Reply Comments of the Writers Guild of America, West, Regarding the Use of Embedded Advertising in Television and Film

and the Need for Adequate Disclosure to Viewers

Relating to: MB Docket No. 08-90: In the Matter of Sponsorship Identification Rules and Embedded Advertising

Filed by John Kosinski

On behalf of

Writers Guild of America, West, Inc. 7000 West Third Street Los Angeles, CA 90048

Writers Guild of America, West, Inc. (WGAW) submits the following reply comments in connection with the Commissions Notice of Inquiry/Notice of Proposed Rulemaking (NOI/NPRM).

I. Introduction: Modernization of the Sponsorship Identification Rules Is Necessary and Real Time Disclosure Is the Best Mechanism to Ensure Viewers Are Aware When Advertising Is Embedded Within Programming Nothing in the submissions to this Commission from interests opposed to modernization of the sponsorship identification rules alters the conclusion that only real time or simultaneous disclosure of embedded advertising will provide viewers the information necessary to know when they are being advertised to and by whom. As explained in our initial submission, while embedded advertising has grown rapidly, broadcasters are making a mockery of current sponsorship identification rules. Notifications pass on the screen for seconds, crowded out by other information, or sometimes superimposed over a programs final scenes. Only by requiring real time disclosure, such as a crawl along the bottom of the screen, will the FCC uphold its longstanding obligation to make sure viewers are aware of the advertising that exists within entertainment content. The WGAW is pleased by the breadth and the depth of support for simultaneous disclosure. Nearly 150 individuals and organizations filed comments in this proceeding advocating some form of simultaneous disclosure. Childrens advocates, media watchdogs and individual citizens from across the country registered their support for effective disclosure -- disclosure that permits the viewer to distinguish advertising from entertainment. The forces opposing effective disclosureincluding the National Association of Broadcasters (NAB), the Motion Picture Association of America (MPAA) and the National Media Providers (NMP)marshal a range of predictable arguments. They want to convince the Commission that nothing has changed in the media and advertising business in the nearly 75 years since Congress passed the Communications Act of 1934 ( the Act). Some argue that any new or revised rule would cripple and potentially destabilize the entire free broadcasting model. The NMP, NAB and MPAA want the Commission to believe that everything is working just fine, and despite evidence to the contrary, no further rules are necessary. The broadcasters and advertisers complain that advances in technology, namely the development and deployment of personal recording devices, have forced them to develop new means of communicating commercial messages. They cite the ability of viewers to speed through commercials as the justification for resorting to embedded advertising. While the WGAW understands these economic concerns, we believe the Commission must also correspondingly modernize disclosure requirements to 2

accommodate these very changes. The Commission has throughout its history occasionally updated sponsorship identification rules to address changes in the media landscape. On each occasion, updates to the rules have been made while leaving intact the underlying principle: viewers have the right to know when they are being advertised to and by whom. As we explain below, real time disclosure is the only sensible response to these new forms of advertising. Anything less would effect an abandonment of the principles that have guided sponsorship identification since the requirement was first imposed.

II. The Congressional Intent Behind the Sponsorship Identification Rules is Clear; the FCC Should Modernize the Rules while Remaining Committed to That Intent The NMP and NAB contend that the current sponsorship identification rules adequately address the types of embedded advertising that we now see on television and in films, and that no regulatory update is necessary.1 This plea for inaction, however, is curiously at odds with the industrys alternative theme that the media landscape has changed so dramatically that they cannot survive economically without resort to embedded advertising. Any assessment of the adequacy of the current rules must start with an understanding of their purpose: the underlying principle that viewers have the right to know who is advertising to them. An examination of Congressional intent in this area begins with the Radio Act of 1927 the first context in which sponsorship identification was prescribed for broadcasters that rely on public spectrum. Among the provisions in the Radio Act was a requirement that broadcasters disclose the sponsors of their programming to listeners.2 At the time, the provision was largely preventative: the FCC, and its predecessor, the FRC, found the sponsorship identification rule largely irrelevant in their supervision of radio for nearly twenty years. Congress had crafted the requirement before either the industry or lawmakers understood how radio advertising would develop.3 Nevertheless, Congress purpose was clear: as Kielbowicz and Lawson document, Congressman Emanuel Celler explained to his colleagues that Section 19 of the Radio Act was created to prohibit stations from disguising advertising as program content.4

NAB at 2: The history of sponsorship identification rules shows that product placement and product integration are not new developments in television and radio. The rules have been written for these types of advertisements. 2 Radio Act of 1927. 3 Richard Kielbowicz and Linda Lawson, Unmasking Hidden Commercials in Broadcasting: Origins of Sponsorship Identification Regulations, 1927-1963, Federal Communications Law Journal, April 2004, Vol. 56(2) at 332-33. 4 Id. at 332.

