Sunday, July 18, 2010

Product Placement comes to the UK

Whilst, the ACMA continues its review of Australian commercial radio standards and the regulation of commercial arrangements, the UK is in the throes of implementing a momentous decision – namely to allow product placement on commercial television. For an Australian (or US) television viewer, accustomed as we are to infiltration of commercial references in programming – radio and television - this may not seem especially momentous. However, in the UK it overturns a prohibition which has existed since the commencement of commercial television broadcasting in 1954. The process of reaching that decision is evidence itself that it was seen as a significant transition.

How has this change come about? As noted, the UK has had a long-standing prohibition on product placement, but UK television broadcasting is also governed by EU law. Since 1989, a directive has been in place setting minimum standards for television in the EU. This directive was thought to provide a de facto prohibition on product placement although practices varied between the member states. However, in 2007 a new directive – the Audiovisual Media Services Directive (AVMS Directive), revising the 1989 directive, came into force. The AVMS Directive permits product placement in certain types of programming. Once a directive comes into force, a member state is required to implement its terms into domestic law. The UK Government launched a consultation in July 2008 canvassing its proposals for implementation.

The treatment of product placement in the Directive allowed each member state some flexibility regarding implementation. Essentially, the Directive requires each member state to prohibit product placement, but permits it to allow product placement in certain types of programs; namely, feature films, television films and series, sports, and light entertainment programs. However product placement is not permitted in these types of programs if they are made for children.

The UK Government’s initial preference was to maintain a complete prohibition on product placement. This was confirmed when, following the consultation, the Government announced in March 2009, its plans for implementation. Despite a strong preference for product placement from industry, “[o]n balance, and mindful of the need to maintain public trust in television broadcasters and British television’s reputation for high standards, the Government has concluded that no conclusive evidence has been put forward that the economic benefit of introducing product placement is sufficient to outweigh the detrimental impact it would have on the quality and standards of British television and viewers’ trust in it”.

Notwithstanding this seemingly strong commitment, a change of Government minister heralded a revisiting of the issue. A new consultation was launched in November 2009 and in February 2010, the Government announced that it would permit product placement subject to strict limitations. Why the change? The main trigger had been the need to ensure the competitiveness of the UK television industry which it considered was under threat given the general economic situation and the competition from other EU countries, which had decided to permit product placement, as well as the US.

The restrictions on product placement to safeguard against undue commercial influence are more severe than those required under the EU rules. So, in addition to the EU restrictions, the UK will also prohibit product placement of alcoholic drinks; foods and drinks high in fat, salt, or sugar; gambling; smoking accessories; over-the-counter medicines; and infant formula. (EU rules already prohibit product placement of tobacco products and prescription medicine.) In addition, the UK rules make clear that product placement is not permitted in news, current affairs, consumer and religious programming.

The necessary legislative changes having been effected, Ofcom, the UK communications regulator, is now consulting on the specific rule changes to the Broadcasting Code. Product placement will not be permitted until the Broadcasting Code rule changes have been completed. Ofcom is also taking the opportunity to devise new rules for radio which will relax rules on paid-for references.

As can be seen, despite the significance of this change to UK television regulation, the relaxation of product placement is partial only. Two other important safeguards remain – principles which have been at the heart of UK regulation of broadcast advertising: transparency and editorial independence. The principle of transparency means that where product placement has been used, that must be signalled to the audience. The proposed Ofcom rules suggest that there should be visual and audio signals to the presence of product placement. A transparency principle is one which is familiar even in the US and Australia which have much more liberal approaches towards commercial references in programming.

