Product Placement In Movies And On Television

Product placement refers to the practice of having a specific product, or the product's brand name or logo, appear conspicuously during the course of a chosen movie or television show. Such placement is considered especially effective when an actor or actress playing the part of a hero or a sympathetic character personally uses the product in a conspicuous manner on screen. This is a relatively recent phenomenon; not only did older movies not contain product placements, but the producers and directors deliberately avoided having any identifiable product names appear in the movies. Of course, many products other than ciga-

rettes are now advertised in this manner, such as candy and soft drinks. However, such advertising of cigarettes raises obvious ethical concerns not associated with the advertising of other products; when the advertisements are placed on television, there may be legal ramifications as well, because of the ban on television advertisement of cigarettes, which went into effect on January 2, 1971.

Brown and Williamson hired Associated Film Promotion (AFP), a firm in Century City, California, to obtain product placement for B&W in motion pictures and television programs. B&W eventually became dissatisfied with the placement of its product by AFP and felt that other companies, particularly Philip Morris, were getting better exposure. In addition, B&W concluded that even Philip Morris often did not get its money's worth. According to an October 26, 1983, "Limited" memorandum from D. R. Scott, B&W's director of auditing, to N. V. Domantay,

The relationship with AFP or Mr. Robert Kovoloff, President of AFP, apparently began in 1979, and was prompted by the Company's desire to remain competitive in the "movie placement" arena [emphasis added]. {2400.01}

This statement suggests that tobacco industry advertising by product placement predated 1979 and was a widespread activity in the industry at the time. According to the audit report itself, between the inception of the contract with AFP in July 1979 and August 1983, B&W paid a total of $965,500 to AFP, which included $687,500 for special movie placements (summarized in table 9.4, p. 387) and $278,000 in retainer fees {2400.23, p. 1}.

In one of the most important deals arranged by AFP, it received firm written commitment for use of Brown and Williamson's products from Sylvestor Stallone (figure 9.2). In a letter dated April 28, 1983, and addressed to Kovoloff, the actor guaranteed in writing to smoke Brown and Williamson cigarettes in five of his upcoming films for payment of $500,000. Stallone wrote:

As discussed, I guarantee that I will use Brown & Williamson tobacco products in no less than five feature films.

It is my understanding that Brown & Williamson will pay a fee of $500,000.00. {2404.02}

The agreement between Brown and Williamson and Stallone (via AFP) was consummated shortly thereafter. On June 14, 1983, James F. Ripslinger, senior vice president of AFP, wrote Stallone:

In furtherance of the agreements reached between yourself and Associated Film Promotions, Inc. representing their client Brown & Williamson Tobacco

FIGURE 9.2. Letter from star Sylvester Stallone agreeing to smoke B&W products in five
upcoming movies in exchange for a $500,000 fee. Source: {2404.02}

Crop. (B&W), I wish to put in summary form the various understandings and details regarding B&W's appearances and usage in your next five scheduled motion pictures. B&W is very pleased to become associated with the following schedule of films and to have you incorporate personal usage for all films other than the character of Rocky Balboa in Rocky IV, where other leads will have product usage, as well as the appearance of signage (potentially ring).

The following is the current list of the next five (5) minimum films for B&W's appearance. It is understood that if production commitments change the order or appearance of any of the group of films to be released, B&W will appear in a substituted film. The only nonappearance for B&W will be by mutual consent of both parties in which case another Sylvester Stallone movie will be arranged for substitution.

The initial schedule of films is:

In consideration for these extensive film appearances of B&W products, Brown and Williamson agrees to forward to Robert Kovoloff and Associated Film Promotions, Inc. their initial deposit to you of Two-Hundred-Fifty-Thousand Dollars ($250,000.00). This represents a fifty percent (50%) deposit of the total financial commitment by B&W. The subsequent Two-Hundred-Fifty-Thousand Dollars ($250,000.00) is agreed to be forwarded in five (5) equal payments of Fifty-Thousand Dollars ($50,000.00) each payable at the inception of production of each participating film. {2404.01}

As discussed below, B&W terminated its contract with AFP before all the films were made, because of disappointment with the lack of prominent placement achieved. A file note, written on February 8, 1984, by J. M. Coleman, manager of media services, with a copy to T. P. McAlevey, media director, indicates that B&W discussed settlement with Stallone for $110,000, although it is not clear whether such a settlement was made or whether Stallone actually smoked B&W brands in any of the planned films {2400.07}.

