Mar 30, 2005 6:08 AM, PROMO Xtra

Largely fueled by the popularity of reality shows, product placement in TV jumped by 30.5% to $3.46 billion in 2004, and that number is only expected to surge in coming years.

According to Product Placement Spending in Media 2005, paid product placement has become a faster growing initiative than barter or gratis arrangements. Paid placement made up 29.2% of the market alone in 2004, compared to 18% in 1974, the report states.

Stamford, CT-based PQ Media, a custom media research firm, conducted the report, which it released Tuesday.

With TiVo's ad-skipping capabilities and the declining popularity of the 30-second spot, marketers focused more of their advertising dollars last year on reality TV programs and media to lure the 18- to 34-year-old demographic, the report states. From 1999 to 2004, product placement grew in TV, film and media at a compound annual rate of 16.3%.

And its popularity is only going to gain momentum. Product placement is projected to grow another 22.7% to $4.24 billion in 2005. Three contributing factors to the rise include an increase number of paid placements, larger placement deals and greater use of personal video recorders, according to PQ Media's report.

Product placement in television rose 46.4% to $1.87 billion in 2004 with the growing marriage of reality TV shows and product placement deals (think Survivor and The Apprentice). Product placement in films increased by 14.6% to $1.25 billion in 2004.

With such growth reported in product placement, marketers saw a smaller increase on marketing and advertising spend. In 2004, advertising and marketing expenditures rose by 7%, compared to the 30.5% jump in product placement spending that year, the report states.

"The reasons behind this development are rather simple, but critical to a media industry undergoing rapid change in an era of ad-skipping technologies and accelerating audience fragmentation," said Patrick Quinn, president of PQ Media, said in a statement. "Technological advances, most notably PVRs, and continued audience fragmentation, due to the growing popularity of new media like the Internet and video games, have led major marketers who are already skeptical of their return on investment in traditional advertising to become even more dispirited with the old means of reaching target audiences."

PQ Media predicts the growth in product placement in media will continue to 2009, reaching $6.94 billion. The media will develop new ways for marketers to insert their products via brand integration and attach high rates to meet marketer demand, the report states.

For more information about product placement spending and entertainment marketing, see the upcoming May issue of PROMO Magazine.

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