My poli-econ professor mentioned something interesting today about why we don’t see ads for smoking on TV.  The obvious assumption would be because they were banned from the air by anti-smoking lobbyists, but that’s not entirely true.  In a bizarre, Twilight Zone-twist, that legislation was actually supported by the four major tobacco companies.

Basically, ads for smoking on TV don’t actually get people to smoke.  All that they can really accomplish is getting people to switch the brand of cigarette the prefer.  In order to keep their market share, then, all the tobacco companies have to invest hundreds of millions of dollars just to maintain their status quo.

The companies could get together and agree not to advertise at all, but that wouldn’t last for long—why would it?  They’d all rush to their advertising agencies gleefully, ready to unleash a new round of ads to push their product (expecting no competition).

The only way that their agreement can be enforced is if it is enforced by government . . . “no honor amongst thieves” and all that.  So by supporting this legislation banning tobacco ads on TV, the tobacco companies are actually saving hundreds of millions of dollars.

Interesting stuff.  It’s kind of like what you were talking about, Chris, where a business operating on a loss could still actually be providing an overall profit as an ancillary benefit.