[Intl-tobacco] Czech/EU: Advertising sector not afraid of tobacco ban

[robert.weissman@essentialinformation.org]

Advertising sector not afraid of tobacco ban
EU directive could be major blow to theaters
The Prague Post
June 17, 2004

By Zuzana Kawaciukova

The Marlboro man is poised to ride off into the sunset when a ban on
cigarette advertising takes effect July 1. But will the cowboy's departure
from posters, billboards and movie screens really reduce smoking here, as
proponents claim, or will a new law barring cigarette advertising simply
hurt those businesses that are dependent on ad revenue?

The new law, which is being implemented under a European Union directive,
will prohibit almost all forms of cigarette advertising. Proponents of the
plan argue that such a law could help reduce smoking in the country and cos=
t
cigarette makers 750 million Kc ($28.8 million) in annual revenue. The
advertising sector, however, is not concerned that 1.5 billion Kc could
quickly dry up as a result of the legislation because most advertising
agencies say they have taken the necessary steps to soften the financial
impact.

But the move is likely to hurt businesses such as movie theaters that depen=
d
on cigarette advertising, especially those in poorer regions of the country=
.
Critics in the tobacco industry also contend that removing cigarette
advertising will do little to keep people from lighting up.

Closing the gap

So far the industry that would appear to be hit hardest by the
prohibition -- advertising -- seems prepared to absorb the hit. Lenka
Blazkova, the marketing director for JCDecaux, a firm that specializes in
selling outdoor advertising space, said the company has altered its approac=
h
to handle the impending blow. "A way back, we adjusted our strategy
accordingly and went after new clients," Blazkova said. She added that the
firm has already seen a decrease in the demand for cigarette advertising
over the past year and has continually closed the gap through an increased
demand from pharmaceutical and cosmetics companies.

Blazkova said the global trend in the industry is toward greater advertisin=
g
by food and drug producers and away from cigarettes.

The Association for Outdoor Advertising is also not worried about the
long-term effect on the future of outdoor advertising. Alexandr Krizek, the
president of the association, said the portfolio of billboard advertisers i=
s
so huge and diversified that the sector would not see any significant
impact. Outdoor advertising also makes up just 6.2 percent of advertising
revenues.
SNUFFED OUT

A peek at the ban on cigarette advertising

=80 When? July 1

=80 Why? European Union directive

=80 What is prohibited? Cigarette advertising on billboards, posters and pr=
int
media and in movie theaters

=80 Estimated loss to cigarette makers? 750 million Kc ($28.8 million)

=80 Who will suffer? Movie theaters likely to be hit hardest

=80 Who won't? The advertising market is expected to avoid the impact becau=
se
of an increase in advertising from sports events, pharmaceuticals and
cosmetics.

Although revenue streams could shift, the value of the market is expected t=
o
slightly increase. Stepan Wolde, marketing director at Arbomedia, said
advertising income should grow to 17.04 billion Kc in 2004, an increase of =
4
percent from last year. He said a loss of tobacco cash could be made up thi=
s
year through sports events, mainly the Ice Hockey World Championship and th=
e
European Soccer Championship.

'Irreplaceable impact'

One area that will suffer is the movie theater industry, where cigarette an=
d
alcohol account for 60 percent of advertising revenue.

Olomoucka kina, which operates three movie theaters in Olomouc, north
Moravia, is one company that is not sure how to cope with the loss of its
biggest advertisers. "The change is going to have a straight and
irreplaceable impact on our revenues," said Dagmar Cernikova, the legal
representative of Olomoucka kina. She said it would be difficult to replace
that revenue because regional entrepreneurs often cannot afford to invest i=
n
promotion.

"We will wait," Cernikova said, "but we will not increase ticket prices to
make up for the loss." Although ticket prices range from just 60 to 90 Kc -=
-
half the price of a movie in Prague -- Cernikova said less purchasing power
means many in areas like Olomouc would not be able to pay more for a ticket=
.

Indoor advertising to increase

Under the ban, cigarette advertising will be limited to indoor points of
sale, which is likely to result in an increase in the price of indoor
advertising space, industry observers said. That, however, has yet to
transform. Geco, a company which operates 126 newsstands in hypermarkets an=
d
shopping malls thorough the country, said it has not registered an increase
in demand yet. "We have not heard of any new long-term investment strategy
from cigarette makers so it is difficult to estimate the redirection," said
Petr Polacek, the vice-chairman of Geco.

While nobody questions whether smoking has a negative impact on health, the
notion of censoring cigarette campaigns has its critics. "The idea that an
advertising campaign makes a nonsmoker want to buy and smoke a cigarette is
absurd," said Richard Vavrik, the spokesman of tobacco company Reemtsm. He
added that under communism, when cigarette advertising did not exist, the
Eastern bloc still had more smokers than the West.