For some, a cautious eye has gazed on the legalization, in some states, of recreational marijuana use and its purchase. Walk into Main Street Marijuana in Vancouver, Wash., and any adult aged 18 and over presenting identification at the door can purchase a variety of smoke-able and edible cannabis products. For the owner, a complex labyrinthine business plan is required, with all-cash transactions, and taxation payments to the state of Washington.
Across the Columbia River, in Oregon, the law is a bit different. It also happens to be the home of nearly every radio and TV station serving Clark County, Wash., an important part of the Portland DMA. That said, what if a radio station owner wanted to take advantage of what’s legal in Vancouver, Wash., by getting Main Street Marijuana to advertise or sponsor anything on an AM or FM with Vancouver as its city of license?
It’s a thorny issue that Eugene Morgulis, Director of Legal & Strategic Initiatives at the New York-based National Association of Cannabis Businesses (NACB), is committed to addressing and discussing with broadcast media — in particular, radio.
Morgulis is taking the case for legal, and responsible, cannabis advertising to the industry’s trade publications, on behalf of a member-driven organization that works as an advocate, or Better Business Bureau, for cannabis.
In his view, his organization is a vetted B2B network for a growing industry full of individuals working hard to follow the laws in place where they live and work.
“A lot of times people are new entrants to the industry, or it is unclear exactly who we can trust,” Morgulis says. This keeps ethical, responsible and trustworthy cannabis vendors in the mix.
Many of these ethical, responsible and trustworthy vendors seek to promote their businesses. Of course, challenges abound with how to do this. Free alternative weeklies such as New Times or Creative Loafing are prime venues for advertising. But, then what?
Morgulis argues that radio, and even television, can benefit. It just can’t involve over-the-air ads — at least right now.
To help media, and cannabis vendors, the NACB in early 2018 adopted an advertising standard. It is comprised of suggested guidelines designed to protect consumers and to demonstrate to regulators that cannabis brands value the highest level of ethics and responsibility.
MULTISTATE MYRIAD OF LEGAL LOOPS
In the Portland, Ore., market, Entercom and iHeartRadio have an interesting opportunity to benefit from cannabis advertising — or do they?
For iHeart, one radio station in their local cluster, Rocker KFBW-FM “105.9 The Brew,” is licensed to Vancouver. Does this mean that the station can accept and air cannabis commercials?
What about Entercom, which has Alternative KNRK-FM 94.7 and Sports KMTT-AM 910 in its Portland cluster, but are also licensed to cities in Clark County, Wash.?
“Every state is going to have certain restrictions when it comes to advertising,” Morgulis says. “Some are rudimentary. Some are extensive.”
This is where radio and TV will likely be an impossible venue for over-the-air advertisements, regardless of where the city of license is, versus where the local business operations are or where the owner’s corporate headquarters may be.
Market share restriction is core to the NACB advertising standards its members adopted. First, not more than 30% of the targeted audience can be under the age of 21. This is a blanket policy, reflecting all advertising — including OOH.
For TV and print media, including those free alternative publications often seen in an independent record store or bar, it is 15%.
This could prove nerve-wracking for a TV or radio station GSM. With Adults 18-49 the advertising standard, how would a broadcast station possibly strip out the under 21 audience and come up with a metric that proves 85% of its listeners are able to legally purchase alcohol? And, what’s to stop a 7-year-old from tuning in to Kiss FM and suddenly hearing a “puff puff pass” ad, as cannabis legalization opponents might say?
Radio and TV could avoid all of this pitfalls by looking to monetizing its forlorn online platforms — a ROI opportunity that doubles-down on the philosophy that radio is giving away too many eyeballs and dollars to social media giants Facebook and Google.
“Anything perceived as targeting children is a concern,” Morgulis says. “But, underlying all of this is the fact that I haven’t seen any ads on TV and I don’t think I’ve heard any on the radio. It is not illegal, but the airwaves are federally regulated. Radio, TV stations simply don’t accept cannabis advertising as the status of cannabis is federally illegal.”
