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Product Placement in Practice, in Germany

Marc Schwieger's talk at Alcatel-Lucent Foundation / HBI 2009 is followed by a panel discussion with Marc, Martin Hoffmann from MME Moviement, and Martin Krapf from IP Germany. Krapf begins by noting that even the $70m in product placement advertising in James Bond movies remain a small component of all advertising; this is no revolution in advertising yet. While product placement will certainly grow, conventional advertising will continue to be the leading form. Indeed, product placement is most effective when combined with conventional advertising.

Hoffmann adds that for the media production industry this discussion is less than central. What component of financing is contributed by product placement is a secondary question, except for a few very obvious formats (such as reality TV shows, presumably). Production costs are negotiated between producers and broadcasters in a series of negiotiations; product placement payments are simply the icing on the cake for TV shows which are already slated for production, for example.

Marc Schwieger responds that the discussion must take place with a view to the attitudes of audiences towards product placement, though. This also requires moving away from the primacy of television. New opportunities in product placement offer an extension of the arsenal of techniques available to advertisers.

But, Krapf says, the point here is not to forcibly introduce products into programming in a highly visible form - if products are simply part of everyday life, then they are also hardly remarkable and won't be recognised strongly by audiences; if product placement becomes more important than the storyline, this will alienate audiences, and advertisers must refrain from such efforts.

Proposed new regulations in Germany allow product placement only in a number of entertainment formats (movies, and various television genres). Schwieger adds that he expects new business models to arise around this greater level of product placement which this allows; Krapf asks, however, whether product placement in the coverage of everyday life situations is really relevant and effective. But if market leaders are able to ensure their constant low-level presence in such situations, does this affect the operations of the free market?

At the same time, the natural place for product placement is service programming - docutainment, servicetainment, etc. There's a fine line between information (where product placement isn't allowed) and service programming (where it is), Hoffmann says; and he'll know which is which when he sees it - but what about audiences? Hoffmann believes that they, too, are sophisticated in their analysis of content - but this is different between different age groups, for example. There is also a difference in the legal definition of 'product placement' and 'hidden advertising' in Germany, which further complicates matters.

Schwieger notes that a brand's reputation capital can be severely affected by poor product placement, or hidden advertising; brands therefore have a clear incentive not to engage in misleading practices, and German government regulation which is currently under discussion also clearly requires product placement to be indicated up-front. Krapf now shows an example for how this is done through channel signature-style inserts in the German daytime television soap Gute Zeiten, Schlechte Zeiten. (Followed by acknowledgments in the end titles.)

German draft regulation also distinguishes between the placement of valuable and less valuable products, and between for-pay and free placement (i.e. provision of products as in-kind support for content production). This further complicates matters, and is ultimately unhelpful especially for content producers and broadcasters. Much of this discussion also relates to the public broadcasters, who are generally encouraged to avoid accepting substantial in-kind support (but who as government-funded institutions rely much less on product placement in the first place, so this discussion is a distraction, Krapf says).

A more central questions is the placement of advertising breaks in television programmes. This remains highly regulated in Germany, and there are rules requiring the bundling of TV commercials in a small number of breaks per hour. For Krapf, this is a key problem, as it makes it impossible to engage in more flexible forms of advertising that respond to market interests (i.e. more advertising in popular programmes, less in unpopular shows). Some sensible forms of advertising are made impossible by such rules, he says.

Schwieger points out that some advertising agencies, his own included, are now reinventing themselves as communications service agencies, and exploring new format ideas - while maintaining clear boundaries between editorial and advertising content. One example of this is the Tchibo Show, an infotainment show sponsored by a major German coffee roaster. This was connected to some extent with other media forms, too, but there still remains significant potential for further cross-media advertising opportunities here.

Krapf also notes Deutschland sucht den Superstar, the German version of the (American, Australian, ...) Idol format, which has been very successful in this and has been a key element in promoting a new drinks brand. For advertisers, this is also a high-risk approach, however - what if the programme flops? In the other media - additional to television - product placement and similar advertising efforts would be clearly indicated as advertising, too (advertising isn't some dirty little secret after all, Krapf notes). Schwieger agrees that advertisers should take a fairly relaxed and open approach to advertising - there's no need to hide the fact that they are advertising products.

Hoffmann has been involved in producing a German Web soap, too, which was produced as professionally as any television soap. The result was that producing such quality content turned out to be expensive, and such costs were unable to be recouped through online advertising only - but product placement and supplier partnering provided useful financing options.

Distribution for this took place through the entertainment site of German tabloid newspaper Bild, rather than simply by placing the content on YouTube or another generic videosharing site; this also enabled direct interlinkage with the Websites of stores providing clothing for the main characters in the show, with moderate success. (It was a trial, after all, and all partners intend to continue the show - some 150,000 viewers accessed each episode, and episodes cost a third of a comparable TV episode.)

This places such efforts in the online advertising environment, of course - a growing area which is taking its place and developing cross-media connections with advertising in other media. Part of this drives a convergence of business models, Schwieger suggests - clothing distributors also become content providers, print publishers are starting to produce audiovisual content, and content producers partner with product distributors, for example.

Hoffmann points to the continuing primacy of telling stories in this context, though - hybrid forms which mainly aim to sell product are unlikely to be accepted by users. But, Schwieger adds, what is now possible is to provide services around the content - direct sales of products seen in episodes, for example (and in a related example, there is now a site, too, which each day covers what Michelle Obama is wearing, and indicates where people may be able to buy those clothes).

Schwieger points to the well-established model of the talk show - which is all about advertising products (books, movies, music) and does so in a highly transparent and widely accepted form. What happens today is just a more modern form of the same - and Krapf adds that the ultimate question always remains what audiences, what users want to see: in addition to government, the second key regulatory body are the users themselves. The challenge is matching content formats to audiences. The limits for such emerging advertising practices, then, Hoffmann puts it, are those imposed by the law and those imposed by the audience.

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