Stealth Marketers Gone Wild: Will the FCC Act?

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One of my favorite critiques of our ad-saturated modern world is in "Infinite Jest," the epic novel by recently-departed author and essayist David Foster Wallace. In the novel's not-too-distant future, time itself has become a corporate marketing opportunity. There's the Year of the Trial-Size Dove Bar and the Year of the Depend Adult Undergarment. That's not to mention the Year of the Yushityu 2007 Mimetic-Resolution-Cartridge-View-Motherboard-Easy-To-Install-Upgrade For Infernatron/InterLace TP Systems For Home, Office, Or Mobile, which is often abbreviated.

The novel's system of Subsidized Time is hilarious ... and you can almost imagine it really happening. At least corporate-sponsored years wouldn't present the disclosure problems of today's stealth ads -- marketing messages that masquerade as entertainment or news content.

The Center for Media and Democracy believes that all advertising should be as clearly announced as the Year of the Trial-Size Dove Bar. That's why we just filed a comment with the Federal Communications Commission (FCC). The FCC is debating how its sponsorship identification rules apply to product placement, product integration and other types of "embedded advertising" relayed over television or radio stations.

In 2003, Commercial Alert urged the FCC to address product placement disclosure. "Advertisers can puff and tout, and use all the many tricks of their trade," the watchdog group wrote (pdf). "But they must not pretend that their ads are something else."

Especially, we would add, when that "something else" is news programming.

The intrusion of marketing and public relations messages into newscasts goes far beyond the video news release epidemic we've researched extensively, written about and urged the FCC to address (pdf), with limited success. In 2006, one in eight television news directors surveyed said they had either already done product placements in their newscasts or were considering doing so. An academic analysis of hundreds of television newscasts from 2004 detected at least one instance of "stealth" advertising in 90 percent of the news programs.

Clear disclosure of product placement and product integration in entertainment programming is important. But, for our comment to the FCC, we decided to focus on what we know best: news media. Sadly, there's more than enough evidence of undisclosed or poorly disclosed stealth ads in newscasts to warrant a submission focused on the issue.

Read our comment -- copied below -- for more on embedded advertising in news programming. You can also read the comments filed by other groups and individuals by visiting the FCC's electronic comment filing system and searching for proceeding number 08-90.

Not surprisingly, the submitted comments fall into two broad groups: consumer advocates calling for better disclosure and industry advocates wanting to maintain the status quo. On the consumer side, Commercial Alert reiterated its call for clear and concurrent disclosure of embedded ads. The Writers Guild of America, West also supported clear "simultaneous disclosure" and included screen shots from various television shows to illustrate how current notices are barely legible. The Children's Media Policy Coalition called for a ban on "embedded advertising and the use of interactive links to commercial advertising on children's programs." The Center for Science in the Public Interest and Marin Institute both highlighted issues around stealth ads for alcohol. An individual commenter expressed concern about the extent of product placement in "radio music, music videos and internet music."

On the industry side, the National Association of Broadcasters urged the FCC to take no action, stating that "the current rules already address the issues raised." GroupM, a WPP subsidiary that described itself as "the world's leading global media investment management operation," claimed that embedded advertising is already "fully transparent." The National Cable & Telecommunications Association warned the FCC that it lacks the authority to require cable networks to disclose embedded ads. The Motion Picture Association of America responded with "an emphatic 'no'" to the question of whether movies shown on television should disclose product placements. Viacom didn't submit a comment, but did file notice that its representatives met with FCC Commissioner Robert McDowell in July, to discuss "the state of the advertising market today and the challenges and opportunities facing media companies in light of fragmenting viewership and the increasing use of digital video recorders." Lastly, the industry-funded think tank Progress and Freedom Foundation simply dismissed the entire process as "the Commission's latest effort to micromanage the free marketplace of ideas, i.e., the media."

The big question, of course, is where the FCC goes from here. Stay tuned.

Our comment to the FCC follows.

The Center for Media and Democracy (CMD), a nonprofit public interest organization reporting on the public relations and marketing industries and promoting media literacy and citizen journalism, welcomes the opportunity to respond to questions raised by the Federal Communications Commission in its June 13, 2008 Notice of Inquiry and Notice of Proposed Rule Making.¹

We applaud the Commission's ongoing attempts to determine how its sponsorship identification rules apply to a rapidly evolving media landscape. There is no question that product placement and other forms of "embedded advertising" are widespread marketing practices.

