No ad breaks but plenty of ads: Inside the $23 billion business of product placement

Sascha: [00:00:02] From Equity Mates media. This is the dive. I'm your host, Sascha Kelly. Headlines were made around the world last week as Netflix announced Microsoft as their official business partner for the new ad supported, lower priced subscription offering. [00:00:15][12.7]

Audio clip: [00:00:15] Netflix and Microsoft are partnering to. [00:00:17][1.9]

Sascha: [00:00:17] Bring a lower priced, ad supported tier to the streaming service. This is the latest step in Netflix's plan to offer ads on their platform similar to the ad breaks we're used to on TV or more recently, the ads that keep popping up on YouTube but wasn't on demand. Whenever you want uninterrupted content, one of the big problems streaming services were meant to solve. That's why you pay subscriptions to enjoy ad free content. But here's the thing there's always been ads on Netflix. It's just not as obvious. It's Monday, the 18th of July. And today I want to better understand the relationship between product placement and streaming services. Just how many of the shows I watch have been suddenly advertising to me? To do this, I'm joined by the co-founder of Equity Mates today, Alec Renehan. And Alec, welcome. [00:01:04][46.3]

Alec: [00:01:04] Hey, Sascha, good to be here. In an ad supported free content format. [00:01:08][4.0]

Sascha: [00:01:09] I know we don't hide from our ads very upfront about it, but the news of the week is that Netflix have famously never had ads have taken their next step forward in introducing these plans. But we're here saying there's a whole other category of advertising that already exists on the platform. Can you help me understand this? [00:01:27][18.1]

Alec: [00:01:27] So product placement is a form of advertising as old as time and just like movies and TV shows before it, Netflix and it's streaming competitors right in the product placement game. Now, Sascha, when I think of examples of product placement, I think of two examples. The first is tobacco companies before this was banned. [00:01:47][20.2]

Audio clip: [00:01:48] Hey, we ought to do something, Fred. Okay. How's about taking a left? I got a better idea. Let's take Winston. Bring that in. Winston is the one smoke the cigarette that delivers flavour 20 times a pack. [00:02:01][12.9]

Alec: [00:02:02] And the second is, strangely enough, James Bond. [00:02:04][2.2]

Audio clip: [00:02:04] That's my betting. Oh, he's had its day. I'm afraid you'll be using this Aston Martin DB5 with modifications. Now, pay attention, please. [00:02:14][9.1]

Alec: [00:02:14] I believe Aston Martin paid $35 million for Bond to be driving one of their cars in just one movie, Die Another Day. [00:02:22][8.4]

Sascha: [00:02:23] I don't think that's strange enough at all. James has all the gadgets, and I think, like when I think of product placement, I remember desperately wanting a motorola Razr when I watched the Earthsea. [00:02:33][10.5]

Audio clip: [00:02:36] Paul Ryan. Hey. Good. I was hoping you'd answer. [00:02:39][2.7]

Sascha: [00:02:39] All of them had those flip phones and now they look so dated. And of course, I think you can't talk about product placement without talking about the cultural juggernaut that was Sex and the City. Basically everything that the characters touched, whether was a cocktail, a shoe or a brand, it sold out and it just changed the fortunes of whatever that company or product was. [00:02:57][18.2]

Audio clip: [00:02:59] We're not even supposed to be. [00:03:00][0.9]

Sascha: [00:03:00] In here like Mary Janes, but this one urban shoe, Miss Wolf. [00:03:07][6.7]

Alec: [00:03:08] Sascha, here's a trivia question for you. When you think the first instance of product placement in TV or movies was. [00:03:14][6.4]

Sascha: [00:03:14] You know what I'm going to say, it's almost at the advent of TV. I would say. [00:03:19][4.5]

Alec: [00:03:19] You want to try and guess what the product was? [00:03:21][1.2]

Sascha: [00:03:21] Was it cigarettes? [00:03:22][0.3]

Alec: [00:03:23] No, it was the movie washing day in Switzerland, made in 1896, and the product was soap. [00:03:31][8.1]

Sascha: [00:03:32] So you're telling me that even though every product placement has been as old as time streaming services have supercharged this industry? [00:03:39][7.7]

