Cinema Marketing Cost Up, Not Down in ’06

A common refrain from news reports about 2006 cinema industry stats is that the U.S. average marketing spend per major studio film dipped 4.4%, according to data from the major studio trade group the MPAA. The figures cover the United States.

While the math is correct, I disagree with the conclusion. More films were released in 2016, or precisely 11% more. So even if marketing is down slightly per major-studio film (at least for the United States), the overall sum is still higher because of more pictures.

According to the MPAA, some 607 titles released in 2016 is up from 549 releases in 2005, reflecting an 11% increase. Unfortunately, the MPAA does not identify how many of those 607 total titles are classified as “major studio” releases. But it’s probably under one third. The non-major studio release each have smaller spending so they are less significant economically.

In past years, the number of total releases (major films, studios’ specialty independent arms and true indies) hovered around 500, so the 2006 volume surged into new territory.

Again, looking at MPAA figures, total U.S. advertising expenses for major studio amounted to $34.5 million big film, down from $36.1 million in 2005.

Meanwhile, “The Hollywood Reporter” quotes media research company Nielsen that aggregate film advertising spending rose slightly in 2006 to $3.5 billion. That’s just for media buying like TV commercials, and not non-advertising costs like making trailers.

“The total spend for the major studios in 2006 was estimated at a little more than $3.5 billion — $3.541 billion, to be precise,” says the “THR” article by Stephen Galloway. “That is just a whisker higher than the $3.5 billion spent in 2005 and the $3.3 billion spent in 2004.”

Also for 2006, the marketing spending at specialty distribution units of major studios leaped 13% per film to $17.2 million, from $15.2 million in 2005, according to the MPAA. Again, there’s no information on number of films incorporated into that average. The specialty divisions at major studios are niche operations devoted to distributing lower-cost independent films such as Disney’s Miramax, Fox Searchlight and Sony Pictures’ Screen Gems.

According to “Marketing to Moviegoers: The Handbook” U.S. distributors spend over $3.5 billion annually to buy advertisements in the U.S. to support theatrical releases—everything from TV air time on to space in magazines. In contrast, MPAA figures cover buying advertising, but are broader by also including ad creation costs, cost of promotional trailers and the like.

When examining film data, it’s always important to define the target area properly because data is often mislabeled or inappropriate comparisons are made. First, always consider geography—is Canada included or not? The MPAA data excludes Canada and overseas.

Next, does data on marketing expenses cover the myriad of non-ad-spend expenses—such as the cost of making in-theater trailers—or just ad spend, which is the biggest single component?

U.S. CINEMA STATS AT A GLANCE (2006) CATEGORY                         DATA                        % CHANGE ‘05   Revenue                                  $9.488 bil.       +5.5% Tickets Sold                            1.458 bil.         +3.3% Avg. Ticket                             $6.55               +2.2% Releases                                  607                  +11% Avg. Prod. Cost/Majors          $65.8 mil.        +3.4% Avg. Mktg Cost/Majors          $34.5 mil.        -4.4% Avg. Film Cost/Majors*         $100.3 mil.      -0.6%

The MPAA data indicates U.S. box office rose 5.5% in 2006 to $9.488 billion, versus $8.991 billion in 2005. Even admissions—unit ticket sales—rose, edging up 3.3% to 1.458 billion, versus 1.403 billion in 2005. The difference in percentage rates is due to impact of average ticket price, which rose 2.2% to $6.55. (The MPAA put global box office at $25.8 billion, an 11% increase from $23.3 billion in 2005).

“Marketing to Moviegoers: A Handbook” notes that media fragmentation—cable TV networks siphoning broadcast TV audiences and the internet are cutting into newspaper turf. That means that it is increasingly difficult to mount mass market ad campaigns as inexpensively as the past. Media is becoming more niche oriented, which is an advantage to films with narrow appeal because more options are available for advertising to demographically concentrated audiences, says the book.

Related content:

• ‘Hollywood Reporter’: 2006 B.O. on the Up and Up
• ‘Variety’: Box Office, Admissions Rise in 2006
• ‘Hollywood Reporter’: Movies & Media: 2006 Theatrical Marketing
• MarketingMovies.net: Theatrical Marketing Costs Rise in 2005