Sunset magazine has suffered a drop in advertising revenue, a decline big enough to help cause layoffs and a headquarters move to a temporary, shared office space.

To offset the revenue drop, Sunset publisher Michael Reinstein is hunting for new ad revenue sources for the company’s print magazine and website.

One place he isn’t looking for ad dollars, however, is the newly legal California marijuana industry.

“Sunset is currently not accepting advertising from marijuana companies, and I don’t ever see it on the horizon,” said Reinstein, chief executive of Beverly Hills-based private equity firm Regent, which owns Sunset.

Sunset, Reinstein added, works with brands that “absolutely do not want the affiliation with cannabis.”

Sunset’s apprehension about marijuana ads is in line with many other Los Angeles area newspapers and magazines.

At first glance, print media and marijuana ads would seem to be a match made in heaven.

The print industry is struggling for advertising dollars, with advertising revenues seeing a year-by-year 10 percent decline, according to Pew Research Center.

The marijuana market, meanwhile, is trying to get the word out about their new, legal industry.

The legal marijuana industry was slated to generate about $10 billion in 2018 U.S. sales, per Statista Inc., with some market analysts predicting $50 billion in annual revenue within the next decade.

But legal concerns, plus a fear the ads will send the wrong message, has some publications turning away marijuana advertisements.

Publications’ preference

Many local publications have done little to tap into marijuana advertising revenue.

The Los Angeles Times “has run a limited number of advertisements for marijuana, following legal and ethical guidelines,” spokeswoman Hillary Manning said.

Southern California News Group, which runs 10 local newspapers including the Los Angeles Daily News, does not accept cannabis advertising, according to spokeswoman Caroline Wong, though it will “consider cannabis-related products such as oils on a case-by-case basis.”

The Hollywood Reporter ran advertisements for Culver City-headquartered marijuana dispensary MedMen Enterprises Inc., but it backed away from the ads amid legal concerns.

MedMen is perhaps the most prolific marijuana advertiser in Los Angeles, with a fast-growing ad budget.

The dispensary spent $4.8 million in sales and marketing in just the third quarter of 2018, according to its public filing.

Its ads are often wrapped-around the LA Weekly and adorn other local publications including Los Angeles magazine.

But MedMen ads are not in more widely circulated publications, which Mark Bartholomew, an advertising law professor at the University of Buffalo, attributes to fears the ads might alienate readers.

“Some readerships embrace recreational marijuana; others not so much,” Bartholomew said.

Marijuana ads can also turn off other advertisers including banks, which cannot deposit money from marijuana sales, or simply more established brands.

“Many advertisers are very concerned about what ads are placed around them,” Reinstein said.

Another obstacle: Most advertising agencies “don’t want to touch” marijuana ads, according to Larry Schwartz, of Cannabiz Media, a consultant firm for marijuana companies.

MedMen, for example, does its ads in-house, according to MedMen spokesman Daniel Yi.

The result can be quirky ads out of place in publications not catered to a cannabis consumer audience, Schwartz said.

Many in the marijuana industry, Schwartz noted, turn to billboards in order to not depend on publications.

Legal fears

The most concrete concern for publications regarding marijuana advertising is that the drug remains illegal under federal law, said Sean McAllister, an attorney who specializes in marijuana law.

Arguably, this concern should be minimal, McAllister said. “You haven’t seen enforcement from the federal government in terms of cracking down on companies who advertise or publications that accept the advertising.”

Also, print media would seem at a legal advantage to federally policed digital media – Facebook Inc. and Alphabet Inc. subsidiary Google Inc. do not accept marijuana ads – or radio and broadcast television stations, Bartholomew said.

It is unlikely the federal government will go after print media, Bartholomew said, especially if the ads are just in the print product and not on the publication’s website.

“The Federal Communications Commission’s purview has been traditionally more limited to broadcasters, like radio and television stations,” Bartholomew said. “Newspapers and magazines have more freedom to operate.”

Still, publications have voiced concerns.

“The risk is not zero,” said Nikki Moore, outgoing legal counsel with the California Newspaper Publishers Association. “The bigger you are, probably the more risky the endeavor.”

For example, the Los Angeles Times and Hollywood Reporter are sold in states in which marijuana is not legal. Plus, the majority of print publications big and small are mailed through the U.S. Postal Service.

Moore also raised the concern that the federal government could use marijuana ads as a pretense to go after media it doesn’t like. “If you have an administration or political figures that do not like you as a publication, that could be a risk,” she said.

Alternative path

Two types of publications have embraced marijuana ads: newspapers and magazines whose content is about marijuana, and alternative weeklies.

Los Angeles is home to the oldest marijuana-focused magazine in the U.S. – 45-year-old High Times.

While marijuana ads are prominent in High Times, advertising overall is actually a minor part of the magazine’s business strategy.

Ad sales comprised 16 percent of HighTimes Holding Corp.’s 2017 revenue, according to a Securities and Exchange Commission filing, down from 27 percent the year before.

The company’s business plan, as laid out in a public stock offering, is instead to make money on events, plus on its own merchandise and branding.

Los Angeles’ main alternative publication, the 40-year-old LA Weekly, has been in the public crosshairs, including a boycott by some journalists and advertisers.

However, the Weekly, which did not return messages requesting comment, is in line with alternative weeklies throughout the West Coast when it comes to placing marijuana ads in its print edition.

In addition to Med Men, the paper has placed ads from, among others, Kush Jobs and Kurvana, an Orange County company that employs Weekly publisher Brian Calle.

“Marijuana ads are a significant opportunity, especially since many mainstream newspapers are still hesitant to dip their toes in the water,” said Jason Zaragoza, executive director for the Association of Alternative Newsmedia, a nationwide consortium of alternative weeklies.

Marijuana legalization often fits into the political views of alternative weeklies, Zaragoza noted, and papers that usually appear on news racks instead of being delivered through the mail, limits legal liability.

Ken Doctor, a media analyst at Harvard University’s Nieman Foundation for Journalism, agreed that marijuana ads could be a boost for alternative weeklies, which Doctor described as “in the doldrums” due to sharp ad revenue declines.

Zaragoza declined to disclose how much revenue the Weekly or other papers get from marijuana.

“It’s not a silver bullet that’s going to save the industry,” Zaragoza said, “But it’s been a very solid source of revenue for papers where it’s been legalized.”