Film Ad Spending Still Hefty, Despite Critics

"You can eliminate all the limos and velvet rope events you want," said former studio executive Marty Kaplan, director of the Norman Lear Center and research professor at the USC Annenberg School for Communication. "But if you're still spending $100 million on pictures that have little chance of being hits, you're in a business that is inherently nuts."
- Quote in Los Angeles Times Jan. 2, 2009
  Commentary by Robert Marich
   June 25, 2009 -- Advertising Age just published its 2008 ranking of ad spending by industries and individual advertisers—finding the movie business, in the view of the professor quoted above, is still “inherently nuts.” Ad Age’s “Movies, recorded video and music” industry segment ranks a lofty 11th, between #10 “Airlines/hotels/travel” and #12 “Media” (such as TV channels, newspapers, etc.).
   That’s the same 11th-place ranking as 2007, which puts the category for 2008 ahead of such industries as Insurance (#13), Apparel (#15) and Beer-wine-liquor (#20) in terms of buying advertising media.
   It can be assumed theatrical distribution is the bulk of the Movies/recorded/video/music category – since music marketers tend not to buy a lot of expensive national ads for recordings and home video is a smaller category than theatrical. Ad Age counts $5.1 billion in measured spending for the category, of which Marketing to Moviegoers would say at least 80% is attributable to theatrical movies.
   What’s with the big, “nutty” movie spending?
   Despite the naysayers, movies are a healthy industry with domestic box office up 10% year-to-date. Theatrical movie sales to basic cable networks are booming—topping $20 million for the biggest hits. Domestic home video revenue is eroding a few percentage points a year, which is an economic crunch of concern. But the emerging Blu-ray DVD format looks to give home video a kick upwards in the years ahead. Looking to foreign markets, they are a patchwork, but the overall trend is for growth.
   The estimated $160 million that Paramount Pictures spent on making the latest Star Trek movie doesn’t seem nutty (global ad spending for the movie is probably another $100 million+). Still, against $300 million in production and marketing costs, the sci-fi movie grossed $241 million domestically and another $123 million internationally from just theaters, with DVD and TV sales to follow. Heck, a studio doesn’t even need to spend $100 million for a big payday. Sony Pictures’ youth comedy Paul Blarth: Mall Cop – a mere $26 million production – grossed $180 million worldwide.
    UPDATE June 28- In another sign of robust health for film and cinema, Transformers: Revenge of the Fallen grossed $112 million for the three-day weekend ended June 28 and $201.2 million for five days (including its midweek opening). That five-day figure seems gigantic, but it's not a record as second to $203.8 million from The Dark Knight last year. Paramount Pictures distributes what is the current Transformers sequel that says cost $200 million to film; the first incarnation came out in 2007 and cost $150 million to produce.
   It may be fashionable to pooh-pooh the film industry, but the reality is that it is a growth industry. Earlier this month, business consultancy PriceWaterhouseCoopers predicted that worldwide consumer spending on filmed entertainment would grow at an annual compound rate of 4% through 2013. Most industries would be ecstatic at half that growth – automakers, travel and media outlets that are looking at contraction.
   The Ad Age rankings merit a closer look. Ad Age lists the top 100 companies, of which the parents of the six major Hollywood studios are in the top one third. Three are in the Top 10: Disney (#7) Time Warner (#8) and Universal parent General Electric (#9). The other three are Columbia Pictures-parent Sony (#19), Fox parent News Corp. (#21) and Paramount-parent Viacom (#33).
   Of course, the major-studio parents have advertising outlays for wares besides movies, such as Disney’s theme parks, Time Warner’s HBO service and Sony’s consumer electronics. But each major studio spends north of $500 million a year in paid media, so theatrical is a big part of their mix.
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