The sponsorship identification requirements in the Radio Act were also based upon similar provisions that applied to magazines. Congressional leaders realized that certain magazine and newspaper publishers were using decreased postage rates to include more advertising in the publications. The Newspaper Publicity Act of 1912 required publishers profiting from cheap postage [to] label any material readers might mistake for editorial content as advertising. The Supreme Court upheld the constitutionality of this disclosure and labeling requirement in 1913.5 When Congress debated and adopted the Federal Communications Act of 1934, it included the sponsorship identification language found in the Radio Act of 1927. In fact, [t]he sponsorship disclosure provision, reincarnated as Section 317, continued with only immaterial changes in language and did not warrant debate in Congress (emphasis added).6 In 1944, the FCC embarked on creating rules to enforce the sponsorship identification requirement in the Act, responding to the creeping influence of political and policy voices into program content. The process culminated in new rules that applied mainly to broadcasts about politics or public affairs.7 However, the Commission also initiated its first sponsorship identification rules directed specifically at commercial broadcasts, by requiring a simple identification of a sponsors corporate or trade name or the name of the sponsors product.8 It is important to note that the Commission was lobbied by the NAB and the American Association of Advertising Agencies: The FCC watered down [the commercial] requirement after consulting with NAB lawyers. The FCCs original proposal would have mandated specific language for announcements, stating that a sponsor paid for or furnished the program. Broadcasters, joined by the American Association of Advertising Agencies, regarded this language as redundant because sponsors ordinarily mentioned their names throughout the program (emphasis added).9 Following the adoption of the new rules, the FCC released a report to reiterate their purpose and intent. In a 1946 FCC report titled Public Service Responsibility of Broadcast Licensees, the FCC articulated the now well-entrenched principle that [a] listener is entitled to know when the program ends and the advertisement begins.10 In 1950, the FCC again shored up the enforcement of this basic principle in response to its violation in the broadcasting industry. Certain broadcasters had taken to
5 6

Id. at 333. Id. at 334. 7 Id. at 340. 8 Id. 9 Id. 10 Id. at 341-42.

merely describing the product being advertised, without disclosing the actual name. The FCC issued a public notice that clearly described, once again, the intent and specifics of the rules: In all cases, the public is entitled to know the name of the company it is being asked to deal with, or at least, the recognized brand name of his product. . . . [I]ts plain intent is to prevent a fraud being perpetrated on the listening public by letting the public know the people with whom they are dealing.11 In response to the payola and plugola scandals of the late 1950s, Congress and the public exerted significant pressure to revisit and refashion the rules. Extensive Congressional and FCC hearings revealed the deepening mutual influence between advertisers and broadcasters, and new techniques that advertisers were using to pitch their products on broadcast television. Congressional leaders and commissioners heard of department stores placing an employee on a quiz show with the express intent of mentioning the store on the air, and policymakers learned of a new bartering system in the entertainment industry, where advertisers would provide transportation or other production services in exchange for product mentions or placements in programs.12 In a public notice, the Commission rejected the argument that these examples were normal business practices and insisted that sponsorship identification was required because the viewing public is entitled to the knowledge that such is the case in order that it may view such a commercial presentation in its true context.13 Later, reeling from the quiz show scandals and allegations of payola and plugola, Congress amended the Act to extend the applicability of sponsorship identification rules to anyone involved in the production of a broadcast production who receives items of value or other consideration. In addition, Congress adopted language clarifying the prominence that products would be required to have in order for sponsorship identification rules to apply. Congress expressly agreed that identification was not warranted when any service or property [is] furnished without charge or at a nominal charge for use on, or in connection with, a broadcast, or when identification of a product was reasonably related to the use of such service or property on the broadcast.14 The House Commerce Committee and the FCC then devised 27 examples to help broadcasters comply with the law. The examples illustrate the principle that the context and use of the product in the program content determine whether sponsorship identification is necessary:
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Id. at 345. Id. at 350. 13 Id. at 351. 14 Act, Sec 317 (a)(1).

For instance, if a refrigerator were furnished for use in a dramatic program, mentioning its brand name as part of the dialogue would not fit with the conventions of the genre. On the other hand, a refrigerator furnished as a prize on a game show could appropriately note its brand name, its cubic content and other such features as serve to indicate the magnitude of the prize. No announcement is required because such identification is reasonably related to the use of the refrigerator on a giveaway show . . . But if the shows host went further, urging the audience to purchase the appliance, the pitch became plugola, warranting disclosure.15 Another example described the sponsorship requirement in terms of the prominence a product was given in a program: If a bus company supplied a travel film to a television station, and it fleetingly depicted one of its vehicles in highway scenes, no announcement was required. But if the bus is shown to an extent disproportionate to the subject matter of the film, the public should know it was aired for promotional consideration.16 With the recent rise of embedded advertising, the WGAW has observed a tremendous growth in products receiving disproportionate prominence on the screen during programming a prominence we would argue that Congress and the FCC could not have expected. A few examples of recent product integrations will help illustrate this point. Below is a screen shot from a 2005 airing on CBS of an episode of Survivor. In the program, contestants were provided with basic toiletries such as mouthwash and toothpaste.

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Kielbowicz and Lawson at 360. Id.

Screen Shot I: CBSs Survivor

Notice that the Scope bottle is in the middle of the screen, and the label is purposefully positioned toward the camera -- what is known in the trade as facing the product. The misleading nature of the practice is compounded by the fact that Survivor is a reality program, whose viewers are all the more likely to assume that the program content is truly organic, rather than commercially scripted.

Another example of disproportionate prominence for a product is from a show Pepper Dennis on the WB. The episode originally aired in April of 2006 and included a plug for Crest Whitestrips. Screen Shot II: The WBs Pepper Dennis

Here, the product consumes the entire visual field. In each example above, products are shown to an extent disproportionate to the subject matter and are not reasonably related to the programs content. In the illustrative examples furnished by Congress and the FCC, product uses far less prominent than these were deemed to warrant sponsorship disclosure. The Congressional intent behind the relevant statutes, rules and advice provided to broadcasters is clear: viewers have the right to know when they are being advertised to and by whom. Due to technological changes in the entertainment industry and the rapid growth of the use of embedded advertising, the WGAW believes the FCC should 8

modernize its current rules with the purpose of honoring the original intent and purpose underlying the regulatory scheme. Real time disclosure of sponsorship information is the only means to achieve this in the modern media marketplace.

