Research study details ad spend allocation

New media can’t yet carry the day

Studio corporate brass have long complained about the spiraling costs of marketing films — particularly the ever-rising fees charged by TV networks for commercial time — and have futilely pondered ways to lower those expenditures.

Now, with the emergence of new media, that picture may be changing — sort of.

The bad news: Pricey spots on TV remain a drain. They amounted to nearly three-quarters of Hollywood’s ad spending for theatrical releases last year.

The better news: Studios are finally trimming aggregate theatrical ad spending by imposing reductions on spending in other paid media. Research firm Kantar Media estimates paid ad spending in the U.S. for cinema releases fell 8.3% from 2008 to 2010, dropping from $3.9 billion to $3.57 billion. It’s a bigger decline than can be attributed solely to the soft economy.

The worse news: A closer look shows that even though spending for movie ads is down, the overall number of theatrical releases declined even more steeply. In the three years from 2008 to 2010, the number of releases fell by 11.7% according to the Motion Picture Assn. of America.

In other words, ad spending on a per-pic basis actually crept up.

“With all the talk about cutting back, it’s still mostly talk,” says Roger Smith, a New York based media finance consultant and former senior financial exec at Warner Communications (now Time Warner) and Carolco Pictures.

Still, there’s a silver lining. The Kantar Media data identifies some category reductions and, equally significantly, some big changes in the media mix.

Spending on film ads in radio, newspaper and magazines fell by double-digit percentages from 2008-2010. However, the categories of Internet display ads and outdoor (such as billboards) climbed.

Overall, the broad shift is from media spending for newspaper “directory” ads, which provide specific playdate information, to online.

The Kantar Media numbers refer mainly to the cost of placing ads on media. They do not include the cost of producing those ads, testing them, creating trailers and other expenses that come under the umbrella of marketing costs rather than media-buying.

Yet, while new media is shaking up the marketing world, for studios, the centerpiece of ad campaigns remains TV, which gobbled up 73% of movie advertising dollars in 2010. That’s actually an increase over TV’s 67% share of movie ad spending in 2008, due to cuts in other media, according to Kantar.

From 2008 to 2010, absolute spending on TV fell a minor .3 of 1%: in 2008 it stood at $2.617 billion; in 2009 it actually increased to $2.632 billion; and in 2010 it dropped to $2.609 billion.

“For all the talk about the need to re-invent motion picture marketing and do a better job of getting fannies into the theater seats, by and large the advertising practices that are being pursued today strongly resemble the practices of six and seven years ago,” says Jon Swallen, Kantar’s senior VP of research. For example, the bulk of ad spending is still funneled into primetime TV, he adds.

Whether via broadcast, basic cable or Spanish-language nets — TV delivers large audiences quickly. And because each film is essentially a new product that needs to create awareness among consumers, and has a short shelf life on theater screens, reaching a maximum number of moviegoers just before release is crucial to juicing box office.

That’s why theatrical releases are always a major category among Super Bowl commercials, despite the event’s astronomical media costs, with in-game ads running an average of $3 million for a 30-second spot. In 2011, 15 movie blurbs were purchased in the pre-game show and the game itself watched by 111 million viewers.

Super Bowl aside, even regular programming on primetime TV can decimate movie ad budgets fast. Research firm Sqad estimates the average price of a primetime 30-second spot on a big-four network is around $100,000 this season (that’s a year-round average including both in-season and summer re-runs).

On Thursday nights, which is a key for movies that usually open on Fridays, the most popular series in primetime on a Big Four network sell half-minutes for $135,000-$200,000 each, according to Sqad.

By comparison, the top basic cable networks average $9,500 per spot in primetime for the full season, and cable prices fall sharply for second- and third-tier basic channels with smaller auds. “With the audiences on broadcast networks declining, the only way for film distributors to achieve the reach and frequency they need to build wide awareness is to buy a combination of broadcast networks and cable,” says Lawrence S. Fried, Sqad veep of national sales.

Even cable networks with vertical program formats get movie ads if they pull big enough auds, including the Weather Channel, which carried ads for “The Smurfs,” “Midnight in Paris” and the upcoming “Moneyball.”

Film marketers know that imposing any steep cuts on P&A is fraught with risk, because films face growing competition for leisure time from videogames, online video and vast choices on cable TV. That’s why the two dozen tentpole releases annually from the major studios are launched with a domestic ad spend of anywhere from $30 million to $50 million each.

For years, studio execs have groused to Wall Street analysts about high marketing expenses. When asked for a progress report on a longstanding goal of reigning in overall costs, Walt Disney chairman Robert Iger responded in an Aug. 9 earnings conference call, “I don’t think they’ve necessarily been heading in any more positive direction.” Moments earlier, Disney’s chief financial officer cited “higher marketing and distribution costs” as a drag on Disney’s quarterly film-segment earnings.

Divining trends in movie-marketing expenses got a lot harder after the Motion Picture Assn. of America stopped reporting domestic prints-and-advertising spending data several years ago in its annual review of theatrical industry statistics.

But one bright spot in the P&A equation is that big savings can be achieved on the “P” side. With the industry converting to digital cinema worldwide (more than 50% of the screens in the U.S. today already use digital projection), the creating and shipping of release prints made of big, bulky celluloid film is declining.

IHS Screen Digest estimates these prints constitute a $2 billion annual expense worldwide, and that when the conversion to digital is complete, the use of digital releasing will eventually yield an 80% savings on direct costs.

Now if only there was a way to get that “A” to fall into line.

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