Some motion picture producers were actively soliciting product placement in their films as a way to increase the overall profitability of the project. For example, Alta Marea Productions, a motion picture production company, sent promotional material to B&W soliciting product placement for its planned movie Supergirl , specifically mentioning the effectiveness of placements that had appeared in Superman II . The material, which is undated but refers to the release of Superman III "this June" (1983), states:

Audiences everywhere will recall watching the titanic battle over Metropolis between Superman and the Arch Villains, which occurred in front of gigantic Coca Cola and Cutty Sark signs, and will be able to tell you that a truck bearing a prominent Marlboro logo played an important role in the sequence. The advertising opportunities on the Midvale Street [in Supergirl ] will be equally as memorable.

In addition to the outdoor billboard advertisements, exposure can be provided on storefronts, bus shelters, neon signs and trade vehicles. We are also offering a variety of promotional and premium opportunities, and are developing plans for advertiser tie-in promotions, in conjunction with the United States Government programs on Drug and Alcohol Abuse and Highway Traffic Safety [emphasis added]. {2400.24, p. 2}

Although B&W did not respond to this solicitation, Liggett & Myers apparently did. Liggett's placement was one of many that were later highlighted in congressional hearings in 1989 on a bill (H.R. 1250) to, among other things, ban product placement of cigarettes. At the opening hearing, on July 25, before the Subcommittee on Transportation and Hazardous Materials of the Committee on Energy and Commerce of the House of Representatives, Thomas A. Luken (D-OH), a cosponsor of the bill, described the various methods by which "the merchants of addiction advertise and promote" cigarettes. One such method, he noted, was to

[spread] their message in ways that do not appear even to be advertisements, such as paying to have cigarettes in the movies. The subcommittee's investigation in recent months has revealed, for example, Philip Morris paid $42,500 in 1979 to have Marlboro cigarettes appear in the movie "Superman II" and paid $350,000 last year to have the Lark cigarette appear in the new James Bond movie, "License to Kill." Liggett told the subcommittee that in 1983 it paid $30,000 to have Eve cigarettes appear in the film "Supergirl", and American Tobacco told us that in 1984 it supplied more than $5,000 and other props to have Lucky Strike appear in the movie "Beverly Hills Cop." Philip Morris told us in 1987 and 1988 it supplied free cigarettes and other props for 56 different films. {2406.01, p. 2}

The tobacco industry realized that one of the benefits of placing tobacco products in films was that people would also be exposed to the product if they saw the movie on video or on television. As a letter from Kovoloff to Ted Parrack, vice president for brand management at B&W, dated August 4, 1981, makes clear, the placement of tobacco products in films was treated as a mechanism for getting around the broadcast ban on tobacco advertising:

Pursuant to our telephone conversation this morning, I believe that it would be most beneficial for the Barclay Brand to take advantage of the placement of two Barclay Billboards in the soon to be produced, Columbia Feature, The Tempest.

The Tempest, produced and directed by Paul Mazursky, will star Mr. John Cassavetes, Ms. Gina [sic ] Rowlands, Ms. Susan Sarandon and Mr. Victorrio [sic ] Gassman. The two principal characters, Mr. John Cassavetes and Ms. Gina Rowland [sic ], will both use Barclays [sic ] cigarettes in such a way that the packages will be readily identified by movie-goers, as well as future cable television, video cassette, video disc, and network viewers.

The total investment to Brown & Williamson for the above service is seventy-thousand dollars ($70,000.00), payable upon the commencement of production of The Tempest [emphasis added]. {2400.16}

This proposal generated an enthusiastic response from B&W. The letter {2400.16} includes a handwritten note from someone stating, "Tom: follow up immediately I would do." "Tom" was probably Thomas Neville, B&W's director of marketing services. On August 13, 1981, Neville wrote back to Kovoloff:

Confirming our August 12 conversation, we will proceed with the Tempest project. As you requested we will forward four 30-sheet billboards to your office. Additionally, I am enclosing two BARCLAY lighters which might be appropriately used in the movie.