III. The Use of Embedded Advertising Has Grown in Feature Films, and Sponsorship Identification Rules Must Apply When Films Are Exhibited on Broadcast Stations While product placement has existed for decades in feature films, its use has dramatically increased in recent years. The MPAA would like this Commission to believe that the integration practices have not changed since 1963, when the FCC exempted feature films from the sponsorship identification requirements.17 While precise data on the extent of product integration in feature films is unavailable, a look back at recent feature films reveals a growing trend within this segment of the entertainment industry. And despite claims to the contrary, feature films remain a significant source of broadcast programming. The FCC should apply the same rules to feature films reused on broadcast networks as those that apply to television programming. The commercial success of product integration in films is well documented. In 1982, Reeses experienced a 65 percent increase in sales of its chocolate candies following exposure in the hit film ET: The Extra Terrestrial.18 This experience led to a sharp increase in the use of product integration in feature films. Ray-Ban was quick to follow suit in advertising its brands in feature films. In the year Tom Cruise donned the companys classic Wayfarers in Risky Business, sales tripled, and seven months following the release of Top Gun, the classic Aviator model worn by Cruise saw sales increase 40%.19 Dozens of other examples exist. The success of product integration became so prominent in the 1980s that it now sustains it own industry with dozens of product placement agencies and advertising agencies exploring new scripts for product placement opportunities.20 Since the 1980s, the practice has only grown. Recent examples include Transformers, the third highest grossing film of 2007, which included several GM vehicles as the good guys. Dr. Pepper found its way into the top grossing film of 2007, Spiderman 3, which even included a scene where Spiderman uses his special powers to fetch a can of Dr. Pepper. Yet another example is the James Bond thriller, Die Another Day. The film was so teeming with advertising (for some 20 products in all) that
MPAA at 2-3: These industry practices with respect to product placements [in feature films] have not changed in any significant manner from the practices that existed in 1963 . . . 18 J.D. Reed, Plugging Away in Hollywood, Time, January 2, 1989. 19 Id. 20 Laurie Babin and Sheri Thompson Carder, Advertising Via the Box Office: Is Product Placement Effective? Journal of Promotion Management, Vol. 3(1/2), 1996 at 32.
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certain critics began to call the movie Buy Another Day.21 In 2005, NBC Universal announced a global marketing alliance with Volkswagen that included product placement and integration in feature films.22 Volkswagen cars have since been seen prominently in such Universal films as Knocked Up, The Fast & The Furious: Tokyo Drift, Inside Man and The Bourne Ultimatum.23 In a brazen attempt to craft a movie storyline around a product, FedEx played a supporting role in the film Cast Away, allowing the company to boast Were a character in this movie.24 The MPAA, in its initial comments in this proceeding, argues that there is no reason to apply sponsorship identification to films because there continues to be a substantial lag time between theatrical release and broadcast by licensees.25 While films certainly may have a longer shelf life than other types of programming, recent titles continue to make their way to broadcast with regularity. For example, a review of programming in 2007 demonstrates that 114 distinct film titles appeared on the Los Angeles affiliates of ABC, CBS, and NBC (see Appendix 1), and some films were reused on broadcast several times within a single year. Of the 114 films, 57 per cent, or 65 of the films were reused less than five years after their released date. 86 per cent or 98 of the films shown on broadcast were released within ten years of being reused on the broadcast networks. Reviewing the list of films shown on broadcast television in 2007, one can also see that many of the films reused on the major broadcast networks are intended for young audiences. Films such as Ice Age, Shrek, Finding Nemo, Madagascar, Shark Tale, Shrek 2, Shrek the Halls, 102 Dalmatians, The Cat in the Hat, Freaky Friday, Harry Potter and the Sorcerers Stone, How the Grinch Stole Christmas and The Polar Express, Elf were all shown on broadcast networks in 2007. The Commission should safeguard the ability of children to discern between their favorite movie and advertising by enacting clear and unambiguous disclosure requirements. Whats more, many of the titles shown on broadcast happen to be among the most cited examples of product integration in film. Die Another Day, Cast Away, Spider Man 2, Bad Boys II, Men in Black II, and The Italian Job, among others, all found their way to broadcast and all were examples of embedded advertising in film. The MPAAs argument concerning lag time between production of a film and its exhibition on television is also weakened by its own contentions in current proceedings before this Commission. In May 2008, the MPAA petitioned this Commission to relax
Stephen McGinty, Does This Mean Bonds Past his Sell-By Date? The Scotsman, October 27, 2008. Nat Ives, Volkswagen Product Placement on NBC, The New York Times, January 13, 2005. 23 Karl Greenberg, VW Touts Touareg Via Bourne Ultimatum, Rally Racing, Media Posts Marketing Daily, July 27, 2007. 24 Elizabeth Getttelman and Dave Gilson, Ad Nauseam: Madison Avenue is scrambling to stick ads anywhere if can, from childrens books to bathroom stalls, Mother Jones, January/February 2007. 25 MPAA at 3.
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the rules restricting selectable output control. In that proceeding, the MPAA has argued that the studios are interested in exploring opportunities to provide consumers with the ability to order recently released theatrical, high definition movies.26 While the WGAW is not opposed to this proposed business practice, we believe it is indicative of a general trend towards greater reuse of feature films on television, and a shorter window between the theatrical release of a film and its exhibition on television. Given the economic challenges the entertainment industry faces, we can expect studios to reuse their film libraries more frequently through television exhibition, including on broadcast. The WGAW readily admits that the FCC lacks jurisdiction to apply sponsorship identification rules to all film exhibitions. Instead, we ask that the rules apply to those films reused on broadcast. This modest proposal is well within the statutory authority of the FCC. As the Act clearly states, sponsorship identification applies to all matter broadcast by any radio station.27 Removing the 1963 exemption would not be overly burdensome to the major production studios. Simple modifications can be made to insure the broadcasters are in compliance. Should the Commission agree with the WGAW that simultaneous disclosure is necessary, film companies can work with broadcasters to insure that disclosure is provided to the viewer at the appropriate point in a film. Failing to include feature films in the modernization of the sponsorship identification rules would be a grave disservice to the viewers whose interests the Commission is charged with safeguarding. Feature films, like broadcast television programming, have become saturated with embedded advertising for a wide range of products. If the Commission is to remain committed to the intent and application of the sponsorship identification rules, those rules should apply to all broadcast programming, including the reuse of films on broadcast. IV. The FCC Has Statutory Authority to Modify and Update Sponsorship Identification Rules Certain submissions have argued that the Commission lacks authority to expand the sponsorship identification rules as they apply to broadcast television.28 The argument is contrary to the plain language of the statute. Section 317 of the Act gives the Commission the express authority to require disclosure in [a]ll matter broadcast by any radio station for which any money, service or other valuable consideration is directly or indirectly paid. In addition, as part of the

