Arts: As seen in a cinema near you

Product placement in films has become big business. A new Bond caper can expect to rake in as much as $10m at $30,000 a shot. But which comes first - the movie or the merchandising? In Hollywood it's increasingly hard to tell.

It had to happen sooner or later: irony arrived in American movies... in the form of product placement. It's the latest in a long line of clever Hollywood ploys, and one that endlessly ratchets up exploitation of its own product. With George Lucas set to make a cool $1bn from the merchandising of The Phantom Menace alone, it's a business that's beginning to dwarf not only the nuts and bolts of mere movie-making but all other considerations. But should we care if our movies become little more than celluloid malls with a story thrown in?

Ron Howard's Edtv - the blue-collar Truman Show lookalike movie where the eponymous Ed (Matthew McConaughey) has Cable TV surveillance 24 hours a day - marks the apogee of sly, invasive product placement tactics. It perfects ironic placement on no less than three levels.

On the one hand there's the straightforward, in-your-face variety: McConaughey and family all chow down on highly visible boxes of KFC chicken in their kitchen. But wait - McConaughey's feckless elder brother (Woody Harrelson), scorns the stuff and tries to make his family eat more healthily. It's clearly an in-joke dreamed up by the director: we all know Woody Harrelson is a fitness freak who espouses macrobiotic food in real life (though there's just enough doubt about his character's judgement so as not to ruin the placement by calling it junk food).

From there we enter ever more convoluted territory. When McConaughey begins his stint with 24-hour camera crews, the fictional TV company moves a real commercial-sized Coke machine into his fictional home in order to product place the ubiquitous soft drink. There are several extraordinary, ostentatious shots of this big glowing monster during the latter part of the movie - and when it is removed, its presence is, once again, clearly flagged.

On top of this there is an even more arcane level of placement; whenever the film cuts to the hand-held "TV transmission" pictures of the Edtv show, ticker-tape ads scoot across the lower part of the screen. They're all for real products - from Liptons to Yahoo to Saturn cars. During one sexually charged scene, an ad for Trojan condoms swims across the picture like a used tissue on a tidal flow of commercial nuance.

Coca-Cola surely gets the prize for the most product placements of all time. Christopher Fowler, co-owner of the successful Creative Partnership film marketing agency (celebrating its 20th birthday this week), told me: "I remember being astonished by the final scene in Volunteers where Tom Hanks sits on a crate of Coke, opens a can, and all his problems are solved. That's the punchline of the whole movie! It seems so crude now; techniques are so much more sophisticated since it reached a nadir in the Seventies with Bond movies like Moonraker, with their brazen endorsements of BA and makes of watch and champagne. But now the Bond franchise is much more canny, less hung up on being stylish and more likely to go after something like McDonalds". A modern Bond movie can expect to make $10m from product placements at $30,000 a shot.

Period films might appear safe havens in this respect, but not according to Tiffany Whittome, one of the few product placement specialists who would actually speak to me. She has supplied Jameson Whiskey for the currently filming Norah - the Joyce biopic featuring Ewan McGregor. "Alcohol is always easy to place in period movies because the designs don't change much; cigarettes would be too, but there are too many legal problems".

Where will it end? Fowler, whose company designed campaigns like that for Trainspotting, tells me he's seen the George Lucas list of "endorsement opportunities" connected to The Phantom Menace. It's slightly mindbending by all accounts, worked out with a vaguely paranoid and surreal intricacy that one suspects overshadows the energy put into making the actual, boring old film. Fox has dreamed up an astonishingly non-ironic (and, sadly, secret) list of products they will permit to be associated with each character. The possibilities are mind boggling. Will Darth Vader be the new Milk Tray man? Will R2D2 whizz round the kitchen floor with a bottle of Flash? Will Natalie Portman's teenage queen dab her acne with Clearasil? "There's this new character called Jar-Jar," reveals Fowler, referring to the streetwise alien with an absurd Jamaican accent already dubbed the most irritating thing about the film. "I believe that the right company would be allowed to create `an official Jar-Jar three-bean salad' for the right fee paid for licensing, of course."

The idea that someone actually sat down and decided that a three, not a two or four bean salad, was appropriate for this character, is pretty near unfathomable. Hollywood clearly has learnt a lot from the influx of product-savvy directors in the late Seventies who cut their teeth shooting commercials, notably British talents like the Scott brothers and Alan Parker. Only recently Tony Kaye and Jake Scott - son of Ridley - have followed the same post-advertising trajectory from Nike trainers to personal trainers, as have the directors of Waking Ned and the upcoming hip-hop movie Belly.

With such hard-nosed directors at the helm, Hollywood has woken up to commercial vistas undreamt of by the likes of Louis B. Mayer. And by the time Disney reversed a serious decline in its fortunes in the early Eighties by ruthlessly strip-mining its own brand, everyone had cottoned on. Merchandising can now end up driving the whole process.

Films like Toy Story give you the feeling that the merchandising angle was dreamt up first. But for bare-faced, consumer-culture brazenness, Spielberg's Jurassic Park takes the prize: one scene actually features a toy shop selling Jurassic Park merchandising (step into the foyer, folks and buy a velociraptor).

We're now completely used to the endless twistings and turnings of "ironic" post-modern culture. We're even used to seeing reverse product placement, firms trying to produce Duff beer (a spoof beer in the Simpsons) in real life or the imaginary sweets in Charlie and the Chocolate Factory from whistling lollipops onwards being reproduced. Even Fly Fishing by JR Hartley was cynically contrived for the Christmas market after its fictional counterpart was endlessly rehearsed in a whimsical Yellow Pages ad.

Commercialism is a fact of life (but not the only fact, despite Alan Parker's pernicious dictats on the subject) that is here to stay. Hollywood will find ever more ingenious ways to sell itself because that is what Hollywood is about. Multi-media DVD and the Internet offer even more effective means of self-exploitation. So, don't mind the three-bean salad or the ads within films within films. The true irony about product placement is that we've learnt to accept it as a necessary, even faintly engaging practice.