Of particular concern to CMD is the intrusion of embedded advertising into news programming. Our comments focus on this growing phenomenon, which we believe raises serious questions about editorial independence and the public's right to know. We also recognize the need for improved disclosure of embedded advertising in entertainment programming, but are limiting our comments to our area of expertise, news media.

Product placement in news programming

"Paid placement outside of entertainment shows is a growing trend," according to a recent Advertising Age article. In July 2008, the morning news program on KVVU, a Meredith Corporation-owned Fox television station in Las Vegas, began a six-month product placement deal with McDonald's. Under the terms of the deal, iced coffee drinks are placed in front of the morning anchors, with the McDonald's logos facing the camera. The station discloses the deal with "an on-air announcement as well as on-screen graphics," and does not accept product placements on its "more serious newscasts" in the evening and early morning.²

Such product placement raises many concerns. One is that the negotiation and implementation of these deals require interactions between the station's editorial staff and the advertisers or their marketing firms. An account supervisor at the marketing firm that negotiated the KVVU / McDonald's deal told the New York Times, "If there were a story ... about a McDonald's food illness outbreak or something negative about McDonald's, I would expect that the station would absolutely give us the opportunity to pull our product off set." If a negative story ran with the coffee cups on screen, "it might lead to the termination of an agreement," he explained. KVVU editorial staff "do realize that some businesses' brands, some businesses' reputations, could be at stake in terms of how commerce and news are interacting here," he added, raising the possibility of station self-censorship, in addition to advertiser pressures on news content.³

Another reason for concern is the impact on news audiences. Television newscasts are especially powerful marketing vehicles, due to "the surrounding presence of prominent, ratings-boosting anchors" and the association of the product or company "with the news station's general credibility," according to academic research.⁴ Conversely, the presence of embedded advertising negatively impacts viewer perceptions of the news content. Nearly three-quarters of adults surveyed said they would be less likely to watch television news, if there were product placement or "if the anchors or reporters did product or business endorsement in the newscast."⁵

Perhaps most alarming is the proliferation of product placement in news programming, especially in the absence of clear disclosure standards. In addition to KVVU, McDonald's has "placed products on morning news shows on WFLD in Chicago, which is owned and operated by Fox; and on KCPQ in Seattle, a Fox affiliate owned by the Tribune Company," reported the New York Times. The Meredith-owned CBS stations in Hartford, Connecticut and Atlanta, Georgia -- WFSB and WGCL, respectively -- "are also accepting product placements on their morning shows."⁶ McDonald's logos and stores have been featured on KCPQ in Seattle and, as part of a sponsorship agreement, on WFLD in Chicago.⁷ In a 2006 survey of 251 television news directors, 12.4 percent said they were either already doing or considering product placements within their newscasts.⁸

A March 2006 article reported that, "with TV stations facing pressure on advertising revenue ... U.S. product placement, media and branded entertainment agencies say they are increasingly being pitched by local stations to integrate their clients' products into news programming in exchange for buying commercial time or paying integration fees." Stations that confirmed having "integrated advertisers into newscasts" or news magazine shows at that time include KRON in San Francisco; KMEX and KCAL in Los Angeles; KPTV in Portland, Oregon; and "Gannett's NBC affiliates in Denver, Minneapolis, Atlanta and Cleveland," namely KUSA, KARE, WXIA and WKYC. A marketing executive whose firm arranges product placement deals said, "The line, which has always been black and white in terms of what’s news and what’s commercials, is now being blurred."⁹

Morning newscasts are especially open to product placement deals. "With more marketers eyeing morning news shows, producers are starting to capitalize on a new revenue stream," reported Advertising Age in 2006. "Stations -- especially those owned by Gannett in markets such as Atlanta, Denver, Cleveland, Phoenix, Sacramento and Minneapolis -- are now charging for placements, which they didn't before. The price: $2,500 a pop."¹⁰

Worse, advertisers may exercise near-total control over these segments. "The marketer controls how its brand will be presented, who the spokesperson will be, signage, scripting and what the segments will look like," according to Advertising Age’s description of the morning newscast deals.¹¹ Jane Rockwell, who heads a marketing firm that specializes in morning news product placements, travels with her staff "to each market with the trained 'expert,'" where they "produce the live on-air segment themselves," reported AdWeek.¹² Her firm's website states that they have integrated products into "over 700 segments in the last seven years."¹³

Other types of embedded advertising in news programming

Product placements aren't the only type of embedded advertising in newscasts. An academic analysis of commercial messages in television newscasts noted four different types of "stealth advertising": product placement, sponsored segments, segments with "promotional tone or content," and "news framing of business," which is when a particular company or product is used to illustrate a news story. The researchers studied 294 newscasts on network-affiliated television stations in 17 media markets across the United States. They found that 90 percent of the newscasts included at least one instance of stealth, or embedded, advertising.¹⁴ According to the lead investigator, the "links between advertisers and television news are rarely disclosed."¹⁵

While embedded advertising is used to promote a wide range of products, health-related goods and services are perennial favorites. Station producers see health segments as popular "news you can use," and it's easy to add product mentions.

