Italy approves TV Product Placement in Media decree

Following the recent decision by British lawmakers, Italy’s government has approved a similar decree that allows product placement in television programs. The common rules have been introduced for all services that broadcast images on any platform to ensure greater flexibility for advertising and broadcasting, including product placement in TV programs.

The decision to allow product placement will especially benefit Silvio Berlusconi’s Mediaset because of its leading position on Italy’s TV advertising market, while new pay-TV advertising ceilings may hurt archrival Sky Italia (News Corp). The decree lowers the amount of advertising that pay television players can broadcast and introduces a daytime ban on adult programming.

Mediaset collects more than half of what is spent for TV advertising in Italy and its Mediaset Premium digital terrestrial pay-TV package already complies with the new ceilings. Advertising accounts for 6 percent of Sky Italia’s revenue and 50-60 percent to its earnings before interest and tax, according to estimates from Bernstein analysts.

The legislation will also open up new revenue sources for Italy’s independent film and television producers for gap financing up to 25% of budget and will help strengthen Europe’s creative economy and reinforce Italy’s cultural diversity. The new decree transposes the earlier 2004 Decree Urbani, consistent with Europe’s 2009 Audio-visual Media Services Directive (AMS).

The changes are significant to Italy’s media and entertainment sector, at a time in which new contents such as Internet television, VOD and IPTV are making in roads to home entertainment and Internet-enabled television viewing, which allow for new forms of interactive advertising and t-commerce.  Product placement is currently growing five times faster than traditional media and will continue to grow over the next three years.