It's simple math: As the DVD craze continues to shift consumers away from renting and toward buying movies, studios are making more money than ever before from home video. But as does most everything else, this cash cow comes with a price.

"With DVD, everything is a sell-through title now," says Peter Staddon, senior vp marketing at 20th Century Fox Home Entertainment. "In order to stand out and get our fair share of consumer attention, every title needs to be spent against -- which is why we're all spending much more on marketing than we ever did in the VHS era."

Adds New Line Home Entertainment president Stephen Einhorn: "The trend is certainly to spend more, particularly on hard media. Even for titles that earn $80 million at the boxoffice, we're spending $3 million, $4 million (or) $5 million; not too long ago, that was what theatrical spent."

How much more money are studios spending? Nielsen Monitor-Plus estimates that the home entertainment divisions of the top nine movie studios spent $887.5 million to market their titles in 2003, up nearly 26% from $705.6 million in 2002.

That sum computes to an overall per-title average of nearly $1.6 million -- and Buena Vista Home Entertainment emerged on the high end with average per-title hard-media expenditures of nearly $3.4 million, according to NMP. Of course, that studio also boasted some of the year's biggest video releases, including "Finding Nemo" and "Pirates of the Caribbean: The Curse of the Black Pearl." BVHE executives declined comment about being the top spenders, saying they wanted "no part" of this report.

DreamWorks placed second with average per-title marketing expenditures of nearly $2.1 million. On the low end of the field were Fox and Columbia TriStar Home Entertainment, both with averages of nearly $1 million.

Industry analyst Tom Adams of Adams Media Research is not surprised by the overall spending numbers. According to his company's figures, studios are earning about 60% more upon initial release from video sales of theatrical feature films than they did during the VHS-only era. Among movies that earned more than $100 million at the domestic boxoffice, the average home video yield last year was $152 million, a 71% increase on the comparable $89 million average in 1997, the year DVD launched.

"I think they'll be spending even more in the future because it's only going to get more challenging," Adams says. "For the last few years, the public was so infatuated with DVD that sales grew almost by themselves, and studios probably spent a smaller percentage of revenue on marketing than they had in the past. But now that DVD has been in homes longer, there will be a natural decline in per-household buying -- unless studios spend the marketing money to drive continued growth."

Another factor likely to boost marketing budgets is a growing need to make a big bang out of the gate. Rampant discounting by mass merchants such as Wal-Mart and Target Stores allows consumers to buy nearly every new DVD release for $15 or less during its first seven days in stores; it is not uncommon, therefore, for studios to realize 50% or more of total sales during that first week.

"It's a first-week business on most titles, so people are moving up their advertising," TCFHE president Mike Dunn says. "At the same time, it takes a while to (prepare the audience); if you want to have a good first day, you can't start on Thursday prior to Tuesday and expect to have any meaningful awareness."

There is one thing on which most studios agree: Allocating marketing dollars to the small screen makes sense. Nearly 80% of video marketing expenditures last year were for television commercials, with broadcast and cable in the lead at $385 million and $222.8 million, respectively. DreamWorks Home Entertainment spent the highest percentage of its marketing budget on network TV (58.3%), followed closely by BVHE (53.2%). Fox led percentagewise spending on cable television (37.8%), followed by New Line (31.4%).

The tube is so appealing, according to NLHE executive vp marketing Matt Lasorsa, because "it's still the best reach frequency out there." For "The Lord of the Rings: The Return of the King," Lasorsa's studio went broad, hitting shows like CBS' "Everybody Loves Raymond." For edgier films such as "Final Destination 2" and "The Butterfly Effect," New Line ran advertisements on smaller networks favored by younger viewers, such as the WB Network and FX.

"The reason we tend to prefer cable is that it allows us to segment our audiences further," Lasorsa says. "Cable gives you the ability to drill down and target a particular audience."

