paid for by the American Car Company.” Finally, in a restaurant scene, she orders a light entrée with a tall glass of green tea. As the drinks are served, here comes the boldface notice: “ADVERTISEMENT: Promotional consideration paid for by the Oriental Green Tea Company.”

Now repeat this scenario for every single negotiated product appearing in every single television program on every single channel, and you will understand what advocates are proposing and the FCC is considering.

Could this really happen? Yes. A proposed new rule covering embedded advertising and sponsorship identification will mandate that broadcasters and advertisers disclose product sponsorship in real-time.

The the policy debate on product placement has several moving parts which need to be clarified, starting with a definition of the practice itself.

The Federal Trade Commission (FTC) says “product placement is a form of promotion in which advertisers insert branded products into programming in exchange for fees or other consideration.” It usually takes three forms: visual (a product or logo is seen), aural (a product is mentioned) or when, as in NBC's Knight Rider, the product is the “star.”

With numbers approaching $5 billion and increasing annually, product placement has blossomed into a profitable revenue stream for broadcasters and content creators.

Its steady rise is directly attributable to creative advertisers and agencies, reaching diminishing audiences, especially as viewers gain greater choice and control over media and advertising. DVR technology now unapologetically allows easy ad-skipping as a key benefit.

But product placement, per se, can be clearly distinguished from traditional advertising or promotions, including celebrity endorsements, product reviews, sponsored programming, video news releases or infomercials. For these promotions, there are well-established rules about sponsorship.

Most advertising is designed to market products by making certain claims or representations about their features, benefits, performance or attributes.

In enforcing existing rules, the FTC looks for a material representation or omission of information that could mislead the consumer into acting or not acting with regard to the product.

In other words, is there something false or misleading about the ad that would prompt viewers to act as a result? If so, the ads can be pulled off the air and the company and its agency can be fined.

In 2005, the FTC (which regulates advertising) reviewed the same issue and concluded that the existing statutory and regulatory framework provides sufficient tools for challenging any advertising that might be deceptive or misleading.

In virtually every product placement I know, there are no claims whatsoever being made about the benefits, attributes or performance of the product. The value lies in its appearance or mention in the context of a program.

But mere appearance on screen, alone, has not yet been shown to give the product more credibility or credence in the eyes of viewers.

Thus we are left with the lingering question: where is the harm to viewers?

Under existing FCC rules, all commercial messages must be clearly and conspicuously disclosed to advise the viewing public of who paid for what. Promotional considerations paid by corporate sponsors are listed before or after a television program runs. I contend these rules are tight enough to accommodate the full range of product placements we see today, provided viewers are advised that consideration—something of value—was provided for the placement.

Let's give viewers the benefit of the doubt. They are smarter than consumer advocates would have policymakers believe. They understand that companies will pay good money to put their products into programs and there is nothing wrong, manipulative or sinister about that. They also understand that unless some character draws attention to a product by touting its features, benefits or attributes, it's not an ad—it's just another prop.

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