©Ofcom Regulation of commercial communications in the age of convergence Ian Blair Warsaw – 8 Dec 2005

©Ofcom1 1. Purpose and importance of qualitative and quantitative advertising rules

©Ofcom2 Current situation in the UK UK broadcasting regulated by Codes interpreting TWF, provisions of the Communications Act 2003 and other local legislation Communications Act and other legislation require protection of minors, protection of morals and human dignity, and prohibition on tobacco advertising So the restrictions required by TWF Arts would anyway form part of our Codes, regardless of TWF TWF adds a requirement for restrictions on alcohol advertising In general, UK has no problem with current Articles Qualitative rules

©Ofcom3 Current situation in the UK Regulation by separate Code specifically interpreting, and expanding on, articles 11, 18 and 19 of the TWF Article 11: – Provisions seen as too restrictive, especially the “20 minute” rule and the sports programmes break rules – UK permits three breaks in a one-hour programme. Difficult to comply with 20 minute rule. – Film “45 minute” rule also seen as restrictive Article 18: – No real problem with current 15% limit, and the 20% maximum – UK public service broadcasters limited to average seven minutes per hour (11.6%), all other broadcasters have 15%. Quantitative rules

©Ofcom4 UK position in relation to issues paper Generally no problem with the proposal to extend scope of qualitative rules to cover audiovisual commercial communications (ACC) in relation to conventional broadcast material Less comfortable about the possible extension of regulation to, for example, material on mobile telephones, currently outside scope of UK legislative framework Qualitative rules

©Ofcom5 UK position in relation to issues paper Broadly pleased at the direction taken by the issues paper To have just a single hourly limit (eg. of 20%?) seems sensible It is not clear what happens to teleshopping windows if teleshopping is “assimilated into other forms of ACC’s”. If as suggested advertising limits in teleshopping channels are removed (art. 18), then channels devoted exclusively to advertising would be permitted. Very pleased to lose the Article 11 restrictions, but sensible to retain some restrictions on news, religious and children’s programmes. We would hope for relaxation on film rules. Would broadcasters take 12 minutes advertising every hour (20%)? We think not – they would lose too many viewers. Quantitative rules

©Ofcom6 2. Virtual, interactive and split-screen advertising – UK practice

©Ofcom7 Current situation in the UK Permitted in UK since 1994 Subject to conditions: – Broadcasters and viewers must be aware in advance – May only replace existing advertising spaces – Broadcasters may not trade in virtual advertising Use of pure virtual advertising not widespread, but use of virtual images in sporting events is common Treated as programme material, so not subject to advertising quantitative restrictions Our rules consistent with the spirit of TWF, and certainly consistent with the interpretative communication of 2004 Virtual advertising

©Ofcom8 Current situation in the UK Permitted in UK, subject to clear identification and spatial separation Long-running examples of permanent channel formats based on split-screen: Bloomberg Sky Sports But no examples yet of split-screen advertising breaks, eg. to continue to show the action in long sporting events. Consistent with TWF and with interpretative communication Split-screen advertising

©Ofcom9

10

©Ofcom11 Current situation in the UK Interactive advertising is growth business in UK: estimated value £160m Digital TV changing the landscape Increased possibilities for enhanced services: Interactive programmes – now commonplace Interactive advertising – less frequent Interactivity delivered by: broadcast, telephone, broadband etc Can be seen on all main channels Creates new challenge for regulation Interactive advertising

©Ofcom12 Current situation in the UK Since 1999, guidance based on the principle that material more than 2 “clicks” from the linear service is not responsibility of broadcaster Current regulation (2004) based on principle of “general control”: General control includes control over services and facilities to which access is provided (eg. through the inclusion in the main service of a link to interactive features) and over which the broadcaster may not have editorial control. Consequently, all material that is: In the general control of the broadcaster Is not 1:1material (eg. credit card transaction) Available for reception by members of the public Not internet service Not on-demand is the compliance responsibility of the broadcaster. Principles of Articles apply Interactive advertising: how do we regulate it?