Also we are getting together a list of new materials for the various brands and this will be forwarded to you as soon as possible. We are looking into creating a new KOOL T-shirt that can bee [sic ] worn by appropriate people. {2400.17}

Despite Kovoloff's representations, Brown and Williamson was not pleased with the results of the Tempest project. On March 22, 1982, Neville wrote Kovoloff:

Thank you for your recent letter explaining what we will receive for our $70,000 dollar commitment to your company. However, I am still at a loss as to what happened in 1981. I was under the impression that we would also get some placement in the film, The Tempest. While I now understand that the placement was not as originally presented, there was something for BARCLAY or was there?? The attached letter also indicates that two BARCLAY lighters were to be used. If so, can you let me know how? {2400.19, p. 1}

In 1983 B&W conducted an audit of its relationship with AFP, and a report on the results of the audit was transmitted from D.R. Scott to Domantay on October 26, 1983 {2400.23}. The audit was requested by Domantay and Coleman. Its principal objectives were stated to be:

(1) review of current and past contractual agreements, (2) review of Company internal control systems, and (3) review of performance of AFP. {2400.23, p. 1}

In his October 26, 1983, memorandum accompanying the audit report, Scott raised serious questions about the sufficiency of B&W's procedures for documenting the product placements specified in its contract with AFP.

Based on the audit findings and recommendations, I have concluded that the Company's internal controls and procedures for documenting intended movie placements and performance have not been and are not currently adequate. {2400.01, p. 1}

Perhaps more troubling to B&W, however, was the fact, as noted in the audit report, that AFP had a practice of keeping two sets of books and of distributing payments in the form of cash, jewelry, or cars, rather than in the form of checks.

During a field visit we were informed by AFP personnel that AFP keeps two sets of books for its movie placement activities. One set of books is for their daily operations (commissions earned and ordinary business expenses) and the "second set of books" is for all their special movie placements (e.g., the Sylvester Stallone movies).

Mr. Robert Kovoloff, President of AFP, and Mr. James Ripslinger, Senior Vice-President, are primarily in charge of operations. They told us the following concerning the monies involved with the special placements:

It should be noted that this "second set of books" appeared to have been prepared solely for the auditor's visit. {2400.23, p. 3}

According to the audit report, the practice of keeping two sets of books violated the provision in the contract between the parties requiring AFP to maintain proper accounting procedures {2400.23, pp. 3, 4}. As is indicated in an audit of the AFP payments to actors, producers, and other people associated with the films where B&W products were placed (see table 9.5, p. 388), B&W's auditors did not question the use of noncash payments. (After release of the documents, the Los Angeles Times found that many of these goods never reached the stars; Kovoloff told the Times that Sean Connery never got any jewelry, and that Paul Newman, Sylvester Stallone, and Clint Eastwood never got cars [7].)

As part of the audit, B&W did a detailed analysis of several of the films, similar to Hazan, Lipton, and Glantz's research on smoking in the movies (8), except that it was much more detailed and focused on looking for specific brand imagery. The B&W auditors were not pleased with what they found:

No procedures have been in place at B&W to ensure that AFP actually has been placing our products in movies. Because of this, we viewed seven movies in which AFP has indicated that they have made placements for B&W (two of which involved special payments). Our observations are as follows:

Body Heat —We observed a Kool poster on a wall in a restaurant. It appeared three times in the movie. The first time it was on screen for approximately a minute, but was blurred except for a couple of seconds. The other two times the sign was blurred. We also observed the two lead characters in the movie smoking Marlboro throughout the movie.

First Blood —We observed a Kool lights billboard on screen for a couple of seconds. We saw a glimpse of a Raleigh billboard and a Barclay poster.

Jinxed —The top half of a Barclay pack appeared on screen momentarily.

Only When I Laugh —We observed a blurred pack of Kool on the front of a vending machine. The lead character of the show bought a pack of Marlboro from the machine. She smoked Marlboro throughout the movie.

Nine to Five —We observed no B&W products or advertising in this movie. We did see a cigarette vending machine in the movie.

