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Advertising in videogames has been prevalent for a number of years, but often it's been unsubtle to the point of outrage - the McDonalds-themed Mick and Mack Global Gladiators on Mega Drive being a case in point.

The bottom line is, however, that product advertising can play a crucial role in the funding of projects which simply would not otherwise be feasible. But in this media savvy age where gamers will simply switch off in exploited disgust at product placement, what is the solution?

Recently formed UK outfit Hive Partners believes it has part of the answer with what it terms 'situation placement' - finding an interactive purpose in a game for consumer brands which serve both the gamer and publisher/developer effectively.

The first fruits of the labour have already featured in Rebellion's Dredd Vs. Death and Team 17's Worms 3D, where in the latter the energy drink Red Bull is an unobtrusive power-up, which makes contextual sense rather than being a shameless plug.

Crucially, Hive's initiative should be of huge benefit to smaller software development companies, enabling a valuable alternative source of income which should facilitate riskier concepts and more original games in the long run.

For a fuller picture of the potential impact of 'situation placement' in gaming, we spoke with former Bitmap Brother and CEO of Hive Ed Bartlett:

How did Hive Partners come about?

Bartlett: Hive was originally established in September of 2003 so that I could concentrate 100 percent on pursuing new game development related opportunities without the constraints of working for a single company.

Although the majority of my industry past has been game-design based, I spent considerable time in my most recent role as Business Development Director for The Bitmap Brothers looking at new and viable ways as an independent developer of getting a game to market, as well as developing it as a brand from day one and looking for significant new revenue streams that could be generated from a project.

The next logical step was to look at how consumer branding and making very specific and targeted brand partnerships could help both with funding, and also with the profile and positioning of the game.

After explorative talks with a few notoriously proactive brands I came to the conclusion that it was some years from the time where a brand would fund an entire pre-production process without any publishing deal in place, but more importantly I also discovered that this was an area that was of huge interest to a great number of brands, and could provide a valuable new creative and financial resource for both the videogame sector and for the consumer brand and marketing world.

It appears your core focus has become 'interactive product placement' in games. Can you explain what this entails?

Bartlett: We cover the full range of possible videogame-related branding and sponsorship opportunities including the more traditional static environmental and billboard branding that gamers have seen for years in sports and racing titles, but our core focus is on a new range of opportunities termed 'situation placement', where we work much more intensely with the brands and the developers to create a tailored gameplay scenario or 'situation' for the brand or product to sit in.

Although technically static branding is still interactive product placement due to the fact that it is within an interactive environment, situation placement is where the gamer gets to experience a product first-hand, and in a considered gameplay context.

This would be what we've already seen in Dredd Vs Death and Worms 3D with Red Bull?

Bartlett: Correct. In both cases we've worked extremely closely with the game developers and the brand to create totally seamless implementations for the product. Actually those two placements side-by-side make a good case for the huge variety of possibilities available to brands in this sector: polar opposite game genres and target consumer demographics, completely different product integrations (one as a performance-enhancing power-up and the other as a cleverly-themed game mission) but both with the same product. Further integrations we are currently working on will continue to show the almost endless range of possibilities.

Since titles like the shamelessly McDonalds-themed Global Gladiators on Mega Drive gamers have become increasingly resistant to advertising. How can you be sure situation placement isn't going to turn people off in the same way?

Bartlett: Consumers live with static branding in practically every waking minute of their lives, and even with the advent of so-called ambient media, it just doesn't have the same impact anymore. Consumers have developed a naturally inbuilt propensity to screen out static advertising, and a recent consumer study by mediaedge:cia even went so far as to report that 40% of UK consumers actively avoid advertising.

With situation placement we make the brand or product an active part of the gameplay experience, which not only guarantees a captive audience, but uniquely it enables us to actively demonstrate to the consumer the qualities and the benefits of a product.

It's critical here to understand the difference between passive demonstration such as watching a sports person or a film character interacting with a product on a screen or in a magazine, compared with an active experience where the consumers themselves use the product.

At the most basic physiological level, this extra sensory input helps the brain make those vital object recognition links much more effectively, but even on a more nebulous brand recall level, being able to integrate a product so specifically into such an engrossing medium as videogames, particularly given the range of demographic profiles we have as gamers today, is a dream come true for most brand managers. The all-important 15-35 male consumer has simply dropped off the radar for many.

Why should gamers be excited about what you are doing?

Bartlett: The gamer has been our first consideration from day one. To put it bluntly, if you piss the gamer off you risk potentially permanent damage to the host brand, the partner brand and ultimately the industry as a whole. It's very dangerous for publishers and brands to be 'dipping their toes' into this market as they could easily do more damage than good. As lifelong gamers, and award winning ex-developers ourselves, we simply wouldn't undertake a placement that ultimately proved detrimental to the game experience.

Our immediate aim is to create compelling and complementary brand-funded additional game content, but our longer term aim is to drive sector growth to a stage where publishers can almost guarantee a certain amount of revenue from product placement and brand partnerships from concept stage, allowing them to take on more commercially risky, but creatively innovative products that are so lacking in this consumer-driven market.

I can also foresee a point in the near future, particularly next-gen and with the gradual proliferation of broadband and online where we will see 'free' brand-subsidized add-on content and even standalone titles.

How do you see your strategy benefiting the UK games development scene particularly, which has suffered numerous studio closures over the last couple of years?

Bartlett: As I've said, this all came out of my work looking at reliable new revenue streams for developers and publishers, so this whole concept has been driven initially from a development perspective. It's no secret the UK development scene has had a rough 18 months, but from what we are seeing in our talks with the remaining development talent, I do think we have seen the worst and are entering slightly more stable times.

Obviously giving developers a significant new revenue stream is going to be a big help, but there are also numerous secondary benefits, including additional game content that would not have been possible without direct advertiser funding, increased consumer awareness of their products through mainstream brand partnerships and eventually I hope we will see publishers making faster and more creatively left-field commissioning decisions based upon these opportunities.

On the most part the UK industry has been very proactive and excited about what we are doing, but people, and in particular developers are always slightly suspicious of agencies, regardless of their backgrounds or credentials. I think the groundbreaking work we have done with Rebellion and Team 17 has gone a long way to allaying the fears of the minority, and I hope that will only continue when people see our forthcoming placements and partnerships.