CBS refuses to show Schwab ad deriding Wall Street practices
By MICHAEL LIEDTKE
The Associated Press
6/7/02 12:43 AM
SAN FRANCISCO (AP) -- With their sales practices under fire, Wall Street stock brokerages have found an ally in CBS-TV.
The network won't show a Charles Schwab commercial poking fun at an industry sore spot -- allegations that commission-driven brokers sometimes recommend stocks known to be poor investments. Analysts said CBS's decision illustrates the power of Wall Street's financial clout at a time when revenue-starved media outlets are reluctant to alienate major advertisers.
The Schwab commercial, which other TV networks are airing, features an executive urging brokers at an unidentified firm to tell customers that a stock is "red hot" even though the fundamentals "stink."
After promising to reward whoever sells the most stock, the executive encourages the brokers to "put some lipstick on this pig."
The derogatory language echoes descriptions used by Merrill Lynch analysts in e-mail discussions of stocks recommended as good investments to the firm's customers. After the e-mails were obtained by New York State Attorney General Eliot Spitzer, Merrill Lynch last month paid $100 million to settle allegations that it recommended the stocks of troubled companies to win lucrative investment banking fees.
San Francisco-based Schwab said the commercial -- part of an advertising campaign launched May 16 -- wasn't spurred by the early April revelation of the Merrill Lynch e-mails.
"It was not inspired by any particular firm," Schwab spokesman Glen Mathison said. "It was inspired by the generally reported and documented practices of Wall Street brokerages."
The sales practices of other prominent investment banks also are under scrutiny.
Some analysts said they suspect CBS didn't want to rankle Merrill Lynch by running the Schwab ad.
Merrill Lynch does more business with CBS than Schwab, a factor that probably led the network "to think like an investment bank -- they went with the one paying them the most money," said brokerage industry analyst Justin Hughes of Robertson Stephens.
But CBS spokesman Michael Silver said Merrill Lynch's advertising relationship didn't sway the network.
CBS rejected the commercial because it "impugns the motives of anyone who works for a big brokerage," Silver said. "Our obligation is not to allow ads that unfairly disparage the competition."
The network is airing three other Schwab ads included in a campaign touting the discount brokerage as a way to buy stocks without commission-driven salesman.
Several cable TV networks, including CNBC, CNN and Bravo, have shown the commercial CBS rejected. The ad was scheduled to debut on NBC Thursday night during "ER." It's also supposed to be shown during NBC's upcoming broadcasts of the NBA Finals, Belmont Stakes and the French Open.
The networks that accepted Schwab's ad are taking a calculated risk, said Roland Rust, chairman of the University of Maryland's marketing department.
"It's a bet on who will spend the most in the future," Rust said. "They are betting that Schwab is on the way up and Merrill is on the way down."
With the stock market's prolonged funk discouraging its customers from buying stocks, Schwab is trying to develop products and services that will encourage more trading -- a goal that eventually may force the firm to grapple with its own conflict-of-interest questions, said industry analyst Mark Constant of Lehman Brothers.
Nevertheless, Schwab's attack on its Wall Street rivals is a sound strategy in light of the scandalous headlines dominating the business pages, Constant said. "It makes sense to kick a dog when it's down."
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