According to NMP, studios also put dollars into radio spots ($19.8 million) and newspaper ads ($12.4 million). Magazines appear to benefit exponentially when it comes to DVD marketing-dollar allocation: They account for only 0.7% of marketing money for theatrical releases, but the pie slice jumps to 16.2% ($143.8 million) for video marketing. Percentagewise, Paramount Home Entertainment spent the most on magazine ads last year, allocating an estimated 45.1% of its DVD marketing dollars to that medium (compared with only 29.3% on network TV).

PHE senior vp marketing Michael Arkin sees magazines as an "efficient way to build reach as part of an overall media mix" but notes that national TV "is our media of choice, budget permitting." He believes that magazines are an affordable alternative to television for titles with smaller budgets but disputes NMP's findings, asserting that PHE's actual magazine spending accounts for 20% of the division's marketing outlay, with nearly two-thirds of marketing dollars going to national broadcast television.

Still, marketing budgets are expanding, and as Adams notes, sales are growing -- which is why even the biggest media buys typically fall well below the 15%-20% of projected gross revenue that studios traditionally have spent to market videos. BVHE spent $34.3 million to market "Finding Nemo" in 2003, including more than $20 million on TV ads; it was the year's biggest single-title video marketing campaign but still equaled a small fraction (6.4%) of the $536.7 million that Adams Media Research estimates the studio grossed from "Nemo" video sales. Fox spent an estimated $12.9 million to market "X2: X-Men United," also about 6% of that title's nearly $200 million video payoff.

One reason for such low-investment/high-return percentages is that hard-media buys are only part of the promotional equation. Increasingly, studios are staging elaborate DVD launch parties, often featuring a film's cast and crew, to drum up free publicity and buzz. In addition, cross-promotional partnerships with other consumer goods and services are stepping up, often resulting in integrated television and other advertising that complements studio media buys; big retailers such as Best Buy, Circuit City and Wal-Mart consistently plug hot new DVD releases in Sunday newspaper inserts.

"When you talk about each circular generating 40 million-50 million impressions, you're doing a hell of a campaign through circulars," Lasorsa says.

Adds Steve Feldstein, senior vp corporate and marketing communications at TCFHE: "It's so much more than buying ads. Making a title an event involves all areas of product promotion: It's advertising, it's publicity, it's retail marketing, it's promotions -- and, ultimately, it's the mix of those elements exciting your consumer."

Feldstein notes that with shorter theatrical-to-video windows, home entertainment marketers can tap into awareness by reenergizing theatrical campaigns still fresh in the public's mind. "It's the halo effect," he says.

One emerging trend is ads for new DVD releases -- as played in theaters. Tim Nett, CEO of movie marketing company Trailer Park, notes that trailers his firm made for BVHE's "Haunted Mansion" DVD release were shown nationwide. "This is something that indicates the growing importance of DVD to the studios," Nett says.

Executives predict that fourth-quarter 2004 likely will see marketing expenditures hit record heights as nearly all of this summer's theatrical blockbusters hit home video. Joining those titles will be a bevy of special-edition catalog titles and gift sets, including an extended edition of "King" and Newmarket's "The Passion of the Christ."

"You're going to see even-higher media spends," says Thomas Lesinski, president of worldwide home entertainment at Paramount Pictures, who predicts that home video ads "are going to be as pervasive as theatrical ads are this summer.

Particularly in the last eight weeks of this year, consumers will get bombarded with advertising -- and the amount of money that will be spent probably rivals what gets spent theatrically."

Adds Staddon, who notes that the flood of political ads ahead of November's presidential election leaves less space for movie spots, and that networks in turn figure to charge higher rates: "It's going to be an expensive year for media. I've seen published reports that rates are expected to go up 5%-15% -- but there are some huge titles on their way, and no one's going to want to leave their message unheard."

Agrees Lexine Wong, executive vp worldwide marketing at CTHE: "As the DVD sell-though business continues to grow, we're going to continue to fuel the direct-to-consumer business with above-the-line marketing expenditures. (Decisions as to where to run spots and for how long) obviously depend on the size of the budget, but all of us realize the importance of supporting the launch of the DVD release as well as sustaining sales for as long as we can."

Thomas K. Arnold is associate publisher and group editor at Video Store Magazine.