Alec: [00:03:40] Yeah, that's right. The business of product placement has exploded, I guess, in line with the business of making content for streaming services. The past decade has been a boon for both of them. [00:03:52][12.0]

Sascha: [00:03:52] Yeah, the golden age of TV. That's what they keep saying. So how big is this industry? [00:03:57][4.4]

Alec: [00:03:58] Last year, 23 billion U.S. dollars was spent on product placement in streaming services. That's about 34 billion AUD. It grew 14% between 2020 and 2021 and peak media estimate that the industry has grown every year for the last ten years. Again, not really surprising because the streaming business has grown every year for the past ten years. But Sascha, that $23 billion number might be underestimating just how big this is because the majority of product placement isn't paid. It's a quid pro quo, i.e. a company gives their car for free and then the production company no longer has to go and buy a car. The car company gets the promotional value. The production company saves money on the car. So $23 billion, maybe even a lot bigger. This industry is in a golden age at the moment. [00:04:54][56.6]

Sascha: [00:04:55] And that makes sense because as we've stopped watching traditional TV and sort of watching more things via streaming services or the Internet, it's also been easier to skip traditional advertising and go straight into the content. [00:05:06][11.3]

Alec: [00:05:06] Yeah, that's right. The Internet has made it very easy for us to skip ads. In a recent survey, only 5% of adults in the US said they rarely skipped ads online. 74% said they often did so. Basically, if we're going to skip traditional ads, then the brands are going to find a way to weasel their way into our content. [00:05:27][20.7]

Sascha: [00:05:28] Okay, Alex, so we've been talking about the industry generally, but I want to hear specifics. What are some of these famous examples from the streaming services where they're getting clever? [00:05:36][8.3]

Alec: [00:05:37] So I think Netflix is Stranger Things is a classic example. Eggo, had you heard of that product before? [00:05:44][6.8]

Sascha: [00:05:44] I had to Google this when you brought it up this morning. [00:05:46][1.9]

Alec: [00:05:47] Yeah. So Eggo, after years of lagging sales, they were made popular again by Stranger Things and they saw a 14% spike in sales after Stranger Things Season one aired. [00:05:58][11.8]

Sascha: [00:05:59] Get Your Wins Where You Can When You Lego with Eggo. [00:06:02][2.4]

Alec: [00:06:02] Perhaps one of the more famous ones of recent times, House of Cards, also on Netflix. [00:06:06][3.9]

Audio clip: [00:06:07] Did you think I've forgotten you? [00:06:08][1.2]

Alec: [00:06:08] Kevin Spacey's BlackBerry. It was such an important product placement in season one that reportedly Samsung tried to take it over in season two. But BlackBerry was so tied to the show that the producers couldn't switch it out. Cheerios have a long history of product placement, famously in Euphoria on HBO, core hydration with its iconic bottle has appeared in Hazel, that in Riverside in How I Met Your Father. This one really interested me. Sascha Dell Computers brokered a deal with HBO succession to be the computer of choice at Waystar Royco. [00:06:43][35.4]

Audio clip: [00:06:45] So you fuck off, you back off this executive level business. [00:06:48][3.5]

Sascha: [00:06:49] Having watched succession, I'm not sure that I would have been fighting for that position. [00:06:51][2.9]

Alec: [00:06:52] Hey, any publicity is good publicity, I guess. But Dell is so focussed on product placement, they have a specific job title in their company, head of product placement, and they've also appeared in the sex lives of college girls and and just like that. [00:07:06][14.0]

Sascha: [00:07:06] So those are a couple of examples where the brand would have been happy, but things don't always turn out that well, do they? Can you give me some of the more negative associations? [00:07:14][7.6]

Alec: [00:07:15] Yeah, well, I think the most famous one is the peloton example, so on. And just like that, the Sex and the City reboot. Mr. Big isn't Mr. Big. I'll just be it's Mr. Big. [00:07:25][10.0]

Sascha: [00:07:25] It's John, actually. [00:07:26][0.7]

Alec: [00:07:28] Well, John gets on a peloton and unfortunately works a little bit too hard and has a heart attack. [00:07:34][6.4]