Hospitals and healthcare companies have taken this dynamic a step further, by entering into "partnerships" with television news operations. The result is "a hybrid of news and marketing," concluded the Columbia Journalism Review. "The partnerships may involve traditional commercials, but they often include a promise of some kind of 'news' stories, too. ... These can take the form of 'ask the expert' programs, quick helpings of medical advice, short stories inserted into newscasts, or longer, news-like specials that may be hosted by a news anchor or health reporter. In the worst cases, hospitals create the storyline, supplying both the experts and the patients."¹⁶ Some partnerships even limit news appearances by staff from competing hospitals.¹⁷ The Society of Professional Journalists and the Association of Health Care Journalists have announced their opposition to these deals, saying the sponsored content "does not fulfill the duty of news organizations to provide the public with independent medical reporting."¹⁸

Healthcare partnerships inevitably impact news coverage, skewing health segments towards promotional stories and profiles of expensive services. For example, a partnership between Temple University Hospital and KYW in Philadelphia resulted in a series on the hospital's transplant services. Yet the television station failed to cover the hospital's practice of misrepresenting its patients' conditions, in order to move them up on national transplant lists. The group that oversees the nation's transplant system placed the hospital on probation for a period that "spanned the time that Temple and KYW were producing and airing their award-winning specials promoting the hospital’s transplant services."¹⁹

While the impact of these partnerships on local coverage of health issues is profound, "too often the full nature of the arrangements is not disclosed, or is inadequately disclosed," reported the Columbia Journalism Review.²⁰ For example, several television stations in Columbus, Ohio, air sponsored healthcare segments. Yet only one station, WCMH, "labels its paid health spot as advertising on its Web site" and none "label the spots as paid advertisements in the on-air versions."²¹

The Center for Media and Democracy has reported extensively on two additional types of embedded advertising in newscasts: video news releases (VNRs) and satellite media tours (SMTs).²² Public relations firms produce and script these sponsored "news" reports and interviews, but the impact on newscasts is similar to product placements negotiated by marketing firms.

The vast majority of VNRs tracked by CMD "prominently featured specific products offered by the client(s) behind the VNR."²³ Worse, the vast majority of newscasts that included VNRs lacked any disclosure. Of the 143 instances where we documented VNR footage in television newscasts, only twice did stations provide viewers with clear disclosure.²⁴ In keeping with the principle that "listeners and viewers are entitled to know who seeks to persuade them,"²⁵ the Commission has issued two Notices of Apparent Liability to date, for undisclosed VNRs.²⁶

SMTs are just as promotional and as rarely disclosed as VNRs. Of the 11 different SMT segments documented by CMD, only one offered partial disclosure to viewers. In that case, the news anchor ended the segment by saying, "This interview ... was provided by vendors at the consumer trade show," but did not name the four companies that sponsored the SMT.²⁷ The accounts of morning news show product placements cited above suggest that many of these embedded advertisements occur in a format similar to SMTs.

Lastly, some companies have retained marketing firms to create their own "news" operations. For example, Branded News, a practice of the Ackerman McQueen advertising agency, creates video-rich online news sites for its clients.²⁸

In April 2008, Branded News launched CleanSkies.tv. The video channel is sponsored by the American Clean Skies Foundation, which is itself funded by the natural gas company Chesapeake Energy and is headed by Chesapeake CEO Aubrey McClendon. At least two CleanSkies.tv programs are aired on broadcast outlets. "Clean Skies Sunday," which is hosted by former CBS Morning News host Susan McGinnis, airs on WJLA, the ABC television affiliate in Washington DC. "Energy Matters," which is hosted by former oil lobbyist Denise Bode, airs on Oklahoma radio station KTOK.²⁹ Both stations and both shows appear to fail to disclose the role of either Chesapeake Energy or Branded News in the broadcast content. This is especially concerning, as CleanSkies.tv presents itself as "the nation's environmental forum for citizen-driven decisions."³⁰ In fact, it is an industry-driven forum with a clear incentive to promote natural gas as a solution to current environmental and energy supply problems.

