Outdoor ads at risk in new cig pact

By Published on .

Almost 28 years after pulling ads from the broadcast media, tobacco companies' withdrawal from outdoor advertising may be imminent.

Eight state attorneys general negotiating with tobacco marketers to settle claims have agreed any pact signed will eliminate transit ads and outdoor signs except outside stores and gas stations where tobacco is sold, those familiar with the talks said.

Although tobacco products currently account for nearly 10% of outdoor advertising, there could be a silver lining to such new curbs, as outdoor media companies replace long-term tobacco ad contracts with higher-paying advertisers.


The withdrawal from outdoor is among four major marketing curbs expected to come out of any pact. Others would:

  • Limit brand sponsorships. Any pact is expected to require tobacco companies to give up some of their tobacco-related sponsorship activities. Some proposals reportedly being considered would allow companies to: sponsor series, like car racing competitions, but perhaps not teams; use limited event signage; sponsor a single activity. R.J. Reynolds Tobacco Co. would be able to continue its Nascar Winston Cup series and Philip Morris USA the Marlboro IndyCar activities, but it could force elimination of their other sponsorships.

  • Eliminate giveaways of merchandise featuring tobacco brands. Giveaways of jackets in Marlboro colors or sporting the Marlboro name, for instance, would be stopped, though companies still could give away designer jackets not displaying tobacco brand names.

  • End cartoon characters in ads, though tobacco marketers already have stopped using such characters in advertising.

    An agreement to accept the curbs and to fund as much as $1.5 billion in anti-tobacco ads within the states, as part of a nearly $200 billion-plus settlement of state cases, could be announced as soon as next week by the eight attorneys general who now are meeting with the top four tobacco companies.

    RJR and Brown & Williamson Tobacco Corp., which previously exited talks, returned a week ago.


    A deal depends on closing negotiations on some final sections, including what happens to "renegade companies" that don't sign on, then getting support from most of the nation's other state attorneys generals.

    Gary Black, an analyst with Sanford C. Bernstein & Co., said negotiators are near an accord, and he expects other attorneys general would agree to it.

    The pact needs no congressional approval. State attorneys general once before reached a broader agreement with tobacco companies only to see that agreement come apart in Congress.

    The proposed marketing curbs "will eliminate the capacity to introduce a new premium brand," said David Adelman, an analyst with Morgan Stanley Dean Witter & Co.

    LESSER BRANDS WOULD SUFFERWith fewer mechanisms to market brands, more-valuable shelf space and signage limited, tobacco marketers would cut support for lesser brands, Mr. Adelman said.

    "It won't be economical to do this for secondary and tertiary brands," he said, predicting brand trends now in place would continue, with Philip Morris' Marlboro growing along with Lorillard's Newport, while Brown & Williamson brands continue to lose share.

    The Outdoor Advertising Association of America estimated 8% of all outdoor advertising is for tobacco products. The common calendar-year contracts for those products could cease as soon as December, although marketers were continuing to renew contracts even as they negotiated with attorneys general.

    OAAA President Nancy Fletcher said the initial impact of deals in the first four states that settled with tobacco companies was somewhat less than anticipated.

    FINDING NEW REVENUEMedia companies that signed deals with tobacco marketers years ago at reduced prices, then saw those contracts renewed annually, have been able to replace the tobacco contracts with pacts paying higher rates, she said.

    "People have been making plans for this possibility for quite a while," Ms. Fletcher said. "There is a potential upside for the [outdoor] industry."

    The tobacco industry last year spent $236 million on tobacco-related sponsorships according to International Events Group's IEG Sponsorship Report, with $202 million in motor sports, $11 million in other sports and $23 million in music, arts and entertainment events.

    The publication said tobacco company sponsorships, while significant in auto racing, represent 4% of total sponsorship spending by companies and that tobacco company spending is down 12% since 1990.

    Copyright October 1998, Crain Communications Inc.

  • Most Popular
    In this article: