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Legal and Regulatory Updates Branded Entertainment: the Old Is New Again and More Complicated Than Ever

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Legal and Regulatory Updates Branded Entertainment: the Old Is New Again and More Complicated Than Ever Journal of Sponsorship Volume 2 Number 2 Legal and regulatory updates Branded entertainment: The old is new again and more complicated than ever James L. Johnston Received: 21st August, 2008 Davis & Gilbert LLP, 1740 Broadway, New York, NY 10019, USA; Tel: ϩ1 (212) 468 4867; Fax: ϩ1 (212) 974 6949; E-mail: [email protected] James L. Johnston is a partner with Davis INTRODUCTION & Gilbert LLP, representing numerous multi- Rather than a new development, the national, national and local media companies, current era of branded entertainment is television and motion picture producers, adver- one of evolution and, if one word could tising, promotions and media agencies, and characterise the evolution of branded advertisers in connection with all aspects of entertainment in the USA, it is diver- motion picture, television, entertainment, ad- sification. Branded entertainment in the vertising, promotions and marketing industries. USA generally falls into one of three His practice covers intellectual property issues; categories: sponsorships, placements and production, distribution and financing issues; integrations. Sponsorships generally con- talent and union issues; and regulatory issues, sist of title credits or presenting credits in with a particular focus on the crossover of the programming which otherwise has little advertising and entertainment worlds. to do with the advertiser, such as The Texaco Star Theater variety show and the Hallmark Hall of Fame and Johnson & ABSTRACT Johnson Spotlight Presentation series of Some in the media would have us believe that television movies. Product placements product placement is some new and perhaps generally consist of passive on-screen dangerous development in US television. Yet and/or verbal mentions of brands or the practice of brands securing product place- advertisers, with minimal connection to ments, sponsoring radio and television program- the storyline of the programming, such as ming, and integrating their brands and products the appearance of Coca-Cola products in into programming, is nearly as old as electronic American Idol. Brand integrations comprise media itself. From The Jell-O Program a wide array of brand exposure, which starring Jack Benny to The Johnson Wax often includes extensive integration into Program with Fibber McGee and Molly, the the storylines and/or traits of characters in very start of radio was dominated by sponsored the programming, such as the use of and programming and in-programme product exposure for Sears brand products in mentions. Extreme Makeover: Home Edition,inwhich the Sears products are a vital element of Keywords: product placement, televi- the home and life transformations which sion, brands, sponsored programming, take place on the programme, and the brand exposure storyline in the US version of the 170 ᭧ HENRY STEWART PUBLICATIONS 1754-1360 JOURNAL OF SPONSORSHIP VOL. 2 NO. 2. 170–175 FEBRUARY 2009 Johnston programme The Office,inwhichthe subject matter is broadcast. Additionally, character Dwight Schrute was fired from the FCC adopted what is known as the the fictional Dunder Mifflin Paper Com- sponsorship identification rule, which pany and took a job at the real world established the responsibilities of the competitor, Staples, with numerous scenes broadcaster in making the sponsorship set in a Staples store. Where historical identification.2 branded entertainment focused on spon- The second source of law governing sorships and placements, the current product placement is Section 507 of the branded entertainment landscape is filled Communications Act 1934 which re- with a diverse blend of sponsorships, quiresthatadisclosurebemadeinad- placements and storyline integrations, vance of a person providing or promising with the most explosive growth coming to provide money, services or other con- in the category of integrations. sideration to someone to include pro- Each of these categories of branded gramme material in a broadcast.3 Both the entertainment has been subject to increas- individual or entity providing the money, ing scrutiny and mounting pressure over services or other consideration as well the last several years, reaching a turning as the recipient are required to make point in the last six months with the this disclosure so that the station may decision by the Federal Communications broadcast the sponsorship identification Commission (FCC) to review its rule announcement required by Section 317 of making over this field. the Communications Act 1934. The FTC, while not as active in this area as the FCC, has traditionally viewed REGULATORY FRAMEWORK branded entertainment within the over- Branded