Philip Morris Move Gives New Meaning To 'Burn Rate' - Philip Morris Inc., advertising - Brief Article - Statistical Data Included

But the publisher of EW--one of the hardest hit--believes the decision to pull ads will be temporary

The key question for magazine publishers following the decision by Philip Morris to suspend cigarette advertising in 42 magazines is whether the rest of Big Tobacco will follow its lead. The decision will cost the industry more than $130 million in lost advertising revenue.

"If you look at the tobacco industry as a whole, one company pulling out is not going to drive magazines to bankruptcy," says Roberta Garfinkle, director of print media in the New York office of McCann-Erickson. "But if others follow suit, it will have significant ramifications."

Dave Morris, publisher of Entertainment Weekly, one of the hardest hit titles, doesn't think they will. "I've talked to the other tobacco companies and they say they don't plan to do the same."

R.J. Reynolds, the second largest tobacco company in the United States, after Philip Morris, is sticking with its existing policy of advertising only in magazines with at least 66 percent adult readership. RJR says that "study after study has shown that peer and family influences lead kids to smoke, not the appearance of cigarette advertising in magazines."

The surprise announcement by Philip Morris on June 5 was the result of pressure from the National Association of Attorneys General (NAAG) to stamp out tobacco ads in magazines with more than 15 percent youth readership (ages 12-17) or more than two million readers under 18. The tobacco giant will pull the ads starting in October 2000. Asked to comment, the Magazine Publishers of America told FOLIO: that it has no position on the decision by Philip Morris.

The figures for youth readership were taken from commercial marketing surveys that tracked the popularity of various magazines among young people.

The investigation into youth readership was spearheaded by Christine Gregoire, attorney general for Washington State and NAAG president, who said the attorneys general are focused more on who is reading the magazines, and not so much on who is subscribing to them.

The attorneys general were particularly concerned about the findings in a study by the Massachusetts Department of Public Health. The study showed that cigarette advertising expenditures in magazines with more than 15 percent youth readership rose $30 million during the first nine months of 1999, to $119.9 million.

The increase followed the $246 billion settlement reached in November 1998 between the tobacco industry and the states to resolve suits aimed at recouping Medicaid costs spent on sick smokers. As part of the settlement, the industry vowed not to target youths in the sale of cigarettes.

Time Inc. was seriously burned by the smokeout, with Sports Illustrated, People and Entertainment Weekly losing a combined $50 million in cigarette ads.

Sports Illustrated is number one on the list of big losers. SI ran $20.9 million of Philip Morris advertising last year, which was 40.4 percent of its total cigarette ad, revenue and 3.4 percent of its total ad dollars. Indeed, Philip Morris has been a prominent advertiser in SI ever since the magazine's 1954 launch.

EW pulled in $11.9 million in cigarette advertising from Philip Morris last year, which was 51.8 percent of the magazine's cigarette advertising in 1999 and 5.8 percent of its total ad revenue.

Even so, Dave Morris played down the Philip Morris decision. "It's not a huge problem for us," he says. "I'm looking at it as a suspension, not a forever cancellation." He's hopeful that EW can get below the 15 percent youth-readership cutoff in the future. Pointing to the heart of the matter--as far as publishers are concerned--Morris says that EW has 18 percent youth readership, but only 4 percent of the magazine's subscribers are under 18. "We're on the cusp, and we'll be looking at our database," he says. "If there's a way for our database to segment our readers, we'll do that. But right now we don't have that capability. Eight or nine years ago this would have hurt us more than today. But diversifying and getting a wider ad base has helped us."

Like many of the 42 publications on the list, Better Homes and Gardens disputes the youth-readership figures used by Philip Morris. A spokesman for the Meredith Corporation says the Philip Morris decision will have "no material financial impact" on BH&G, even though the magazine stands to lose $7 million a year in cigarette advertising.

Some magazines could possibly benefit from the smokeout. Philip Morris might decide to redistribute the ad money to magazines with fewer youth readers. Another scenario, one not so appealing to publishers, would have Philip Morris redirecting the freed-up ad dollars to direct marketing.

Drew Edmondson, Oklahoma attorney general and chairman of the NAAG enforcement subcommittee, says that while the Philip Morris decision may negatively affect publishers financially, he's not about to take up a collection for them. "All I'll say is that since billboard cigarette advertising came down in April 1999,1 haven't been seeing a lot of empty billboards around. Those back pages will get filled."

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