A Toast to Diversity
At the end of last year, the broadcast television subsidiary of General Electric, National Broadcasting Company (NBC), announced its plans to end the 54-year voluntary ban on liquor advertising with the sale of primetime commercial slots to British spirits firm, Diageo, which owns such brands as Smirnoff vodka, Tanqueray gin, Johnnie Walker whiskeys and Guinness. The move was triggered by the cirrhotic advertising market, which has heaved the revenues of media firms into the toilet and punished poorly rated network programs. In January, NBC announced that its 2001 revenues fell by 15 percent from the previous year.
As to be expected, the decision drew the ire of politicians, and several “public interest” organizations like the American Medical Association, the Center for Science in the Public Interest, and Alcoholics Anonymous, who argue that NBC has chosen profits over probity. Perhaps, but in the wake of the Enron scandal, NBC’s concern for the investment of its shareholders may be viewed as something of a blessing.
Two other groups have also aligned themselves against the decision: Beer manufacturers, who have used television to establish their brands and increase market share relative to hard-liquor, and magazine publishers, who stand to lose hundreds of millions in ad revenue if alcohol advertisers migrate their marketing to television. Both have been somewhat reticent in recent weeks so as not to disclose that they too are orientated towards increased profits, which could deflect some of the remaining moralistic indignation away from NBC.
Two months into the ads – thus far they have only been public service announcements such as anti-drunk driving spots – the outrage seems to be dissipating, or at least becoming less visible. No legislation has been introduced, and only Rep. Frank Wolf (R- Va.) seems interested in pursuing the matter. The reason for the relative contentment could be NBC’s strict regulations on the ads: No actors under the age of thirty, no ads airing before 9 pm, no symbol, animation, or promotional character, no drinking, no glamorization of alcohol, no “language intended to appeal to minors,” or intended to suggest that alcohol is some sort of rite of passage.
And the list goes on. In fact, NBC’s limitations are so proscriptive that Mothers Against Drunk Driving (MADD) has welcomed the ads, if the new restrictions are applied to beer and wine in the same fashion. “MADD is not against alcohol advertising as a whole or responsible drinking for adults over the legal drinking age of 21,” its press release on NBC’s decision reads, “our policies specifically oppose advertising that appeals to or targets youth or that encourages drinking and driving.”
MADD’s concern for underage drinking leads it to oppose beer commercials that feature sports celebrities, frogs, lizards, Cedric the Entertainer, and other famous promotional vehicles that could draw the attention of youths, rather than a Glennfiddich pitch aimed at middle age executives. MADD’s concerns, while logical, may be a bit exaggerated, as every teenager who feels compelled to shout “Wassssup” to his friends, probably doesn’t have the same urge to slug a six-pack of beer.
Alcohol commercials differ from ad campaigns launched by industry trade groups in that they do not promote a consumer good, but a particular brand. For example, the “Beef: It’s What’s For Dinner” and “Pork: The Other White Meat” spots are sponsored by the National Cattleman’s Beef Association and the Pork Producers Council, respectively, and attempt to bolster demand for their product at the expense of other meats and meat substitutes. There is no plan for a consortium of spirits manufacturers to come together to promote intoxicants generally, nor would antitrust regulators view such a move favorably.
In fact, as a study released last June by economists Jon P. Nelson and Douglas J. Young demonstrates, liquor advertising does not increase alcohol consumption, or alcohol abuse. Using data from the United States and other developed nations, Nelson and Douglas found that alcohol advertising, like advertising for nearly everything else, reinforces (or erodes) customer loyalty and invigorates price competition by increasing knowledge of alternative products. The study also found that increased aggregate liquor expenditures attributed to liquor commercials were caused by substitution for more expensive brands.
However, the regulation of hard-liquor commercials does not just hinge on whether they will contribute to the degradation of society through more pervasive intoxication, but involves questions central to the economics of media enterprises in a free society. In today’s media world, with over 200 channels available on satellite and digital cable, an average of 50 channels in the homes of 85 percent of Americans, a record number of magazines in circulation, and the rise of the Internet, the mass market that once characterized broadcast television is rapidly coming to an end.
Television – and nearly all media for that matter – provides a means for businesses to reach identifiable groups of potential consumers with information about their product. Today, the four networks’ share of total viewership has dipped under 50 percent, and that total could plummet once high-speed Internet access, which allows for real-time video streaming, siphons away even more viewers.
While everyone knows that ratings often determine the fate of new programming, it is not just the aggregate viewers that matter anymore. With the programming market as competitive as it is, shows that are able to attract large numbers of males ages 18-44, for example, may be an attractive media property, even if the programming is not attractive to large numbers of Americans.
But to diversify programming so as to target segmented groups of potential consumers requires the flexibility to raise revenue from advertisers interested in the specified demographic. Sometimes that revenue will come from products related to the programming, like an ad for a flea collar during Animal Planet’s “Good Dog U,” but most often they simply match the viewing demographic with products of potential interest. This interplay between demographics and products of potential interest is the province of a new class of advertising agencies that work predominately as clearing houses between producers and media outlets.
This is why liquor ads are unlikely to appear at times, or in front of audiences, where they are not appropriate. Just as Copenhagen spit tobacco does not devote its marketing budget toward sponsoring the America’s Cup yacht race, don’t expect Chivas Regal to run spots during Saturday morning cartoons, or ABC’s “The View.”
While network hard-liquor advertising is currently limited to after 9 pm on NBC, it has been appearing on cable channels and local affiliates since 1996. Less than 15 percent of homes with television sets have only the four broadcasters from which to choose their programming, so liquor ads are only new for a very small segment of the nation’s television viewership. Still, local affiliates can always refuse to air the spots, as Maine’s two NBC stations have done following a drunk-driving accident that killed several teens. And families will remain in control of what their children watch, while consumers will still decide what they buy. But for the television industry, things will never be the same.
The networks have come to understand what the old Italian proverb, “Amico di tutti e di nessuno è tutt’uno” (A friend to all is a friend to none), means to their industry. Slumping revenues, increased competition, and new technologies like ReplayTV and TiVo that allow viewers to avoid commercials are all coalescing to make broad-based programming designed for a mass market an anachronistic business model. Programming diversity and the richness of choice makes it unrealistic to target everyone.
There is simply too much choice and dynamism in the evolving programming market to try to regulate how content is financed. The best course for policymakers would be to leave the business of television advertising to the stations, ad agencies, manufacturers, and the sovereign consumers they target, and the proselytizing about the virtues of temperance to the many medical and public interest groups who do it so well.