"Hidden" commercials and disclosure

As detailed above, "hidden" commercials have become the rule, rather than the exception, in news programming. One academic study found that 90 percent of television newscasts include at least one instance of embedded advertising.³¹ The format for these commercial messages ranges from product placements to sponsored segments to ongoing "partnerships" and special reports to VNRs and SMTs to entire sponsored "news" operations run by marketing firms.

Unfortunately, few of these intrusions of marketing into news content are disclosed at all, let alone fully disclosed to news audiences. It is often not apparent if this failure is due to a lack of diligence on the part of those involved in content production and preparation, or of broadcast and cable operators. For example, public relations firms generally clearly indicate the sponsor of a VNR or SMT in the materials they send to stations. However, this information may become separated from the broadcast content and may not be transmitted to newsroom staff.³² To be effective, attempts to ensure the public's right to know must take into account the variety of ways in which sponsored content enters newsrooms and the reality of hectic newsrooms.

Due to the surrounding news context, neither the commercial nature nor the sponsor of these embedded advertisements is obvious. We strongly urge the Commission to address these important issues by setting strong, specific standards for disclosure of embedded advertisements in news programming, and then monitoring whether licensees uphold these standards.

Modifications to the sponsorship identification rules

We believe that the public's right to know necessitates concurrent disclosure, whenever embedded advertisements -- whether via product placements, sponsored segments, VNRs or other formats -- occur during news programming. For television, this disclosure (for example, the words "Footage provided by X" or "Segment sponsored by Y") should appear on-screen for the entire duration of the embedded advertisement. At least one aural disclosure, during the segment or immediately preceding or following it, should also be made. For radio, this disclosure should both directly precede and follow the embedded advertisement.

In addition, news programming that contains embedded advertisements should list all of the sponsors involved in that show at the end of the program. Lastly, because commercial interests can influence news coverage beyond the segments or shows in which they're directly involved, all licensees -- broadcast, cable and radio -- should be required to list the entities behind any embedded advertisements in their news programming over the past year, on their website and in their public file.

First Amendment implications

Because our comments are limited to news programming, the question of artistic integrity does not come into play. In fact, television news presents nearly the opposite dilemma: How to ensure that disclosure messages are clear and meaningful to viewers, when screens are often filled with news crawls and multiple video feeds. That is why we recommend an aural disclosure, in addition to on-screen text, for embedded advertisements in television news. Additionally, the Commission should consider setting specifications for on-screen text disclosures, such as font size or color, that help distinguish the disclosure from news crawls.

Given that embedded advertisements have already pervaded news programming and that current sponsorship identification rules have largely proved inadequate to ensure the public's right to know, there is no question that the Commission has not only an interest but an obligation to act. We applaud the Commission's actions to date on VNR disclosure, but the problem continues and is much wider than VNRs alone.

When watching or listening to news programming, members of the public must be made fully aware when outside parties were somehow involved in that content. Since public relations and/or marketing firms are frequent brokers of embedded advertising -- and as highlighted by the troubling example of CleanSkies.tv described above -- it is vital to require that the funding party whose interests are being served is the party that must be disclosed to news audiences.

Proposed rule change

As described above, we suggest that disclosures for television news include an aural announcement and a text disclosure that remains on-screen for the entire duration of the embedded advertisement. The lettering of the text disclosure should be large enough that viewers of average-sized televisions can easily read them. We also encourage the Commission to specify that text disclosures should appear in a different color, size or font, or otherwise be made visually distinct from news crawls. For radio newscasts, we suggest that aural disclosures be made immediately prior to and following the embedded advertisement.

Regardless of medium, all newscasts should include in their closing credits a list of entities that sponsored any embedded advertisements in the preceding program. Lastly, all licensees should maintain in their public file and on their website an up-to-date list of entities that paid for embedded advertisements in their news programming. This information should remain publicly accessible for at least a year.

Cable television

We agree that the Commission's sponsorship identification requirements should apply equally to all licensees, in broadcast television, cable television and radio.

Radio endorsements

Listeners must be made aware when radio reporters or hosts are given products or services in exchange for on-air mentions. We do not believe that such embedded advertisements, especially within the context of news programming, fall within the "obviousness" exception to the sponsorship identification requirements.

However, assuming that consideration was given for any on-air mention of products or services makes as little sense as the status quo, which is effectively assuming no consideration. Instead, we urge the Commission to clarify the responsibilities of radio producers and hosts to report to the station and to disclose to listeners whenever consideration has been given or promised, in return for favorable coverage.

