EU ready to put b'cast rules to test

New revenue streams, relaxed ad rules fuel reform

When it comes to bureaucracy, the European Union has a formidable reputation. Yet last week in Brussels, EU audiovisual ministers clinched a deal to slash red tape and give an adrenaline boost to the European broadcasting industry.

The overhaul of EU broadcasting law is expected to unleash new revenue streams by relaxing advertising rules and allowing product placement on television.

The reforms will affect a vast range of broadcasting issues — from ad break scheduling to cross-border transmissions, and from junk food ad bans to quotas for foreign programs — but the changes to product placement rules are expected to have the biggest effect on the business.

EU Audiovisual and Media Commissioner Viviane Reding, who helped transform the European debate on product placement from one of outright suspicion to grudging acceptance, said the new rules would be invaluable in a fast-changing business. "This will be a clear and encouraging message to the industry to invest in television and television-like services for 500 million European viewers and citizens," she said.

Reding argued during the 18-month debate on the reform that new technologies such as TV-on-demand, Internet television and digital, hard-disk-based recorders — capable of automatically suppressing advertising blocks — obliged the advertising industry and the EU to innovate. "Product placement is a complete anarchy at the moment," she said. "It happens every day and there is no regulation of it. These rules will put things in order."

However, product placement will remain banned from news and children's programs as well as documentaries. The rules say that even where they are allowed — in films, series, sports programs and light entertainment — they need to be clearly identified at the start and end of the program. "We do not want a system where advertisements drive content. We want content to drive advertising," Reding said.

The law was delicately steered through the European Parliament by German socialist Euro-MP Ruth Hieronymi, who argued that it is better to have some rules than none at all — especially at a time when advertising provides 90% of revenue for Europe's private TV channels and 29% for public channels. But she changed the wording of the law to say that product placement must not affect the editorial independence of broadcasters, and not directly encourage purchases or rental of the goods and services in question.

Other provisions say there must be no "undue prominence" for the product in question. Product placement for tobacco products will be completely banned, as will medicines.

The measures were still slammed by European consumer group BEUC, which said children will now face a barrage of advertising and that the code of conduct on junk food ads is not strict enough.

The group was countered by British Conservative Malcolm Harbour, who warned that technology is making legislation increasingly ineffective. "Regulators will need to apply nonlegislative tools, such as voluntary program certification, public-interest programming guidelines, better consumer information and filtering technology that protects the young and the vulnerable," he said.

But all of the EU's 27 national governments welcome the clarity the law should bring. Until now, they have taken different approaches to product placement, with some (Austria, Denmark and Italy) applying a complete ban and others (U.K., the Netherlands) almost indifferent.

Germany was the most difficult government to win over to the reform: The country has been scandalized by revelations of undeclared product placement with the public broadcasters. Though Germans generally see subliminal advertising as a corrupting influence, they think little of U.S. productions like "Lost" that are chock-full of such methods. In recent weeks, public broadcasters ZDF and ARD have indicated that they will ban product placement on a voluntary basis, but officials in Brussels were skeptical about whether they would follow through with their pledge.

Advertisers have welcomed the changes. The World Federation of Advertisers said the new rules will help Europe keep pace with the global shift from 30-second ad blocks toward more targeted, and less interruptive, models. "We have consistently called for better, not more, advertising," WFA managing director Stephan Loerke said.

Even the European Broadcasting Union, representing public broadcasters, said the new rules should improve legal certainty. "However, they will not resolve all practical issues that will need to be tackled by EU member states during the implementation process," EBU secretary general Jean Reveillon said, reflecting fears that there could be a confusing mix of different rules for product placement for imported programs and live broadcasts.

But the Association of Commercial Television in Europe said fears of unrestrained commercialism in broadcasting have always been wide of the mark. "Twenty years or so ago, both TV sponsorship and advertiser-funded programming were virtually nonexistent," ACT secretary general Ross Biggam said. "And, as with product placement today, many critics feared for the editorial integrity or the viewers' experience as these new techniques were introduced. Yet both have benefited the viewer and the broadcast economy with their different contributions to the 'virtuous circle.' "

Bonnie J. Gordon contributed to this report from Munich.