The FCC's sponsorship identification rules: ineffective regulation of embedded advertising in today's media marketplace.

• Author: Fujawa, Jennifer

1. INTRODUCTION II. EMBEDDED ADVERTISING: DEFINING THE PHENOMENON III. DEVELOPMENT OF EMBEDDED ADVERTISING: A MAJOR SHIFT IN THE ADVERTISING MAINSTREAM IV. SPONSORSHIP IDENTIFICATION REGULATION AND ITS CURRENT INABILITY TO REGULATE A. Historical Background. B. Current Regulation and Why It Fails C. Call for Change--Potentially V. CONFLICT AND THE NEED FOR CHANGE A. Conflict Overview B. Critics' Views of Increased Regulation C. Negative Consequences of Embedded Advertising VI. CONCLUSION I. INTRODUCTION

   The advertising industry increasingly relies on embedded advertising in the contemporary media landscape to reach consumers. The scope of embedded advertising in today's marketplace raises significant concerns and complicated First Amendment questions regarding the type of regulation needed to best suit the interests of all parties concerned. While many critics argue that increased sponsorship identification regulations would inhibit First Amendment fights and harm the modern consumers' viewing experiences, this Note argues that the negative consequences stemming from embedded advertising are far more threatening than any potential negative consequences that the increased regulation might have on First Amendment rights and the interests of venture consumers. Thus, this Note contends that the FCC needs to revise its sponsorship identification rules to address the growth and implications of embedded advertising in the contemporary media landscape.

   Part II of this Note defines embedded advertising, providing insight into exactly what this phenomenon is today. Part III describes the development of embedded advertising and its effect on the advertising mainstream. Part IV outlines the history of sponsorship disclosure law and its inability to regulate in the current media marketplace and discusses the FCC's 2008 Notice of Inquiry ("NOI") and Notice of Proposed Rule Making ("NPRM") regarding the potential revision of its sponsorship identification rules. Part V identifies criticism facing increased regulation of embedded advertising. Part VI concludes that the FCC needs to revise its rules to avoid the numerous undesirable consequences caused by embedded advertising today. Revising the law to more effectively regulate within the current media mainstream would better serve society's interests as a whole.

2. EMBEDDED ADVERTISING: DEFINING THE PHENOMENON

   Carrie Bradshaw typed her weekly column on a Mac, while she dreamed of Manolo Blahnik Mary Janes in the hit series Sex and the City. (1) In the film Demolition Man, the character Lenina Huxley explained that the only restaurants in 2032 are Taco Bells, which won the franchise wars. (2) And on 30 Rock, after discussing the virtues of Verizon Wireless, Liz Lemon looked straight into the camera and asked, "Can we have our money now?" (3) Embedded advertising can take many forms, but it is generally defined as the inclusion of sponsored brands into entertainment media content. (4)

   "Product placement" and "product integration" are the two terms used most interchangeably with embedded advertising. (5) While both refer to embedded advertising, product placement and product integration are two distinct advertising practices. Broadly defined, product placement is the insertion of "branded products into programming in exchange for fees or other consideration." (6) Narrowly defined, product placement is the placement of a visual or aural reference to a commercial product, brand, or service in media content as a prop. (7) Product integration is the prominent positioning of a commercial product, brand, or service into media content. (8) Instead of a mere glimpse of or reference within the program, the product, brand, or service is substantially integrated into the storyline of the program in exchange for consideration or another anticipated benefit. (9) While product placements can often be overlooked by consumers, product integrations are rarely missed. (10) Frequently, media content contains both product placements and product integrations.

   The purpose of all embedded advertising "is to draw on a program's credibility in order to promote a commercial product by weaving the product into the program." (11) Embedded advertising is not designed to be deceitful, false, or subliminal--the objective of advertisers who use embedded advertising is to "ensure that the brand or product is seen, as much and overall as clearly as possible." (12) To achieve this, advertisers utilize numerous embedded advertising methods, including four types of product placements: classic, institutional, evocative, and stealth. (13)

   Classic placement is the most traditional product placement technique, merely requiring a shot of the product at some point during the program. (14) Classic placement of products is expertly incorporated within the hit series Mad Men. For example, in the fourth season, Smirnoff becomes the characters' vodka of choice. (15)

   Institutional, or corporate placement, is even easier to implement than classic placement because it "prioritizes the brand over the product;" thus, no products are required. (16) In the series Heroes, the character Hiro teleports himself into Times Square and stands looking at the advertisements flashing on the billboards--the brands of Bank of America, Virgin, and Marriott are all shown. (17) This scene exemplifies institutional placement, as none of the billboards show a specific product, but the consumer is exposed to the brands.