©Ofcom13 Current situation in the UK We continue to require programme and advertising separation (the red button) We continue to require programme and advertising transparency Principles consistent with TWF and the interpretative guidance Interactive advertising: how do we regulate it?

©Ofcom14 3. Product placement v. surreptitious advertising

©Ofcom15 Current situation in the UK Is prohibited Doesn’t prevent: – References to products or services acquired at no cost, when their inclusion within a programme is editorially justified – Arrangements covering the inclusion of products or services in a programme acquired from outside the UK and in films made for cinema No specific UK rules for surreptitious advertising Product placement and surreptitious advertising difficult to identify, as regulator does not know if money has changed hands But both concepts covered by rules relating to “undue prominence” Product placement

©Ofcom16 Current situation in the UK Recognises that there is a place for commercial references in programming when editorially justified. But when commercial references become too prominent (and cannot be editorially justified) in the opinion of the regulator, we consider that the Code has been breached. This rule has worked well until now, but the world is changing! Undue prominence

©Ofcom17 Looking to the future Issues paper proposal that product placement should be permitted UK sympathetic to the proposal Potential for broadening the sources of revenue for broadcasters Product placement

©Ofcom18 Looking to the future Can we move from a world based on separation of commercial and editorial content to one based on transparency? In what genres of programme should product placement be allowed Not NCA and children’s (EU proposal) What about factual and drama? Just entertainment and sport? How should audiences be made aware of product placement at the start? in the end credits? Product placement – issues to be considered in UK (1)

©Ofcom19 Looking to the future Can the concept of ‘undue prominence’ be retained in a regulatory regime permitting product placement? Are all products and services acceptable for product placement – Application of advertising rules? Ofcom’s role in the commercial arrangements surrounding product placement Ofcom’s initial research show product placement is a subject that provokes highly divergent views among stakeholders and groups of stakeholders Some indication that viewers don’t mind when it enhances realism of a programme, is relevant and not too prominent Subject to Board approval, Ofcom likely to publish a consultation document in December Product placement – issues to be considered in UK (2)

©Ofcom20

©Ofcom21 Supplementary information

©Ofcom Placing of Breaks Breaks within programmes may be taken only at a point where some interruption in continuity would, in any case, occur (even if there were no advertising) and such natural breaks must not damage the integrity or value of the programme in which they occur. 5.2 Programmes with ‘Autonomous Parts’ In programmes made up of autonomous parts (for example magazine format programmes) breaks may be taken only in between the separate parts. 5.3 Events containing Intervals In sports programmes and in coverage of similarly structured events or performances containing intervals, breaks may be taken only in the intervals. 5.4 Period Between Breaks In the case of programmes other than those referred to in 5.2 and 5.3 above, a period of at least 20 minutes should normally elapse between each successive internal break. A slightly shorter interval is acceptable only where the interests of viewers would be better served by taking a break earlier (for example to fit in with a particularly suitable interruption of continuity). However, in such cases the programme must not contain more internal breaks than would be permissible by strict application of the 20-minute minimum separation principle. UK rules on break insertions (1)

©Ofcom Films Feature films and films made for television must not carry an internal break if their scheduled duration is 45 minutes or less. Longer films may be interrupted once for each complete period of 45 minutes. Thus: Films of 45 minutes or less no breaks; between 46 and 89 minutes one break; between 90 and 109 minutes two breaks; between 110 and 135 minutes three breaks; between 136 and 180 minutes four breaks; Internal Breaks on Channels 3–5 (a) In programmes of up to 20 minutes duration - no breaks. (i) in programmes of minutes duration - one break (ii) in programmes of minutes duration - two breaks (iii) in programmes of minutes duration - three breaks (iv) in programmes of minutes duration - four breaks (v) in programmes of minutes duration - five breaks. (b) The maximum duration of any break within a programme is three minutes fifty seconds, of which no more than three and a half minutes may be advertising and no more than 20 seconds may be programme promotion. UK rules on break insertions (2)