Media spending down, studios cutting back on releases
Empty"We're on a diet," brags one studio chief.
He's right, according to the latest numbers from Nielsen Monitor-Plus. Money spent by major studios on media buys dipped in 2007 to under $3.4 billion, compared with $3.5 billion in 2006.
That's positive news for studio marketing chiefs haunted for years by escalating marketing costs. But in March, the MPAA said the average cost to market a studio release actually grew by 4%. How to explain the discrepancy between the MPAA and Nielsen?
"There are less movies," explains David Brooks, president of worldwide marketing for Focus Features. "It doesn't seem to me that people are spending any less on the marketing of films, and if anything, they are spending more."
In other words, the studios' diet consists of fewer meals but plenty of calories per serving. And that's a concern to marketing executives.
"There is nobody I talk to in the business who isn't under pressure to defend what is being spent to market films," says Adam Fogelson, president of marketing and distribution for Universal. "There is more scrutiny and rigor in the financial process of how films are being marketed -- and that is justified."
Given this, one might expect to see a shift in spending, or at least a more radical way of marketing movies. But the Nielsen numbers are surprisingly consistent with previous years. With all the talk about how the Internet would revolutionize advertising, most marketing departments are still fairly traditional.
"We continue to experiment with how to use the Internet," Fogelson notes, "but when we spend $5 million in traditional media, we can see we are increasing audience awareness, and that is not necessarily the case with $5 million spent in new media."
Like all marketing chiefs, Fogelson gets daily tracking numbers from four separate companies, allowing him to see how well his campaigns are working. Since spending in new media does not result in a visible spurt of interest, he says, "it is hard for anyone to risk a $200 million investment to try out a theory."
Not that the studios aren't spending on online campaigns. "A digital campaign could be in excess of $1 million," says Gerry Rich, president of worldwide marketing for Paramount. "It could be half a million for primary placement" -- meaning, for advertising on the homepage of major Web sites.
Any shifts that did take place in 2007 could largely be attributed to so many sequels, which are marketed somewhat differently.
"There was already great awareness of 'Spider-Man 3' and 'Shrek the Third' and 'Pirates of the Caribbean: At World's End,'" says Jim Gallagher, president of domestic marketing for Disney. "With pictures like that, you might not spend in traditional areas of media, and you might spend more on publicity or the promotional space."
So where did the studios spend on ads in 2007? As always, they spent the most on network television -- though the bad news is that network spending dipped to $1.09 billion, or 32.2% of the studios' total media purchases last year, compared with $1.13 billion (31.2%) in 2006 and $1.2 billion (33.8%) in 2005.
That's a reflection of three things: First, the failure of the broadcast networks to come up with many bona fide hits. Second, the flight of audiences from network to cable. And third, the move away from television altogether by the most desirable audience: young people.
"Overall, the network numbers were a little bit down last year and there were a lot of 'make goods,'" Gallagher says, referring to the free advertising networks offer when a show does not deliver promised ratings. "That tends to affect the money the networks are taking in."
Given the decline in network viewing, cable television spending predictably rose a notch to $893.5 million, or 26.5% of total media purchases, compared with $851.9 million (24.1%) in 2006 and $804.2 million (23%) in 2005.
"Cable was always looked on as a secondary or tertiary thing; that is not the case any more," says Sue Kroll, president of worldwide marketing for Warner Bros. "Now there are all these wonderful first-run programs on cable."
Cable is allowing marketers to target precise segments of the audience, which is particularly valuable to specialty and genre releases.
"In our world, we have been buying as much cable, if not more than before," Brooks says. "Places like Comedy Central or Spike work great for our more male-oriented programs, and the Bravo audience tends to line up with a number of our movies."
Media spending remained curiously flat for Spanish-language network television, which many insiders had expected to grow more. The studios spent $75.4 million, or 2.2% of the total, on Spanish network television (compared with $80.6 million/2.3% in 2006 and $66.2 million/1.9% in 2005).
And while Spanish-language cable spending increased to $4 million, or 0.1% of the total (compared with $2.6 million/0.1% in 2006 and $1.7 million/ less than 0.1% in 2005), the total spend on Latino-oriented TV remained paltry given the growth of the Latino population.