Petition for Expedited Special Relief submitted by MPAA, May 9, 2008 at ii. Sec. 317 (a)(1). 28 NMP at 35: Any further regulation would substantially expand the Commissions authority into areas where it previously declined to regulate and/or in which it lacks statutory authority.
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1960 amendments to the Act, Congress gave the FCC express authority to develop rules as they apply to broadcast television. Section 317(e) of the Act states: The Commission shall prescribe appropriate rules and regulations to carry out the provisions of this section. The Act in no way prohibits or curtails the Commissions ability to develop rules for sponsorship identification as they apply to broadcast networks. Despite the protestations of the broadcasters and advertisers, Congress gave the Commission broad discretion to modernize the sponsorship identification rules as they apply to broadcast and radio. Given the rapid growth of embedded advertising in the current media marketplace, and the Commissions longstanding policy of ensuring viewers are aware of stealth advertising, the WGAW believes there is no time like the present to update the sponsorship identification rules. For too long, broadcasters have been able to blur the line between content and advertising. A simple modernization, such as a requirement of real time disclosure whenever products are embedded into advertising on broadcast, is clearly within the statutory authority of the Commission. V. Children Are Exposed to Unregulated Embedded Advertising, and the Commission Should Act to Protect Them The Commission and Congress have consistently applied more stringent requirements to advertising in childrens programming. Both Congress and the Commission, citing the inability of children to distinguish between advertising and programming, have prescribed clear rules to ensure that children are protected from both excessive and deceptive advertising. In their comments, broadcasters and advertisers argue that childrens programming is already well protected and that updating of the sponsorship identification rules is unnecessary.29 However, these arguments miss a fundamental point: children are not watching only what the Commission and the Congress have defined as childrens programming. In fact, many of the most watched shows by children ages 2-17 happen to be the most heavily laden with embedded advertising. In October of 2007, the Parents Television Council released a report of the most popular broadcast television shows watched by children ages 2-17. What is notable about the list is that many are nonfiction programs, and programs that are notorious for embedded advertising.
See NMP at 31-32: In short, the FCCs rules are robust and effective in addressing advertising during childrens programming. See also NAB at 11: It is also clear that no new or additional restrictions are needed to protect children from advertising in the modern media marketplace.
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Top Six Most Popular Primetime Programs Watched by Children Ages 2-17 Program Network American Idol Fox Survivor CBS Dancing with the Stars ABC Extreme Makeover: Home Edition ABC th Are You Smarter Than a 5 Grader? FOX Deal or No Deal NBC
Source: Parents Television Council report, What Are Your Children Watching? October 2007

Of the top six most popular programs for children, three are among the most prolific users of embedded advertising during programming. While American Idol is the most watched program among children ages 2-17, during the first six months of 2008 there were 4,636 occurrences of product placement on the program, making the show the most advertising-laden on television. Deal or No Deal is among the most popular programs for children, and in the first 6 months of 2008 it accounted for 2,122 occurrences of product placement. Yet another example is Extreme Makeover: Home Edition. This program is the fourth most watched among children 2-17. However, it contained the fourth highest number of product placements in 2008, with 1,776 occurrences during the first six months of 2008. The effects of advertising on children are well-documented. The WGAW will leave it to childrens advocates to describe the research that has been done to determine the affects of advertising, both overt and stealth, on children. However, it is clear that the typical definition of childrens programming used in past proceedings is too narrow for the purpose of regulating embedded advertising. As demonstrated above, the most watched television programming by children is also the most saturated with embedded advertising. The remarks of certain executives show that embedded advertising in childrens programming is intended to be stealthy. Scott Donaton, an editor at Advertising Age, relayed a conversation with an unnamed executive in his book Madison and Vine: You can weave it in, in an organic way, and not hit somebody over the head. As corny as this may sound, even with American Idol, Coke was organically part of that show. You and I watching it, seeing the red couch and cooler in the back room probably seemed like, Man, theyre getting hit over the head with a sledgehammer. But to the kids watching, it was