However, what has set and will continue to set the UK apart is the principle of editorial independence. So, product placement, even where allowed to be used, will not be permitted to influence the content or scheduling of the program. The rules also prohibit undue prominence of the products or any direct encouragement to purchase. The principle of editorial independence is a means of ensuring that commercial interests don’t have an inappropriate degree of access to broadcasting space compared to the public. The separation of advertising and program content also means that the audience is not misled by the format into believing that what is really promotional material has a greater substance or credibility. The UK/EU rules by excluding programs such as news and current affairs from product placement will minimise these risks.
It might be thought that entertainment programs don’t deserve the same type of protection; we can all see the importance of news not being distorted by commercial influences, but why should we care about drama or even a comedy program? Apart from the integrity of the program maker, dramatised programs can also reflect and convey ideas and values, even information – and so, help us to observe and understand our world. The requirement of editorial independence even where product placement is permitted is an implicit recognition of this role and its importance. What will be interesting to see as product placement becomes a reality is how well the principle of editorial independence is maintained. Would a company be happy to pay for product placement if there is a risk that the product could be subject to a critical story line? (See my post on the ABC and Commercial Conundrums.)

Ofcom, despite a mission of lighter touch regulation, has maintained close regulatory supervision over broadcast advertising especially sponsorship and commercial references and its current consultation on product placement indicates a similar approach. This may be important if the public is to have confidence that standards are being maintained. But the future of communications regulation and Ofcom’s role is up for discussion. The new UK Coalition Government has just announced its plans for structural reform which include the possibility of scaling back the role of Ofcom and deregulation of the broadcasting sector. Will standards of transparency and editorial independence be at risk in a future deregulated environment as commercial pressures intensify?

Thursday, July 1, 2010

The ABC & Commercial Conundrums

Media Watch’s episode of 21 June 2010 had an interesting segment on the ABC and commercial references. The ABC as a public broadcaster is prohibited from broadcasting advertising and so commercial references in other forms are also not acceptable. The ABC’s governing statute and its editorial policies spell this out. The spirit of these prohibitions is reflected also in the ABC’s statement of Editorial Policies, when it says: “The ABC is conscious that its audiences value the ABC’s role as a non-commercial broadcaster and its non-commercial style”.

The Media Watch segment was about visual references to Apple products during a comedy series, :30 seconds. This series had originally been produced for a commercial provider, Foxtel, and later acquired by the ABC. Media Watch was questioning whether there was a discrepancy between ABC policy and practices dealing with acquired content (as in this case) and content produced or commissioned by the ABC.

Does this mean that the ABC can never make visual or aural references to branded products? No, but the Editorial Policies make clear that such references must be appropriate having regard to the context of the program (section 16.1.1) and that undue prominence should not be given. Product placement (where a supplier pays for products or services to be featured) is also prohibited. In the case of :30 seconds, the producers were trying to create the feel of an international advertising agency and so the references might have been dramatically relevant. A key principle here is that the ABC must maintain editorial independence. Under the arrangements for this series, Apple supplied the products for use in the episodes. There were no express product placement arrangements, but, as Media Watch explained, there was a requirement that the products not be presented in a derogatory manner and that they be shown only in a way which reflects favourably on the products. It is difficult to see how this does not infringe editorial independence, and indeed, the ABC would normally not agree to such a requirement if it was producing or commissioning the program or series. Apparently, as reported by Media Watch, the ABC does not investigate the commercial arrangements for acquired content. Well, perhaps this makes sense; after all the ABC is not making the program itself, and therefore not, itself, being influenced by commercial considerations. But, surely the integrity of the ABC ‘brand’ and the perception viewers will have is important. Does the public have the information to identify what is ABC content and what is acquired content? I doubt that ABC promotions for the series promote it as anything but an ABC series.

