By Daniel Hunter

Product Placement could significantly alter the way UK TV programming is produced, financed and consumed over the next few years, according to a KPMG report published ahead of the two year anniversary of an Ofcom ruling which allowed product placement for the first time on UK TV.

The report Taking a subtle approach: How product placement will breathe a new lease of life into UK TV advertising argues that product placement will become much more common and widespread in the UK as the broadcasting sector is in the midst of a dramatic revolution, driven by rapidly changing consumer preferences and fast-paced technological developments.

Clement Chan, Executive Advisor at KPMG’s media consulting practice, comments: “The UK product placement market is still in its infancy stage. The timing of Ofcom’s ruling in 2011 plays a big part in explaining the relatively slow growth until now. The global economic downturn and major sporting events in 2012 (Euro2012, the Olympics and Paralympics) have distorted the way brand owners spend their money. But technology continues to disrupt the way content is consumed, content creators are hungry for new revenue models and consumers seem to be increasingly comfortable with the idea of product placement on UK TV."

Among the most notable PP deals announced in the UK since the Ofcom ruling in February 2011 were the Nationwide cash-machines which have appeared on ITV’s Coronation Street since November 2011, the Nescafe Dulce Gusto Coffee machine on ITV’s This Morning and the Nokia phones displayed prominently by the actors in the episodes of Hollyoaks.

However, recent deals between big brands and prime time shows suggests there is growing strength and depth in UK TV product placement (Samsung in X-Factor, Highland spring in Dancing on Ice, Yeo Valley and Uncle Ben’s in Jamie’s 15 minutes meals, Nokia and L’Oreal in episodes of Hollyoaks to name a few).

Research suggests the current size of the UK product placement market to be between £10 and 30 million pounds, which is relatively small compared to an overall TV ad market of about £ 3.3bn. Estimates suggests that within five to six years that market could grow to £120million, accounting for around three percent of the TV spot ad market.

Key trends identified by the report:

Traditional broadcasts become increasingly overshadowed by new technologies

As growing number of consumers start to speed up, slow down or altogether skip ads through phased viewing, advertising models need to become more sophisticated

The timing is right for new funding models

Similarly, as funding is becoming increasingly tight, particularly for those in the early stages of content development, producers and content creators are increasingly ready to embrace new funding models. Product placement is set to play an increasingly important role.

Growth of a supportive ecosystem and evolving structure for industry

Already, more than 20 well known UK media agencies offer product placement services. This number is only set to grow as more and more agencies start to recognise both the revenue potential and the benefits for their clients’ brands.

“Product placement will become one of the key weapons in the advertising industry’s arsenal and an important source of revenues for virtually everyone in the media value chain," Clement Chan commented.

"Understanding and exploiting the potential opportunities of product placement should rank high on the agenda for advertisers, producers, broadcasters and agencies. We already see UK broadcasters adapting and putting increased numbers of paid for PP opportunities out into the market place.”

Join us on
Follow @freshbusiness