Marketing Budget Cuts At the Box Office

Excerpted from LA Times, “Studios struggle to rein in movie marketing costs” By Claudia Eller, Apr 20, 2009

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You know times are getting tough in the movie business when an entourage of studio executives, instead of flying by private jet to Sacramento to attend a screening, is forced to ride-share … Along with hosting fewer lavish premiere parties, curtailing newspaper advertisements and restricting the number of agencies that produce trailers, the Hollywood studios are struggling to get a grip on the movie industry’s equivalent of the pork barrel earmark: marketing budgets.

And like an entitlement program that can’t be axed, Hollywood isn’t having much success … Studio executives contend that if they want to get out the word to the public about their movies, they have to pony up … “Every film launch is a new-product release …we can’t jeopardize successfully opening these pictures” …

One bit of good news is that the depressed economy has apparently not stopped people from going to movie theaters. Ticket sales are up 17.3% this year from a year earlier, and attendance is up 15.6%.

As the studios have flooded theaters in recent years with an increased number of releases, they have been forced to spend more on marketing as they jostle for the attention of moviegoers. Although studios have begun to reduce the numbers of films they make and squeeze the fees they pay talent, marketing costs have largely escaped the scythe.

After falling from a peak of $40 million in 2003, the average marketing cost for a studio picture popped back up again to $36 million in 2007

But executives say it’s hard to know exactly where to trim marketing costs because they fear spending too little could hurt a movie’s chances at the box office. A picture basically gets one shot to make a mark on opening weekend; if it doesn’t gain traction with audiences, it will be knocked out of the way on subsequent weekends by the next films opening up behind it … As a result, when it comes to cutting marketing costs, the studios have been largely confined to trimming the edges …

Buying commercial time to advertise a movie on network and cable TV remains the biggest marketing expense for the studios … Despite the recession, studios still spent as much as $3 million for each 30-second spot for 10 movies … that aired on the Super Bowl telecast in February.

For the same reason, companies defend their multimillion-dollar Super Bowl ads because of the huge audience the game delivers — about 100 million viewers — and argue that they can’t afford to cut back on network TV ads, even though viewership is declining …

One major contributor to rising marketing costs is the fragmentation of media, which makes it harder to reach an audience. The long-ago three TV network era has given way to an abundance of broadcast and cable channels and Internet sites …

With no end in sight for the recession or the economic pressure that the studios are under to shore up their bottom lines, marketing costs may finally get the same scrutiny as movie production budgets.

“Marketing is really an integral part of this business and always has been as far back as the barkers who used to stand out in front of the nickelodeon theaters and try to get people to come in … we just have to be smarter about it and try to get as much bang for our buck as we can.”

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