And while we are on the subject:
The ABC is permitted to promote its own programs, activities, and products and services, and ABC Television viewers will be conscious that the ABC does that actively, and it seems with increasing length between programs! This does not undermine the non-commercial nature of the ABC, and, again, its editorial policies deal with these types of promotions. But a current ABC promo highlights the care needed even when promoting its own. Showing on ABC Television is a promotion for ABC apps, highlighting especially its new iPad App. When I first saw this, I thought for a moment that I had accidentally switched to a commercial channel, so prominent is the visual reference to the iPad. The promotion also scrolls through quickly some branded phones (including the iPhone) and other ABC apps, but it is the iPad which is predominant. Of course, it seems obvious that promoting an app for an iPad would feature the iPad, but getting the balance right is tricky. It is unlikely that Apple would be unhappy with the iPad coverage. The ABC has done an excellent job in embracing new delivery options for its content, but since many of these platforms will be offered by commercial providers the ABC’s responsibility for ensuring the integrity of its ‘brand’, whilst making known new opportunities for accessing ABC content, will clearly grow in complexity.

Also announced last week was a deal between the ABC and publisher, Fairfax Media, which allows the publisher to publish on its online sites the back catalogue of some ABC programs. Fairfax is interested in current affairs and documentary type content. As delivery platforms proliferate, and print and broadcast media merge, demand for quality content will make ABC content attractive. These provide good revenue opportunities for the ABC. But, again, are there new complexities for the ABC as it exploits these opportunities? Deals such as the one with Fairfax Media don’t compromise the ABC’s non-commercial role in program production – the Fairfax deal is currently only interested in back content. Inexorably linked with the ABC as a non-commercial public broadcaster are notions of trust and independence. Is there a risk that the appearance of ABC branded content on a commercial platform (and Fairfax intends to sell advertising around the ABC content) creates confusion?

The relationship between program content and commercial content is becoming increasingly complex as content delivery changes and old models of advertising-funded media come under pressure. The UK is in the process of developing rules to allow product placement on commercial television. It marks a fundamental change in approach to regulation of UK commercial broadcasting. The rule change will also have a knock-on effect for commercial radio as rules around commercial references will be relaxed. Stay tuned…

Sunday, June 27, 2010

NBN Co reaches agreement with Telstra

At the beginning of the week, it was announced that NBN Co and Telstra had reached a financial heads of agreement (on 20th June 2010). It marked a significant move ahead with the plans for National Broadband Network (NBN) and seemed like a newsworthy start to the week. However, NBN’s news was soon overshadowed by unexpected developments on the political front, and by Thursday we had a new Australian prime minister, Julia Gillard. Certainly a memorable week in which to start a blog! And, what would be the impact of this change on the NBN? It appears that Prime Minister Gillard also supports the NBN.

The heads of agreement reached between Telstra and NBN Co is the beginning only of a lengthy and complex process (although the heads of agreement has itself taken many months) to achieve what is in effect the structural separation of Telstra. It relates back to the Government’s proposals announced in April last year which sought to deal with the problem of Telstra’s market dominance. The Government gave Telstra two choices: voluntarily structurally separate or have functional separation imposed. The latter option would also have meant that Telstra would have been excluded from acquiring spectrum for advanced mobile/wireless broadband services.

The financial heads of agreement reached with Telstra means that, subject to ACCC regulatory approval, Telstra will gradually decommission its copper and hybrid fibre coaxial cable network, whilst NBN Co will have access to parts of Telstra’s infrastructure which can assist with the NBN rollout. Thus, instead of Telstra having the potential of being a competitor or NBN Co having to duplicate parts of the network, Telstra will become a customer of the NBN. If the agreement is completed, Telstra’s access to wireless spectrum should be secure. One of the Government’s original requirements, that Telstra should sell its interests in Foxtel, does not appear to be being pursued; an indication that the Government is satisfied with the structural separation arrangements.

All of this indicates a satisfying step forward for the implementation of the NBN, and it might have received more news coverage had it not been for the mid-week developments. But for those of us who are interested in the impact NBN and the content services, likely to be offered over a superfast broadband, will have on traditional approaches to media regulation, little has yet emerged from the Government about its thinking and the form a review of such regulation will take. The Government had indicated that it would begin to address such issues in 2011. Perhaps now that progress has been made with Telstra, the Government may begin to turn its attention to this crucial aspect.