Extraordinary Growth in Product Placement Expenditures:
Thanks to the release of a new report detailing extraordinary growth over recent times in the at best, questionable practice. Movies were the first to do
it, but recently television has embraced the new revenue streams - the value of US television placements grew 46.4% to US$1.87 billion in 2004. If you
weren’t aware of the depth of the relationship between film, TV and the marketers of the world, this article entitled Why Product Placement Works by
advertising psychologist Dr Max Sutherland covers the topic exceptionally well. Product placement is booming – the first-ever report on the size and
structure of the product placement market says the total value of the Product Placement Market grew 30% in 2004 to reach US$3.46 billion. Now reports
in respectable journals such as the New York Times and International Herald Tribune are beginning to bring the insidiousness of the practice to the
public attention.
The report, which includes 30 years of historical trends, five years of spending forecasts and more than 75 tables and charts, found that the value of
all product placements in media climbed at a compound annual rate of 10.5% since 1974. The product placement market is projected to expand 22.7% to
US$4.24 billion in 2005, propelled by strong growth in each of the three major media segments, an increase in paid placements, larger placement deals
and deeper penetration of personal video recorders (PVRs), according to PQ Media. Growth over the past 30 years, and particularly during the last five
years, was driven mainly by the strong expansion of the television segment, including broadcast, cable and syndication.
The value of television product placements soared 46.4% to US$1.87 billion in 2004, and grew at a compound annual rate of 21.5% from 1999 to 2004,
as reality television became a haven for numerous product placement deals. Meanwhile, the value of product placements in films rose 14.6% to US$1.25
billion in 2004, and grew 11.4% on a compound annual basis in the 1999-2004 period, according to Product Placement Spending in Media 2005. Spending
in the other media segment, including magazines, newspapers, videogames, Internet, music, books and radio, increased 19.9% in 2004 to US$325.8 million,
and rose at a compound annual rate of 11.7% from 1999 to 2004.
Product placement's growth is coming at the advertising market's expense, according to PQ Media, as marketers more aggressively migrate dollars away
from advertising to alternative media, especially product placement. While product placement spending surged 30.5% in 2004, advertising
and marketing expenditures rose just 7% for the year.
"The reasons behind this development are rather simple, but critical to a media industry undergoing rapid change in an era of ad-skipping
technologies and accelerating audience fragmentation," said Patrick Quinn, president of PQ Media. "Technological advances, most notably PVRs,
and continued audience fragmentation, due to the growing popularity of new media like the Internet and videogames, have led major marketers
who are already skeptical of their return on investment in traditional advertising to become even more dispirited with the old means of reaching
target audiences."
As a result, leading advertisers are more than ever questioning the relevance of the 30-second television spot, as their messages become scattered in the increasing advertising clutter or omitted altogether by a more empowered consumer who can skip them with the touch of a button, Quinn added. To compensate for this perception of diminished advertising returns, marketers have substantially ratcheted up the role of product placement in their buying strategies. In short, product placement - the seamless integration of products into media - is becoming an integral part of a larger marketing package for many advertisers that includes traditional advertising and alternative marketing such as product placement.
Another key trend in product placement is the growth of paid placements compared with barter and gratis arrangements. Paid placements are defined as those in which the integration is arranged and there is financial compensation; barter agreements also are arranged, but the product serves as compensation; and gratis arrangements are those in which the placement simply happens, often to strengthen a character's profile or to add richness to the plot. The share of paid placements increased from 18% in 1974 to 29.2% in 2004, as competing marketers became more willing to pay for placements on programs, films and other media that are targeted and considered to be attractive properties by their consumers. As a result of the increased pressure to control costs and grow revenue, gratis placements, which accounted for 24.3% of the market's value in 1974, have become much less frequent, accounting for only 6.6% of total spending in 2004. Meanwhile, barter arrangements grew from a 57.7% share in 1974 to 64.2% of the market in 2004, according to Product Placement Spending in Media 2005.
Marketers in the food & beverage, house & home, and health & beauty categories accounted for more than half of all product placements in media in 2004.
These placements, however, don't necessarily generate as much integration value as do other categories with products that have higher price points,
such as transportation & parts, according to PQ Media. Over half of product placement spending is found in four of the 10 marketing categories:
transportation & parts, apparel & accessories, food & beverage, and travel & leisure.
