Studios cut marketing as landscape changes
Hollywood cut ad spending by 8% to $4.39 billion in 2009LOS ANGELES -- "How to Better Market a Film Opening" might be the sequel to 3-D film "How to Train Your Dragon" if critics have their way.
Analysts say DreamWorks Animation SKG Inc's strategy for 'Dragon' failed, underscoring how Hollywood, which spends over $4 billion a year promoting movies, is under pressure to cut costs and experiment -- and stumbling occasionally.
From Time Warner Inc's Warner Bros to Walt Disney Co, Hollywood's stalwarts are employing Youtube and Twitter, consolidating advertising staff, using fans to spread the message through viral marketing -- any way to get the word out in an era of stretched budgets.
"Marketing costs are the most dramatically impactful on a studio's quarterly earnings. If you don't open strongly, it really hurts, so there's a high level of attention to efficiency. Everybody's trying to do more with less," said veteran Hollywood marketer Gordon Paddison, who spearheaded the online media campaign for "The Lord of The Rings" films.
Pummelled by the downturn, Hollywood cut ad spending by 8% to $4.39 billion (1.9 billion pounds) in 2009 after trimming it by 3% in 2008, said Michael Nathanson of Bernstein Research. More cuts will come through the first half of 2010, he added.
The point is underscored by Dreamworks' latest animated tent-pole film. It spent $160 million to $175 million to market "Dragon," then had to revamp its promotional materials and TV commercials right before it opened. Analysts say its campaign fell flat with audiences.
The movie pulled in $43.7 million in its domestic debut weekend, compared with a projected $65 million to $70 million.
"It wasn't resonating with its target audience, leading DreamWorks to refocus its marketing efforts, but perhaps not in time," said Piper Jaffray analyst James Marsh, noting longer-form trailers were scrapped for shorter, funnier ones.
The film has held up well in the wake of a revised campaign the studio said included critical praise and has earned $104.7 million in ticket sales so far.
Faced with weak DVD sales and an evolving marketplace, studios such as Disney and Viacom Inc's Paramount have cut costs by combining marketing for DVDs and theatrical releases, whereas they used to have separate teams.
And Disney will also soon announce a new studio marketing chief to replace Jim Gallagher, who left as part of a studio revamp. Disney is expected to hire from outside Hollywood, shaking up the establishment. Disney declined to comment.
Since "The Blair Witch Project" in 1999 and more recently "Paranormal Activity" -- both of which amassed massive Web followings that translated into boxoffice gold -- many in Hollywood appreciate ad forms outside of traditional media.
The latter $15,000 film grossed over $100 million after it redefined marketing with a first of its kind "Demand It" campaign that asked fans to go online and demand screenings.
Many are using Facebook, viral marketing and the Web to supplement campaigns and reach viewers at less cost. Sony Corp's Sony Pictures ran a "Death at a Funeral" ad on Youtube on Thursday, imitating many others who have run film ads on YouTube's home page at an estimated $250,000 a clip.
"About 40 million people visit the YouTube home page each day. If you're releasing a movie, its a coveted space," said Tommy McGloin, entertainment team manager for Google Inc's YouTube. "We're reaching upfront deals with major studios who are signing annual agreements."
Twitter has also been used to boost boxoffice performance. Sony was one of the first studios to create branded Twitter pages for films such as "District 9," "Julie & Julia" and "The Ugly Truth" that kept fans continually engaged.
"Using fans as evangelists is the most effective ways to lower marketing costs," said Paddison.
But many in Hollywood are resistant to change, partly because of patchy results -- "Bruno" for instance fizzled despite a raging Web presence -- and partly because they believe TV still has more impact if the timing is right.
Studios typically spend $300,000 to $400,000 for a 30-second spot during a prime-time show. But in the fourth quarter, TV ad spending by major studios fell 7% to $916 million from a year ago, according to Bernstein's Nathanson.
Paddison said studios are using a mixed media approach, using a TV ad during sweeps week, along with an online campaign. And while more are realizing a TV ad may not always be the most efficient promotion, studios still like TV because they think it gives viewers the closest experience to watching the movie in a theatre.
"Studios are challenging marketing budgets and doing more experimentation, but TV continues to take the major share on views it reaches the biggest audience," said Howard Bass of Ernst & Young Global Media & Entertainment.