Smoke and mirrors: Philip Morris swore off using print advertising to build its brands, but the magazine ad habit was harder to kick than anyone imagined

Folio: The Magazine for Magazine Management, March, 2002 by Seth Mnookin

Six weeks after going cold turkey, Philip Morris USA, the country's dominant cigarette maker, admits it can't break the habit. Once again magazines will carry ads for Marlboro, Merit and Parliament. But this year is likely to be the second straight year the company cuts its marketing budget for print: the $114 million the company spent in magazines last year was almost 50 percent less than in 2000, when it spent $216 million.

And with Philip Morris USA making up more than 40 percent of the $267 million the tobacco industry spent in magazines last year, competitors and publishers look to the company's print budget as a gauge of where the industry is heading.

"You'll probably start seeing our ads appearing in a matter of weeks," says Brendan McCormick, manager of media affairs at Philip Morris USA. For competitive reasons, McCormick wouldn't give specifics, but he did say the company was talking to both weeklies and monthlies. "We're constantly reviewing our strategies."

Philip Morris USA's pullback from print during the first month and a half of 2002 inspired some barely concealed panic on the part of magazine publishers. For more than three decades, magazines and newspapers have been some of the last refuges for cigarette ads--ever since the tobacco industry pulled its spots off television in 1971. But lately, even print has become less hospitable. Philip Morris' massive drop in print advertising from 2000 to 2001 resulted from restrictions in 1998's Master Settlement Agreement, which the country's tobacco manufacturers signed with the Attorneys General from 46 states.

"Now we put no advertising in publications that go to more than two million youths, or that have more than 15 percent of youth readership," McCormick says, noting that the company also stopped advertising on the back covers of magazines. "That change single-handedly drove us out of about 50 publications and resulted in a reduction of our overall advertising by about 50 percent," he adds.

That downward trend looks almost certain to continue. The big-three American cigarette companies--Philip Morris USA, Brown & Williamson and R.J. Reynolds--are all relying more heavily on direct marketing. "Today, our primary focus is on consumer relationship marketing--that is, marketing to specific individuals who have confirmed that they are both adults and smokers," reads a corporate statement on Brown & Williamson's Web site.

While that's a bit of hot smoke--the makers of cigarettes, like all product manufacturers, depend on winning over new consumers rather than preaching to the converted--it does reflect the thinking in the industry. "It's just more cost-effective to go direct," says one tobacco company official speaking on the condition of anonymity. "It's such a pain to get into print--there are so many hoops. And right now, it sometimes feels like it's barely worth the hassle."

That sentiment is bad news for publishers, some of whom were hoping that Philip Morris' rivals would look at the company's pullback as a rare opportunity to cut into the country's dominant cigarette maker's marketshare: in 2001, Philip Morris sold more than half of all cigarettes consumed in the United States, according to Prudential Securities. And Philip Morris' current day success is based in no small part on its successful ad campaigns; it's not for nothing that Advertising Age crowned the Marlboro Man the top ad icon of the 20th century.

But publishers aren't giving up yet. "We can't live in a world of denial," says James Dimonekas, the publisher of Playboy, which was the beneficiary of more than $9 million worth of Philip Morris ads last year. "A lot of clients and marketers are re-evaluating their media strategies. Our job now is to be ahead of the curve, to be proactive instead of reactive. We're an endemic buy for both liquor and tobacco. Since we've had a relationship with Philip Morris, this is a chance to develop some new strategies with them, to see what kind of things we are in a position to offer. They may want to address point-of-sale promotions, they may want to target an older market or a launch. There are a lot of things we could do at retail locations, a lot of things we could do in terms of sampling opportunities. So our approach is, let's talk about what we can do to get it done--and then let's get it done."

There's evidence other publishers are already looking to make special deals. Brown & Williamson, maker of Kool, Pall Mall and Lucky Strike cigarettes, is targeting specific audiences with the help of some titles. "Magazines like Rolling Stone and Sports Illustrated can segregate their subscribers," says Steve Kottak, a company spokesman. "So we do buys there that go only in subscription copies sent to people 21 and older." (Neither Sports Illustrated publisher Fabio Freyre nor Rolling Stone publisher Robert Gregory returned calls for comment.)

While Playboy's Dimonekas was one of the few publishers willing to talk openly about wooing tobacco money, Time Inc. should feel Philip Morris's cutbacks more than any other single magazine company. For the first nine months of last year, four Time Inc. titles combined to make up more than 35 percent of the company's magazine spending, with Time getting more than $9 million, People and Sports Illustrated both pulling down more than $8 million, and Entertainment Weekly racking up more than $4 million in Philip Morris money.