Sascha: [00:07:34] Yeah, I'm jealous. I'm jealous of your Peloton instructor. [00:07:38][3.1]

Audio clip: [00:07:39] Well, you should be. She motivates me, and she's giving me a special. [00:07:43][4.4]

Alec: [00:07:43] Shout out after he died on the show. Peloton stock in real life plunged 11%. [00:07:51][7.4]

Sascha: [00:07:52] Yeah, it was tragic in the show and tragic, obviously, in real life for Peloton. So let's leave it there for a moment and go listen to your own ad so that we can pay for our streaming services. But when we come back, let's talk about the future of product placement, because that's really exciting where some of this technology is leading us down the line. Welcome back to the Dive. I'm joined by my colleague Alec Shanahan. And today we're talking about product placement, which is something that I need no help with because I definitely have a shopping addiction. So I'd actually like to put a stop to this, but we've talked about some of the physical products that characters use a peloton bike, a BlackBerry phone, Dell Computers. But more and more companies exist only on the Internet these days. So how did they get into the product placement game? [00:08:39][47.1]

Alec: [00:08:39] Yeah, this is a fascinating area. It's a lot harder to feature a Amazon.com or a Zillow.com on your show than it is a physical product. The New York Times featured Zillow as a case study and explained how they're getting into the product placement game. Now, for those who aren't familiar with Zillow, it's a real estate listing site. [00:09:01][21.4]

Audio clip: [00:09:02] It started as a street address. [00:09:03][1.0]

Alec: [00:09:05] So Zillow approached a product placement agency about six years ago with the brief that they wanted to be featured when characters were going through major life changes, getting married, moving house, finding a new job, moving city, Zillow wanted to be front of mind for the characters and then hopefully front of mind for us. So the agency got to work. Zillow ended up being featured in Grace and Frankie. Never Have I Ever Sweet Magnolias Promising Young Women Book Club and Clifford the Big Red Dog Boy. [00:09:36][31.3]

Sascha: [00:09:36] You have to make Clifford Small again or they're going to hurt him. [00:09:38][2.2]

Alec: [00:09:39] Have you seen any of those up? [00:09:40][0.9]

Sascha: [00:09:40] No. And that's pretty rare for me because I've watched a lot of TV. [00:09:43][3.0]

Alec: [00:09:44] Well, Clifford, the big Red Dog, top of your list. [00:09:46][1.7]

Sascha: [00:09:46] Oh, absolutely. Top of my watch list now. [00:09:48][1.6]

Alec: [00:09:48] But even though Zillow is not a physical product, they integrated it in a really interesting way. A lot of these scripts use the term Zillow as in I, Zillow to this house and it's worth X. And that term got so into pop culture that it is now a really common term in the same way that, you know, you hoovered something, the brand is the word. Zillow has become a verb and it's now used in media, it's used by regular people. But it all started with this product placement agency getting it into the scripts of these TV. [00:10:23][35.1]

Sascha: [00:10:23] Shows in the same way Google is a verb now. They did the same thing for that company. Yeah. [00:10:27][3.9]

Alec: [00:10:28] We need to figure out how the dived can be a verb. [00:10:30][2.3]

Sascha: [00:10:32] Well, that's product placement for you. Okay, so there's a $23 billion advertising industry that exists right in front of us. Earlier in the episode, you said it's grown 14% in the past year. So what does the future of the industry look like? [00:10:46][14.1]

Alec: [00:10:47] Yeah. Now, Sascha, this is where it gets a bit out there, a bit exciting and a bit dystopian. So hold on, I'm ready. First thing, tech companies are experimenting with tools to place products into shows that have already been taped. [00:11:02][15.6]

Sascha: [00:11:03] What? [00:11:03][0.0]

Alec: [00:11:05] So I guess in theory, shows that have already been filmed, already released. You could go back and pay for your brand to feature in those. [00:11:11][6.6]

Sascha: [00:11:12] So they could change friends Central Perk into a Starbucks. I mean, I've never made coffee before in my entire life. [00:11:18][5.8]

Audio clip: [00:11:18] That is amazing. [00:11:19][1.0]