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organically part of the show. It was actually a better spot because it didnt feel like it was hitting them over the head.30 VI. The FCC Has Statutory Authority Distinct from that of the FTC Some have argued during this inquiry that the FCC should not usurp the jurisdiction of the Federal Trade Commission (FTC), and that the FTC has sole authority to regulate deceptive advertising.31 As already demonstrated above, the FCC has regulated sponsorship identification for radio and broadcast for at least 60 years, and the FCC has periodically updated its rules over that time. To argue that the FCC lacks authority to regulate sponsorship identification is, frankly, 60 years too late. Furthermore, claiming that the FTC has already addressed problems of deceptive advertising is misleading. In 2003, Commercial Alert filed a petition asking the FTC to require prominent disclosure when products are placed or integrated into television content.32 The FTC denied the request 16 months later on the ground that embedded advertising did not constitute deceptive advertising under Section 5 of the Federal Trade Commission Act. In a response written by Mary Engle, the FTC noted that if through product placement, false or misleading objective, material claims about a products attributes are made, the Commission can take action against the advertiser through an enforcement action pursuant to Section 5 of the FTC Act.33 However, the purpose of embedded advertising is often not to make claims about a product, but instead, to play on the viewers emotional connection to a character or plot element. Often products are integrated into a script without a verbal reference. Ms. Engle goes on to state that there may be instances in which the line between advertising and programming may be blurred, and consumers would be deceived absent a disclosure clarifying that a communication is an advertisement.34 The WGAW and others are asking the FCC, with a long history of requiring disclosure of advertising, to clarify the exact distinction that the FTC felt they did not have the authority to make. The FCC has long held that viewers have the right to know when they are being advertised to and by whom. Unlike the FTCs practice of adjudicating matters on a case-by-case basis, the FCC has applied consistent regulatory requirements to advertisers on broadcast and in other media.

Scott Donaton, Madison and Vine: Why the Entertainment and Advertising Industries Must Converge to Survive, New York: McGraw Hill, 2004, at 155. 31 See NMP at 28: Labeling Product Placement Deceptive Does Not Allow This Commission to Usurp FTC Authority to Override its Finding that Disclosures Are Unwarranted. 32 Letter from Gary Ruskin, Executive Director, Commercial Alert, to Donald Clark, Secretary, Federal Trade Commission, September 30, 2003. 33 Letter from Mary K. Engle, Associate Director for Advertising Practices, Federal Trade Commission, to Gary Ruskin, Executive Director, Commercial Alert, February 10, 2005, at 3. 34 Id. at 5.

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Lastly, in the FTC response, Ms. Engle wrote, The decision not to take formal action in this matter should not be construed as a formal Commission determination of whether the actions challenged in the Consumer Alert submission comply with Section 5.35 Thus, even the FTC was not rendering a final decision in the matter and may be open to further consideration.

VII. Embedded Advertising is Commercial Speech and Modernizing the Sponsorship Identification Rules is Consistent with the First Amendment Protections Afforded Commercial Speech

The NMP contends that regulatory modernization of the Commission's sponsorship disclosure scheme, to keep pace with fast-changing technology and industry practices and continue to honor the Act's guarantee that "listeners are entitled to know by whom they are being persuaded," would violate the First Amendment. NOI/NPRM at note 16. The NMPs arguments, however, prove too much: to credit their alarmist rhetoric would also entail the conclusion that the entire regulatory history of the Commission's enforcement of Sections 317 and 507 of the Act violates the First Amendment. In particular, the Act itself requires that sponsorship disclosure be made "at the time the same is so broadcast." 317(a)(1). As the NOI/NPRM in this proceeding notes, the Commission already requires that the sponsorship disclosure be broadcast in such a manner that it may be "read or heard by an average viewer" and also has historically contemplated "more than ordinary diligence" when it comes to advertising embedded in otherwise non-commercial programming, the latter directive dating back to 1960 . NOI/NPRM at 5 and note 31. The Act's letter and intent to reasonably inform viewers of the identity of a sponsor, and the fact that a programmer has been paid by a commercial entity to broadcast a certain message, has not changed. What has changed is the increasingly prevalent use of embedded advertising as an industry practice, as the NMP itself acknowledges, and the decreasing likelihood that the average viewer will see a sponsorship disclosure that appears briefly during or after the credits to a program. Modernizing the regulatory requirements to ensure a disclosure that will actually be "read or heard by an average viewer" does not violate the First Amendment rights of commercial network providers and programmers any more than the Act itself does. As we show below, the NMPs argument that embedded advertising does not constitute commercial speech for First Amendment purposes lacks merit. The further argument that even if embedded advertising is commercial speech, it is "inextricably intertwined" with non-commercial speech and therefore entitled to the same level of First Amendment protection, also fails. Finally, once embedded advertising is properly
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Id. at 5-6.

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analyzed as commercial speech under the test articulated in Zauderer v. Office of Disciplinary Counsel, 471 U.S. 626 (1985), for mandatory disclosures in the advertising context, it is clear that requiring effective disclosure is reasonably related to the important government interest announced and codified decades ago by the Act. A. The Argument that Embedded Advertising Does Not Constitute Commercial Speech Lacks Merit.

