In Germany, TV executives are losing their jobs because of it. In the United Kingdom, there have been allegations involving BBC programming. In Italy, some suspect it might be happening too.


(The Hollywood Reporter) -- In Germany, TV executives are losing their jobs because of it. In the United Kingdom, there have been allegations involving BBC programming. In Italy, some suspect it might be happening too.

Product placement on television -- illegal in most European countries -- has become a hot potato for channel bosses and producers, many of who would welcome a change, or at least a clarification, in rules.

With a relaxation of European Union regulations almost certain to be included in the revised Television Without Frontiers directive due to be unveiled in December, it can't be long before the floodgates of integrated branding revenue open.

"'Yes' to clear rules on product placement in works of fiction," EU media commissioner Viviane Reding said recently at film industry conference in France, though she said brand integration would remain banned in news programming, documentaries and children's programming in EU member states.

The cash bonanza once Europe joins the fray could be huge. In 2004, the value of overall TV product placements in the U.S. rose nearly 50%, to $1.9 billion, according to research firm PQ Media.

Across the continent, the power of producers to resist the siren call of integrated branding appears to be weakening. The latest revelation in an ongoing German scandal comes from commercial broadcaster ProSiebenSat.1, which in October admitted to illegal product placement, saying advertisements disguised as news reports were slipped into breakfast TV shows and other programming on its Sat.1 channel. The group face fines of up to €500,000 ($584,360) for their inclusion.

After the admission, ProSiebenSat.1 head Guillaume de Posch called for clearer EU guidelines as to what should and should not be allowed -- a view echoed by Nicolas de Tavernost, chairman of French commercial channel M6.

"It'd be better to have a clear framework than to see what has happened in Germany," de Tavernost said.

The series of German scandals began with the exposure of illicit placement on such popular soaps as "Marienhof" and "Lindenstrasse" on pubcaster ARD and has led to several high-profile firings and resignations.

Leading German channel RTL also is under investigation for suspected product placement. RTL Television CEO Anke Schaeferkordt said that the network would welcome a more open policy toward product placement, adding that the real problem is the overall rigidity of current advertising regulations.

"Product placement has been made the focus in the public discussion, but for us a much more important issue are the traditional commercial blocks," Schaeferkordt said. "Right now we are tightly constrained as to how much commercial time we can air per hour and how we do it. That's what we want to change, to become more flexible."

The European Commission, the EU's executive body, seems likely to give broadcasters and marketers a freer reign as part of its TWF review.

Under existing EU rules, product placement is not outright banned, but "surreptitious advertising" or placements likely to mislead the public about their nature are outlawed. National law in some territories does stretch to an explicit ban.

Reding said new regulations will have to strike a balance among protecting consumers against being misled, boosting the competitiveness of the European content industry and preserving the independence of editors. One condition will be that placement is clearly identified at the start of a program.

The European Group of Television Advertising said it welcomed the opportunity to formally recognize product placement.

"It is important that a legal base be provided as some EU governments interpret the current directive as forbidding product placement," the group said.

Despite the obvious potential for producers seeking new sources of finance, Germany's ARD said it will fight to maintain the ban on product placement whatever the EU decides.

But all the big commercial broadcasters have come out in favor of a loosening of the German rules to allow more U.S.-style freedom. Britain's commercial broadcasters also are keen to see the barriers to placement on domestically made shows dropped and are lobbying for change ahead of the TWF review.

In a September speech to European regulators and broadcast ministers, ITV chief executive Charles Allen said that product placement on British screens was nothing new.

"U.S. shows like '24,' 'Desperate Housewives' and 'Lost' have demonstrated, through their successful links with brands such as Ford and Sears, that there is a place for sensible and well thought-through product placement in the commercial TV marketplace," he said.

"Twenty years or so ago, both TV sponsorship and advertiser-funded programming were virtually nonexistent. We have been able to create, execute and regulate both, and both have benefited the viewer and the broadcast economy with their different contributions to the 'virtuous circle.' There is no reason why new techniques like product placement can't do the same," Allen said.

"It is a paradox and in my opinion unthinkable that films with product placement can be broadcast on television but that it is prohibited for (TV fiction programs) to seek product placement," said Michele Lofoco, an attorney and president of the rights department at financier Cinecitta Holding.

Two years ago, Italy introduced a law that loosened restrictions on product placement in film in the hope of opening untapped financial sources. The law immediately propelled cash-strapped Italy into the vanguard of product-placement-friendly European countries but left many scratching their heads as to why it did not extend to the small screen.

"This is not a question of law but a question of common sense," said Lofoco, who noted that the practice within television is likely going on anyway, albeit clandestinely.

Charles Masters reported from Paris; Scott Roxborough reported from Cologne, Germany. Mimi Turner in London, Leo Cendrowicz in Brussels and Peter Kiefer in Rome contributed to this report.

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