It was 20 years ago that E.T.’s craving for Reese’s Pieces candy turned an M&Ms wannabe into a household word; the film moment also established product placement as big business and a vital part of motion picture marketing. Product placement in movies, particularly in kids and teen films, is now at an all-time high and has become a mini industry unto itself, due to its ability to gain exposure for brands in a unique way that generates a level of interest and enthusiasm rarely achieved by traditional advertising.

‘We’ve seen it grow,’ says Katie Chin, senior VP of entertainment partnerships for The L.A. Office, a motion picture promotions consulting firm. ‘As the whole world of promotional tie-ins is growing, so is product placement.’

‘Product placement has existed since the beginning of motion pictures because most films need branded products to create an aura of reality. Now more widespread than ever, product placement is firmly linked with broader entertainment marketing, in the form of sizable cross-promotions and joint-marketing efforts,’ says product placement specialist Eric Dahlquist, senior VP of the Vista Group, a public relations agency that focuses on connecting products with entertainment projects.

This year, don’t be surprised to see product placement and cross-promotions infiltrating most kids and teen flicks. Universal’s Josie and the Pussycats is linking up with girl merchandisers like Pyramid Accessories and Hanes; Miramax/Dimension’s Spy Kids has product placement with Isuzu cars and Foster Grant; and Jurassic Park III will highlight a variety of brand-name sporting gear.

But while the tactic is a benefit to both movie-makers and advertisers, placing brands in kids films to target kid consumers has always been a touchy, if not taboo, issue. ‘We have to be very careful about how we promote to kids,’ says George Leon, senior VP of global promotions and product placement at Sony Pictures. ‘There is no television product placement for kids at all. It’s all regulated by the FCC. And we are trying to be sensitive to it on the theatrical side by not placing actual toy items in features.’

In the early 1970s, producers and broadcasters in the U.S. came under fire from public interest groups (particularly Action for Children’s Television), the Federal Trade Commission and the Federal Communications Commission over TV programming based on existing commercial products. Such animated shows as Linus the Lion Hearted (based on a line of Post cereals) and Hot Wheels (centered on Mattel’s toy car line) were branded as half-hour commercials that unfairly and irresponsibly advertised to children. Since then, network broadcasters have generally shied away from any kind of product-based kids shows or any hint of masked advertising practices, though syndicators and cable nets have walked a thin line with toy-based programming ranging from He-Man and G.I. Joe to today’s Action Man, Transformers and Beast Wars.

Marketing execs maintain, though, that the goals are a little different in films skewed toward the younger demographics. ‘We did some product placement in Antz… but for most animated movies, it doesn’t make sense,’ says Anne Globe, head of marketing and consumer products at DreamWorks. ‘Product placement is about servicing the filmmakers with actual product to set a scene. Sometimes it has marketing elements relating to it; most of the time it’s a function of accomplishing a filmmaker’s vision.’

‘Brand awareness begins very early in life, and this is an important argument for product placement in kid films,’ counters Dahlquist, who facilitated clients in placing automobiles in the 1993 Warner Bros. family flick Free Willy. ‘Toymakers try to establish their brands with children very early, and children have very specific tastes. If they want a ‘power ranger,’ they want the Power Ranger; if they want Froot Loops, it’s Froot Loops or nothing. So if a child sees a vehicle in a movie, in a situation that’s cool, then perhaps, later on in life, they may consider buying one.’

How sophisticated has the product placement process become? Bill Kren, VP of public relations at product placement facilitator the Phelps Group, explains: ‘Most of the studios have separate departments for product placement, and I would deal directly with those people.’

‘There are also a number of product placement firms that act as middle people. You pay them a fee, and they’ll work to get [your product into the film]. But a lot of times, those fees can be huge. You might be spending US$25,000 to US$100,000 for a very quick, two-second or five-second spot-if you glance away you’ll miss it.’

‘That’s one of the inherent problems with product placement-you’re at the mercy of the film studio; you are supplying them with product, and its up to them how they use it. Sometimes your exposure ends up on the cutting room floor for one reason or another, in which case they might not charge you or they might try to get you in the next production.’