The NMP asserts that the Commission "overlooked some major constitutional issues involving the applicable standard of First Amendment scrutiny" by failing to consider that embedded advertising is entitled to the stricter scrutiny afforded regulations of noncommercial speech. The NMP argues that integration of a brandname product into the storyline of a fictional entertainment program, in exchange for valuable consideration from the maker of that product, and for a motivation that is purely economic in nature, does not constitute commercial speech. This argument is simply a non-starter. Providers rely solely on Bolger v. Youngs Drug Products, 463 U.S. 60, 66 (1983), for their contention that commercial speech is speech which does "no more than propose a commercial transaction." NMP Comments at 45. This is a striking misstatement of the law. Bolger merely stated that the core notion of commercial speech is that which proposes a commercial transaction, but went on to hold that the informational pamphlets at issue in that case constituted commercial speech because they were advertisements; mentioned a specific product; and had an economic motivation. 463 U.S. at 66-67. Each and every one of these factors is present here. Embedded advertisements are just that36; they, by definition, refer to a specific product; and they are concededly undertaken for an economic motivation (as evidenced by the NMPs extended discussion of the economic necessities which force them to resort to the practice). Moreover, Bolger specifically clarified that these three characteristics are not even necessary to conclude that speech is commercial. "Nor do we mean to suggest that each of the characteristics present in this case must necessarily be present in order for speech to be commercial." Id. at 68. In fact, advertising disclosures are uniformly treated as regulations of commercial speech: see Section C, infra. The NMP furnishes no other authority for their assertion that
Providers furnish no authority, either judicial or regulatory, for their contention that embedded advertising is not advertising. Instead, they attempt to analogize embedded advertising to corporate underwriting of public radio and television programming. Yet the integration not only of product names, but also product images and product characteristics, into the content of a program, as described at length in WGAW's opening comments, is a far cry from public broadcasters' practice of mentioning a sponsor along with their product or products at the end or beginning of a program. In any case, the NMP furnishes no authority for the proposition that even such a practice does not constitute advertising, relying merely on Congressional permission of such "enhanced underwriting" by public broadcasters, and on the FCC's comment in another context that such enhanced underwriting need not constitute advertising "in the absence of comparative or qualitative language." NMP Comments at note 52. Indeed, the practices described in WGAW's opening comments clearly encompass qualitative language, and thus even under the NMPs strained analogy, constitute advertising.
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embedded advertising is not commercial speech. B. The NMP Incorrectly Contends that Embedded Advertising Should Not Be Treated as Commercial Speech Because It Is Inextricably Intertwined with Non-Commercial Speech.

Providers argue that because embedded advertising is inextricably intertwined with non-commercial speech, it is entitled to the same level of First Amendment protection as the speech which surrounds it. This is not only false, but adds insult to injury in the eyes of the writers WGAW represents. Obviously, there is nothing intrinsic about the embedded advertising that corporate departments increasingly insist that their writers insert into their artistic product. On the contrary, WGAW's opening submission documents artists' hostility to the use of embedded advertising in their work product, with 73% in a survey of WGAW members opposing the practice of product integration per se. WGAW Comments at 4. Indeed, one creator of a popular sitcom testified before Congress that on his program, so-called product integration became a problem as "production entities started making product placement deals for items that were not initially intended to be part of a scene. Writers tried to find ways to incorporate the product after the fact, but in certain instances the actors ultimately were required to use props that made them appear awkward . . . Product integration is a level of corporate pressure that impinges upon . . . free expression over the airwaves . . ." Id. Obviously, the commercial speech in question is not intrinsically intertwined with the artistic speech that is its context. On the contrary, embedding is a post hoc intrusion that does violence to the artistic process and is actively resented by the creators of the protected artistic speech. That the NMP then attempts to leverage the artistic nature of the speech that embedded advertising distortsin the teeth of opposition from the creators of that speechin an attempt to shield their commercial activity from disclosure, is pure chutzpah. The NMPs reliance on Riley v. Nat'l Federation of the Blind of North Carolina, 487 U.S. 781, 796 (1988), does not alter this conclusion. There, the speech in question, solicitation of charitable donations, was found to be inextricably intertwined with noncommercial "informative and perhaps persuasive speech" even if it would be deemed commercial standing on its own. The Court relied upon a line of cases specific to the regulation of charitable donations and their solicitation, a circumstance that is entirely inapposite here. Further, a request for a charitable donation truly is intertwined with the informative, persuasive, and sometimes even political speech that accompanies and motivates it. By contrast, for the reasons already set forth, there is absolutely no natural connection, much less an "inextricable" one, between the commercial speech at issue here and the artistic speech upon which it is unwillingly and often awkwardly grafted. As the Court explained soon after deciding Riley:

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Riley involved a state-law requirement that in conducting fundraising for charitable organizations (which we have held to be fully protected speech) professional fundraisers must insert in their presentations a statement setting forth the percentage of charitable contributions collected during the previous 12 months that were actually turned over to charities (instead of retained as commissions). In response to the State's contention that the statement was merely compelled commercial speech, we responded that, if so, it was inextricably intertwined with otherwise fully protected speech, and that the level of First Amendment scrutiny must depend upon the nature of the speech taken as a whole and the effect of the compelled statement thereon. . . . By contrast, there is nothing whatever inextricable about the noncommercial aspects of these presentations. No law of man or of nature makes it impossible to sell housewares without teaching home economics, or to teach home economics without selling housewares. Nothing in the resolution prevents the speaker from conveying, or the audience from hearing, these noncommercial messages, and nothing in the nature of things requires them to be combined with commercial messages. Board of Trustees of State University of New York v. Fox, 492 U.S. 469, 474 (1989) (emphasis added). Identically, "no law of man or nature makes it impossible" to air an entertainment program without embedding commercial advertising in it; if anything, the laws of nature militate in the opposite direction. Nothing "in the nature of things requires [entertainment programs] to be combined with commercial messages." C. Under the Applicable Constitutional Test, Modernization of the Disclosure Requirements Is Clearly Constitutional.

