Coming to a Small Screen Near You

Over the next couple of months, Hollywood will give movie fans super villains, an alien invasion and a trip to the Dark Side. Studios will bombard TV viewers with commercials for Batman Begins, War of the Worlds and the last of the Star Wars trilogy, Revenge of the Sith in one of the most competitive box-office battles ever.

That’s great news for media outlets that may learn to depend on entertainment advertising in what is shaping up to be a questionable upfront advertising season.

While there are mixed signals in virtually every major advertising category—automotives, pharmaceutical, financial services, and fast food—Hollywood studios continue to be some of the healthiest advertisers and most demanding of premium ad inventory, spending more than $2.7 billion last year.

And though the movie industry has begun shifting its ad budgets into a wide array of alternative media—especially the Internet and a variety of buzz marketing techniques—TV continues to be the happy mainstay of motion picture marketing. It is almost common knowledge, even with television viewers, that, on Thursday night, the movie studios load up on TV advertising trying to boost weekend box-office results.

In fact, it is now customary for studios to run commercials for some of the most anticipated summer blockbusters during the Super Bowl, as much as six months before the films are released. That was true for what will be two of the most heavily marketed films of the year: Warner Bros. Batman Begins and Paramount’s War of the Worlds.

Unlike other major ad categories, the movie industry’s budgets are rising not because of inflation but because there are more movies and they’re becoming more profitable.

“While the number of films increased last year, the cost to make and market those films dipped slightly from the previous year,” Dan Glickman, president and CEO of the Motion Picture Association of America, boasted during an annual economic update at a film- industry trade show in Las Vegas. The average ad budget of an MPAA-member movie in 2004 was $30.6 million, down 12% from 2003.

That might seem a concern for the media industry, but it is more a reflection of how economical advertising has become for movie marketers, as they develop more-sophisticated methods for modeling how and when to spend their ad budgets, and perhaps more important, when not to.

“Whereas other categories are having problems with their business models, the movie business is profitable on all sides,” says Michael Lotito, managing partner of Media IQ, a New York-based firm that evaluates the media buys of agencies for big national marketers.

“Their modeling has gotten so sophisticated that, based on the first week’s box-office gross, they can tell you exactly how much money they will make over time,” Lotito explains. “They know how much money to plow back into marketing and how much profit that will generate. If it opens big, they put more money into it. If it opens medium, they put a little more into it. If it opens small, they know not to waste their time on it.”

The good news, says one movie-marketing expert, is that the movie industry is not pocketing those savings. Instead, it is reinvesting them in marketing more product than ever before, meaning that, while movie ad budgets are declining on average, the category’s spending is growing overall.

“The broader release slate is fairly constant compared to where we’ve been relative to the last few years. We’re projecting around 150 wide releases for 2005,” says Andy Wing, president and CEO of Nielsen Entertainment, Los Angeles, referring to the number of major movies that open on 600-1,000 movie screens nationwide. Those are the type likely to have big ad budgets, he says, noting that the output equates to “three major new product launches a week.

“What other industry can you say that about?” he asks. And, Wing adds, it isn’t simply theatrical releases that are boosting Hollywood’s marketing spending but the subsequent DVD sales, as well.

The combined effect of simultaneous theatrical and DVD releases has created an incredibly competitive and cluttered movie-marketing environment, says Jon Mandel, chairman of MediaCom Worldwide’s U.S. operations in New York.

That, he says, has led to a year-round marketing cycle for the movie industry that has stretched well beyond its traditional summer and holiday-season focus.

While summer and holiday releases are still get some of the biggest budgets, Mandel, who handles Warner Bros.’ media buying account, says, when smaller titles and independent features are factored into the mix, there will be “something like 33 movies releases a week” during 2005.

He predicts that this movie-marketing frenzy will be especially concentrated during the next few quarters as Sony absorbs the MGM studio library it acquired and begins fulfilling the marketing terms of the movie- financing deals related to those films.

“Sony will be just stupid for a while,” he says bluntly, predicting an ad blitz for some films. “They will be vomiting over themselves chasing these movies.” Nonetheless, Mandel believes that script will be followed by other major studios, which may actually output fewer films than last year.

