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Los Angeles-It’s no accident that contestants of The Apprentice, Donald Trump’s reality television show, designed the actual marketing brochures for a new Pontiac model. Or that the Man in the Yellow Hat in the recently released Curious George movie drives a Volkswagen. They’re the results of a new type of promotional contract between advertisers and entertainment, loosely dubbed “branded entertainment,” which is generating substantial revenue for many law firms throughout the United States. Designed to incorporate a company’s product or brand name directly into the script of a television show or movie, the new deals go far beyond the day when Reese’s Pieces candy got a famous feature in the 1982 film E.T.: the Extra-Terrestrial. They involve product placement, joint marketing of a film or show and Internet or cellphone promotions. In the most far-reaching deals, advertisers have agreed to pay for portions of a production, such as last month’s opening of Lions Gate Entertainment Corp.’s Akeelah and the Bee, which coffee giant Starbucks Corp. helped finance. “The percentage of work for branded entertainment has grown exponentially in the last three to four years,” said Brian Murphy, a partner at New York-based Frankfurt Kurnit Klein & Selz, a media and advertising firm that has about 10 lawyers handling the new deals. “Our practice has bloomed.” But branded entertainment hasn’t come without scrutiny. Jonathon Adelstein of the Federal Communications Commission (FCC) has called for stricter and clearer rules regarding disclosures of branded entertainment. Ron Whitworth, a special assistant to Adelstein, a commissioner, confirmed that the FCC has received a number of formal complaints involving potentially inadequate disclosure of product placements. In another legal wrinkle, the Screen Actors Guild (SAG) and the Writers Guild of America (WGA) are protesting the use of branded entertainment, describing it as a form of “forced endorsement” without compensation. The guilds may file protests with the FCC. The new ‘reality’ The growth of branded entertainment comes as advertisers are seeking new ways to broadcast their message to consumers, who, with high-tech products such as TiVo and digital video recorders, or DVRs, are able to fast-forward through traditional 30-second commercials. It also comes as producers and television networks, which depend on revenue from commercials, are seeking new ways to obtain financing. Nowhere has branded entertainment been more successful than in reality television programs, where product-placement deals have helped fund production of the shows. One of the first shows to incorporate real products into the story line was The Apprentice, which is in its fifth season on NBC. Last year, the winning team of one episode designed a brochure to market General Motors Corp.’s Pontiac Solstice, a new model that “sold out production output in a month,” said Clark Siegel, a partner and co-chairman of the intellectual property and entertainment practice at Irell & Manella in Los Angeles, which crafted the product deals on behalf of Mark Burnett Productions, producer of The Apprentice. “They paid a lot of money, but it was incredibly successful,” he said. The recent deals are much more complicated than simple product placement, which only five years ago rarely involved lawyers. Advertisers want their brand or product to have the most screen time, be in the most retail shops or generate the biggest gossip on Web sites. As a result, more companies are looking outside their own legal departments to craft the deals. “The prior deals were fairly simple, straightforward,” said Larry Ulman, a partner at Los Angeles’ Gibson, Dunn & Crutcher who crafted a $200 million deal last year with NBC Universal on behalf of Volkswagen of America Inc. “You either supplied the goods for free in exchange for seeing your goods on television, or you paid a small amount of money to make sure your goods are shown,” Ulman said. “But the deals now are much more complicated. That’s why you’d go to a big law firm.” ‘Tremendous growth area’ Most of the law firms that structure brand entertainment deals already have developed advertising and entertainment practices, typically in New York and Los Angeles. With branded entertainment deals, both departments are working closer together. “It’s been a tremendous growth area for us, without question,” said Murphy of Frankfurt Kurnit. “It’s given us an opportunity to take the expertise in the entertainment area and have those attorneys work closely with attorneys who’ve been working with brands for decades.” Linda Goldstein, chairwoman of the advertising, media and entertainment group and a partner in the New York office of Los Angeles-based Manatt, Phelps & Phillips, said that five years ago the firm handled few, if any, product placement deals. Now, about a half-dozen lawyers, split between the advertising group in New York and the entertainment group in Los Angeles, structure up to 25 deals a year. Few of the firms doing branded entertainment deals have a background in traditional motion picture financing. “Unlike traditional forms of financing, where, if you put money into a film or television production you’d have the expectation of getting money back, in these deals there is no expectation of getting the money back,” said Craig Emanuel, partner in the Los Angeles office and head of the entertainment practice at Loeb & Loeb, which has doubled to eight the number of lawyers working on branded entertainment deals in the past year. “The value to the product is getting your presence in the film.” Many branded entertainment deals involve some level of co-promotion, in which a movie is advertised or promoted by the financier. The movie Akeelah and the Bee, for example, is advertised on Starbucks’ cup holders. “Anytime you