"We do target this audience," Kroll says. "But you do that through publicity, grassroots and newspapers, not just television."
Spot buys returned to roughly the levels of 2005, after spiking somewhat last year, with $519.1 million, or 15.4% of the total spend (compared with $648.7 million/18.3% in 2006 and $556.2 million/15.9% in 2005).
Spot buying tends to reflect the demographics of individual films, and was not seen as reflecting a broader trend.
"That is basically a way of buying local markets to overlay your major markets -- you can buy the top 40 or top 100, and generally your rates are going to be more beneficial," Gallagher says.
Of more interest to the television business was the continuing decline in spending on syndication, the category that saw the biggest drop compared with two years ago, with $64.9 million or 1.9% of the total (compared with $72.4 million/2% in 2006 and $104.1 million/3% in 2005). These are significant differences -- spending is down by more than one third in two years. Most marketing chiefs again related that to individual programs, while also noting that many of the cable networks now show first-run broadcast series that might once have only been syndicated.
In the print arena, newspapers and magazines could breathe a sigh of relief. Other advertisers have fled those businesses, but the studios remained loyal, if only for one year.
Spending on newspapers, indeed, rose fractionally, reaching $479 million, or 14.2% (up from $477.5 million/13.5% in 2006). But those numbers are definitely trending down -- and quite a bit down from two years ago, when spending totaled $538 million, or 15.9%.
"What we are definitely utilizing more and more in the newspaper space is their online sites, as well as their mobile sites," Brooks says. "There is money migrating from the traditional print sites into that area. But for pictures where the audience is largely 25-plus and upscale, we still believe newspapers are a great medium."
Magazines remained roughly steady with $25.8 million, or 0.8% -- negligibly different from the two preceding years, though with a downward bullet ($25.7 million/0.7% in 2006 and $30.2 million/0.9% in 2005).
"We are not spending a lot on magazines," Kroll says. "We will take ads in very targeted publications, but generally we use them as a publicity tool" -- that is, for free advertising.
Radio and outdoor (mainly billboards) trended slightly down from last year, but not enough to indicate any major change of thinking. Radio spending was $55.6 million, or 1.7% (compared with $65.2 million/1.8% in 2006 and $66.2 million/1.9% in 2005).
"We continue to use (radio) aggressively when we have a movie whose sell can be translated into that medium," Fogelson says. "In the case of 'Forgetting Sarah Marshall,' the reviews were great and interesting -- and because you have 60 seconds in radio, as opposed to 15 or 30 seconds (in television), this is a great way of getting out the fact that the reviewers are saying interesting things."
Outdoor spending accounted for $85.9 million, or 2.5% (compared with $88.2 million/2.5% in 2006 and $92.7 million/2.7% in 2005). That arena draws varying levels of support from executives.
"We did a big New York and Los Angeles campaign on (2005's) 'The 40-Year-Old Virgin,' because the title is funny and absolutely tells you what kind of movie it is," Fogelson says. "But for (2007's) 'Knocked Up,' we did not do outdoor, because the title of the movie and the visuals were more complicated."
Studios are likely to continue spending on billboards in L.A. and New York, he says, if only to please the talent.
But a significant outdoor campaign can cost $1 million-$2 million -- and as much as $4 million-$5 million if it stretches to several markets.
"If outdoor is in fact as important as some people make it out to be, why do we not see a statistical variance between the markets that have outdoor campaigns and the ones that don't?" Fogelson wonders.
The Internet numbers held the biggest surprise: In 2007 the studios spent $85.1 million or 2.5% of the total, and that was actually less than the $95.6 million, or 2.7%, in 2006. This number seems even more perplexing given that spending last year was almost double the year before, when the studios aggregated $52.3 million, or 1.5%.
Rich, for one, says he is not all that surprised. Web-savvy young men and women know how to find the information they need without waiting to be targeted by the studios, he says. And major portals like MySpace or Facebook have all gotten exceptionally expensive.
What intrigues Rich is that this most modern of marketing tools still depends on the most traditional of elements: a great trailer.
"If you had asked me 10 years ago, 'What is the formula for success in our business?' I would have said, 'Having an outstanding trailer at the onset,'" he says. "And that hasn't changed."
Chris Edling contributed research to this story.