Getting actors, especially stars, to cooperate is another matter entirely. ‘For the most part, they get approval if they have to directly interact-if the script calls for them to drink a beverage or touch a computer, for example,’ says DreamWorks’ Globe. ‘And we always have a separate negotiation if that frame of the movie or a film clip with that scene is used in the marketing campaign.’ Sony’s Leon also points out that ‘some actors come to the table with a slew of endorsements that they cannot have any conflict with.’

One other downside to product placement, says Kren, is public perception-especially if it’s overdone. ‘In some instances, product placement is so evident that people look at it and realize that someone paid for what they’re seeing on-screen.’

How much can an advertiser expect to pay for different levels of product placement? ‘The product placement companies charge on the basis of two things: the time it’s going to take them to actually sell the product to a production company; and how much exposure [the placement will get],’ says Kren. ‘If it’s a movie with a little-known cast, the likelihood of you getting a reduced rate-say 10% to 50% less-is very, very good. If you’re looking to get exposure in a kids blockbuster, you’ll pay a lot more. (A high-end placement fee runs around US$50,000).’

‘In the majority of deals nowadays, no cash changes hands,’ contends Vista Group’s Dahlquist, who is also president of the Entertainment Marketing and Resources Association, an organization of product placement professionals. ‘Rather the client supplies goods or equipment for use in filming, or tosses in some extra product like food or crew jackets, for example.’

On the producer’s side, Sony’s Leon was especially delighted with the promotional spin-offs that resulted from product placement in Stuart Little and Charlie’s Angels. ‘Charlie’s Angels was more than product placement-it had products integral to the story line,’ explains Leon. ‘For example, Charlie needs to engage in top-secret communications with the Angels, so we placed Nokia phones in the film, seamlessly demonstrating all the product’s features. Then on the back end, we did a successful off-screen promotion. Nokia had national television ads targeted at their young teen market. The bulk of it was on MTV, as well as TV Land and Comedy Central. They also had on-site promotions at all Best Buy and Circuit City locations.’

On Stuart Little, the situation was a bit different. The promotion was a by-product of the film. ‘The car was in the story and in the film first,’ explains Leon. ‘The talented promotions team here read the script, worked closely with production, and knew that the car had such an important part in the movie that a promotional partner for the car was a likely possibility.’ Radio Shack tied into the toy car in the movie, and made it their own by making it an exclusive Radio Shack item. The retailer advertised it using clips from the film, making it look as though it had placed their product in the film.

‘Radio Shack was the right partner at the right time,’ says Leon. ‘Its Stuart Little promotion was extremely successful, largely because it was based on an actual character and car vehicle from the movie. It really established Radio Shack in the entertainment marketing field, and you can believe that they wouldn’t have done Dr. Seuss’ How the Grinch Stole Christmas this year if they hadn’t done Stuart Little last year.’

Sony’s Leon sees a new trend emerging among product placement promotional partners: Loyalty. ‘We are looking back to our established partners and saying, `Look, you did a great job with us on the first movie, why wouldn’t you want to continue with us on the second?”

In Sony’s case, two of the three big movies currently booking product placement and promotions for 2002 are sequels, according to Leon, with Spider-Man: The Movie, Stuart Little 2 and Men In Black 2. Radio Shack has already committed to partner again for the Stuart Little sequel, as has Ray Ban for MIB 2.

Kren believes product placement is on the rise in kid- and teen-centric films. ‘Kids and teens drive decisions in major commercial theatrical feature films, so there is more competition now than ever,’ he says. ‘It helps to have a good product and good connections to successfully place it on screen.

Sony’s Leon is equally optimistic about the partnership between advertisers and filmmakers. ‘I predict a closer association between the development of product placement in the preproduction process and off-screen promotions at the back end, during initial release.’

As long as it serves filmmakers, advertisers and movie studios, audiences can expect to see more movie characters drinking Coca-Cola, eating Big Macs and wearing Nikes. And next time E.T. phones home, he might be using a Verizon wireless.