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Companies Withdraw Ads from Rush Limbaugh - Right Decision?

March 07, 2012 | About:
Politico reported that, as of yesterday, at least 29 companies had withdrawn advertising from Rush Limbaugh’s radio show. Are these withdrawals worth it for the companies? The controversy started over insensitive comments Limbaugh made about a Georgetown law student and liberal activist. Sandra Fluke, wittingly or unwittingly, was part of a coordinated campaign by Democrats to distract attention on President Obama’s contraception mandate. Catholics are rightfully incensed over the administration's lack of respect for their religious beliefs on the issue. President Obama has attempted to make this a women’s rights issue and use it for his re-election campaign, which is why Fluke was invited to testify before Congress. Republicans see it as another example of coercion by the administration.

What has been the effect on the companies who have withdrawn their support? The one highlighted by conservatives the most has been Carbonite (CARB). Why? Because the stock dropped nearly 9% yesterday. Many of the other advertisers were larger, such as J.C. Penney (JCP), Sears Holdings (SHLD) and AOL (AOL), and the controversy hasn’t seemed to affect them. Then again, if you’re a Sears’ shareholder and this is the reason you dump the stock, as opposed to the plethora of other reasons that can be imagined, you may not necessarily be a rational actor.

Carbonite, though, is a business that is easier to boycott. They’re in a tough position because liberal activists could call for a boycott if they continued to advertise with the show, and conservative activists may now boycott since they pulled their ads. Their CEO, David Friend, announced the withdrawal of their ads on Saturday afternoon. It took until Monday at 2:30 in the afternoon to see a drop in the price of their shares.

It’s tough to peg that drop specifically on the Limbaugh event. Investors had Saturday night, all day Sunday, and most of the day on Monday to consider it. Other companies who pulled their ads didn’t have shareholders bail any more than the overall market. The fact is, few people will remember this controversy and base any buying decisions on it six months from now anyway, so any boycott or reverse boycott damage will be minimal.

Ultimately the effect will probably be less advertising for politically active radio and television shows in the future, both for the left and the right. Each perceived slight will be especially highlighted this election year. It’s probably a net negative for society to have corporations bullied in this way and will only encourage them to curry more favor with whoever holds office. That’s how we got Obamacare in the first place.

I’m a conservative, though I’m not a fan of the tactics of Rush or Glenn Beck. I’m also not a fan of the tactics of the liberal organizations that threaten companies who advertise with them. It would benefit everyone if we stop projecting the activities of the hosts, whether its Rush on the right or Rachel Maddow or Bill Maher on the left, from the companies that advertise with them. The advertisers don’t have anything to do with contributing to a “more civilized debate” as Friend said he was doing in Carbonite’s statement. Advertisers will go where the eyeballs and ears are. They’re mercenaries. They react. And they should get off their high horses.

Who would have thought Maher would be the voice of reason when he tweeted this: “Hate to defend #RushLimbaugh but he apologized, liberals looking bad not accepting. Also hate intimidation by sponsor pullout[.]”

Disclosure: No holdings

About the author:

Steven Kiel
Steven Kiel is the president and chief investment officer for Arquitos Capital Management, a Virginia-based investment management firm. He is a graduate of George Mason School of Law and a captain in the Army Reserves. He manages two spoke funds, The Freedom Fund, a value-oriented portfolio, and The Hayek Fund, a portfolio dedicated to free market principles. He can be contacted at steven.kiel@arquitos.com or through the firm's website at www.arquitos.com.

Visit Steven Kiel's Website


Rating: 2.8/5 (24 votes)

Comments

ClydeMid
ClydeMid - 2 years ago
Excellent perspective. Thank you.

I don't watch television much, and am appalled at some of the mindless shows that are on - but I never once thought that Colgate or Lucky Charms was somehow in bed with the mindset of the writers and producers because those companies chose to advertise during the airtime. It's a false association.

I do, however, disagree with you one point. It's my belief that Rush's listeners are similar to Paul Harvey's from decades ago - a product was bought because Paul talked about it on his show. I put coal tar in my hair because Paul said that T-Gel worked. And it did. Everyone knows that Carbonite was pimped hard by Rush, and that they took their sales and ran over this situation. I don't think the customer base will come back as quickly as you suggest. And perhaps Rush, out of spite, and a competitor, out of a desire for market position, will be a replacement to Carbonite.

AOL's stock didn't move? Rush listeners that trade on political whims wouldn't own it because of the HuffPo deal. Further, have you looked at the institutional ownership? There's not enough room left for Rush listeners to move the stock. And I view JCP and Sears as long-term holds anyway - fundamentally different from Carbonite which is kinda sorta a start-up break-out investment.

All that said, great article.
Eliot Ness
Eliot Ness - 2 years ago
Carbonite's 2011 Annual Report shows that this dot-com disaster has vaporized $100.4 million over the past seven years and is speeding toward insolvency by losing $2 million more each month.

http://www.sec.gov/Archives/edgar/data/1340127/000119312512101462/d277280d10k.htm

Carbonite pays its CEO David Friend $500,000 per year to manage the loss of $500,000 per week. That is insane! (Except here in Washington, DC.)

When Carbonite's piggy bank is empty it will perforce be shut down or liquidated in a fire-sale.

Limbaugh will be doing his listeners a service by NOT shilling Carbonite's service and/or stock because the company's business model simply is not that of an "ongoing concern." It is run as an impending "spectacular dot-com flameout" that enriches its executives and insiders at the expense of shareholders.

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