Never Say Never Again ($20,000 special payment)—We observed what appeared to be a pack of Kool Super Lights on screen for one or two seconds. The word Kool could not be seen. A pack of Winston appeared briefly in this film.

Tempest ($70,000 special payment. The Company also was to receive a bonus placement in Traces. We were unable to obtain a copy of Traces.)—We observed what appeared to be a pack of Barclay on screen for a second. The word Barclay could not be seen. Mr. E. T. Parrack (Vice President of Brand Management when the Tempest was released) stated that Mr. Kovoloff called shortly after Tempest was released and told us that B&W did not receive much exposure and he promised to provide placement in two or three other movies as a "make good". Records currently available at B&W do not indicate which movies were to be utilized.

With the exception of the Sylvester Stallone movies, there is virtually nothing in writing at B&W which indicates what specifically B&W is to receive. The agreement involving the Sylvester Stallone movies only specifies that he will be smoking our products in four of the five movies and that B&W signage will be included. The agreement does not specify the length of time or frequency of [sic ] which our products will appear nor does it assure that the visual clarity of the product logo will be acceptable to B&W. {2400.23, pp. 5–6}

Despite these concerns, as late as November 8, 1983, Tom Humber, B&W's assistant director of corporate affairs, wrote to J.M. Coleman, manager of media services, and recommended continuing the product placement program:

Confirming our conversation of yesterday, I support the continuation of product placement in movies made for theatrical release, provided that correct business practices are followed, there is a concerted effort to restrict the program to adult-interest films and characters, we have greater knowledge than I believe currently exists about context, and each project is commercially sound. {2402.06}

In any event, disappointment with AFP's performance and growing political pressure—fueled in part by the Snow White controversy—led Ernest Pepples, B&W's senior vice president and general counsel, to recommend getting out of product placement. He explains his reasons in detail in a "Restricted and Privileged" memorandum to Coleman on November 8, 1983:

Brown & Williamson should discontinue the [AFP] program in an orderly way.

Of the four points listed under RATIONALE [in a draft statement of issues on the AFT matter], I agree only with the statement that "control weakness can be corrected". In my opinion:

Accordingly, it is foolish for Brown & Williamson to continue this program both for business and political reasons [italic emphasis added]. {2400.02}

In addition to analyzing the value of its own product placement in movies, B&W was acutely aware of the placement of its competitors' products in films, and evidently believed that they, too, were not effectively served. For example, in a memo to N.V. Domantay, dated December 5, 1983, on the subject "Apocalypse Now—Marlboro," Coleman concludes:

The exposure Marlboro received from this movie is worth something but not $200M—if I had to assign a value it would be approximately $100M. This placement is not worth $200M because the actual logo is not seen, and because of the setting, they were not able to use any other product identification (i.e. billboard, cab top). This movie is a "Marlboro commercial" only to people in our industry because we know the pack and the cigarette brand even when the pack is not shown—but to an ordinary person, the pack/cigarette shots are not that intrusive. {2400.13}

Of course, Philip Morris may have had a different opinion about the value of Marlboro's appearance in this film.

On January 11, 1984, B&W met with AFP to work out termination of their agreement. The meeting is summarized in a memorandum of February 2, 1984, from Coleman to Domantay:

During the period of the contract between AFP and B&W, AFP claims to have attempted to place Brown and Williamson brands in more than

150 movies or television shows and succeeded in making placements in 22 movies and one television show (table 9.6, p. 390) {2400.23, p. 10}. Significantly, product placement in the television show The A-Team , a program with a strong youth appeal, was paid for by the B&W advertising budget. The payment for product placement on a television show did not appear to raise any questions with those involved in the process, despite the federal law against advertising tobacco products on television. The auditors, and indeed everyone in the process, treated it in a very matter-of-fact manner.

Whatever Brown and Williamson's professed policies on advertising may have been, any advertising in theaters, particularly when an ad appears in conjunction with a movie aimed at a young audience, would reach children and teenagers. Yet, B&W stopped the theater advertising only when a public relations gaffe made its continuation too embarrassing. Similarly, product placements in the movies and on television were discontinued only when the company determined that it was not receiving sufficient value for the money being spent. There is nothing in the documents to indicate that the company was having second thoughts about the propriety of the practice.