Alec: [00:11:20] Exactly. Exactly. That's a big product placement. [00:11:22][2.1]

Sascha: [00:11:23] Yeah, that would be worth a lot of money. [00:11:24][1.6]

Alec: [00:11:25] So that's one. A second thing is companies are building AI that could swap one brand for another. So a character could be drinking a beer. And depending on who's watching or perhaps more importantly, where we're watching, we could say a different beer brand. [00:11:40][15.2]

Audio clip: [00:11:41] Character or parody to DoorDash for that. Yeah. [00:11:43][1.9]

Sascha: [00:11:43] Oh, I'm a current ago. [00:11:44][0.8]

Audio clip: [00:11:44] All right, there we go. [00:11:44][0.6]

Alec: [00:11:45] Oh, you know, you could say a world where every year Coke and Pepsi have to outbid each other to win the soda placement. And the ally would just update the brand every year. [00:11:56][11.1]

Sascha: [00:11:57] That's just wild to me. [00:11:59][2.2]

Alec: [00:11:59] Another one that's coming down the line, Amazon, have announced they'll be experimenting with virtual product placement and they've identified shows like Reacher, Jack Ryan and Bosch where they're going to try it in explaining it. It's basically they're going to edit the product placement in during post-production rather than including the product placement in while filming it. So kind of like a super advanced Photoshop, I guess. And Amazon shared a still from Bosch, which shows a packet of M&Ms edited into a scene next to an office coffee machine. [00:12:33][33.4]

Sascha: [00:12:33] You know what that reminds me of in Game of Thrones, the final season where they accidentally left the coffee cup in next to dinner. Kristen Bell, she set it up. [00:12:41][8.0]

Alec: [00:12:42] Winter is coming. [00:12:42][0.6]

Sascha: [00:12:43] And it's like the opposite of that. They like Starbucks, had this great product placement that they're like, Ooh, sorry, that wasn't in Westeros. Let's take that out. [00:12:50][7.0]

Alec: [00:12:50] But you can you can see where all this technology is going. It's going to be a world where we have a piece of content and then the streaming services, the production companies all of a sudden can edit products in over the top, but not just once ongoing, swapping them in and out forevermore. [00:13:10][19.6]

Sascha: [00:13:10] Yeah, I watched the show last night where there was a vendor. Machine. I mean, you could put something in and every single slot in the vending machine. So I'm getting pretty cynical at this point. Is everything just an ad? Am I just being targeted from all angles? Like, how do I fight this off? [00:13:25][14.8]

Alec: [00:13:26] You are being targeted from all angles. But it is also true that being surrounded by brands is just real life. In 2022, we see some government broadcasters like Australia's ABC or Britain's BBC doing everything they can to avoid brands. Some shows even blur out brands, but that just makes the show look less realistic. We are surrounded by brands in our daily lives, and for our streaming shows to look realistic, those characters need to be surrounded by brands as well. Stacey Jones, the chief executive of one of these product placement agencies Hollywood branded, told The New York Times, quote, Everything is a brand new product place, roses, almonds, you can do roofing, shingles, refrigerators are full of real products. And you want that to be realistic unless it's full of Tupperware. But Tupperware is a brand, too. So, Sascha, everything's a brand. Everything's about well. [00:14:24][58.0]

Sascha: [00:14:24] I feel like that lets me off the hook at least. So I'm not going to feel so guilty about wanting something the next time I watch my favourite show. Let's leave it there for today. I'm off to cynically rewatch and super analyse every single Netflix show on my watch list and calculate how much money that must have changed. So thanks for joining us so much for today's edition of The Dive. Remember to follow us on Instagram where the handle at the dive dot business news and keep up to date with some of the biggest news stories from around the world and tag us when you're listening. Take a screenshot, share the episode with your friends. We love reaching new people. If you have any topic, suggestions or feedback, please email us at the dive at Equity Mates dot com and if you enjoy the show, please tell a friend about it. Word of mouth is the best way for a podcast to grow. Product placement. Here, we need you to tell your friends. Thanks so much for joining me today, Alec. [00:15:19][54.8]

Alec: [00:15:19] Thanks, Sascha. [00:15:19][0.0]

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