Regulations requiring effective disclosure of sponsorship information for embedded advertising easily pass the test the Supreme Court has established for mandatory disclosures. First, the Commission has unfettered discretion to regulate the instances of embedded advertising that are overtly misleading. Second, even if embedded advertising is not deemed per se misleading, effective disclosures would clearly advance the substantial government interest in ensuring the viewer's right to know that (and by whom) he is being persuaded, and would be no more extensive than necessary to serve that interest. "The States and the Federal Government are free to prevent the dissemination of commercial speech that is false, deceptive, or misleading . . ." Zauderer v. Office of Disciplinary Counsel, 471 U.S. 626, 639 (1985). As the WGAW noted in its opening comments, embedded advertising is a form of "stealth advertising" where consumers do not know that they are "being sold." WGAW Comments at 4-5. Thus, the analytically unique feature of embedded advertising is that it is the very absence of the disclosure that renders it

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misleading. Indeed, the very fact that sponsorship disclosure is already required by 317 of the Act signals Congress' concern that undisclosed sponsorship even without product integration is inherently misleading. Often, the courts contemplate outright bans on misleading speech (e.g., certain forms of attorney solicitation). 471 U.S. at 638. Here, in contrast, the remedy for the misleading nature of the speech in question is both simple and minimally invasive: WGAW is not asking for an outright ban, but merely for an effective disclosure of sponsorship. As detailed in its opening comments, the current disclosures are ineffective. A simultaneous crawl across the bottom of the screen is necessary to inform the average viewer, and thus necessary to neutralize the otherwise misleading nature of the practice. Even if embedded advertising is not deemed inherently misleading, however, the regulatory modernization endorsed by WGAW easily passes muster under the Zauderer test . The governmental interest motivating improved regulation is clear. As the Commission has stated, its sponsorship identification rules are "designed to protect the public's right to know the identity of the sponsor when consideration has been provided in exchange for airing programming." NOI/NPRM at 4. Further, the Court has clearly articulated "the State's interest in preventing deception of consumers" when it comes to mandatory disclosures. 471 U.S. at 651. The Acts aim to protect the publics right to know clearly fits within this definition. This interest is not paternalism, as the NMP urges, but a long-accepted and judicially recognized interest in requiring consumer disclosures.37 The NMP ignores the fact that the Supreme Court has already clearly articulated the nature of their constitutional interest in avoiding regulation, the nature of the governmental interest in imposing it, and the relationship between the two: Because the extension of First Amendment protection to commercial speech is justified principally by the value to consumers of the information such speech provides . . . appellant's constitutionally protected interest in not providing any particular factual information in his advertising is minimal. Thus, in virtually all our commercial speech decisions to date, we have emphasized that because disclosure requirements trench much more narrowly on an advertiser's interests than do flat prohibitions on speech, 'warning[s] or disclaimer[s] might be appropriately required ... in order to dissipate the possibility of consumer confusion or deception.' Zauderer, supra, 471 U.S. at 651 (emphasis added). The NMP never addresses or suggests any way in which the value to consumers of the information provided by embedded advertising the principal justification for First Amendment

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protection of commercial speech is adversely affected by more effective disclosures, even though the Supreme Court has identified this consumer value as the primary foundation for the constitutional protection they would now invoke on their own behalves. Effective disclosure requirements increase, rather than decrease, the information the consumer receives, and therefore the interest justifying First Amendment protection is actually better served by appropriate and effective disclosures. Because the "appellant's constitutionally protected interest in not providing any particular factual information in his advertising is minimal," there are few or no interests to be balanced against the governmental interest justifying disclosure. Further, effective disclosure directly serves the governmental interest in protecting the publics right to know and in preventing the deception of consumers. The Court has made clear that disclosure requirements are constitutional and an advertisers rights are adequately protected as long as disclosure requirements are reasonably related to the States interest in preventing deception of consumers. 471 U.S. at 651. The Court outright rejected the suggestion that it should subject disclosure requirements to a strict least restrictive means analysis under which they must be struck down if there are other means by which the States purposes may be served. Id. Modernization of the Commissions regulations such that an average viewer is able to actually see the disclosure, and thereby know that a particular portion of programming is in fact an embedded advertisement, is more than reasonably related to the state interest in protecting the consumers right to know that someone is attempting to persuade him (and who that is) and in avoiding deception. While some truly onerous disclosure requirements (such as a health departments requirement that half of the space on a restaurant menu be consumed by the raw shellfish warning, NMPs Comments at 63) may be overly burdensome, numerous recent decisions have affirmed compelled disclosures under Zauderer. See, e.g., United States v. Schiff, 379 F.3d 621, 631 (9th Cir. 2004) (upholding order requiring peddlers of tax advice to post a copy of an injunction issued against them on their web site); Nat'l Elec. Mfrs. Ass'n v. Sorrell, 272 F.3d 104, 115 (2d Cir. 2001) (upholding a requirement that lightbulb manufacturers disclose the mercury content of their products because Zauderer, not Central Hudson Gas & Electric Corp. v. Pub. Serv. Comm'n . . . describes the relationship between means and ends demanded by the First Amendment in compelled commercial disclosure cases); United States v. Wenger, 292 F. Supp. 2d 1296, 1304 (D. Utah 2003) (concluding that the disclosure requirement of 17(b) of the Securities Act of 1933 is constitutional because "[t]hough Central Hudson applies to statutes that restrict commercial speech, Zauderer v. Office of Disciplinary Counsel discusses the distinction between statutes mandating disclosures versus statutes prohibiting speech"); Bellsouth Adver. & Publ'g Corp. v. Tenn. Regulatory Auth., 79 S.W.3d 506, 520 (Tenn. 2002) (upholding

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regulation that compelled a telephone service provider to list its competitors on the cover of the phonebook because "under current law-as announced in Zauderer-as long as the disclosure requirement is reasonably related to the state's interest in preventing deception of consumers, and not unduly burdensome, it should be upheld"). VIII. Conclusion For all of the reasons stated above and in our initial submission, the Commission should recognize the need to modernize existing disclosure rules, and should require simultaneous disclosure as the only means to effectuate the statutory purpose of providing viewers the information necessary to know when they are being advertised to and by whom.

