Cigarette Companies Will Have Ads on TV, but They Won't Help the Bottom Line

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For more than 40 years, cigarette companies have been banned from advertising on TV. That's about to change. In a bid to punish the companies for purportedly hiding the risks associated with smoking, they'll soon have to run new ads that warn of the risks. The ads are part of a settlement to a lawsuit.

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Unlike the anti-smoking ads we've seen from the Centers for Disease Control and Prevention or the Truth campaign by the American Legacy Foundation, the twist of the knife here is that the tobacco companies themselves will be producing and paying for them, and the message they'll be delivering is a stark one: The cigarette giants were essentially trying to kill you all along.

Up in smoke

Beginning in late November, both Altria (NYSE: MO) and British American Tobacco (NYSE: BTI) will run ads that are between 30 and 45 seconds long that explain to viewers via voiceover that "Altria, R.J. Reynolds Tobacco, Lorillard, and Philip Morris USA intentionally designed cigarettes to make them more addictive." According to The Wall Street Journal, another ad acknowledges, "More people die every year from smoking than from murder, AIDS, suicide, drugs, car crashes, and alcohol, combined."

Altria estimates it will spend $31 million to fund the ads while Reynolds expects to spend around $20 million. British American Tobacco goes out of its way to point out that it is not part of the settlement, though it bought Reynolds-American last year, which in turn previously bought Lorillard. 

The ads are part of a resolution to a lawsuit the Justice Department brought against the cigarette makers over 20 years ago, in which the courts mandated the latter spend millions of dollars to produce these hard-hitting ads that will run five days a week for a full year. And while the cost of the ads is negligible in terms of the profits the tobacco giants earn, it's still significant in that they're funding advertising detrimental to their business.

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A heavy habit

Tobacco companies have been paying for anti-smoking campaigns for years. As part of a $206 billion settlement in 1998, cigarette companies including Altria, Reynolds-American, and Lorillard agreed to pay into a fund to finance ad campaigns to educate the public on the risks of smoking. The Truth campaign, the CDC ads, and others from various nonprofit organizations were all paid for from this fund.

But there was a stipulation attached to the money in that the ads run couldn't "vilify" the companies. The American Legacy Foundation ran afoul of that provision when it produced ads in front of Philip Morris' headquarters showing body bags being unloaded as well as a tobacco executive being applauded by people representing Adolf Hitler, Josef Stalin, and Ku Klux Klan members.

Ultimately, North Carolina threatened to pull the funding the foundation received from the settlement and the ads were pulled from the airwaves.

In the new ads, the tobacco companies will be vilifying themselves. One includes language saying the tobacco companies "intentionally designed cigarettes with enough nicotine to create and sustain addiction." Another says, "Smoking kills, on average, 1,200 Americans every day."

It could've been worse

While these are powerful ads the cigarette companies are being forced to run, not everyone in the anti-smoking camp is pleased. One critic noted that because the ads are confined to television, many teens will never see them as opposed to if had they been run on social media. Others have pointed out that the TV networks profited from the original cigarette ads that ran on their stations, and now they're receiving a windfall again because of the court-mandated campaign.

The cigarette companies all understand the end of cigarette smoking is on the horizon. Even if politicians don't have the courage to outright ban the habit, they continue to regulate it harshly. For example, the FDA is proposing new regulations that would reduce the amount of nicotine in cigarettes to such a minuscule level that it can't be addictive.

Philip Morris has already said the future is "smoke-free" and it's launching a foundation to discourage traditional smoking but encourage the use of electronic cigarettes and heat-not-burn technology like its iQOS device instead.  

The latest ad campaign is another cost of the cigarette companies' legacy operations, which are slowly transitioning to reduced-risk products like electronic cigarettes. In the meantime, they'll have to let people know that for decades they tried to get them hooked on a deadly habit.

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