For as long as most of us can remember, there have been advertisements on TV. It's these advertisements that allow broadcasters to purchase content from producers, and broadcast the content for free to your TV set.
Audiences are at the mercy of broadcasters. You watch content when you say you can, and you're forced to deal with 4-minute (sometimes more!) advertisement breaks. If the broadcaster wants to delay your favourite weekly show by one week because the grand final of the tennis is on (as is very frequently done in Australia), you're at their mercy. If the broadcaster decides to air a show one year after it's already been aired somewhere else in the world, that it's not worth the investment to purchase content in high definition, you're at their mercy. And clearly audiences in Australia and the UK (the world's top two countries when it comes to torrenting TV serials) won't stand for it (Source: 24 reasons why TV piracy is soaring).
Over the last few years, there's been a huge shift in the TV-content landscape. With the advent of cheap fast Internet connections, users can view TV shows before they are aired in their country, advertisement free, and in high definition. Suddenly, the broadcaster (and with them, advertisers) are being cut right out of the picture, because of the years of abuse audiences have had to put up with. Content is essentially been distributed directly from the producer to the audiences.
While it's all well and good to say, "screw the advertisers!", it's essentially the advertisers that pay for the production of the content. Without them, you would have to pay for the content, in a similar way that you have to pay for music (think iTunes). Advertisers and producers are being forced to come up with new business models to deal with the change.
Studies show that the demographic that is consuming content off Bittorrent is exactly the demographic they want to target: 18-25 year olds, with a high disposable income (Source: How Battlestar Galactica Killed Broadcast TV). So how can advertisers give their money to producers, have their products promoted amongst this demographic, and audiences still receive free content? Easy. Product placement.
Perhaps the most successful (and widely known) product placement in content was the Nokia cellphone in the movie "The Matrix". Nokia must have payed millions for it. Why have advertisers decided that product placement is no longer worthwhile, compared to a 30-second advertisement? Product placement can't be removed from content, and the advertising is likely far more effective. Audiences are far less likely to reject having a Ford in every scene as opposed to a 4-minute advertisement break.
Let's take a current example, and see how easy product placement would be. In the series "The OC", the Cohen family have a Range Rover. The vehicle is always referred to as "the car". For a few million dollars, Josh Schwartz will likely be very open to the idea of changing every reference of "the car" to "the rover".
The only danger I see is the overcommercialisation of content. Undoubtedly, a money-hungry writer will have a McDonalds in every scene, and the characters will constantly be drinking Pepsi-Cola. The key to good advertising is subtlety.
Comments
The problem with product placement is it only works for products from big name companies or brands. It's easy to get the Chohens to refer to the car as their "brand new Range Rover with optional leather seats for only $59 990" but not as easy to work in "Hey, let's go down to John's Leather Goods Store in Fyshwick ACT or Nowra NSW for their 50% off sale today only"
I don't think that much will change. In 10 years time there will still be channels much like we know them today. They will still have a set schedule, with their own local content and ads. Why? TV is instanenous. I turn the TV on and the shows start streaming in. I can change the channel and straight away I have the next channel. Compare that to the internet or bittorrnet. It's not instanenous. I have to wait for the show to buffer or worse I have to wait for enough people to share the show.
What will change is that content producers will utiilise bittorrent to serve their shows. The way I reckon it should work is: They will let the channels show the show first and then the next day the show will be available on the bittorrent stream. You can buy a higher quality version with no ads for a certain price or you can watch a lower quality version with ads. The ads can be served much like Google does with AdWords - targeted to the viewer and their location.
You're right, product placement leaves no room for local producers, such as John's Leathergoods Store in Fyshwick. But research shows that traditional forms of advertising aren't working anymore -- because we've been exposed to it far too much.
Back in the 1960s, three advertisements would get you 80% "reach" (I assume this is the advertisement's affect on the consumer). Today, it takes 117 advertisements to have the same effect (Source: Branding a challenge in cluttered world).
An excellent example here is banner ads. What was the last banner ad you saw and remembered? Today, most of the time you see a banner ad, your mind automatically labels it as a banner ad, and ignores it.
There's many other ways to promote a local business, such as local sponsorship, community events and word of mouth (how many people can I deter from using Netspeed as their ISP?). Spending your entire marketing budget on TV advertisements just doesn't make sense anymore in this day and age.