Can H’w’d afford its tube touts?

Soaring ad rates testing studios' TV dependency

This article was updated on April 28, 2004.

Film execs are under the gun to “do something” about soaring marketing costs. But as they study where the money’s going, Hollywood honchos have the sinking feeling things are only about to get worse.

Few in Hollywood were surprised when the MPAA announced in March that film marketing costs had jumped 28% in one year.

Television has long commanded the biggest percentage of a pic’s marketing dollars, and it’s only gotten more expensive as networks raise their ad rates.

Film execs have questioned whether TV ad buys can be reduced, or if they can rely more on bigscreen trailers, print, the Internet or word of mouth.

But they’ve come up with no options that can rival the clout of TV. With a $100 million-$200 million film, too much money is at stake to risk pulling back on TV promos and the millions of people an ad could instantly reach.

“Spending begets more spending,” says Paramount marketing chief Gerry Rich.

The major studios devoted 39% of their marketing dollars to broadcast and spot television buys in 2003, according to the MPAA. That’s compared with 14% spent on newspaper ads, 4% for trailers, 2% on radio spots and 1% for Internet advertising (a small number considering the Web’s supposed influence over moviegoers).

Unfortunately for the film biz, TV rates are expected to grow even higher.

With the May upfronts looming, network execs, including CBS’ Les Moonves, have loudly hinted they’ll drive up ad rates for the 2004-2005 TV season, with some webs expecting double-digit percentage increases.

The broadcast nets could take in a record $10 billion by the end of the selling window, up from $9.3 billion last year. Overall, network ad rates are expected to grow in percentage by mid-to-high single digits.

And an irony is that studios, like other TV advertisers, are spending more for fewer viewers. Networks are losing viewers, while new technology like TiVo makes it easier for auds to zap commercials.

As for that 28% jump, Universal Pictures vice chairman Marc Shmuger says: “It is a little startling to see spending skyrocket across the board. That is a huge year-on-year increase. Clearly, the industry cannot sustain a trend that continues in that direction.”

Runaway rates aren’t just limited to the U.S.

The studios’ desire to release films day-and-date worldwide in an effort to reduce piracy and recoup their costs more quickly is also driving up marketing budgets internationally as well.

International ad costs have ballooned as much as 40% over the past three years, largely due to the greenback’s decline against foreign currencies and higher media costs. It’s common to spend another $70 million to launch huge overseas campaigns that saturate the media in foreign territories, simultaneously with domestic bows.

This summer, Hollywood is planning a slew of simultaneous worldwide bows, including U with “Van Helsing,” WB with the third installment of “Harry Potter” and Col with “Spider-Man 2.”

In terms of hard figures, the average cost to market a movie was $34.8 million in 2003, compared with $21.4 million in 1999, according to the Motion Picture Assn. of America. Launching a summer tentpole can cost upward of $50 million, industryites say.

New figures, given to Variety by TNS Media Intelligence/Competitive Media Reporting, list 2003’s biggest movie marketers as Sony at $603 million and Warner Bros. with $537 million (see chart).

In terms of jumps, Miramax spent 48% more in 2003 over 2002, with an outlay of $274 million. In 2003, it was touting such heavy-hitters as “Chicago,” “Gangs of New York,” “Spy Kids 3D” and, later in the year, “Kill Bill Vol. 1” and “Cold Mountain.”

But the outlay varied. The company spent more on newspapers than on TV for “Chicago,” while the bulk of “Kill Bill” spending was for TV.

Obviously, the specifics may vary according to the film; arthouse pics spend on newspapers but generally avoid TV, for example. But the percentage of studio budgets spent on the various sectors — TV, newspapers, magazines, radio, billboards, the Internet — has remained virtually the same for years.

“Television’s where at least 80% of our budgets go,” says Geoff Ammer, Columbia Pictures’ prexy of marketing. “The rare movie also gets radio and outdoor. The broader point in all this is that with the advent of TiVo it gets harder and harder to get your message across.”

So once again, studio execs find themselves sweating over television. Fifty years ago, the film biz was in a panic over the booming popularity of TV. Ironically, the battle continues, but for a different reason: Instead of cannibalizing their audiences, TV is eating into their budgets.

The much-vaunted idea of synergy — whereby one branch of a conglomerate will help the other — seems to have made no difference. Even though many majors also own networks, the synergy isn’t reducing their budgets.

Television is expected to command even more studio advertising dollars this year:

  • Studios already spend heavily to promote their pics during events like the Super Bowl, but this is also an Olympics year, whose games in August will command pricey ad rates.

  • NBC’s “Friends” and “Frasier” are saying farewell in May, giving the web the chance to demand higher rates for each show’s finale. NBC had already been charging $372,000 for a 30-second spot during this season of “Friends,” according to Nielsen Media Research Monitor-Plus.

  • Top 10-ranked reality shows like “Survivor: All Stars,” “The Apprentice” and “American Idol” continue to attract millions of viewers, especially the lucrative demo of 18-to-34-year-olds. Their finales have also turned into big ratings grabbers, commanding top dollar from advertisers.

For example, while the average 30-second spot on CBS’ juggernaut “Survivor: All Stars” cost $405,000 during the season, the final episode in May will fetch $490,000 per spot. Similarly, NBC’s “The Apprentice” charged $237,000 for a 30-second ad during the season, while Fox’s “American Idol” demanded $419,000.

“In marketing films, there are certain must-have shows,” Rich says. ” ‘The Apprentice’ was a buy that you had to have. We all look at the same tracking, so when a show becomes a must-have, it ups the ante for everyone.”

The thinking goes: Viewers who tune into big TV events are the same people who are likely to see event movies.

“The studios are often looking for environments that are attracting large numbers of viewers and are in themselves events,” Shmuger says.

All this comes as movies are becoming more expensive to make, with the MPAA saying it cost on average $63.8 million to produce a pic, a 9% boost over 2002. Some of this summer’s tentpoles are hovering around the $150 million mark.

To help offset the marketing costs, studios are turning to Madison Avenue for help, seeking more product placement and promotional partnerships with big spenders like automakers, food and clothing brands, to help push their pics and add extra muscle to their campaigns.

Yet, again, TV is proving a thorn in their sides. Those same brands being wooed by the studios are flocking to television, to projects that can give products exposure for 13 weeks or more, rather than days leading up to film’s opening weekend.

Under pressure, execs are also beginning to bring up the “synergy” word again, turning to other companies owned by their parents to cross-promote properties.

For example, Touchstone Pictures will promote M. Night Shyamalan’s “The Village” during a broadcast of the director’s “Unbreakable” on ABC in May, with 15 minutes of behind-the-scenes footage and a trailer.

Universal succeeded earlier in the year by showing a 10-minute sample of “Dawn of the Dead” on sibling cabler USA Network days before the film opened.

Studio execs look at it as 10 minutes of airtime they don’t have to pay for, while TV programmers see it as a way to get more people to tune in.

Such a deal isn’t considered “purchased media because the channel sees that as an attraction that is going to bring in viewers,” Shmuger says. “It’s another way of both cutting through the clutter and cutting costs.”

Other studios are making similar moves, but opting instead to shell out heavily to show new footage of their tentpole pics on networks their parent companies don’t own. Columbia bowed the 2½-minute trailer to “Spider-Man 2” during the second-to-last broadcast of “The Apprentice,” for example.

Meanwhile, the clutter of a large number of films opening on the same weekend and other forms of entertainment stealing away potential ticket buyers continue to create a headache for marketers.

“The clutter factor is hard to overcome,” Rich says. “You have to create awareness for a film. That’s the most expen-sive part of a campaign. But you also have to create a sense of urgency — that it’s a must-see for the opening weekend. How do you make it stand out? You have to find new ways, like using the Internet.”

The use of the Internet as a bigger marketing tool isn’t expected to surge anytime soon, execs say, but there may be other ways to curb TV spending.

The basics of designing a marketing campaign is looking at how many people you need to reach and then identifying the cheapest way to reach them, marketing execs explain.

As Shmuger puts it, marketers must ask themselves: “How many rating points do I need to achieve, and what is it costing for me to achieve them? Studios are spending more to generate events. The question is whether they’re over-spending?”

(Gabriel Snyder, Dave McNary and Claude Brodesser contributed to this report.)

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