This has made on-air ads a non-starter.
Now, Morgulis argues, radio and TV have a big opportunity to rev up their digital ad space. Why? It puts radio and TV at an advantage against the swiftly-rising local digital machine.
Google AdWords doesn’t accept cannabis advertising.
“That is their choice,” says Morgulis.
Additionally, Facebook does not accept paid promotion of cannabis.
“That is a choice they have made for their platform,” Morgulis adds. “They seek too much risk in it.”
That’s where Morgulis seeks to demonstrate that, if businesses can subscribe to standards of advertising adopted by NACB, responsible advertising can follow.
The full National Standard on Advertising is available here and offers more details pertaining to the following guidelines:
Required warning statements on advertising
No promotion of excessive use
No showing consumption
No ads disparaging or degrading persons on the basis of race, gender, religion, or orientation
No images or endorsements that target minors
Minors cannot make up over 15% of audience composition for print and television ads
Digital advertising must employ an age-neutral screening mechanism
No ads on public transit vehicles or shelters
DATA PRIVACY, SECURITY, AND CANNABIS
Morgulis has served with the NACB since June 2017. Three months later, he concurrently took a role as a legal consultant for IBM.
This balance between a company that once dominated the PC and computing industry and a substance once associated with Hippies and a counterculture paints a perfect picture for cannabis acceptance across much of the U.S., and how its legal use and promotion has emerged from a formerly taboo status.
It’s a not-so-strange trip for Morgulis, who served as a Senior Associate at Boston law firm Roper & Gray for seven years until May 2016. In fall 2009, he researched and drafted court opinions as an intern for the Hon. Juan Torruella, on the U.S. Court of Appeals for the First Circuit.
Given this background, the use of cannabis advertising and promotion standards is hardly the stuff of dreams. Rather, it is based on legal experience and standards designed to keep the riff-raff away.
NACB isn’t working specifically with cannabis advertising firms. That’s because there are dozens of agencies that claim to work in this space. Some have made a splash in entering the space, with limited success.
In June 2013, CFN Media Group opened its doors as not only a creative agency, but also a financial network dedicated to legal cannabis. “We help marijuana businesses attract investors, customers (B2B, B2C), capital, and media visibility,” the entity notes. “Private and public marijuana companies and brands in the U.S. and Canada rely on CFN Media to grow and succeed.”
Then, there is Bang Holdings Corp., a high-tech advertising startup that allows advertisers to reach their desired market in areas where marijuana has been legalized for medical or recreational use, giving them a window to promote cannabis products and services to those within a legal market.
This was a promise that gained much attention in August 2016. Shares reached nearly $3 a share as word got out about Bang’s business plan. By the start of 2017, investors lost faith in Bang, sending the stock sinking southward to just 16 cents by Christmas. One year later, Bang is trading at 43 cents per share.
Nevertheless, the cannabis industry is projected to be a $30 billion business in 2019 by some. “That’s the most optimistic figure I’ve seen,” Morgulis says.
He’s only slightly more conservative.
And, with the digital marketing opportunity that radio and TV station owners have, there are dollars for the taking from eager business owners looking to build consumer awareness and revenue.
“On the one hand, you can’t advertise like anything else, but that breeds creativity, and an avenue for other ventures,” Morgulis says. “There’s a lot of opportunity.”
What about those that have reservations about putting any sort of cannabis advertising online, as it is still an extension of an over-the-air brand and could offend some consumers?
Morgulis points to John Boehner, the former Republican Speaker of the U.S. House of Representatives, who in April joined the advisory board of Acreage Holdings.
The company cultivates, processes and dispenses cannabis in 11 U.S. states.
In 2009, Boehner said he was “unalterably opposed” to the legalization of cannabis.
“Cannabis business leaders just want to be treated like any other business,” Morgulis concludes. “They just believe in the product, and over time that is what people will see that they are doing.”
Courtesy of RBR+TVBR INFOCUS
By Adam Jacobson