   Evocative placement, on the other hand, is difficult to successfully employ and is impossible to use for certain products because it is so discreet. (18) Evocative placement occurs when the brand is never referenced--either aurally or visually. (19) Instead, only the product itself is shown, thus requiring the product to be sufficiently unique for the evocative placement to work. (20) For example, in The Pursuit of Happyness, Will Smith's character is seen playing with a Rubik's Cube; despite not having an obvious logo, a Rubik's Cube is a very distinct product. (21)

   Finally, stealth placement is extremely discreet and frequently overlooked; however, it often causes a powerful impact when finally identified in credits. (22) Stealth placement often includes costumes, make-up, or hair-styling. (23)

   These are just four representative examples of the versatility of embedded advertising in the media marketplace today, and the growing prevalence of its use in both traditional and nontraditional media.

3. DEVELOPMENT OF EMBEDDED ADVERTISING: A MAJOR SHIFT IN THE ADVERTISING MAINSTREAM

   Embedded advertising is not a new phenomenon. While more intricately linked within the contemporary media marketplace, "[m]arketing and entertainment have always been allies, especially in the United States." (24) Although embedded advertising can be shown in other media prior to the radio, (25) the practice of including commercial products and brands in entertainment programming became more common after the first radio program broadcast in 1906. (26). By 1929, advertising agencies were financing or producing 55 percent of radio programs in the United States. (27)

   As programming like the Kraft Music Hall, which was a variety program that featured top entertainers and was sponsored by Kraft, transitioned from radio to television, so did the focus of advertisers using embedded advertising. (28) Advertisers now spend much more of their advertising budget on embedded advertising in television programs. (29) Movies also became an integral medium for advertisers after the enormous success of Reese's Pieces in Steven Spielberg's E.T. in 1982. (30)

   The practice of embedded advertising is now firmly entrenched in the entertainment industry and is growing in prevalence. (31) As consumers increasingly rely on alternative viewing platforms like DVRs, TiVo, Hulu, and illegal downloads, advertisers are escalating the number of embedded advertising deals made with media. (32) These technological advances allow viewers to skip traditional advertisements in prerecorded material. (33) Thus, current consumers are less likely to be persuaded by advertisements in the traditional thirty-second and sixty-second television programming formats. (34) In response, from late 2006 to 2008, the average television program went from "ten brand references in it to having fifty; [with] outliers [having] as many as 1,000 references per show." (35)

   Embedded advertising is usually mutually beneficial for both advertisers and television program producers. (36) Advertisers are able to carefully choose which television content should incorporate their brands or products, while program producers are able to maximize commercial value and profits by soliciting different companies to embed within their shows. (37) Controversially, embedded advertising is now even present in news programming, through television stations' use of video news releases ("VNRs"), which are prepackaged news stories produced by corporations, the government, and other entities. (38) VNRs are designed to be indiscernible from normal news stories, and television stations use them to fill empty time slots in their newscasts. (39)

   Embedded advertising is growing more prevalent not only due to increased usage in television programs and movies, but also in other media. While embedded advertising generally describes the insertion of a product or brand into a film or televised series, it is now normal to find such commercial inclusions within other cultural vehicles, such as songs, blogs, novels, video games, and social media outlets like Twitter. (40) Even school textbooks are not immune to embedded advertising. (41)

   Because of the increasing frequency of blurring between advertising and editorial and program content in different media through embedded advertising, it is essential that regulations affecting embedded advertisements are up-to-date and firmly established.

4. SPONSORSHIP IDENTIFICATION REGULATION AND ITS CURRENT...