The $12.3 billion-revenue Warner Bros. movie studio revealed it spends $2 billion a year on marketing, which studio chief Kevin Tsujihara promised to trim during a Wall Street conference. Studio parent Time Warner Inc. wants to slash that expenditure by $200 million, as part of a broader plan to goose up its stock price. This comes after refusing a buyout offer from Rupert Murdoch-led 21st Century Fox.
“We also believe that the appropriate use of next-generation technologies can transform marketing efficiency,” Tsujihara said of Warner Bros. “Other than production costs, marketing is our single biggest cost center. It’s over $2 billion a year. It’s one of the reasons why we acquired Flixster and Rotten Tomatoes (movie websites) which, together, generate billions of searches for movie-related information every year. This data can help us reach consumers in more efficient and impactful ways. If we can cut marketing cost by 10%, that’s $200 million straight to the bottom line.”
There was no definition of what the $2 billion in Warner Bros. marketing encompasses; at minimum, it must count the cost of media buys—space in magazines or TV commercial slots. But does it also might include cost of creating advertising? What about audience research such as testing advertising before it is deployed? Finally, it might or might not include overhead of studio staff involved in marketing? The Warner marketing figure is for all studio products, including TV, though film is clearly the biggest marketer. As “Marketing to Moviegoers: Third Edition” notes: “At the high end for the top tier of major-studio films, this generally involves $30 million to $50 million in advertising, of which over half is deployed in the two-week period prior to a film’s premiere and the week afterwards, mainly on broadcast, cable TV, newspapers, outdoor billboards, magazines, radio, and digital media. Ad spending for second-tier studio movies and independent films is lower.”
Hollywood film distributors such as Warner Bros. periodically pledge to trim marketing budgets, but seldom make meaningful cuts because that means pushing pricy movies into the marketplace with diminished promotion push. Marketing is becoming more complex and expensive as the media landscape and audiences fragment with new digital platforms.
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