can get somebody else to pay for your promotion of the movie, that is terrific,” said Bob Darwell, chairman of the entertainment, media and communications group at Los Angeles-based Sheppard, Mullin, Richter & Hampton, who called branded entertainment “a pretty meaningful part of our practice at the firm.” The deals come with an inherent challenge in getting advertising clients, who want complete control over the project, to communicate effectively with the various production heads who share their own creative input. That becomes a challenge for lawyers, who spend much of their time making sure a product becomes a natural part of the story line, said Arnold Peter, a partner at Los Angeles-based Raskin Peter Rubin & Simon, which derives nearly 15% of its revenue from branded entertainment deals. He said many of the deals take months to negotiate. “If you’re representing the brand, you want to have as much of a product on the screen for as long as you can, but if you’re representing the studio, you want to make sure you give value to the brand for the money they’re paying you,” he said. “You argue about the language. They want to say, ‘No. Re-write that because you barely see the product.’ Whereas, the producer will want as much discretion as they can [get] so that the product does not violate the integrity of the film.” As a result, the deals are “getting increasingly more complicated to negotiate because of issues of creative control,” he said. For most attorneys, branded entertainment deals are unlike any other contract. Ulman said he had to start from scratch in drafting Volkswagen’s five-year deal with NBC Universal, the first of its kind by a major studio. In the deal, Volkswagen is allowed to work with producers in crafting its vehicles into the scripts and plot lines of the studio’s movies, theme parks and television, including the SciFi and USA channels. One of the outgrowths from the deal is the recent movie Curious George, in which the Man in the Yellow Hat drives a Volkswagen. “It’s not like you can pull out your standard promotions form,” he said. “It’s all new and creative; nobody knows the problems that will develop.” FCC gets involved One problem has been recent complaints made to the FCC related to the recent spate of branded entertainment deals. In its petition, Commercial Alert, a nonprofit organization based in Portland, Ore., asked the FCC to require better disclosures of product placement in television shows. “Sometimes product placement is disclosed, sometimes it’s not,” said Gary Ruskin, executive director of Commercial Alert, which, in addition to petitioning the FCC, is lobbying Congress to introduce legislation that would require disclosures of product placement in all media. Commercial Alert filed a similar complaint with the Federal Trade Commission, which rejected its request last year because displaying an image or brand name on a show was not enough to constitute “deceptive claims,” Ruskin said. “That argument is based on this very antiquated notion that advertising persuades only through objective claims, not images,” he said. Ruskin favors a “pop-up” that would notify viewers as the show is going on that a product placement is taking place, instead of disclosing the placement in the ending credits. Rebecca Fisher, an FCC spokeswoman, said that the commission has not yet replied to Commercial Alert’s complaint. ‘Step up enforcement’ But Adelstein, the FCC commissioner, noted in remarks posted on the FCC Web site that concerns over product placement “clearly indicate that the time has come for us to step up our enforcement in this area. “In today’s media environment, product placement has moved beyond Coke tumblers prominently displayed at the judges’ table of American Idol,” he wrote. “Now, products have even seeped into plot lines. Soap operas have woven cosmetic lines into their tales of who-did-what-with-who, while ‘The Apprentice’ sounds more and more like an hour-long infomercial for the latest corporate sponsors.” Adelstein called for stricter and clearer rules regarding disclosures, which should be more than “a split-second during the credits in small type that no one could possibly read,” he said. Ronald Urbach, a partner and head of marketing and communication at New York’s Davis & Gilbert, agreed that the regulatory issues are “still open” with regard to product claims. “If you make a claim in a particular program, what is that and what is that not?” he said. “What rights do I have in content versus advertising? It has First Amendment issues across the board.” Branded entertainment deals have raised several other legal issues about trademarks, copyrights and free speech. “One of the issues that I think will be the subject of negotiation in future discussions is what the SAG is calling essentially a ‘forced endorsement,’ ” said Peter of Raskin Peter. He said actors might request in their contracts that they have a say in product-placement arrangements, especially if the show relies on their “name and likeness,” he said. Last fall, WGA and SAG held a news conference in which they threatened to petition the FCC if networks failed to make more disclosures of product placement. The guilds are making similar protests next month at the annual “upfronts” in New York, at which networks are scheduled to announce their fall programming lineups to advertisers. “Creators, writers, directors and actors don’t have either consolation or compensation for being required to integrate products into their programs,” said Patric Verrone, president of WGA, west. “Not only is that not part of our contracts, but it conflicts in many respects with what we’re obligated to do. We’re supposed to be writing television. You try to make it realistic if appropriate, but if a product gets shoe-horned in, we need to be able to say, ‘No.’ “

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