VOD offers ideal home for product placement revenue stream

Culture secretary Andy Burnham announced last week that he saw no place for product placement on live British TV. But since the practice is permitted in the growing areas of online and video-on-demand, does the ban for live broadcast really matter?Under the Audiovisual Media Services Directive, any video-on-demand programme is allowed to offer product placement opportunities to advertisers and broadcast it online.

VOD and online streaming are no longer niche activities dwarfed by the numbers watching live TV. In fact, 84% of the UK online population is now streaming video – up 13% year on year, according to Comscore. The same figures revealed 99.5 million videos were watched from VOD in January 2009.

The total time spent watching online videos is not yet at the same level as live TV; the average user spends more than eight hours a month watching online videos, reports Comscore. But this figure is up 46% year on year.

Even those people interested in live TV are backing up their viewing with on-demand content. An Ofcom survey of 1,500 people suggests 81% use on-demand services to watch missed TV programming and 89% download content to watch again.

While ITV executive chairman Michael Grade claims that audiences are “savvier than the Government thinks” and bemoans that Burnham cannot see the “realism” added by product placement, perhaps he should be concentrating on integrating it into ITV’s online offer.

The broadcaster recently reported a 9% increase in revenues for its online division. An ITV spokesman says video views on ITV Player rose 600% year on year to 15.7 million in November.

Rather than focusing on the lack of product placement as an ad-funded revenue stream for live TV, broadcasters might do well to further explore the opportunities offered by VOD.

Dan Clays, managing director of BLM Quantum, says/ “Producers should be looking for brands to be involved in scripts and later online. This is a real opportunity for broadcasters and they should be looking to whet their appetites by experimenting with it.”

Paul Gidley, head of video sales at Eyeconomy, agrees: “TV ad revenues are down 25% year on year, but 90% of programmes viewed online are made for TV. Commercial broadcasters have done very little to make use of web technologies and offer brand placements.”

Lizzie Cantor, account director at eType Video, suggests that integrating product placement into VOD may work better than live TV due to the measurable nature of the service. “Layering additional targeting such as audience, website, environment and time of day creates a more powerful proposition for marketers,” she says.

The failure of broadcasters to exploit VOD for product placement may be more to do with the technology’s lack of maturity as a sales tool than anything else, suggests Chris Johnston, director of ad product management at Brightcove, which works for Five, C4, ITV and BSkyB.

“The processes and products to manage these operations tend to be manual and labour intensive,” he warns.

However complex it may be, if VOD product placement can provide companies with new revenue streams in the UK, it is likely to take off quickly. Spend in the US on product placement within VOD has already increased at five times the rate of advertising, according to the Vy Corporation.

Vy Corporation analyst Thomas Martel says: “As long as the logo reaches the right audience profiles, it has the potential to convert its exposure and generate a return on investment.”

Joe Fernandez