Embedded Advertising and Product Placement

by David Oxenford, Davis Wright Tremaine LLP, September 6, 2008

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David Oxenford

The FCC this summer commenced its long anticipated proceeding to reexamine its sponsorship identification rules. This proceeding is yet another move toward greater regulation of broadcasters by the FCC. While increased competition and technological change poses the greatest threat to traditional TV operations, the FCC seems intent on bringing back good-conduct regulations that were abolished 20 years ago.

This new proceeding will look at product placement, embedded advertising, and other innovative techniques that the television industry has developed in response to digital video recorders. The commission is concerned that these practices expose the public to advertising messages without revealing that they are in fact “advertising,” and without telling the public who is trying to persuade them to make a decision.

LONG IN COMING

The proceeding was long in coming--first appearing on an agenda for the commission“s December meeting, but then withdrawn at the last minute.

Apparently the proceeding was initially planned as a Notice of Proposed Rulemaking, which would have set forth regulations that could have been adopted immediately after public comment. After significant lobbying from the advertising community, the bulk of the proceeding was released as a Notice of Inquiry, or NOI, which asks questions about the industry but does not propose specific rules. Such rules would be proposed only after the comments on the NOI were received and reviewed.

The resulting specific rules would be again subject to comments before being adopted as regulation. The commission first reviewed a series of its existing policy statements on sponsorship identification to remind broadcasters and advertisers about the rules that are already on the books.

These include:
â? A policy statement from the 1960s stating that teaser announcements of a few seconds duration were impermissible if the sponsor was not clear from the teaser itself, even if the sponsor became clear in a later announcement in the same program.

â? The requirement that broadcasters must determine if anyone received any consideration for any messages in programs they air, meaning that broadcasters need to ask syndicators and producers whether they have received any consideration for any product placement in their programs


	Sponsored Link

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â? Where a product or service is furnished at no cost or for only nominal consideration for use in a broadcast program, no specific sponsorship identification is necessary, but only if the product is not “dwelled upon” during the program.

â? A sponsorship acknowledgement is required even if the consideration is for the placement of a product or service into a public service announcement or noncommercial program.

â? Commercial advertising is restricted in children“s programming in terms of time and placement. Commercials must be separated from content by bumpers identifying when the commercial starts and stops to make it distinguishable from the programming. Host selling or the inclusion of ads featuring a character who appears on a program is also prohibited.

â? Use of Video News Releases, or VNRs without sponsorship identification is prohibited. If someone provides video footage dealing with a controversial issue of public importance to a station at no or nominal cost, the provider must be identified

FURTHER REGULATION

In its NOI, the commission starts with the basic question of whether there are in fact “hidden commercials” in broadcast programming. Is the product placement is so blatantly commercial that the average viewer recognizes that it is advertising without the need for additional disclosure?

If not, the commission asks what kind of disclosure should be required, e.g., would it be appropriate to require an on-screen crawl identifying who paid for the product placement, to be run concurrent with the appearance of the product on the program? The FCC even asks whether feature films should be subject to the same requirements when they are run on TV.

Finally, the FCC asks whether any regulation would be consistent with the First Amendment rights of broadcasters. The commission also proposes to enact rules adopting the same requirement for visual sponsorship identifications as it currently has for political ads--that the disclosure take up 4 percent of screen height and be displayed for at least four seconds.

Also, the FCC asks if it should adopt a specific rule making clear that product placement in children“s programming is prohibited (the FCC stated that it believes it is already prohibited as there is no bumper separating the commercial message from the program).

This is a very important proceeding for all television broadcasters, as it could impact current and future means of financial support for free over-the-air TV. All television broadcasters should consider filing comments in this proceeding to ensure that their flexibility to adapt to changes in technology and the marketplace can be preserved.

David Oxenford is a veteran media attorney with Davis Wright Tremaine LLP in Washington, D.C. His blog is available at www.broadcastlawblog.com.