• by Ken Liebeskind , May 28, 2002

Smirnoff’s ads on NBC are testing the waters, but the other networks and distillers seem reluctant to wade in.
Waiting for liquor advertising on network TV to take off? It’s probably going to take a while. Surrounded by controversy, NBC has aired more than 30 Smirnoff Vodka PSA commercials since December, and although the advertiser, Guinness-UDV, appears to be pleased with the results, the network has been unable to entice other liquor advertisers to come on board.

Moreover, the first ad, on Saturday Night Live, generated so much negative publicity that all other networks continue to say they won’t accept liquor ads. “They don’t want viewer backlash,” an industry observer says. “And they’re worried about government intervention.”

And government intervention may be what’s ahead. Already, Rep. Frank Wolf (R-Va.) wrote a letter to NBC in December threatening to “introduce legislation to replace the system of self-regulation of hard liquor advertising with mandatory federal regulation.” Elyse Bauer, Wolf’s deputy press secretary, says there will be committee hearings down the road, but she is unsure what they will lead to.

Opposition has also come from the American Medical Association, which charged NBC with putting profits ahead of the nation’s health. And according to a survey by Penn, Schoen & Berland Associates, 68 percent of the general public also opposes liquor ads on TV.

No wonder the networks have serious reservations. Nevertheless, NBC has forged ahead, trying to protect itself with stiff self-imposed guidelines, one of which says that advertisers must run four months of “branded social-responsibility messages” prior to regular branding ads.

That rule may be responsible for the network’s inability to attract more liquor advertisers. Indeed, a spokesman for Absolut’s agency TBWA/Chiat/Day, complained about the guideline, but did not say it would necessarily prohibit the company from using TV.

Nevertheless, Guinness-UDV remains committed, running ads exclusively on NBC late-night shows, including Saturday Night Live, The Tonight Show with Jay Leno, and Late Night with Conan O’Brien. There have been reports that prime-time shows may be used, because they are watched primarily by adults, but the company isn’t ready to go down that road yet. “We want to maintain the late-night status for a few months to deliver a social-responsibility message,” says Gary Galanis, a Guinness-UDV spokesman. “We’ll look at earlier time periods as we move forward.”

Galanis says the company has spoken with other networks and wants to advertise there, but there’s no indication when that might happen. He also says the company wants to advertise other products on TV, including Johnnie Walker scotch and Tanqueray gin.

Advertisers aren’t staying away for lack of interest. Phil Lynch, a spokesman for Brown-Forman, the company that sells Jack Daniel’s, says the company plans to approach NBC and other networks for ad time. The company has run ads on some local and cable stations since 1996, but but it is concerned about another NBC guideline, which says that all liquor ads must run after 9 p.m. “We haven’t decided whether to accept these conditions,” Lynch says. “We think the best way to insure the ads reach adults isn’t by time of day but by programming,” suggesting that the nightly news might be used.

Another NBC guideline says that 85 percent of the audience must be 21 or older. If adhered to by the other networks, this would presumably pose a problem for Fox, UPN, and WB, which program to youth.

Other distillers who have expressed interest are Allied Domecq Spirits and Wine North America and Joseph E. Seagram & Sons. Seagram has an extensive background in TV advertising, and was the first to do it in 1996. The National Distilled Spirits Council is also working to generate support for network TV advertising.

There’s a big opportunity here, because liquor companies are big spenders. They spent $273.3 million on ads during the first nine months of last year, with nearly $200 million going to magazines and only $15 million to spot and cable TV. Furthermore, TV liquor advertising grew more than 100 percent during that period, with spot 6.5 times higher. Magazine ads dropped to 71 percent of total spending, from 75 percent in 2000.

Thus, there is an indication that a shift of liquor dollars is already starting to take place. “If they make headway in the marketplace with TV, everyone will follow because TV is a more powerful medium,” says Jack Trout, president of Jack Trout & Partners, a marketing strategy firm. Trout says the only reason magazines get most of the dollars now is because TV hasn’t been able to run ads. “They do it by default,” he says, indicating it will change if TV advertising is successful.

There’s a certain amount of nail-biting going on now in the magazine industry. Ellen Oppenheim, chief marketing officer of Magazine Publishers of America, recalls 1997, when TV restrictions on DTC pharmaceuticals were lifted. “We saw a drop in magazine [share],” she says, “but within a couple of years the whole pie grew. We have to see whether the same thing happens here. It depends on how many broadcast networks accept it.”

Outdoor advertising, the second largest category for liquor, could also be hurt, but not like magazines, because outdoor is generally a local medium, unlike magazines and TV, which are national. Stephen Freitas, chief marketing officer for the Outdoor Advertising Association of America, also says outdoor advertising is safe because it is frequently bought long-term. “Many liquor accounts have them for many years and want to maintain marquee locations, like billboards on major highways,” he says. He also says local liquor stores sometimes buy them in co-op deals.

Another worried party is beer companies, who have ruled TV for a long time and don’t want the competition. “The beer business has been flat for years; the last thing they need is another alcoholic beverage horning in on TV and getting people away from beer,” Trout says.

Brewers spent $770 million on TV in 2000, making beer one of the biggest advertisers. Indeed, this is one reason the other networks may be holding back on liquor. “The network strategy is laying low because of the ad dollars from beer, which they don’t want to put at risk,” says Ken Sacharin, executive vice president/media director at The Media Edge. It’s possible brewers could move some of their dollars to other media or increase their spending to stem the threat.

Of course, the main reason for accepting liquor ads on TV is the revenue opportunity. “The bottom line is it’s about the bottom line,” says the industry observer quoted earlier. “The broadcast medium is looking for more opportunities to bring in additional revenue. The advertising economy is down and everyone’s getting killed, so they’ve been looking at it for some time.”

“It will become a part of the revenue stream for broadcasters slowly, but it will happen,” he claims. As for the other networks’ getting involved, “it’s only a matter of time, because they won’t let one network generate all the additional revenue.” Brown-Forman’s Lynch predicts it will be three to six months before the other networks join in. “The dust needs to settle, but once the initial criticism calms, they’ll start accepting the ads.”

MediaPost staff writer Ken Liebeskind can be reached at kenrunz@aol.com.