• by Hank Kim , Richard Linnett , December 29, 2005

Change is in the air. Even in the Old World. Yes, Paris was recently burning, but that is a social issue and this is a marketing column. We don't pretend to understand politics. We do pretend to understand branded entertainment, and so here is the big news: The European Union will legalize product placement. The bad news: It will take far too long to implement.

If you haven't been paying attention, you may not know that product placement has been banned in places like Germany, England, Portugal, and France since the 1980s. That's when the European Union created the Television Without Frontiers Directive, which lays down airtime quotas for programs made in Europe and for advertising. The directive also puts limits on product placement, which it calls "surreptitious advertising" and defines as the representation of a company's products or services where it is "intended by the broadcaster to serve advertising and might mislead the public as to its nature."

Cash-strapped European producers have successfully argued before the European Commission that current restrictions put them at a disadvantage with u.s. producers who milk product placement as an additional revenue stream. This past September, EU media commissioner Viviane Reding caved, announcing that product placement will be allowed but that networks will still be required to clearly identify integrations at the start of shows so that viewers are aware of them. Also, according to reports, the commission does not expect this relaxation of the ban to be implemented by member states until 2008, because it must first pass muster with the European Parliament and the Council of Ministers before being made into domestic law.

That's two full years of missed opportunities.

Some countries, such as the U.K. and Italy, have already adopted a liberal approach to product placement, allowing use of brand names only where necessary to maintain realism in a program while disallowing close-ups and longer-than-necessary shots.

Spain has permitted product placement for years and it is a very mature and lucrative business there (as it is in most of Latin America, especially Argentina). But France, Germany, and Portugal have enforced the broadcasting rules strictly. Purveyors of branded entertainment in these countries have been operating like bootleggers during Prohibition: They slip brands into programs covertly, under fear of significant penalties.

A branded entertainment colleague of ours in Lisbon -- we shall call her Luisa -- has spent lots of time in and out of court. Her trials, which are positively Kafkaesque, start when a competitive brand, an unhappy consumer, or a consumer association sees her client's product placement and files a complaint with something called the Consumer Institut, which administers "publicity law" in Portugal. The Institut investigates, interviewing Luisa and her client, and prepares a case that is handed over to another court called the Committee of Penalties, which examines the evidence to determine if a law has been broken and how much of a punishment to impose. The committee fines Luisa and her client, often thousands of euros. If they contest, which they always do, Luisa appears in civil court to argue their case.

"The problem with product placement here is a problem of 'recognition of publicity,' " says Luisa. "It is forbidden by the publicity code to engage in hidden publicity. We must identify whatever we are doing, or else they say people at home are being misled."

Luisa's defense is to argue that her integrations do not literally promote brands. "We say we are using them not as a marketing tool but as a support to the production. We say they are integrated in the action and are necessary to the understanding of the script." But this argument only works if the brands are recognized sponsors of the program. Integrations without a media buy are considered misleading and therefore criminal.

"At the beginning, seven years ago, I was the only one to do integrations," says Luisa. "So I went to the Consumer Institut once a month, on average. In seven years we went to court three times, and we paid the fine once."

This is no way to run a business. And we're not alone. As the editors of The Economist recently put it: "Governments don't need to police entertainment," they wrote. "Content producers will do it themselves." And the sooner the better.

Hank Kim and Richard Linnett are directors at MPG Entertainment. (hank.kim@mpg.com and richard.linnett@mpg.com)