“Protected by the free speech provision of the First Amendment, corporations marshal huge public relations efforts on behalf of their agendas.
In the United States the 170,000 public relations employees whose job it is to manipulate news, public opinion and public policy in the interests
of their clients outnumber news reporters by 40,000. A study in 1990 discovered that almost 40 percent of the news content of a typical U.S.
newspaper originates as public relations press releases, story memos, and suggestions. The Columbia Journalism Review reported that more than
half the news stories in the Wall Street Journal are based solely on corporate press releases (cited in Korten 1995:146 [When Corporations Rule
the World]). United States corporations spend almost half as much on advertising (approximately $120 per person) as the state spends on education
($207 per person).” — Richard Robbins, Global Problems and the Culture of Capitalism, (Allyn and Bacon, 1999) p. 138
“In fact, “brand-sponsored content” as Steve Golin likes to call this, is as old as television. Today, many gripe that the World Wide Web is nothing
but a World Wide Commercial for which securing eyeballs for advertisers is the first and last concern. Lest we forgot, TV was also invented to
sell to us in the comfort of our home. Content has always been an after thought. At the dawn of TV, soap operas got their name from the soap
that was hawked by the show's sponsors, who exercised a good deal of control over the show's themselves, (which existed merely to fill the
space between commercials.)” — Erika Milvy, Advertainment's New Frontier, AlterNet, June 25, 2001
Globalization is integrating not just trade, investment and financial markets. It is also integrating consumer markets. ... [Economically, ]
there is fierce competition to sell to consumers worldwide, with increasingly aggressive advertising.
On the social side local and national boundaries are breaking down in the setting of social standards and aspirations in consumption. Market
research identifies “global elites” and “global middle classes” who follow the same consumption styles, showing preferences for “global brands”.
There are the “global teens” — some 270 million 15- to 18-year-olds in 40 countries — inhabiting a “global space”, a single pop-culture world,
soaking up the same videos and music and providing a huge market for designer running shoes, t-shirts and jeans.
... At the same time the consumer receives a flood of information through commercial advertising. An average American, it is estimated, sees
150,000 advertisements on television in his or her lifetime. And advertising is increasing worldwide, faster than population or incomes.
Global advertising spending, by the most conservative reckoning, is now $435 billion.
— Human Development Report 1998 Overview, United Nations Development Programme (UNDP)
Don't take my word for it. Jeff Greenfield, executive vice president of entertainment marketing firm 1st Approach, The Hollywood Reporter that
advertisers who pay $3 million to $5 million for product placement/integration deals are "massive suckers." Of course, Greenfield was referring
to a couple of shows in particular--you know, the ones with "The Apprentice" title attached to them. Of course, those "Apprentice" product
placement advertisers --Sony Pictures Entertainment, Burger King, Mattel, and others--might tell you differently. They might say that, in fact,
those million dollar arrangements, which almost equate to hour-long infomercials, were effective in getting out name recognition or ringing
up sales of product. Greenfield went on to say that "90 percent of the brands you see in shows are there for free... A lot of brands get in for
free not because they're cool but because they happen to be there." Being there. Does "The West Wing" need some Johnny Walker scotch? You need
to be a quick pourer. Could "King of Queens" use some Pop-Tarts on the kitchen set? Only if the cookie crumbles. The biggest success story for
unpaid product placement is with Apple Computers. As has been known for a long time, Apple has been the quickest in overnight delivery of
laptops to almost any and all entertainment projects for two decades. As a result, Apple appears to be dominating the PC market in the fictional
lives of TV shows and movies. Other executives think just the brand names of Apple, iPod, and Aston Martin alone will get you in the door.
Perhaps you don't even need that. Norm Marshall & Associates said it worked more than 10,000 product placements on TV shows and movies last
year--all free. So where is the money product placement? It's either in the hands of Mark Burnett or with long-time product placement agencies
like Norm Marshall. It certainly isn't with the networks or movie companies. Market researcher PQ Media reported paid product placements were
$1 billion in 2004, about a third of overall branded integration. That means 70 percent of all deals--for the moment--are sucker-free.
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