entertainment in the USA is all jurisdiction of its consumer protec- within the regulatory jurisdiction of the tion regulatory authority in relation to FCC and the Federal Trade Commission deceptive advertising and unfair business (FTC). Each of these agencies examines practices. branded entertainment through a unique prism and with different aims and goals. In addition, this area is subject to the RECENT HISTORY self-regulatory guidelines of entities in the Not since the quiz show scandals of the USA, such as the National Advertising 1950s or the ‘payola’ scandals of the 1960s Review Council (NARC), the Children’s has governmental interest in branded enter- Advertising Review Unit (CARU), both tainment been as high as it is now. In units of the Better Business Bureau, as a prelude to the current debate over well as the US broadcast networks. branded entertainment in popular US The FCC asserts its jurisdiction over media, the Center for the Study of branded entertainment through two Commercialism (CSC) filed a complaint in sources of law. The first source is Section 1991 with the FTC requesting an inves- 317 of the Communications Act of 1934,1 tigation of and rule making for motion which requires broadcasters to disclose to picture product placement.4 The CSC’s their listeners or viewers if any content of complaint proposed that films directed to the broadcast has been made in exchange adults include a clear audio and visual for money, services or other valuable notice immediately before the start of the consideration. Under this law, the film informing the audiences of the paid disclosure must be made at the time the advertisements contained in the film. The ᭧ HENRY STEWART PUBLICATIONS 1754-1360 JOURNAL OF SPONSORSHIP VOL. 2. NO. 2. 170–175 FEBRUARY 2009 171 Branded entertainment complaint also argued that films directed to programme and prove annoying to children should be prohibited from includ- viewers. ing any product placements. The following The FAC’s opposition to Commercial year, the FTC rejected the CSC’s proposal Alert’s complaints was joined by The and elected not to take action at that time. Washington Legal Foundation (WLF) This would be a decision the FTC would which, in March 2004, also filed com- repeat in the future. ments with the FTC in response to More recently, in September 2003, the Commercial Alert’s petition.8 In its com- consumer watchdog group Commercial ments, the WLA asserted, among other Alert filed a complaint with the FTC things, that Commercial Alert failed to urging it to investigate product placement demonstrate the harm necessary for a practices on television.5 Concerned that finding of unfairness under Section 5 of the line between programming and com- the FTC Act, which prohibits unfair or mercials had become increasingly blurred, deceptive practices. thereby making it difficult for consumers TheFCCjoinedthedebate,aftermuch to know when they are being advertised anticipation, when in May 2004 FCC to, Commercial Alert called for added Commissioner Jonathan Adelstein, in a disclosures in product placement advertis- speech before the Media Institute, stated ing so that consumers would know that that ‘it is a cardinal right for Americans to the advertiser had paid for the placement. have the commercial elements of radio Commercial Alert simultaneously filed a and TV broadcasting clearly marked similar complaint with the FCC.6 In its and made explicit to even undiscerning complaint to the FCC, Commercial Alert viewers and listeners’.9 contended that the television networks The FTC’sofficial response to the failed to comply with the FCC’s spon- Commercial Alert complaint came on sorship identification requirements with 10th February, 2005, when the Commis- respect to paid product placements. sion concluded that paid product place- The Commercial Alert complaints ment alone does not violate Section 5 of were met with resistance by several the FTC Act. The FTC rejected Com- advertising trade associations. In Novem- mercial Alert’s request to require pop-up ber of the same year, the Freedom advertisement disclosures to appear during to Advertise Coalition (FAC) filed television programming each time there is two oppositions to Commercial Alert’s a paid product placement. The FTC did complaints.7 The FAC argued that agree to monitor future uses of product product placement is advertising which placement and reserved its right to step in, is protected by the commercial speech should false or misleading claims about a doctrine. The FAC also argued that product’s attributes be made. Commercial Alert did not ‘identify a Just three months later, Commissioner strong enough governmental interest’ to Adelstein stated publicly that the FCC warrant action or show ‘that product should toughen its product placement placement is unlawful or misleading’. disclosure requirements and expand its The FAC further argued that pop-up investigation
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