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Appendix 1: Feature Films Exhibited on Los Angeles Broadcast Affiliates in 2007 Source: Writers Guild of America, West Credits and Television Monitoring Service Number of Runs in 2007 1 1 1 1 1 2 1 1 3 1 1 2 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 3 1 1

Title 102 Dalmatians 13 Going on 30 After Alice Along Came Polly Along for the Ride Anchorman: The Legend of Ron Burgundy Anger Management Austin Powers in Goldmember Baby Boom Bad Boys II Blue Moon Breaker! Breaker! Bringing Down the House Bruce Almighty Bruno Cast Away Catch Me if You Can Charlies Angels: Full Throttle Cheaper by the Dozen Chicago Christmas with the Kranks Confessions of a Teenage Drama Queen Cooley High Coyote Ugly Daddy Day Care Dancer, Texas Pop. 81 Die Another Day Dirty Work Dodgeball: A True Underdog Story Don Juan Demarco

Station KABC KTTV-FOX KABC KNBC KABC KABC KTTV-FOX KTTV-FOX KABC KTTV-FOX KABC KABC KABC KTTV-FOX KABC KABC KABC KABC KTTV-FOX KNBC KTTV-FOX KABC KABC KABC KTTV-FOX KTTV-FOX KCBS KABC KTTV-FOX KCBS

Year of Release 2000 2004 1999 2004 2000 2004 2003 2002 1987 2003 2000 1977 2003 2003 2000 2000 2002 2003 2003 2002 2004 2004 1975 2000 2003 1998 2002 1998 2004 1995

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Double Team Dr. Seuss The Cat in the Hat Elf Endless Love Finding Nemo Forrest Gump Freaky Friday Gun Shy Gunshy Harry Potter and the Sorcerers Stone Head of State Highwaymen Hollywood Homicide How the Grinch Stole Christmas Ice Age Igby Goes Down Its a Wonderful Life King of the Corner Lara Croft: Tomb Raider Legally Blonde 2: Red, White and Blonde Lemony Snickets A Series of Unfortunate Events Looking for an Echo Madagascar Meet the Fockers Men in Black II Million Dollar Baby Minority Report Miracle on 34 Street Money Talks Monsters, Inc. Mortal Kombat Annihilation Most Wanted National Treasure Oceans Twelve
th

KTTV-FOX KABC KCBS KABC KABC KABC KABC KABC KABC KABC KABC KTTV-FOX KTTV-FOX KABC KTTV- FOX KTTV-FOX KNBC KABC KTTV-FOX KABC KABC KABC KABC KABC KTTV-FOX KCBS KABC KNBC KTTV-FOX KABC KTTV-FOX KTTV-FOX KNBC KCBS

1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 1 1 1 1 1 2 1 2 1 1 1 1 2 1 1 1 1 1

1997 2003 2003 1981 2003 1994 2003 2000 2000 2001 2003 2003 2003 2000 2002 2002 1946 2004 2001 2003 2004 2000 2005 2004 2002 2004 2002 1947 1997 2001 1997 1997 2004 2004

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Old School Pearl Harbor Pirates of the Caribbean: The Curse of Black Pearl Poltergeist II Pumpkin Robocop Rocky IV Run Ronnie Run! Scary Movie School Daze Seabiscuit Shark Tale Shrek Shrek 2 Shrek the Halls Ski School 2 Spider-Man 2 Spy Kids 3: Game Over Surviving Christmas The Bourne Supremacy The Animal The Assignment The Crocodile Hunter: Collision Course The Day After Tomorrow The Family Man The Forgotten The Haunted Mansion The Incredibles The Italian Job The Lost World: Jurassic Park The Notebook The Pacifier The Polar Express The Princess Diaries

KABC KABC KABC KABC KTTV-FOX KABC KABC KTTV-FOX KNBC KABC KABC KABC KNBC KABC KABC KABC KTTV-FOX KABC KABC KNBC KTTV-FOX KTTV-FOX KTTV-FOX KTTV-FOX KNBC KTTV-FOX KABC KNBC KNBC KTTV-FOX KCBS KABC KABC KABC

1 1 2 2 1 2 2 1 2 1 1 1 1 1 2 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1

2003 2001 2003 1986 2002 1987 1985 2002 2000 1988 2003 2004 2001 2004 2007 1995 2004 2003 2004 2004 2001 1997 2002 2004 2000 2004 2003 2004 2003 1997 2004 2005 2004 2001

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The Princess Diaries 2: The Royal Engagement The Real Howard Spitz The Rookie The Santa Clause 2 The School of Rock The Sixth Sense The Sound of Music The Ten Commandments The Terminal True Heart Two Hands Two Ninas Up the Creek White Chicks Win a Date with Tad Hamilton X2: X-Men United

KABC KABC KABC KABC KTTV-FOX KABC KABC KABC KABC KABC KABC KABC KABC KTTV-FOX KABC KTTV-FOX

1 1 1 1 1 1 1 1 1 3 1 1 1 1 1 1

2004 1998 2002 2002 2003 1999 1965 1956 2004 1997 1999 1999 1984 2004 2004 2003

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