Product placement gains foothold in Europe

Viewers jarred but networks welcome new revenue

Product placement traditionally has been shunned in Europe. Auteurs fear the taint of association with such crass commercialism, and on the small screen in-program advertising had been banned outright in most territories.

That changed in April with new EU regulations allowing product placement on European television. Producers and channels across the continent are now looking to cash in.

The reaction has been immediate. On the German game show "Beat Your Host," entertainer Stefan Raab kicked a soccer ball-sized M&M at his opponent. Alfa Romeo slipped one of its cars not-so-discreetly into an episode of TF1's "Les Touques," and Clear Channel placed virtual, changeable giant banners on the France 3 hit soap "Plus Belle la Vie."

Some of Europe's biggest firms, from Finnish cell-phone giant Nokia and Swedish furniture group Ikea to German carmaker BMW, now are slipping products into local sitcoms, series and shows.

"It's been an odd situation, where these companies have been doing product placement in the U.S. for years but weren't allowed to at home," said Sabine Eckhardt, managing director at AdFactory, the division of German broadcaster ProSiebenSat.1 that helped place the M&M plug in "Host." "Now the field is wide open."

Europeans aren't complete strangers to sponsorship, product placement and promotional tie-ins -- in feature films, the practice is commonplace. At the U.K. premiere of Fox's "The A-Team," director Joe Carnahan took the stage ahead of the movie and thanked Brit cell-phone network Orange for its support. He then screened an Orange product-placement trailer, shot by him and his cast, before unspooling the main feature.

In France, companies including product-placement king Marques et Films have been sticking sponsors' brands in everything from Xavier Giannioli's auteur feature "In the Beginning" to such crowd-pleasing fare as Jean Pierre Jeunet's comedy "Micmacs" and Frederic Berthe's "R.T.T."

Also common is unpaid placement, where brands supply "free stuff" for a production.

Ealing Studios chief Barnaby Thompson, who recently produced and co-directed "St. Trinian's 2," which includes placements for Adidas and Foot Locker, said such bartering deals can provide a "quite significant" boost to indie budgets.

"If I was plucking numbers out of the air, I would say productions' values can be enhanced by maybe £100,000 ($156,000)-£200,000 ($315,000) if things are supplied to the production for free," he said.

But the relaxation of product-placement rules across the continent promises much greater returns. For European television, still smarting from a plunge in traditional advertising, product placement offers hope of a new, lucrative revenue stream.

In such countries as Spain and the Netherlands, which have long allowed in-program plugs, product placement is one of the fastest-growing forms of advertising.

Joaquin Ruiberrez de Torres, president and CEO of Madrid-based agency Product Placement, which works with Spanish and international brands, said he expects an explosion as more and more pay and Internet channels appear.

"Another factor driving growth of product placement is that viewers are getting fed up with these 12-minute blocs of ads on Spanish television, and advertisers know it," he said.

Just how big the product-placement business in Europe will become is a matter of debate. In France, French analyst the NPA estimates the product-placement market could earn close to $90 million a year, one-sixth of what regular ads bring in on Gallic TV but still significant. German networks are hoping for revenue between 1%-2% of traditional advertising, or about $65 million-$130 million a year. In the U.K., estimates go as high as $225 million annually.

At the moment, however, the promise of such a windfall seems a distant one for most European producers and broadcasters.

For one, the new EU regulations restrict what products can be plugged. Advertising for tobacco, prescription medicines and firearms remains forbidden, as is product placement during news, current affairs, religious and children's programming.

The rules vary slightly from country to country, reflecting local culture and tastes. In the U.K., there is a ban on product placement for alcohol, gambling services and junk food. In France, product placement is allowed in dramas and feature films but not on entertainment shows, so no Coke cups on the judges' table in the Gallic version of "American Idol."

Regulations also restrict how European producers can position such paid-for promos. So-called thematic placements, where the product is a key plot element -- think Carrie's Manolo Blahniks in the "Sex and the City" movies -- are banned. Fictional characters can't directly plug a product, either. A German detective can't ask his partner for a cold Budweiser or suggest they stop by the Dunkin' Donuts on the way to the crime scene.

"Our audiences are also not used to seeing this kind of advertising in local shows, so they are much more sensitive to it; we have to be very careful what we show and how," said Stefan Kastenmuller, who runs product placement at UFA Brand Communication, a division of German production giant UFA. "This makes it less attractive to advertisers, so at the moment, there is less money there. I've heard U.S. estimates of 10%-15% of a budget coming from product placement. We're a long, long way from that."

An ITV spokeswoman agrees, suggesting that revenue from the relaxation on product placement might end up hitting $80 million, though not in the immediate future. "It'll be a slow burn, but it should get to those levels in a year or so," she say.

That's not soon enough for RTL Group CEO Gerhard Zeiler, who recently sold RTL's money-losing U.K. network Channel Five to mogul Richard Desmond for $160 million. Zeiler lamented that the ban on product placement contributed to the ad malaise in the British commercial TV market.

Even Desmond will have to wait to cash in on in-show plugs. Britain's media watchdog Ofcom is consulting with the TV and movie industry before issuing a final set of proposals on what will and won't be allowed for product placement. Guidelines are expected by late September at the earliest.

Even with the rules in place, Oliver Castendyk, a lawyer and member of the German Film and Television Producers Assn., warns Europeans to be realistic about the advertising potential of their products.

"U.S. studio films and serial productions -- be it 'Sex and the City' or '24' -- will effectively be seen by hundreds of millions of people over their lifetime of their exploitation," he said. "With European productions, we are talking about a completely different dimension. The audience is smaller, and it is definitely not global."

Scott Roxborough reported from Cologne, Germany; Stuart Kemp reported from London. Rebecca Leffler in Paris and Benjamin Jones in Madrid contributed to this report.