Marketing Costs Run Out of Control

The early blockbuster success of this summer’s first two big-event movies--”Mission: Impossible” and “Twister”--would appear to be great news for the financially struggling movie business.

But in fact it’s likely to exacerbate the trend of runaway costs that is the primary cause of the industry’s notoriously slim profit margins.

Even studio marketing chiefs will tell you they are spending more money than ever to get their films noticed in an increasingly crowded marketplace.

“We are spending big, big time, as all the studios are,” concedes Sidney Ganis, president of worldwide marketing for Sony’s Columbia/TriStar Motion Picture Group. MGM/UA’s marketing chief, Gerry Rich, said, “Until the industry collectively decides to release fewer movies, we’re forced to spend excessive amounts of money to open our films--it’s clutter madness.”

Because there are too many releases fighting for available screens, New Line Cinema marketing president Chris Pula says, “it’s become a business of first-weekend gross just to keep your movie in the theaters.”

One studio head says that with the stunning box-office starts of “Mission: Impossible” and “Twister,” which together have grossed more than $200 million in record time, companies are likely to be forced to spend even more money than they had originally planned for later summer releases.

“It’s a big poker game, and the one with the biggest wallet wins,” says the source. “The success of these two movies will make people that much more aggressive to make a place in the market--it’s all about shouting louder to make sure your picture is heard.”

Even as studios search for alternatives to the high cost of network advertising--the cornerstone of any campaign--some wonder whether studios need to spend as much as they do.

A case in point may be “Mission: Impossible,” a movie based on a popular television series and starring the biggest marquee name in the business. If that isn’t enough of an inherent marketing hook, what is? It would seem that without spending a ton of money, you could get moviegoers in droves to go see Tom Cruise in “Mission: Impossible.”

In fact, the film’s “tracking”--which measures public awareness and interest in a film before it opens, showed that “Mission” was on a similar path to 1993’s mega-hit “Jurassic Park.”

Still, sources say Paramount spent more than $24 million in paid media costs just to open the film, and they suggest that if the studio had spent less, the film would have opened to the same huge numbers. (It grossed nearly $75 million in its first week.)

The problem is, in the movie business there’s no way to quantify what advertising dollars buy you. And, as anyone in Hollywood will tell you, there’s no such thing as a sure thing at the box office.

*

So the studios, driven by fear that the competition will get a leg up, spend more and more.

“Nobody knows how much is enough--that’s why you spend that kind of money,” says one head of a studio.

Paramount’s worldwide marketing president Arthur Cohen insists that Paramount spent “substantially less” than what sources report, yet he admits that even with a marketing “natural” like “Mission:Impossible,” studios are under pressure “not to just open, but to open to a threshold.”

Distributors want to take in as much of the potential revenue stream in the first week to 10 days of a film’s release both to avoid being knocked off screens by competing movies and because that’s when they get a much bigger cut of the box office (as high as 90%)--which they split with theater owners.

Whatever Paramount is spending on “Mission,” it isn’t alone in dishing out huge marketing dollars on this summer’s crop of big movies, which also include “Eraser,” “Independence Day,” “The Rock,” “Cable Guy” and Disney’s new animated movie, “The Hunchback of Notre Dame.”

The typical pre-opening media blitz for such movies, which includes television, print, radio and outdoor advertising, costs between $12 million and $18 million. Those numbers are being exceeded by many this summer.

The average studio marketing cost for prints and advertising has increased dramatically over the last 10 years--rising from $6.4 million in 1985 to $17.7 million in 1996, according to the Motion Picture Assn. of America.

Studios are always looking for new ways to break through the clutter. Sony’s Columbia/TriStar, for example, recently made a deal with MovieFone, the popular phone service used to purchase advance movie tickets, to advertise nine of its upcoming movies, including “Cable Guy” and “The Fan,” on 30-second spots that will run from June 7 through Aug. 29. Sony purchased 9 million calls--half the service’s summer inventory--the largest single purchase of MovieFone time for any studio promotion.

“It’s the most direct route to moviegoers,” Ganis says. “You know that everybody who calls is going to the movies. They’re not shopping for anything else.”

Cable TV is also fast becoming a popular advertising vehicle for movie companies.

“It’s targetable, it’s cheap and you can hit people over the head so much they can’t forget you,” Pula says.

It’s for that reason that MGM/UA’s Rich says the studio is advertising its upcoming summer movie “Fled” on MTV. “It’s a prime advertising vehicle because our movie is music-driven and we can hit that hip, male urban audience.”

The cost of cable advertising is considerably cheaper than network. A 30-second spot on MTV during prime programming is about $8,000, according to Pula, but it’s not unusual to spend well under $1,000 for spots on other cable networks.

Network advertising, which is the cornerstone of any major campaign, is a very expensive proposition, especially during peak times of the year. Since most films open on Fridays, the most highly coveted time is Thursday nights on NBC, which features the top-rated shows “Friends,” “Seinfeld” and “ER.” The unit price of a 30-second spot on those shows is anywhere from $400,000 to $600,000, depending on the time of year and whether a rerun is involved.

*

It costs as much as $1.4 million to advertise during the Super Bowl, the highest-rated show of the year, which reaches 50 million households. This year, 20th Century Fox paid $1.3 million to advertise its summer movie “Independence Day.”

To try to save some bucks, studios will make “upfront buys” of network time a year in advance of their next crop of movies.

Corporate tie-ins will not necessarily save studios money, but as Rich says, “they’re a natural way to expand your advertising.” MGM had a tie-in with BMW for its James Bond franchise movie “GoldenEye” that paid $15 million in TV ads. This summer, “Mission: Impossible” has tie-ins with Apple Computers and Kellogg’s Sugar Pops, which represents advertising worth $15 million.

But if the studios are spending a lot to sell their movies this summer, just wait until next year, when the marketing dollars pour out for sequels to such movies as “Batman” and “Jurassic Park.”

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Costly Promotions

Average marketing costs for domestic movie releases have more than quadrupled in the last 15 years. Average advertising and print costs for domestic movie releases made by Motion Picture Assn. of America members, in millions of dollars:

1995: $17.7

* Does not include international marketing costs.

Source: Motion Picture Assn. of America