Several other studios are going through transitions of their own. There’s a new management team at Paramount, which may opt for a more financially prudent approach during its break-in period under parent Viacom. Walt Disney Co.’s film studio is in transition as it spins off its hit-making Miramax division.

Meanwhile, the summer marketing season itself is being extended beyond the traditional Memorial Day-to-Labor Day period. “The summer box-office season expands every year. Here we are in mid April, and we’re already seeing summer movies open. It used to be at least the second week of May,” says Sean Horvath, VP of entertainment marketing and sales at Alloy Media and Marketing, a youth-marketing agency that specializes in the entertainment industry.

He says the the kind of films being marketed is also changing. While the studios are still focusing on movies that appeal to young audiences, Hollywood now is focusing on films with crossover appeal.

“Most movies are targeted at the 12-34 demo, but the pipeline for most of 2005 seems focused on a broader target than normal,” Horvath says. “It’s not so much the hardcore 12-17 youth audience but more of the 12-24 or 12-34 audience. The titles coming out are aimed at a broader base.”

Expanding the base of moviegoers has led the big studios to focus more on sequels and “franchise films” as likely to appeal to older viewers as to younger ones.

“Look at Batman Begins,” Horvath notes. “If you were a teenager who didn’t see Batman 15 years ago, the focus is on introducing it to you. At the same time, the focus is trying to get the people who know the franchise to come back.”

Something else that’s changing is how movie studios market their films, including the media they choose, and how they reach younger consumers. Alloy, which specializes in “buzz marketing” is emblematic of that.

Instead of TV commercials, the agency uses “viral” marketing techniques ranging from street-marketing stunts and film-merchandise giveaways to a peer-to-peer network of teens who create word of mouth about new films.

Some of Alloy’s stunts include the creation of live “skits” of films, in which actors dressed in movie costumes perform in public areas to create buzz and generate PR.

But the heart of Alloy’s approach is its Buzz Squad, a panel of 200,000 teens and college students who sign up to promote new films in exchange for early previews of trailers, merchandise and other “swag.” By prior agreement, each member of the network has to agree to pass the word on to five peers and to document their efforts, which range from simple word of mouth to personal blogs showing clips and trailers.

“[Studios] know they have to try new approaches to create buzz,” Horvath says. “It’s all about 'eventizing’ a film.”

Not surprisingly, these new approaches are leading to profound shifts in the way studios spend their advertising budgets. Between 2000 and 2004, network TV’s share of the average movie ad budget has declined to 22.9% from 23.8%. Spot TV has fallen even more, dropping to 13.3% from 18.3 %. The fastest-growing sectors: online and “other media,” according to MPAA estimates.

There have also been notable shifts within TV ad spending. Over the same four-year period, Nielsen Monitor-Plus estimates, spending by movie studios on spot TV has declined 4%. While spending on broadcast-network ads has risen 20%, the fastest-growing segments have been cable TV (+121%) and Spanish-language TV (+185%). Syndication was flat during this period.

Charlie Collier, executive VP for advertising sales at Court TV, explains cable’s uptick, noting that cable networks often work harder to “merchandise” films, creating promotions related to the release of a film or integrating movie brands into their programming.

“The challenge is, [studios] have very short windows for launching a new product. Essentially, they’re planning for a two-week cycle,” Collier says, “So they have to find ways to break through the clutter of network TV.”

Nielsen’s Wing explains the Hispanic TV growth as indicative of a more fundamental cultural shift in the U.S. entertainment industry.

While Hispanics account for nearly 13%-14% of the U.S. population, he says, their impact on movie- attendance habits is different. For example, compared with other demographic and ethnic classes, Hispanics are more likely to attend movies as a family on Sundays rather than use movie-going as a “date” on a weekend night.

Despite these shifts, MediaCom’s Mandel believes that traditional TV advertising will remain the focal point of plans by the major Hollywood studios for another very important cultural reason. “Let’s face it,” he says. “It’s the business they’re in: The studios own the networks.”