Lastly, we urge the Commission to form an independent committee to assess compliance with any new rules regarding disclosure of embedded advertisements within news programming, within one year following the enactment of the rules.

References

 

1. Federal Communications Commission, Notice of Inquiry and Notice of Proposed Rule Making, In the Matter of Sponsorship Identification Rules and Embedded Advertising (pdf), June 13, 2008.
2. Brian Steinberg, "Pay-for-Play Wends Its Way Into TV News: McD's, Others Get Exposure on Morning Shows as PR Yields to Paid Placements," Advertising Age, July 28, 2008.
3. Stephanie Clifford, "A Product's Place Is on the Set," New York Times, July 22, 2008.
4. James Upshaw, Gennadiy Chernov and David Koranda, "Telling More Than News: Commercial Influence in Local Television Stations," Electronic News, Volume 1, Issue 2, May 2007, pp 67-87.
5. Bob Papper, "The Future of News: A Study by The Radio Television News Directors Foundation," Section 7: The business side, 2006, pp 32-33.
6. Clifford.
7. Steinberg.
8. Papper.
9. Gail Schiller, "Newscasts Adopt Product Placements: Crossing the Line," Hollywood Reporter, March 17, 2006.
10. Marc Graser, "Product Placement Brokers Succeed in Morning Shows: Crowded Dayparts Have Marketers Rushing to Off-Peak Time Periods," Advertising Age, January 30, 2006.
11. Ibid.
12. Gregory Solman, "Profile: Jane Rockwell; On Why No News Is Good News," AdWeek, June 9, 2008.
13. See Jane Run website, accessed September 11, 2008.
14. Upshaw, Chernov and Koranda.
15. Greg Bolt, "Stealth Advertising Incidents Analyzed by UO Professors: The Practice of Blurring News and Advertising Is More and More Common, The Researchers Say," The Register-Guard (Eugene, Oregon), July 18, 2007.
16. Trudy Lieberman, "The Epidemic: That Gee-Whiz Medical Segment on Your Local TV News? It Was Produced and Written by the Very Hospital It’s Touting," Columbia Journalism Review, March / April 2007.
17. Julian Emerson, "Ethics Dispute Leads to Resignation of WEAU News Director," The Leader-Telegram (Eau Claire, Wisconsin), January 15, 2008.
18. Emily Udell, "Hospital Flacks Spread Fake News," In These Times, September 18, 2008.
19. Lieberman.
20. Ibid.
21. Steph Greegor, "And Now, a Word from Our Sponsor," The Other Paper (Columbus, Ohio), January 7, 2008.
22. Diane Farsetta, "Know Fake News," Center for Media and Democracy, October 11, 2007; Diane Farsetta and Daniel Price, "Still Not the News: Stations Overwhelmingly Fail to Disclose VNRs," Center for Media and Democracy, November 14, 2006; and Diane Farsetta and Daniel Price, "[http://www.prwatch.org/fakenews/execsummary Fake TV News: Widespread and Undisclosed," Center for Media and Democracy, April 6, 2006.
23. Farsetta and Price, "Fake TV News."
24. Free Press and Center for Media and Democracy Complaint to the FCC (pdf), October 11, 2007.
25. FCC Public Notice, MB Docket No. 05-171, "Commission Reminds Broadcast Licensees, Cable Operators and Others of Requirements Applicable to Video News Releases and Seeks Comment on the Use of Video News Releases by Broadcast Licensees and Cable Operators (pdf)," April 13, 2005.
26. Notice of Apparent Liability for Forfeiture, in the matter of Comcast Corporation, File No. EB-06-IH-3723, NAL / Acct. No. 200732080035, September 21, 2007, and Notice of Apparent Liability for Forfeiture, in the matter of Comcast Corporation, File No. EB-06-IH-3723, NAL / Acct. No. 200732080039, September 24, 2007.
27. Farsetta and Price, "Fake TV News."
28. Heather Caliendo, "Web site encouraging travel in Oklahoma," The Journal Record (Oklahoma City, Oklahoma), March 19, 2008.
29. Siobhan Hughes, "CleanSkies.TV Enjoys Backing of Top Natural Gas Executive," Dow Jones Newswire, August 8, 2008.
30. CleanSkies.tv website, accessed September 19, 2008.
31. Upshaw, Chernov and Koranda.
32. Diane Farsetta, "Comments of Center for Media and Democracy and Free Press in the Matter of Use of Video News Releases by Broadcast Licensees and Cable Operators (MB Docket No. 05-171)," June 22, 2005.

Diane Farsetta is the Center for Media and Democracy's senior researcher.